16 - Closing the Books at the End of the Period (The Closing Process)
- Author
- James Stewart
- Published
- Sat 02 Feb 2019
- Episode Link
- https://podcasters.spotify.com/pod/show/james-stewart5/episodes/16---Closing-the-Books-at-the-End-of-the-Period-The-Closing-Process-e33fog
Example: You own a sole proprietorship. For this period, you had revenue of $100,000, wage expense of $40,000, and computer expense of $30,000 (net income of $30,000). You also contributed $10,000 to the business this period.
Step 1 – Transfer Revenue and Expense items to Income Summary
Debit Credit
Revenue $100,000
Income Summary $100,000
Income Summary $40,000
Wage Expense $40,000
Income Summary $30,000
Computer Expense $30,000
Step 2 – Transfer Income Summary to Equity (capital account)
Debit Credit
Income Summary $30,000
Capital Account – YOUR NAME $30,000
Step 3 – Transfer contribution/distribution accounts to capital account
Debit Credit
Contributions – YOUR NAME $10,000
Capital Account – YOUR NAME $10,000
