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Lecture 4

ACCO 230 Lecture Notes - Lecture 4: Retained Earnings


Department
Accountancy
Course Code
ACCO 230
Professor
Elizabetta Ipino
Lecture
4

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COMM$217$–$Financial$Accounting$
CHAPTER$4$
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Handout: Closing entries
COGS
Expenses Revenues
Sales Revenue
850
0
850
To close Expense
accounts:
Credit each individual
To close Revenue
accounts:
Debit each individual
Rent Expense
50
50
balance and Debit Income
Summary for total
expenses
Rent Revenue
20
20
balance and Credit
Income Summary for total
revenues
0 0
Interest Expense
35
35
0
Income tax Expense
25
25
0
Retained Earnings
OB: 500
15 60
545
Income Summary
960
1,020
60 60 (NI)
0
The net balance of the Income Summary
account is the Net Income (NI)
. It can be a Credit amount if NI>0
(net profit)
. Or a Debit amount if NI<0
(net loss)
To close the Income Summary
account:
If NI>0, Debit Income Summary for the
balance in the account and Credit
Retained Earnings,
If NI<0, Credit Income Summary and
Debit Retained Earnings.
Dividends
15
15
To close the Dividends account:
Credit Dividends for the balance in the account and Debit
Retained Earnings
0
!:$1$:$
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