Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements. the steps in recording closing entries

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Answer 1

Question

Chapter 4, Problem 1DQ

To determine

Introduction:

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements.

the steps in recording closing entries

Expert Solution & Answer

Answer to Problem 1DQ

Solution:

There are 4 steps to record closing entries.

Close Credit balances from all Revenue accounts to Income Summary
Close Debit balances from all Expense accounts to Income Summary
Close Income Summary (Net income/Loss) to Capital Account
Close Withdrawals account to Capital Account.

Explanation of Solution

Purpose of closing out process is to extend balances of each Income /Expense/Withdrawal/Income summary account to the Capital account so that it enables to identify the net change in Equity for the given accounting period as well as it enables to start next accounting year temporary accounts with a balance of zero.

Closing Journal Entries are as follows.

1) Close Credit balances from all Revenue accounts to Income Summary by Debiting Revenue Account and Crediting Income Summary Account.

	Dr	Cr
Revenue Account	$X
Income Summary Account		$X

2) Close Debit balances from all Expense accounts to Income Summary by Crediting Expense Account and Debiting Income Summary Account.

	Dr	Cr
Income Summary Account	$X
Expense Account		$X

3) Close Income Summary (Net income/Loss) to Capital Account

Net Gain − After closing out all Expenses and Income accounts if Income Summary Account results with a Credit Balance it is a Net gain, which means Income summary account contains more revenues than expenses. It will be closed out by debiting the income summary account and crediting Income summary account as follows.

	Dr	Cr
Income Summary Account	$X
Capital Account		$X

Net Loss − After closing out all Expenses and Income accounts if Income summary account results with a Debit Balance it is a Net Loss, which means Income summary account contains more expenses than Revenues. It will be closed out by Crediting the Income summary account and Debiting Capital Account

	Dr	Cr
Capital Account	$X
Income Summary Account		$X

4) Close Withdrawals account to Capital Account by Debiting Capital account and Crediting Withdrawals Account.

	Dr	Cr
Capital Account	$X
Withdrawals Account		$X

Conclusion

As mentioned above closing out journal entries are recorded to clear out each temporary account at the end of each accounting year end.

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Students have asked these similar questions

Evergreen Corporation (calendar-year-end) acquired the following assets during the current year: (Use MACRS Table 1 and Table 2.) Date Placed in Asset Machinery Service October 25 Original Basis $ 120,000 Computer equipment February 3 47,500 Used delivery truck* August 17 Furniture April 22 60,500 212,500 The delivery truck is not a luxury automobile. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. b. What is the allowable depreciation on Evergreen's property in the current year if Evergreen does not elect out of bonus depreciation and elects out of §179 expense?

Lina purchased a new car for use in her business during 2024. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2024 and 2025 (Lina doesn't want to take bonus depreciation for 2024) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) a. The vehicle cost $40,000, and business use is 100 percent (ignore §179 expense). Year Depreciation deduction 2024 2025

Evergreen Corporation (calendar-year-end) acquired the following assets during the current year: (Use MACRS Table 1 and Table 2.) Date Placed in Asset Machinery Service October 25 Original Basis $ 120,000 Computer equipment February 3 47,500 Used delivery truck* August 17 Furniture April 22 60,500 212,500 The delivery truck is not a luxury automobile. Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. a. What is the allowable depreciation on Evergreen's property in the current year, assuming Evergreen does not elect §179 expense and elects out of bonus depreciation?

Answer 2

Question

Chapter 4, Problem 1DQ

To determine

Introduction:

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements.

the steps in recording closing entries

Expert Solution & Answer

Answer to Problem 1DQ

Solution:

There are 4 steps to record closing entries.

Close Credit balances from all Revenue accounts to Income Summary
Close Debit balances from all Expense accounts to Income Summary
Close Income Summary (Net income/Loss) to Capital Account
Close Withdrawals account to Capital Account.

Explanation of Solution

Purpose of closing out process is to extend balances of each Income /Expense/Withdrawal/Income summary account to the Capital account so that it enables to identify the net change in Equity for the given accounting period as well as it enables to start next accounting year temporary accounts with a balance of zero.

Closing Journal Entries are as follows.

1) Close Credit balances from all Revenue accounts to Income Summary by Debiting Revenue Account and Crediting Income Summary Account.

	Dr	Cr
Revenue Account	$X
Income Summary Account		$X

2) Close Debit balances from all Expense accounts to Income Summary by Crediting Expense Account and Debiting Income Summary Account.

	Dr	Cr
Income Summary Account	$X
Expense Account		$X

3) Close Income Summary (Net income/Loss) to Capital Account

Net Gain − After closing out all Expenses and Income accounts if Income Summary Account results with a Credit Balance it is a Net gain, which means Income summary account contains more revenues than expenses. It will be closed out by debiting the income summary account and crediting Income summary account as follows.

	Dr	Cr
Income Summary Account	$X
Capital Account		$X

Net Loss − After closing out all Expenses and Income accounts if Income summary account results with a Debit Balance it is a Net Loss, which means Income summary account contains more expenses than Revenues. It will be closed out by Crediting the Income summary account and Debiting Capital Account

	Dr	Cr
Capital Account	$X
Income Summary Account		$X

4) Close Withdrawals account to Capital Account by Debiting Capital account and Crediting Withdrawals Account.

	Dr	Cr
Capital Account	$X
Withdrawals Account		$X

Conclusion

As mentioned above closing out journal entries are recorded to clear out each temporary account at the end of each accounting year end.

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Answer 3

Question

Chapter 4, Problem 1DQ

To determine

Introduction:

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements.

the steps in recording closing entries

Expert Solution & Answer

Answer to Problem 1DQ

Solution:

There are 4 steps to record closing entries.

Close Credit balances from all Revenue accounts to Income Summary
Close Debit balances from all Expense accounts to Income Summary
Close Income Summary (Net income/Loss) to Capital Account
Close Withdrawals account to Capital Account.

Explanation of Solution

Purpose of closing out process is to extend balances of each Income /Expense/Withdrawal/Income summary account to the Capital account so that it enables to identify the net change in Equity for the given accounting period as well as it enables to start next accounting year temporary accounts with a balance of zero.

Closing Journal Entries are as follows.

1) Close Credit balances from all Revenue accounts to Income Summary by Debiting Revenue Account and Crediting Income Summary Account.

	Dr	Cr
Revenue Account	$X
Income Summary Account		$X

2) Close Debit balances from all Expense accounts to Income Summary by Crediting Expense Account and Debiting Income Summary Account.

	Dr	Cr
Income Summary Account	$X
Expense Account		$X

3) Close Income Summary (Net income/Loss) to Capital Account

Net Gain − After closing out all Expenses and Income accounts if Income Summary Account results with a Credit Balance it is a Net gain, which means Income summary account contains more revenues than expenses. It will be closed out by debiting the income summary account and crediting Income summary account as follows.

	Dr	Cr
Income Summary Account	$X
Capital Account		$X

Net Loss − After closing out all Expenses and Income accounts if Income summary account results with a Debit Balance it is a Net Loss, which means Income summary account contains more expenses than Revenues. It will be closed out by Crediting the Income summary account and Debiting Capital Account

	Dr	Cr
Capital Account	$X
Income Summary Account		$X

4) Close Withdrawals account to Capital Account by Debiting Capital account and Crediting Withdrawals Account.

	Dr	Cr
Capital Account	$X
Withdrawals Account		$X

Conclusion

As mentioned above closing out journal entries are recorded to clear out each temporary account at the end of each accounting year end.

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Answer 4

Question

Chapter 4, Problem 1DQ

To determine

Introduction:

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements.

the steps in recording closing entries

Expert Solution & Answer

Answer to Problem 1DQ

Solution:

There are 4 steps to record closing entries.

Close Credit balances from all Revenue accounts to Income Summary
Close Debit balances from all Expense accounts to Income Summary
Close Income Summary (Net income/Loss) to Capital Account
Close Withdrawals account to Capital Account.

Explanation of Solution

Purpose of closing out process is to extend balances of each Income /Expense/Withdrawal/Income summary account to the Capital account so that it enables to identify the net change in Equity for the given accounting period as well as it enables to start next accounting year temporary accounts with a balance of zero.

Closing Journal Entries are as follows.

1) Close Credit balances from all Revenue accounts to Income Summary by Debiting Revenue Account and Crediting Income Summary Account.

	Dr	Cr
Revenue Account	$X
Income Summary Account		$X

2) Close Debit balances from all Expense accounts to Income Summary by Crediting Expense Account and Debiting Income Summary Account.

	Dr	Cr
Income Summary Account	$X
Expense Account		$X

3) Close Income Summary (Net income/Loss) to Capital Account

Net Gain − After closing out all Expenses and Income accounts if Income Summary Account results with a Credit Balance it is a Net gain, which means Income summary account contains more revenues than expenses. It will be closed out by debiting the income summary account and crediting Income summary account as follows.

	Dr	Cr
Income Summary Account	$X
Capital Account		$X

Net Loss − After closing out all Expenses and Income accounts if Income summary account results with a Debit Balance it is a Net Loss, which means Income summary account contains more expenses than Revenues. It will be closed out by Crediting the Income summary account and Debiting Capital Account

	Dr	Cr
Capital Account	$X
Income Summary Account		$X

4) Close Withdrawals account to Capital Account by Debiting Capital account and Crediting Withdrawals Account.

	Dr	Cr
Capital Account	$X
Withdrawals Account		$X

Conclusion

As mentioned above closing out journal entries are recorded to clear out each temporary account at the end of each accounting year end.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 4, Problem 1DQ

To determine

Introduction:

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements.

the steps in recording closing entries

Expert Solution & Answer

Answer to Problem 1DQ

Solution:

There are 4 steps to record closing entries.

Close Credit balances from all Revenue accounts to Income Summary
Close Debit balances from all Expense accounts to Income Summary
Close Income Summary (Net income/Loss) to Capital Account
Close Withdrawals account to Capital Account.

Explanation of Solution

Purpose of closing out process is to extend balances of each Income /Expense/Withdrawal/Income summary account to the Capital account so that it enables to identify the net change in Equity for the given accounting period as well as it enables to start next accounting year temporary accounts with a balance of zero.

Closing Journal Entries are as follows.

1) Close Credit balances from all Revenue accounts to Income Summary by Debiting Revenue Account and Crediting Income Summary Account.

	Dr	Cr
Revenue Account	$X
Income Summary Account		$X

2) Close Debit balances from all Expense accounts to Income Summary by Crediting Expense Account and Debiting Income Summary Account.

	Dr	Cr
Income Summary Account	$X
Expense Account		$X

3) Close Income Summary (Net income/Loss) to Capital Account

Net Gain − After closing out all Expenses and Income accounts if Income Summary Account results with a Credit Balance it is a Net gain, which means Income summary account contains more revenues than expenses. It will be closed out by debiting the income summary account and crediting Income summary account as follows.

	Dr	Cr
Income Summary Account	$X
Capital Account		$X

Net Loss − After closing out all Expenses and Income accounts if Income summary account results with a Debit Balance it is a Net Loss, which means Income summary account contains more expenses than Revenues. It will be closed out by Crediting the Income summary account and Debiting Capital Account

	Dr	Cr
Capital Account	$X
Income Summary Account		$X

4) Close Withdrawals account to Capital Account by Debiting Capital account and Crediting Withdrawals Account.

	Dr	Cr
Capital Account	$X
Withdrawals Account		$X

Conclusion

As mentioned above closing out journal entries are recorded to clear out each temporary account at the end of each accounting year end.

Answer 6

Chapter 4, Problem 1DQ

To determine

Introduction:

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements.

the steps in recording closing entries

Expert Solution & Answer

Answer to Problem 1DQ

Solution:

There are 4 steps to record closing entries.

Close Credit balances from all Revenue accounts to Income Summary
Close Debit balances from all Expense accounts to Income Summary
Close Income Summary (Net income/Loss) to Capital Account
Close Withdrawals account to Capital Account.

Explanation of Solution

Purpose of closing out process is to extend balances of each Income /Expense/Withdrawal/Income summary account to the Capital account so that it enables to identify the net change in Equity for the given accounting period as well as it enables to start next accounting year temporary accounts with a balance of zero.

Closing Journal Entries are as follows.

1) Close Credit balances from all Revenue accounts to Income Summary by Debiting Revenue Account and Crediting Income Summary Account.

	Dr	Cr
Revenue Account	$X
Income Summary Account		$X

2) Close Debit balances from all Expense accounts to Income Summary by Crediting Expense Account and Debiting Income Summary Account.

	Dr	Cr
Income Summary Account	$X
Expense Account		$X

3) Close Income Summary (Net income/Loss) to Capital Account

Net Gain − After closing out all Expenses and Income accounts if Income Summary Account results with a Credit Balance it is a Net gain, which means Income summary account contains more revenues than expenses. It will be closed out by debiting the income summary account and crediting Income summary account as follows.

	Dr	Cr
Income Summary Account	$X
Capital Account		$X

Net Loss − After closing out all Expenses and Income accounts if Income summary account results with a Debit Balance it is a Net Loss, which means Income summary account contains more expenses than Revenues. It will be closed out by Crediting the Income summary account and Debiting Capital Account

	Dr	Cr
Capital Account	$X
Income Summary Account		$X

4) Close Withdrawals account to Capital Account by Debiting Capital account and Crediting Withdrawals Account.

	Dr	Cr
Capital Account	$X
Withdrawals Account		$X

Conclusion

As mentioned above closing out journal entries are recorded to clear out each temporary account at the end of each accounting year end.

Answer 7

Chapter 4, Problem 1DQ

To determine

Introduction:

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements.

the steps in recording closing entries

Answer 8

Expert Solution & Answer

Answer to Problem 1DQ

Solution:

There are 4 steps to record closing entries.

Close Credit balances from all Revenue accounts to Income Summary
Close Debit balances from all Expense accounts to Income Summary
Close Income Summary (Net income/Loss) to Capital Account
Close Withdrawals account to Capital Account.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Purpose of closing out process is to extend balances of each Income /Expense/Withdrawal/Income summary account to the Capital account so that it enables to identify the net change in Equity for the given accounting period as well as it enables to start next accounting year temporary accounts with a balance of zero.

Closing Journal Entries are as follows.

1) Close Credit balances from all Revenue accounts to Income Summary by Debiting Revenue Account and Crediting Income Summary Account.

	Dr	Cr
Revenue Account	$X
Income Summary Account		$X

2) Close Debit balances from all Expense accounts to Income Summary by Crediting Expense Account and Debiting Income Summary Account.

	Dr	Cr
Income Summary Account	$X
Expense Account		$X

3) Close Income Summary (Net income/Loss) to Capital Account

Net Gain − After closing out all Expenses and Income accounts if Income Summary Account results with a Credit Balance it is a Net gain, which means Income summary account contains more revenues than expenses. It will be closed out by debiting the income summary account and crediting Income summary account as follows.

	Dr	Cr
Income Summary Account	$X
Capital Account		$X

Net Loss − After closing out all Expenses and Income accounts if Income summary account results with a Debit Balance it is a Net Loss, which means Income summary account contains more expenses than Revenues. It will be closed out by Crediting the Income summary account and Debiting Capital Account

	Dr	Cr
Capital Account	$X
Income Summary Account		$X

4) Close Withdrawals account to Capital Account by Debiting Capital account and Crediting Withdrawals Account.

	Dr	Cr
Capital Account	$X
Withdrawals Account		$X

Answer 12

Conclusion

As mentioned above closing out journal entries are recorded to clear out each temporary account at the end of each accounting year end.

Answer 13

Ch. 4 - Prob. 1DQ Ch. 4 - That accounts are affected by closing entries?...Ch. 4 - Prob. 3DQ Ch. 4 - What is the purpose of the Income Summary account?Ch. 4 - Prob. 5DQ Ch. 4 - Prob. 6DQ Ch. 4 - Why are the debit and credit entries in the...Ch. 4 - Prob. 8DQ Ch. 4 - Prob. 9DQ Ch. 4 - How is unearned revenue classified on the balance...

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements. the steps in recording closing entries

Concept explainers

Videos

Introduction:

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements.

the steps in recording closing entries

Answer to Problem 1DQ

Explanation of Solution

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Chapter 4 Solutions

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements. the steps in recording closing entries

Concept explainers

Videos

Introduction: Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements. the steps in recording closing entries

Answer to Problem 1DQ

Explanation of Solution

Want to see more full solutions like this?

Chapter 4 Solutions

Introduction:

Closing Entries are used to close out temporary accounts such as Income/Expense/Withdrawals and Income Summary Account at the end of each accounting cycle for preparation of year-end financial statements.

the steps in recording closing entries