After Closing Trial Balance - BC Bookkeeping Tutorials|dwmbeancounter.com

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After Closing Trial Balance

Closing The Books

Prepare After Closing Trial Balance

After you prepare your Adjusted Trial Balance we transfer these balances to our After Closing Trial Balance Worksheet.
We then enter our closing entries and add or subtract the debit and credit amounts to arrive at our After Closing Trial Balance amounts.
Shabby Computer Systems   
After Closing Trial Balance Worksheet  
December 31, xxxx  
 
Account Name  / DescriptionAdjusted Trial Balance Closing Entries  After ClosingTrial  Balance

DebitCreditDebitRefCreditRefDebitCredit
Balance Sheet Accounts


Cash
5260





5260
Accounts Receivable
24800
24800
Office Supplies Inventory
300
300
Prepaid Insurance


Inventory for Resale
8000
8000
Truck
12400
12400
Accounts Payable

10001000
Other Accruals

500500
Shabby Computer Systems, Capital

2210024000a42160p40260



Shabby Computer Systems, Drawings
24000
24000a00



Total Balance Sheet Accounts
74760326005076050760



Revenue & Expense Accounts


Consulting Services

5000050000b00
Computer Sales

100000100000c00
Cost of Goods Sold-Computers
72500
72500d00
Purchases


Rent Expense
6000
6000e00
Utilities Expense
4800
4800f00
Office Supplies
1200
1200g00
Insurance Expense
6000
6000h00
Vehicle Operation Expense
3600
3600i00
Maintenance & Repairs
2900
2900j00
Depreciation Expense
3100
3100k00
Bad Debt Expense
1000
1000l00
Bank Charges
240
240m00
Advertising Expense
4250
4250n00
Professional Fees Expense
2250
2250o00



Total Revenue/Expense Accounts
10784015000000



Income Summary




50000b






100000c




72500d






6000e






4800f






1200g






6000h






3600i






2900j






3100k






1000l






240m






4250n






2250o












Balance Of Income Summary Account After Closing Revenue and Expense Accounts And Prior To Transferring Profit/Loss
Total Debits and Credits

107840
150000


Income Summary Balance-Credit Balance of 42160
 









Transfer Income Summary Balance-Profit/Loss


42160p












Total Income Summary


150000
150000




















 Total All Accounts
1826001826003240003240005076050760
Steps In Closing Our Books

  • Close Drawing Account to Capital Account
    See Entry (a)
  • Close All Revenue and Expense Accounts To Income Summary Account
    See Entries (b) thru (o)
  • Close Income Summary Account to Capital Account
    See Entry (p)
  • Calculate our After Closing Trial Balance Amounts. This column is a calculated by taking the balance in our Adjusted Trial Balance Column and adding or subtracting the debit and/or credit closing entry adjustments in our Closing Entry Column to arrive at our After Closing Trial Balance Amount.

Click on the Reference Number (Ref) in the After Closing Trial Balance Worksheet for an explanation of the closing entry.

Notice that all the revenue accounts are debited and all the expense accounts are credited in order to zero out their balances with the offsetting debit or credit entry to the temporary Income Summary Account. This account is then closed (transferred) to the Capital Account.

Closing Entries
Let's look at our definition of closing entries. Closing Entries-Entries made at the end of a period (usually year) to reduce the "temporary" account balances (revenue, expenses, and drawing accounts) to zero and transfer the summarized balances to the capital account All our Income Statement Accounts are going to be set to zero (closed) and the net balance (which is actually the profit/loss) transferred to the Capital Account in the Balance Sheet Accounts.

In addition the balance of the Owner's Drawing account is also transferred (closed) to the Capital Account in the Balance Sheet Accounts.
A quick refresher about our revenue, expenses, and draw accounts.

Revenue (Income), Expenses, and Draws

Revenues, expenses, and draws are sub categories of owner's equity. Think of owner's equity as a mom with three children to keep up with (I know she's only got one clinging to her leg but she left Expense and Draws at home). The kids are named Revenue, Expense, and Draws and each kid has one job that they are responsible for in order to earn their allowance. Kid Revenue is responsible for keeping track of increases in owner's equity and Kid Expense is responsible for keeping track of decreases in owner's equity resulting from business operations. Kid Draws has the job of keeping up with decreases in owner's equity resulting from owner withdrawals for living expenses and other personal expenses.

At the end of our period, we summarize all our kid's activities and transfer their balances to our Owner's Equity Capital Account (Mom).


What's Next ?

Formal Financial Statements
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