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Closing Journal Entries

What are the four closing journal entries? Why are they necessary?

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Dear student,
Detailed answer to your question is provided in the attached word document with the example of closing entries.

1 Introduction:

After transactions are identified, recorded, and summarized, and Trial balance prepared, the following four financial statements are prepared.

1 INCOME STATEMENT

2 STATEMENT OF OWNER'S EQUITY

3 BALANCE SHEET

4 CASH FLOW STATEMENT

It is more convenient to prepare Income statement and balance sheet with the help of a 10 column work sheet. All income accounts like sales revenue, service revenue etc., having credit balance as such entered in credit column of income statement of work sheet.

Expenses accounts are debit balances which are entered in debit column of income statement part of work sheet.

Adjusting entries are made to adjust the accounts at the end of the period. The adjusting entries are incorporated in the work sheet by adding the expenses payable or incomes accrued in the related ...

Solution Summary

The four closing journal entries are determined. Why it is necessary is given.

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