Closing Process

A step at the end of the accounting period that prepares accounts for recording the transactions of the next period.

Closing Entries for Revenue Accounts

• Revenue accounts all have credit balances.
• To close a revenue account, you transfer a credit balance to Income Summary.
• debit revenue amount equal to credit balance/ credit income summary.

Closing entries for Expense Accounts

• expense accounts have debit balances.
• to close, a debit balance must be transferred to income summary.
• credit expense amount equal to debit balance/ debit income summary.

Closing the Income Summary Account

• the balance, after the revenue and expense accounts have been closed into income summary is closed into capital.
• debit income summary amount equal to credit balance/ credit capital (net income).

Closing the Owner's Drawing Account

• the drawing account is closed directly into capital.
• credit the drawing account amount equal to debit balance/ debit capital.

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