Comments on: Closing Entries

By: Kenneth Meunier

Kenneth Meunier — Thu, 05 Apr 2012 15:28:53 +0000

Hi Tabby and thank you for your question.

Take the prior year GL and file it away for your recordkeeping after you carry the balances forward. Start a new journal for the new year as well. You will want to do that for recordkeeping, audits, etc.

For the balance sheet accounts you can carry the balance forward and start the GL for a new year. For the income statement accounts you can start the new GL with zero balances. This will help keep your financial statements in order and keep the years separate.

Kenneth

By: Tabbi

Tabbi — Thu, 05 Apr 2012 03:16:59 +0000

This is a probably a very simple answer for my question. Once the closing process has been completed and the post trial balance has been done, for the next accounting period, would I continue showing my general journal entries right where I left off and since the temporary accounts have a zero balance in the general ledger, would I just post my next transaction for the next accounting period right under the zero balance? Or would I need to start a new general journal and a new ledger for my temporary accounts? The problem that I need to do is all by hand, not computerized.

By: Kenneth Meunier

Kenneth Meunier — Tue, 20 Dec 2011 17:26:50 +0000

Hi Fido -

If you have a net loss the income summary will have a debit balance, so you can debit retained earnings and credit income summary to close it out. This will reduce retained earnings as a result of the net loss for the period.

Kenneth

By: Fido

Fido — Tue, 20 Dec 2011 11:38:25 +0000

What if we have a Net Loss instead of net income ?

By: Raksmei

Raksmei — Wed, 21 Sep 2011 02:47:34 +0000

can you show me about the closing entry for construction company ?

By: Kenneth Meunier

Kenneth Meunier — Thu, 05 May 2011 05:57:58 +0000

Hi Ashley -

If you need to add more interest, you can do that in an adjusting entry

Debit interest expense and credit interest payable (or credit cash if you are also actually paying the interest too).

By: ashley prince

ashley prince — Wed, 04 May 2011 16:51:53 +0000

if u have interest on a loan in the trial balance,and u have been given a percentage on the loan to calculate the loan in the trial balance, how will u treat it when ur calculation figure is bigger than the interest on loan figure in the trial balance.

By: Kenneth Meunier

Kenneth Meunier — Wed, 13 Apr 2011 17:12:12 +0000

Hi Sarah -

Your software should have a record of the financial statements. The accounts are only zeroed out to start a new accounting period, but the data should still be there from the latest and prior years. You can run the income statement, or you can simply run revenues and expenses for the entire year (and be sure to include any adjusting transactions).

Kenneth

By: Sarah

Sarah — Wed, 13 Apr 2011 16:52:05 +0000

After all closing journal entries were done on dec 31st, the P&L is now all zeroes as of Dec 31. So in order to see the details of how the company did in each P&L category (admins cost, COGS, sales, etc) do I now have to run reports from Jan 1 thru Dec 30? I’m confused. Thank you very much!

By: Kenneth F. Meunier

Kenneth F. Meunier — Fri, 04 Mar 2011 23:30:17 +0000

Hi Jharig - The closing entries were made after the adjusting entries, so yes the temporary accounts were rolled into retained earnings, leaving the temporary accounts all with zero balances for January in this example. But reversing entries are optional and are only made in certain situations (i.e. if an adjusting entry increased an asset or liability account). For example, the reversing entry in February of next period makes the expense account negative, but the entry to record it is positive in Feb, making it zero. This is because the actual expense was incurred in January, so the reversing entry eliminated it in Feb. The steps in the accounting cycle cover the entire process from the original accounting journal entries to the optional reversing entries in the next period and should help clarify. Kenneth