What are the closing entries? Give four examples of closing entries.
What are the closing entries? Give four examples of closing entries.
The preparation of Trading and Profit and Loss account requires that the balances of accounts of all concerned items are transferred to it for its composition. For transferring the balance of all the Ledger account to concerned head is done through closing entries. Here are some examples of closing entries.
(i) Opening stock account, Purchase account, Wages account, Carriage inwards account and Direct expenses account are closed by transferring to the debit side of the Trading and Profit and Loss account. This is done by recording the following entry
Trading A/c Dr
To Opening Stock A/c
To Purchase A/c
To Wages A/c
To Carriage Inwards A/c
To All Other Direct Expenses A/c
(ii) The purchase return or Return outwards account are closed by transferring its balance to the Purchase account. The following entry is recorded for this purpose
Purchase Return A/c Dr
To Purchase A/c
(iii) Similarly, the Sales return or Returns inwards account is closed by transferring its balance to the Sales account as
Sales A/c Dr
To Sales Return A/c
(iv) The Sales account is closed by transferring its balance to the credit side of the Trading and Profit and Loss account by recording the following entry
Sales A/c Dr
To Trading A/c
The preparation of Trading and Profit and Loss account requires that the balances of accounts of all concerned items are transferred to it for its composition. For transferring the balance of all the Ledger account to concerned head is done through closing entries. Here are some examples of closing entries.
(i) Opening stock account, Purchase account, Wages account, Carriage inwards account and Direct expenses account are closed by transferring to the debit side of the Trading and Profit and Loss account. This is done by recording the following entry
Trading A/c Dr
To Opening Stock A/c
To Purchase A/c
To Wages A/c
To Carriage Inwards A/c
To All Other Direct Expenses A/c
(ii) The purchase return or Return outwards account are closed by transferring its balance to the Purchase account. The following entry is recorded for this purpose
Purchase Return A/c Dr
To Purchase A/c
(iii) Similarly, the Sales return or Returns inwards account is closed by transferring its balance to the Sales account as
Sales A/c Dr
To Sales Return A/c
(iv) The Sales account is closed by transferring its balance to the credit side of the Trading and Profit and Loss account by recording the following entry
Sales A/c Dr
To Trading A/c
