Closing Accounts

How to close income summary?

- If net income is positive, income summary will have a credit balance. - Debit income summary the amount of the net income - Credit RE the amount of the net income

How to close dividends account?

- Credit dividends because dividends has a debit balance - Debit Retained earnings

How to close expense accounts?

- Credit expenses for the total amount of expenses because expenses have a debit balance - Debit income summary to keep debits and credits equal

How to close a revenue account?

- Debit revenue for total amount of revenues - Credit income summary to keep debits and credits equal

What are the 4 steps in the closing process?

1) Close expense accounts 2) Close revenue accounts 3) Close income summary account AND update retained earnings 4) Close dividend account