Question

The company's adjusted trial balance as follows includes the following accounts balances: Cash, $15,000; Equipment, $85,000; Accumulated Depreciation, $25,000; Accounts Payable, $10,000; Owner’s Capital $59,000; Withdrawals, $2,000; Fees Earned, $56,000; Depreciation Expense, $25,000; and Salaries Expense, $23,000. All accounts have normal balances. Prepare the first closing entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

Answer 1

The first closing entry transfers credit balances in revenue ( and gain ) accounts to the income summary accounts.

Dec 31 Fees Earned $56,000 Dr

Income Summary $56,000 Cr

We bring account credit balances to zero by debiting them. The entry closes revenue accounts and leaves them with zero balances. The accounts are now ready to record revenues when they occur in the next period.