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    How to prepare a closing entry

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    Given are the adjusted account balances as of December 31st, 2001:

    cash $45,000

    capital $85,000

    accounts payable $33,000

    service revenue $84,000

    depreciation expense-building $12,000

    salary expense $29,000

    unearned service revenue $24,000

    pre paid rent $9,000

    supplies expense $6,000

    note payable $70,000

    land $65,000

    accounts receivable $32,000

    accumulated depreciation -building $12,000

    interest revenue $15,000

    interest payable $3,000

    withdrawals $20,000

    rent expense $15,000

    building $85,000

    supplies $4,000

    interest expense $4,000

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    Solution Preview

    The purpose of closing entry is to close out the temporary accounts such as revenues, expenses, and withdrawals into the owner's equity account. This process is facilitated by the introduction of a temporary account created for closing process. This account is known as the income summary account. For revenue, we will need to debit revenue and ...

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    This solution is comprised of a detailed explanation to answer how to prepare a closing entry.