Closing entries On July 31, the close of the fiscal year, the balances of the accounts appearing in the ledger of Serbian Interiors Company, a fumiture wholesaler, are as follows: Accumulated Depr.—Building $365,000 Inventory $ 115,000 Administrative Expenses 440,000 Notes Payable 100,000 Building 810,000 Retained Earnings 455,000 Cash 78,000 Sales 1,437,000 Common Stock 75,000 Sales Tax Payable 4,500 Cost of Goods Sold 775,000 Selling Expenses 160,000 Dividends 15,000 Store Supplies 16,000 Interest Expense 6,000 Store Supplies Expense 21,500 Prepare the July 31 closing entries for Serbian Interiors Company.

Closing entries: These refers to the journal entries that are recorded at the end of an each accounting period. It closes all revenue accounts earned, and all expenses account incurred during the current accounting year to the company’s capital account.

To Record: The closing entries of Company S.

Explanation of Solution

Sales revenue is revenue and generally it shows credit balance. To close the sales revenue, it should be debited. Therefore, debit sales revenue account by $1,437,000.
Income Summary is a clearing account or temporary account used to close revenues and expenses. Therefore, credit income summary account by $1,437,000.

Record the closing entry for expenses and other debit accounts.

Date	Accounts and Explanation	Post Ref	Debit ($)	Credit ($)
July 31	Income Summary		1,402,500
	Cost of Goods Sold			775,000
	Selling Expense			160,000
	Administrative Expense			440,000
	Interest Expense			6,000
	Store Supplies Expense			21,500
	(To close the expenses and other debit accounts)

Table (2)

Explanation:

Income summary is a component of equity and it decreases by $1,402,500. Therefore, debit income summary account by $1,402,500.
Cost of goods sold, Selling Expense, Administrative Expense, Interest Expense, and Store supplies expense accounts are closed by transferring their amount to Income Summary account. Therefore, credit all these expense and debit accounts with their respective amounts.

Record the closing entry for income summary account.

Date	Accounts and Explanation	Post Ref	Debit ($)	Credit ($)
July 31	Income Summary		34,500
	Retained Earnings			34,500 (1)
	(To close income summary account)

Table (3)

Explanation:

Income summary is a component of equity and it decreases by $34,500...

Financial & Managerial Accounting

Solutions

Financial & Managerial Accounting

Explanation of Solution

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Accumulated Depr.—Building	$365,000	Inventory	$ 115,000
Administrative Expenses	440,000	Notes Payable	100,000
Building	810,000	Retained Earnings	455,000
Cash	78,000	Sales	1,437,000
Common Stock	75,000	Sales Tax Payable	4,500
Cost of Goods Sold	775,000	Selling Expenses	160,000
Dividends	15,000	Store Supplies	16,000
Interest Expense	6,000	Store Supplies Expense	21,500