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

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).

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

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