Back to Financial Accounting Index

Closing Accounts

After the financial statements are completed and the adjusted entries are recorded, we must journalize and post our closing entries. This is a four stage process:

1. Transfer credit balances in the Revenue account to the Income Summary account.

Dr. Revenues                  $xxxx

Cr.            Income Summary     $xxxx

2. Transfer debit balances in the Expense account to the Income Summary account.

Dr. Income Summary     $xxxx

Cr.            All Expenses         $xxxx

3. Transfer the balance of the Income Summary to the Owner's Capital account.

Dr. Income Summary     $xxxx

Cr.            Owner, Capital     $xxxx

4. Transfer debit balance of the Withdrawals account to the Capital account.

Dr.  Owner, Capital        $xxxx

Cr.           Owner, Withdrawals        $xxxx

Now we have successfully closed the accounts for the accounting period.

Back to Financial Accounting Index