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Examples of Closing Entries

The document provides information to prepare closing entries for Gray Electronics Repair Services for the year ended December 31, 2016. The adjusted trial balance is given. The steps are: 1) close service revenue to income summary, 2) close expenses to income summary, 3) close income summary to Mr. Gray capital, and 4) close Mr. Gray drawings to Mr. Gray capital.

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windell arth Mercado
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163 views1 page

Examples of Closing Entries

The document provides information to prepare closing entries for Gray Electronics Repair Services for the year ended December 31, 2016. The adjusted trial balance is given. The steps are: 1) close service revenue to income summary, 2) close expenses to income summary, 3) close income summary to Mr. Gray capital, and 4) close Mr. Gray drawings to Mr. Gray capital.

Uploaded by

windell arth Mercado
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Prepare the closing entries using the following information:

Gray Electronics Repair Services


Adjusted Trial Balance
December 31, 2016

Account title Debit Credit


Cash 7 480.00
Accounts Receivable 3 700.00
Service Supplies 600.00
Furniture and Fixtures 3 000.00
Service Equipment 16 000.00
Accumulated Depreciation 720.00
Accounts payable 9 000.00
Utilities Payable 1 800.00
Loans Payable 12 000.00
Mr. Gray, Capital 13 200.00
Mr. Gray, Drawing 7 000.00
Service Revenue 9 850.00
Rent Expense 1 500.00
Salaries Expense 3 500.00
Taxes and Licenses 370.00
Utilities Expense 1 800.00
Service Supplies expense 900.00
Depreciation expense 720.00
TOTALS 47 570.00 47 570.00

STEP 1: CLOSE ALL INCOME ACCOUNTS TO INCOME SUMMARY


Dec. 31 Service revenue 9 850.00
Income Summary 9 850.00
In the given data, there is only 1 income account, i.e. Service Revenue. It has a credit balance of 9 850.00. To close
that, we debit Service revenue for the full amount and credit income summary for the same. Income summary is
temporary account so it is to close the income and expense.

STEP 2: CLOSE ALL EXPENSE ACCOUNTS TO INCOME SUMMARY


Dec. 31 Income Summary 8 790.00
Rent expense 1 500.00
Salaries expense 3 500.00
Taxes and Licenses 370.00
Utilities expense 1 800.00
Service supplies expense 900.00
Depreciation expense 720.00
To close expenses, we credit the expense accounts and debit income summary. We need to get the balance of the
income summary account. In step 1 we credited it for 9 850.00 and debited it in step 2 for 8 790.00. it would then
have a credit balance of P 1,060.00.

STEP 3: CLOSE INCOME SUMMARY TO THE APPROPRIATE CAPITAL ACCOUNT


Dec. 31 Income Summary 1 060.00
Mr. Gray Capital 1 060.00

STEP 4: CLOSE WITHDRAWALS TO THE CAPITAL ACCOUNT


Dec. 31 Mr. Gray Capital 7 000.00
Mr. Gray Drawing 7 000.00
This step is applicable to sole and partnerships. In our example is a sole proprietorship business. Mr. Gray
withdrawals are recorded in Mr. Gray Drawing. To close drawing account to the capital account we credit the drawing
account and debit the capital account.

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