College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
College Accounting, Chapters 1-27
Financial Statements And The Closing Process. 6SEB

# Prepare closing journal entries in general journal form and post those entries to the T accounts.

Question
Chapter 6, Problem 6SEB
To determine

## Prepare closing journal entries in general journal form and post those entries to the T accounts.

### Explanation of Solution

Closing entries: The journal entries prepared to close the temporary accounts to permanent account are referred to as closing entries. The revenue, expense, and dividends accounts are referred to as temporary accounts because the information and figures in these accounts is held temporarily and consequently transferred to permanent account at the end of accounting year.

Prepare the closing entries.

 Date Accounts and Explanation Account Number Debit  ($) Credit ($) June 30 Referral fees (SE–) 401 2,813 Income Summary (SE+) 313 2,813 (To close the revenue account.) June 30 Income summary (SE–) 313 2,987 Wages expense (SE+) 511 1,080 Advertising expense (SE+) 512 34 Rent expense (SE+) 521 900 Supplies expense (SE+) 523 322 Phone expense (SE+) 525 133 Utilities expense (SE+) 533 102 Insurance expense (SE+) 535 120 Gas and oil expense (SE+) 538 88 Depreciation expense (SE+) 541 110 Miscellaneous expense (SE+) 549 98 (To close the expense accounts.) June 30 RZ, Capital (SE+) 313 174 Income Summary (SE–) 313 174 (To close the income summary accounts) June 30 RZ, Capital (SE–) 311 2,000 RZ, Drawings (SE+) 312 2,000 (To close withdrawals account.)

Table (1)

Working Note:

Calculate the amount of RZ capital (transferred).

RZ Capital =(Total Revenues-Total Expenses)=($2,813$2,987)=$174(Loss) Revenue account: In this closing entry, the referral fees account is closed by transferring the amount of referral fees account to Income summary account in order to bring the revenue account balance to zero. Hence, debit referral fees account and credit Income summary account. Expense account: In this closing entry, all expense accounts are closed by transferring the amount of total expense to the Income summary account in order to bring the expense account balance to zero. Hence, debit the Income summary account and credit all expenses account. Income summary account: Income summary account is a temporary account. This account is debited to close the net income value to RZ capital account. RZ capital is a component of stockholders’ equity account. The value of RZ capital increased because net income is transferred. Therefore, it is credited. Withdrawals account: RZ capital is a component of owner’s equity. Thus, owners ‘equity is debited since the capital is decreased on owners’ drawings. RZ withdrawals are a component of owner’s equity. It is credited because the balance of owners’ withdrawals account is transferred to owners ‘capital account. T-account: The condensed form of a ledger is referred to as T-account. The left-hand side of this account is known as debit, and the right hand side is known as credit. Posting the closing entries to the T- account:  Accumulated Depreciation Account No – 181.1 Date Details Debit ($) Date Details Credit ($) Ending balance 110 Beginning balance 110 Beginning balance 110 Table (2)  Wages Payable Account No - 219 Date Details Debit ($) Date Details Credit ($) Ending balance 260 Beginning balance 260 Beginning balance 260 Table (3)  RZ Capital Account No – 311 Date Details Debit ($) Date Details Credit ($) Income summary 174 Beginning balance 6,000 RZ Drawings 2,000 Ending balance 3,826 Beginning balance 3,826 Table (4)  SG Drawings Account No - 312 Date Details Debit ($) Date Details Credit ($) Beginning balance 2,000 RZ Capital 2,000 Total 2,000 Total 2,000 Table (5)  Income Summary Account No - 313 Date Details Debit ($) Date Details Credit ($) Total expense 2,987 Referral fees 2,813 RZ Capital 174 Total 2,987 Total 2,987 Table (6)  Referral Fees Account No - 401 Date Details Debit ($) Date Details Credit ($) Income summary 2,813 Beginning balance 2,813 Total 2,813 Total 2,813 Table (7)  Wages Expense Account No - 511 Date Details Debit ($) Date Details Credit ($) Beginning balance 1,080 Income summary 1,080 Total 1,080 Total 1,080 Table (8)  Advertising Expense Account No - 512 Date Details Debit ($) Date Details Credit ($) Beginning balance 34 Income summary 34 Total 34 Total 34 Table (9)  Rent Expense Account No - 521 Date Details Debit ($) Date Details Credit ($) Beginning balance 900 Income summary 900 Total 900 Total 900 Table (10)  Supplies Expense Account No - 524 Date Details Debit ($) Date Details Credit ($) Beginning balance 322 Income summary 322 Total 322 Total 322 Table (11)  Phone Expense Account No - 525 Date Details Debit ($) Date Details Credit ($) Beginning balance 133 Income summary 133 Total 133 Total 133 Table (12)  Utilities Expense Account No - 533 Date Details Debit ($) Date Details Credit ($) Beginning balance 102 Income summary 102 Total 102 Total 102 Table (13)  Insurance Expense Account No - 535 Date Details Debit ($) Date Details Credit ($) Beginning balance 120 Income summary 120 Total 120 Total 120 Table (14)  Gas and Oil Expense Account No - 538 Date Details Debit ($) Date Details Credit ($) Beginning balance 88 Income summary 88 Total 88 Total 88 Table (15)  Depreciation Expense Account No - 541 Date Details Debit ($) Date Details Credit ($) Beginning balance 110 Income summary 110 Total 110 Total 110 Table (16)  Miscellaneous Expense Account No - 549 Date Details Debit ($) Date Details Credit (\$) Beginning balance 98 Income summary 98 Total 98 Total 98

Table (17)

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College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
College Accounting, Chapters 1-27
Financial Statements And The Closing Process. 6SEB
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