Closing entries
Objective: Record the four closing entries.
Recommended first: The month-end close checklist
- 1. Close revenues to Income Summary.
- 2. Close expenses to Income Summary.
- 3. Close Income Summary to Owner Capital.
- 4. Close Owner Drawings to Owner Capital.
Afterward, every temporary account is zero and Owner Capital equals ending equity. The simulator refuses to close the same period twice.
Closing entries reset revenue, expense, and drawings accounts so the next period starts at zero, while carrying the period's result into capital. Many systems close automatically at year-end; this course shows the entries so you understand them. The month-end simulator blocks a second close of the same period, so balances cannot be doubled.
Check each closing entry against the adjusted trial balance: the amounts closed must equal the balances shown there, and Income Summary's balance after the first two entries must equal net income or net loss.
Check your work
- Are all temporary accounts zero after closing?
- Does capital increase by net income minus drawings?
- Was each closing entry posted only once?
Service Revenue $4,000.
| Account | Debit | Credit |
|---|---|---|
| Service Revenue | $4,000.00 | |
| Income Summary | $4,000.00 |
Common mistakes
✗ Closing drawings through Income Summary.
✓ Drawings go straight to capital.
Guided practice
Use hints freely here.
Item 1 of 1
Close revenue accounts
At Dec 31, 2026, Maple Street Tutoring's Service Revenue has a $7,400.00 credit balance and Interest Revenue has a $79.00 credit balance. Record the closing entry that transfers revenues to Income Summary.
Independent practice
Try these without hints. Completing the lesson needs at least one independent item solved without revealing the answer.
Item 1 of 6
Close expense accounts
At Dec 31, 2026, Maple Street Tutoring has Rent Expense $2,550.00, Wages Expense $1,550.00, and Supplies Expense $500.00, all debit balances. Record the closing entry.
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Key terms
- Closing entries
- Entries that reset temporary accounts to zero.
- Income summary
- A temporary account used during closing.
- Temporary account
- An account closed at period end.
References and provenance
- OpenStax, Principles of Accounting, Volume 1: Financial Accounting (accessed 2026-10-29)
Original lesson written for Bookkeeping Exercises (AI-assisted drafting). Calculations are verified by the platform's automated accounting tests. Not yet reviewed by a credentialed accountant. Updated 2026-10-29.