Balance sheet account balances called real or

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Unformatted text preview: he only accounts that are closed and brought to a zero balance. Balance sheet account balances (called real or permanent accounts) continue into the next accounting period. Steps to closing accounts: 1. Close all revenue accounts. Revenue accounts have a credit balance, so in order to zero these accounts, you must debit them. The credit will increase the income summary account. Debit: Revenues Credit: Income Summary 2. Close all expense accounts. Expense accounts have a debit balance, so in order to zero these accounts, you must credit them. The debit goes to Owner's Equity (or retained earnings, if a corporation). Debit: Income Summary Credit: Expenses 3. Close the balance of the income summary account. If the remaining balance is a credit (net income) then: Debit: Income Summary (to zero out the account) and Credit: Retained Earnings. If remaining balance is a debit balance (net loss) then: Credit: Income Summary and Debit: Retained Earnings Prepare a Post-Closing Trial Balance • Post closing trial balance will only have account balances for balance sheet accounts (assets, liabilities, and owner's equity) • All revenue and expense accounts will have a zero balance. • Debits still must equal credits! 34...
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This note was uploaded on 01/22/2014 for the course ACG 2021 taught by Professor Linkovich during the Spring '08 term at University of South Florida - Tampa.

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