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Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem

Assume that the entry closing total revenues of $3,190,000 and total expenses of $2,350,000 has been made for the year. At the end of the fiscal year, Teresa Schafer, Capital has a credit balance of $1,885,000 and Teresa Schafer, Drawing has a balance of $770,000.

  1. (a) Journalize the entry required to close the Teresa Schafer, Drawing account.
  2. (b) Determine the amount of Teresa Schafer, Capital at the end of the period.

a.

To determine

Journalize the closing entries.

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 of owner’s drawings to capital:

DateAccounts title and explanationPost Ref...

b.

To determine

Calculate the amount of TS, capital at the end of the period.

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