Question

You are an accountant for an electric company and you are recording closing entries. In a brief essay, relate the steps in recording closing entries. Also outline which accounts are affected and which accounts are not affected by closing entries. What two purposes are accomplished by recording closing entries?

Need help with this paper any suggestions? Please help.

Answer 1

Steps in recording Closing Entries:

Step 1: First thing is to close all the revenue accounts to Income Summary Accounts.

Step 2: Second step is to close all the Expense accounts to Income Summary Accounts.

Step 3: To close income Summary Accounts to Retained Earning Accounts.

Step 4: To close Dividend Accounts to Retained Earning Accounts.

Accounts Affected by Closing Entries: Temporary Accounts Like Sales Account, Cost of Goods Sold Accounts etc.

Accounts not Affected by closing entries: Permanent Accounts like Assets and Liabilities accounts. eg. Land, Building, Accounts Receivable, Note Payable.

Purpose:

1. To bring temporary account balance to zero on the general ledger.

2. Revenue and expense account will begin the next accounting year with a zero balance.

2.