Explanation Closing entries: Closing entries are recorded in order to close the temporary accounts such as incomes and expenses by transferring them to the permanent accounts. It is passed at the end of the accounting period, to transfer the final balance. Rules of Debit and Credit: Debit , the revenue account and owners capital account balance. In addition debit owners capital account if it suffer loss (net loss) Credit, the expense account, owners’ capital if it earns income (net income) and owners’ drawing account balance. Closing entry for revenue account: Date Accounts title and Explanation Post Ref. Debit ($) Credit ($) October 31 Fees Earned (OE–) 519,300 Income Summary (OE+) 519,300 (To close the revenue account ) Table (1) Description for journal entry Fees earned are a revenue account. Since the amount of revenue is closed to Income Summary account. Therefore, it is debited. Income Summary account is a temporary account. This account is credited to close the revenue value. Closing entry for expense account: Date Accounts title and Explanation Post Ref. Debit ($) Credit ($) October 31 Income Summary (OE–) 586,150 Wages Expense (OE+) 488,000 Rent Expense (OE+) 72,000 Supplies Expense (OE+) 11,900 Miscellaneous Expense (OE+) 14,250 (To close the expenses account. Table (2) Description for journal entry Income Summary account is a temporary account. This account is debited to close the expense value. Wages Expense, Rent Expense, Supplies Expense, and Miscellaneous Expense are expense accounts. Since the amount of expenses are closed to Income Summary account. Therefore, it is credited. Closing entry for transferring the income summary to owners’ capital: Date Accounts title and Explanation Post Ref. Debit ($) Credit ($) October 31 BM’s Capital (OE–) 66,850 Income Summary (OE+) 66,850 (To close balance of income summary are transferred to owners’ capital account) Table (3) Description for journal entry The balance of income summary (net income or net loss) is transferred to owners’ capital account...

14th Edition

ISBN: 9781305088436

Author: Carl Warren, Jim Reeve, Jonathan Duchac

Publisher: Cengage Learning

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Chapter 4, Problem 17E

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Journalize the closing entries for MS Company.

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Chapter 4, Problem 16E

Chapter 4, Problem 18E

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Chapter 4 Solutions

Financial Accounting

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Journalize the closing entries for MS Company.

Solution Summary: The author explains how closing entries are recorded to close temporary accounts such as incomes and expenses by transferring them to permanent accounts.

Journalize the closing entries for MS Company.

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Chapter 4 Solutions