Prepare the closing entries at January 31, 2014. (Credit account titles are auto
ID: 2776345 • Letter: P
Question
Prepare the closing entries at January 31, 2014. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
(To close revenue account)
(To close expense accounts)
(To close net income / (loss))
BARONE COMPANYAdjusted Trial Balance
January 31, 2014 Debit Credit Supplies $ 920 Prepaid Insurance 1,611 Salaries and Wages Payable $1,073 Unearned Service Revenue 781 Supplies Expense 824 Insurance Expense 537 Salaries and Wages Expense 1,626 Service Revenue 4,082
Explanation / Answer
Date Entry Debit Credit Remarks xx/xx/xxxx Service revenue a/c Dr $4,082.00 Income summary account is a temporary account. Revenue account is credit balance account by nature, so, to close revenue account, it has to be debited and credit needs to be given to Income summary account as income by nature will have credit balance. To Income summary a/c Cr $4,082.00 (To close revenue account) xx/xx/xxxx Income summary a/c Dr $2,987.00 Expense accounts by nature will have debit balance, so to close these accounts one has to credit them and a debit to be made to Income summary account) To supplies expense a/c Cr $824.00 To insurance expense a/c Cr $537.00 To salaries and wages expense a/c Cr $1,626.00 (To close expense accounts) xx/xx/xxxx Income summary a/c Dr $1,095.00 Profit is $4,082 -$2,987 =$1,095 as it is profit it will be on the credit side of Income summary account. so, this profit is credited to retained earnings account To retained earnings a/c Cr $1,095.00 (To close income/loss)