Closing Process Explained

Hello in this lecture we’re going to talk about the objectives of the closing process the closing process will happen after the financial statements have been created. So we will have done the journal entries where we will have compiled those journal entries into a trial balance, and then we will have made the financial statements. And then as of the end of the period in this case, we’re going to say as of December, when we move into the next time period, January, what we need to do is close out some of the temporary accounts those accounts including the income statement and the draws account so that we can start the new period from start in a similar way as if we were trying to see how many miles we could drive say in a month. If we wanted to Vince in December, and then see how many miles we’re going to drive in January of next year.

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Statement of Equity From Trial Balance 17

More in this presentation we will take a look at the statement of owner’s equity and see how to construct the statement of owner’s equity from the trial balance. When looking at the trial balance, we can see the accounts will be in order with the assets and then the liabilities, then the equity and then the revenue and expenses. The equity accounts being broken out here of owner capital and draws. But it’s a little deceiving to break out this equity section. Because the trial balance really is showing both a point in time the balance sheet account permanent accounts up top and timing accounts which are going to be the revenue accounts down below. When we think about the point in time for total equity as a whole. We’re really considering the entire blue area here. This is one of the most confusing concepts to really know when you’re looking at these financial statements.

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