What are some examples of closing entries?
submitted by Joe

Arnold

Debit Sales, Credit Expenses, Debit or Credit (the net of Sales and Expenses) Retained Earnings

shiela

Revenue, Income Summary, Expenses, Capital, Drawing

Spintzen

Closing entries are the final step in the accounting cycle for a period. They're meant to reset the temporary accounts, which are revenues, expenses, and dividends. This means they'll start out at zero at the beginning of the next period. Fresh start.

To answer your question:
If a company earned $50,000 in revenue and had $30,000 in expenses. At the end of the period, you'd close out the revenue account by debiting it for $50,000 and crediting Income Summary for $50,000. That will zero out your revenue.

You'd close expenses by crediting each expense account and debiting Income Summary for the total expenses of $30,000. After that, you'd close the Income Summary account to Retained Earnings. If Income Summary has a net income of $20,000 (revenue minus expenses), you'd debit Income Summary and credit Retained Earnings for that amount.

Lastly, if dividends were paid out, you'd close the Dividends account by debiting Retained Earnings and crediting Dividends.