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Preparing a closing entries
Entries on my Adusted trial balance
Debit Credit Cash 10678 Repair supplies 194 Repair equipment 4400 Prepaid insurance 100 Account payable 4100 Common stock 12000 Dividends 800 Bicycle repair revenue 2672 Insurance expense 1100 Store rent expense 1040 Utility expense 154 Income tax expense 40 Depreciation expense 70 Repair supplies expense 196 Total 18,772 18772 Prepar closing entries on Oct 31 Oct 31 Service Revenue 2672 Retained Earning 2672 Retained Earning 272 Insurance Expense 1100 Store Rent Expense 1040 Utility Tax Expense 154 Income Tax Expense 40 Depreciation Expense 70 Repair supplies Expense 196 Retaining Earning 800 Dividends 800 Can you please let me what I am doing wrong. Thanks, Nikita |
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Your first closing entry should have a Credit to the Income Summary account, not Retained Earnings. Your second closing entry where you close out expenses to Retained Earnings you should not have a Debit to Retained Earnings and your amount does not equal your credits. Your Debit should be to the Income Summary Account. Now you close your Income Summary to Retained Earnings by debiting Income Summary for the diffence between your credits and Debits, and crediting Retained Earnings. Finally you close out your dividends to Retained Earnings. |
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THIS IS WHAT I HAVE. CAN YOU PLEASE CONFIRM
Debit credit Oct 31 Service Revenue 2672 Income Summary 2672 Income Summary 2672 Insurance Expense 1100 Store Rent Expense 1040 Utility Expense 154 Income Tax Expense 40 Depreciation Expense 70 Repair Supplies Expense 196 Retained Earning 800 Dividend 800 Thanks for all your help. Nikita |
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Your Debit amount for Retained Earnings is incorrect for your second closing entry. Your amount is 2672, but it should be 2600 as your Credits to your Expense accounts equal 2600. The net effect of your closing entries will be that you have a Debit amount of $728 in Retained Earnings and this amount will flow through to your post-closing balance sheet. The result is that your ending Retained Earnings account will be reduced by $728 |
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