Adjusting entries are necessary because a single transaction may affect revenues or expenses in more than one accounting period and also because all transactions have not necessarily been documented during the period. B. You do this by creating lines in … The four basic steps in the closing process are: Closing the revenue accounts—transferring the credit balances in the revenue accounts to a clearing account called Income Summary. Income summary is not reported on any financial statements because it is only used during the closing process, and at the end of the closing process the account balance is zero. All revenue accounts are closed together in a single entry, while all expense accounts are closed in the second entry. & The four main types of financial statements are Statement of Financial Position, Income Statement, Cash Flow Statement and Statement of Changes in Equity. If the year end for the company is September 30, 2013, the closing entries would be dated October 1, 2013. The post closing trial balance reveals the balance of accounts after the closing process, and consists of balance sheet accounts only. The process of closing out your temporary accounts starts by reviewing the income statement. credited. The closing of the owner's drawing account by transferring its balance to the owner's capital account. A. The monthly rent is $7,000. A Closing entries are recorded at the end of each reporting period which could be monthly, quarterly. C) It is a listing of all permanent accounts and their balances immediately after the adjusting process. Closing the Owner's Drawing Account The closing process consists of steps to transfer temporary account balances to permanent accountsand make the general ledger ready for the next accounting period. First, the revenue accounts are closed to the income summary account. Refer to the information above. The income summary account serves as a temporary account used only during the closing process. Expense..................................................... Depreciation........................................................... Supplies The income summary account serves as a temporary account used only during the closing process. All income statement accounts are debited to income Second, the expense accounts are closed to the income summary account. We can now move that balance over to Retained Earnings. Privacy Each earns $800 per week for a five day work week ending on Friday. View desktop site. A) It is a listing of all temporary accounts and their balances after closing. Norma Company records the payment by debiting Prepaid Rent $2,200 and crediting Cash $2,200. It contains all the company's revenues and expenses for the current accounting time period. In addition, the income summary closing entry tells us the company’s profit for the year. A Closing entries are recorded at the end of each reporting period which could be monthly, quarterly. 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