ADJUSTING AND CLOSING ENTRIES

Preparing the General Journal (P. 222)

Adjusting

1. From the Worksheet, transfer the Adjustments column amounts to the General Journal.

Closing (Sales, Expenses, Income Summary…Net Income/Loss, and Drawing)

1. Journalize the closing transaction for Sales. (Sales is debited and Income Summary is credited.)

2. Journalize the closing transaction for Expenses. (Income Summary is debited for the total amount of all the Expenses and the Expenses are all credited.)

3. Journalize the closing transaction for the Income Summary…..Net Income/Loss. (Most often, if a Net Income, the Income Summary is debited and the Capital account is credited.) *If a Net Loss…..REVERSE.

4. Journalize the closing transaction for the Drawing account. (Capital is debited and Drawing is credited.)

Post each item right down the line from the General Journal to the Ledger Accounts

Finally…..prepare the Post-Closing Trial Balance

1. Transfer each account balance from the Ledger accounts to the Post-Closing Trial Balance.

2. Total the Debit and Credit columns. (They must equal.) If they don't, you know you made an error posting.