COMM 295 Lecture Notes - Lecture 1: Double-Entry Bookkeeping System, Promissory Note, Asset
Document Summary
Closing entries are not needed if the business plans to continue operating in the future and. The dividends account is closed to the income summary account in order to properly determine net income (or loss) for the period. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances. Closing revenue and expense accounts to the income summary account is an optional bookkeeping procedure. Closing the dividends account to retained earnings is not necessary if net income is greater than dividends during the period. The dividends account is a permanent account whose balance is carried forward to the next accounting period. Closing entries are journalized after adjusting entries have been journalized. The amounts appearing on an income statement should agree with the amounts appearing on the post-closing trial balance. A business entity has only one accounting cycle over its economic existence. The accounting cycle begins at the start of a new accounting period.
