Question

What are closing entries? Give four examples of closing entries.

Answer 1

The balances of all nominal accounts are transferred to the Trading and Profit and Loss Account. The entries required for such transfers are termed as closing entries.

The examples of closing entries are given below.

1. Closing entries to transfer the following items to the debit side of trading account from Trial Balance:

Trading A/c		Dr.
	To Opening Stock A/c
	To Purchase A/c
	To Wages A/c
	To Carriage A/c
	To All Other Direct Expenses A/c
(Transferred debit balances to Trading Aaccount)

2. Closing entries to transfer the following items to the credit side of trading account from Trial Balance:

Sales A/c		Dr.
Closing Stock A/c		Dr.
	To Trading A/c
(Transferred credit balances to Trading Account)

3. Closing entries to transfer the following items to the debit side of Profit and Loss Account from Trial Balance:

Profit and Loss A/c		Dr.
	To Salaries
	To Rent
	To Bad Debts
	To All in Direct Expenses (Transferred debit balances to Profit and Loss Account)

4. Closing entries to transfer the following items to the credit side of Profit and Loss Account from Trial Balance:

Commission Received A/c		Dr.
Interest Received A/c		Dr.
All Other Indirect Income A/c		Dr.
	To Profit and Loss A/c
(Transferred credit balances to Profit and Loss Account)