ACC 290T UOPX Wk 5 Accounting Closing Process Discussion.
3 substantive responses. This includes your initial post and 2 replies to other student or faculty posts.
Please respond to the following questions:
What are the steps in the closing process? How and why is the income summary account used in this process? Are all accounts closed out or just certain accounts? Why? What final step do we complete to ensure the accounts are still in balance after closing?
You may utilize your additional 2+ posts to reply to your classmates’ original posts. I also encourage you to post about any personal experience you might have with this week’s topic. Do you have any special tasks you have to do with your job at the end of the month or end of the year that might link to this closing process? You can also utilize these posts to ASK questions! If you
The four steps in the closing process are as follows:
- Close income statement credit balances: transfers credit balances that appear in revenue to the Income Summary. It brings all accounts with credit balances to zero by debiting them. This is done to create a zero balance in revenue so that everything is returned to zero for the start of the next period.
- Close income statement debit balances: transfers any debit balances in expense accounts to the income summary account.
- Close income summary account: transfers the balance of the income summary account to the capital account.
- Close withdrawals account: transfers any debit balance in withdrawals to the owners capital account.
The income summary is used only in the closing process. It is used to close revenue and expense accounts. Those accounts are transferred to the income summary at the end of the period. It is used to show total gains or losses during that period.
The closing process is only applied to certain accounts. Those are accounts that have been classified as temporary, or accounts that are only open during one accounting period. Temporary accounts reflect what happened during a specific period, and thus need to be closed at the end of that period.
Permanent accounts do not close at the end of the period, as they are representative of multiple periods. They are not closed and their ending balances are carried over into the next period.
The very final step in the closing process is that of the post closing trial balance. It is a list of permanent accounts and their balances after all of the closing entries. It lists all accounts not closed, and ensures that debits still equal credits.
I learned in this weeks reading that the closing process occurs at the end of an accounting period after financial statements are completed. In the closing process, we (1) identify accounts for closing, (2) record and post the closing entries, and (3) prepare a post-closing trial balance. We close the income summary by transferring the balance to the Capital Account. The income salary and other accounts are closed out so that they can have a zero balance. The final step we complete to ensure the accounts are still in balance after closing is to close the withdraw accounts.