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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Closing entries

On July 31, 2019, the balances of the accounts appearing in the ledger of Serbian Interiors Company, a furniture wholesaler, are as follows:

Accumulated Depr.—Building $365,000
Administrative Expenses 440,000
Building 810,000
Cash 78,000
Cost of Merchandise Sold 775,000
Interest Expense 6,000
Merchandise Inventory 115,000
Notes Payable 100,000
Peter Bronsky, Capital $530,000
Peter Bronsky, Drawing 15,000
Sales 1,437,000
Sales Tax Payable 4,500
Selling Expenses 160,000
Store Supplies 16,000
Store Supplies Expense 21,500

Prepare the July 31, 2019, closing entries for Serbian Interiors Company.

To determine

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 P.

Explanation

  • Sales is a 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.
  • Administrative expense, Cost of merchandise sold, Interest expense, Selling expense, and Store supplies expense accounts generally shows debit balance. To close all these accounts, it should be credited. Therefore, credit all these expense accounts with their respective amounts.
  • P’s capital is a clearing account used to close revenues and expenses. Therefore, credit P’s capital account by $34,500.

Record the closing entry for drawings...

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