PROCEDURES IN CLOSING ACCOUNTS

1. To close revenue accounts. Debit all revenue accounts with their

respective adjusted ending balance, and credit the income summary account
for the total revenues. The format for closing entry would be:

GENERAL JOURNAL
DATE DESCRIPTIONS PR Page Number 02
2002 Debit Credit
12/31 Sales xxx
Other income (itemized) xxx
Income summary xxx
To close revenues

2. To close expense accounts. Debit the income summary account for the total
expenses and credit all expense accounts with their respective adjusted ending
balance. The format of entry would be:

GENERAL JOURNAL
DATE DESCRIPTIONS PR Page Number 02
2002 Debit Credit
12/31 Income Summary xxx
Operating Expenses (itemized) xxx
Other expenses (itemized) xxx
To close expenses

3. To close net income. Debit income summary account and credit the owners
capital account. Note that there is net income if the net balance of income
summary account is a credit balance. The format of closing entry would be:

GENERAL JOURNAL
DATE DESCRIPTIONS PR Page Number 02
2002 Debit Credit
12/31 Income Summary xxx
Owners capital xxx
To close net income
4. To close net loss. Credit the income summary account and debit the owners
capital account. There is net loss if the net balance of income summary is a debit
balance. The format of closing entry would be:

GENERAL JOURNAL
DATE DESCRIPTIONS PR Page Number 02
2002 Debit Credit
12/31 Owners capital xxx
Income Summary xxx
To close net loss

5. To close owners withdrawals. Debit the owners capital account and

credit the owners drawing account. The format of closing entry is:

GENERAL JOURNAL
DATE DESCRIPTIONS PR Page Number 02
2002 Debit Credit
12/31 Owners capital xxx
Owners drawings xxx
To close owners withdrawals