Hello in this lecture we’re going to continue on with the closing process with step four, the final step of the process which will be to close out the draws. Remember that the objective is to have the adjusted trial balance be converted to the post closing trial balance. adjusted trial balance is what we use to create the financial statements. And the difference between the adjusted trial balance and the post closing trial balance will be that we want to have all temporary accounts including draws revenue and expense accounts to be converted to zero and have all that be in the owner capital account meaning the owner capital account will now be including all these accounts underneath it crunched into basically one number, we’re going to do that with a four step process.
Posts with the close tag
Closing Entries Journal Entry 3 of 4 Step 3 Income summary
Hello in this lecture, we’re going to talk about the closing process step three of the four step closing process, which will include the close of the income summary to the capital account. Remember that our objective is to close out all the temporary accounts, which are all the accounts below capital, including drawers, and the income statement accounts of revenue and expenses. So we want the adjusted trial balance to be converted to the post, post closing trial balance, which means that everything from capital on down will be zero. The way we do that is the four steps and that includes step one we did in a prior video closeout income to the income summary. Step two was to close out expenses to the income summary. Step three is what we’re going to do now close out the income summary now having net income in it to the capital account, then we’re finally going to close out the draws to the capital account.
Closing Process Step 1 of 4 – Journal Entry 1 of 4
Hello, in this lecture, we’re going to talk about the closing process step one of the step four process. Last time, we talked about the objectives of the closing process, which in essence was to close out the temporary accounts, all the accounts from the draws, and the revenue and expenses on down to zero. Putting that balance into the capital account, we talked about how we were going to do that, we’re going to do a four step process, including closeout, the income to the income summary, and then close out the expenses to the income summary. And then we’re going to close out the entire income summary to the capital account. And finally closeout draws to the capital account. We’re going to start off with step one of those four step processes. In order to do this. We are adding this new account you’ve probably been wondering, income summary account, what is that? Where did it come from? Why is it there? The income summary can be called a clearing account, meaning it’s going to start at zero and it’s going to end at zero right when we’re done with this four step process which we’re going to do basically at the same point. Time.