16 - Closing the Books at the End of the Period (The Closing Process)

Example: You own a sole proprietorship. For this period, you had revenue of $100,000, wage expense of $40,000, and computer expense of $30,000 (net income of $30,000). You also contributed $10,000 to the business this period. Step 1 – Transfer Revenue and Expense items to Income Summary                                                              Debit           Credit Revenue                                        $100,000             Income Summary                                  $100,000 Income Summary                       $40,000            Wage Expense                                           $40,000 Income Summary                       $30,000            Computer Expense                                  $30,000 Step 2 – Transfer Income Summary to Equity (capital account)                                                                   Debit           Credit Income Summary                            $30,000            Capital Account – YOUR NAME                 $30,000 Step 3 – Transfer contribution/distribution accounts to capital account                                                             Debit          Credit   Contributions – YOUR NAME     $10,000           Capital Account – YOUR NAME           $10,000