Page 161 - Accounting Principles (A Business Perspective)

This book is licensed under a Creative Commons Attribution 3.0 License

Dec. 31 To close to
Income Decreased
Summary 400 by $400

Bal. after —0—
closing
Supplies Expense
(Dr.) Account No. 518 (Cr.)
Bal. before 500 2010
closing
Dec. 31 To close to
Income Decreased
Summary 500 by $500

Bal. after —0—
closing
Depreciation Expense-Trucks
(Dr.) Account No. 521 (Cr.)
Bal. before ■ 750' 2010 "
closing
Dec. 31 To close to
Income Decreased
Summary 750 by $750

Bal. after —0—
closing
The expense accounts could be closed before the revenue accounts; the end result is the same.

As the result of closing the revenues and expenses of MicroTrain, the total revenues and expenses have been
transferred to the Income Summary account.
Income Summary
If total expenses exceed Total expenses Total revenues If total revenues exceed
total revenues, w total expenses,
the account has a debit the account has a credit
balance, which is the net balance, which is the net
loss for the period income for the period.
MicroTrain's Income Summary account now has a credit balance of USD 7,290, the company's net income for
December.
(Dr) Income Summary (Cr.)
2010 From closing 6,510 2010 13,800
Dec. 31 the expense Dec. 31 From closing
accounts the revenue
accounts
Bal. before closing this
account (net income) 7,290
Next, close MicroTrain's Income Summary account to its Retained Earnings account. The journal entry to do
this is:
MICROTRAIN COMPANY
General Journal Page 4
Date Account Titles and Explanation Post. Ref. Debt Credit
31 Income Summary 600 7 2 9 0
2010 Dec.
Retained Earnings 310 7 2 9 0
To close the Income Summary account to the Retained
Earnings account.

After its Income Summary account is closed, the company's Income Summary and Retained Earnings accounts
appear as follows:

Accounting Principles: A Business Perspective 162 A Global Text