LESSON 16-2
Recording Closing Entries
for Income Statement
Accounts
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2
CLOSING ENTRIES FOR A CORPORATION
 Closing entries for a corporation are made from information in a
work sheet
 Corporation’s closing entries to close net income & temporary
equity accounts are similar to those for a proprietorship
 A corporation records four closing entries
 A closing entry for income statement accounts with credit balances
(revenue & contra cost accounts)
 A closing entry for income statement accounts with debit balances (cost,
contra revenue, & expense accounts)
 A closing entry to record net income or net loss in the retained earnings
account & close the income summary account
 A closing entry for the dividends account
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LESSON 16-2
3
INCOME SUMMARY ACCOUNT
 At the end of the fiscal period, the temporary accounts are
closed to prepare the general ledger for the next fiscal period
 Amounts needed for the closing entries are obtained from the
Income Statement & Balance Sheet columns of the work sheet
& from the statement of stockholders’ equity
 Closing entries are recorded in the general journal
 Temporary accounts (revenue, cost, expense) accounts from
the income statement are closed into the income summary
account
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 16-2
4
CLOSING ENTRY FOR ACCOUNTS WITH
CREDIT BALANCES
3
page 488
3
1
2
4
1. Heading
2. Date
CENTURY 21 ACCOUNTING © Thomson/South-Western
3. Debits to close
4. Credit to Income Summary
LESSON 16-2
5
CLOSING ENTRY FOR INCOME STATEMENT
ACCOUNTS WITH DEBIT BALANCES
1.
2.
3.
4.
page 489
Date
Account debited
Credits to close
Debit amount
3
3
1
2
4
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LESSON 16-2
SUMMARY OF CLOSING ENTRY FOR
INCOME STATEMENT ACCOUNTS WITH
DEBIT BALANCES
6
page 490
The balance in the Income Summary account is equal to the net income
or loss shown on the work sheet.
Bal.
(New Bal. zero)
Adj. (mdse. inv.)
Closing (debit
accounts)
Purchases
209,960.00 Closing
Income Summary
15,840.00 Closing (credit
amounts)
404,099.15
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(New Bal.
209,960.00
500,253.10
80,313.95)
LESSON 16-2
7
CLOSING ENTRY TO RECORD NET
INCOME
page 491
1
2
3
1. Date
2. Debit Income Summary
3. Credit Retained Earnings
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LESSON 16-2
8
CLOSING ENTRY FOR DIVIDENDS
page 491
1
2
3
1. Date
2. Debit Retained Earnings
3. Credit Dividends
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LESSON 16-2
9
COMPLETED CLOSING ENTRIES FOR A
CORPORATION RECORDED IN A JOURNAL
page 492
After all closing entries
have been recorded the
next step would be to
post the adjusting &
closing entries to the
general ledger
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 16-2