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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

List the four steps for closing the temporary accounts.

To determine

List the four steps for closing the temporary accounts.

Explanation

Closing entries: The journal entries prepared to close the temporary accounts to Retained Earnings 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.

The following are the four steps for closing the temporary accounts:

Step 1: Close the revenue accounts to income summary account.

DateAccounts and ExplanationDebit ($)Credit ($)
Revenue (SE–)XXX 
     Income summary (SE+) XXX
 (To close the revenue account)  

Step 2: Close the expense accounts to income summary account.

DateAccounts and ExplanationDebit ($)Credit ($)
Income summary (SE–)XXX 
      Depreciation expense (SE+) XXX
      Wages expense (SE+) XXX
   ...

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