Question

1-Jun Cash 50,000.00
Owners Equity 50,000.00
Owner contributed cash to the business
1-Jun Vehicle 15,000.00
Cash 15,000.00
Owner purchased a vehicle
3-Jun Cash 25,000.00
Notes Payable 25,000.00
owner took out a small business loan
5-Jun Rent Expense 1,195.00
Prepaid Rent 7,170.00
Cash 8,365.00
Owner paid rent for June and prepaid office rent
5-Jun Business License Expense 250.00
Cash 250.00
Owner paid business license fees
5-Jun Office Supplies 750.00
Accounts Payable 750.00
Owner ordered office supplies on account
6-Jun Accounts Receivable 1,000.00
Servoce Revenue 1,000.00
Owner performed service for a client on account
9-Jun Cash 750.00
Accounts Receivable 750.00
Service Revenue 1,500.00
Owner provided service for client(partial payment)
10-Jun Advertising Expense 250.00
Cash 250.00
Owner paid advertising costs
15-Jun Wages Expense 325.00
Wages Payable 325.00
Wages due to part-time employee
15-Jun Prepaod Insurance 750.00
Cash 750.00
Owner prepaid business insurance
20-Jun Wages Payable 325.00
Cash 325.00
Owner paid wages due to part-time employee
21-Jun Repairs and Maintenance Expense 210.00
Cash 210.00
Owner paid for plumbing repairs in the office
22-Jun Owners Draw 1,000.00
Cash 1,000.00
Owner withdrew cash for personal use
23-Jun CAsh 1,000.00
Accounts Receivable 1,000.00
Customer paid balance due from June 6 service
25-Jun Cash 800.00
Service Revenue 800.00
28-Jun Owner provided service to a client (pd at time of service)
Accounts Payable 750.00
Cash 750.00
Owner paid balance due for office supplies
29-Jun Accounts Receivable 2,225.00
Service Revenue 2,225.00

30-Jun Utilities Expense 155.00
Accounts Payable 155.00
Paid the telephone bill
30-Jun Wages Expense 325.00
Wages Payable 325.00
Wages owed to parti-time worker
30-Jun Depreciation Expense 250.00
Accumulated Depreciation 250.00
Record depreciation on vehicle

show me how to do closing entries

Answer 1

Closing entries are necessary to reset the balances of temporary accounts (like revenues and expenses) to zero for the next accounting period. Let's go through the closing entries step by step based on the transactions provided for June.

**Step 1: Identify Permanent and Temporary Accounts**

- **Permanent Accounts** (not closed):
- Assets (Cash, Accounts Receivable, Vehicle, Prepaid Rent, Office Supplies, Prepaid Insurance, etc.)
- Liabilities (Accounts Payable, Notes Payable, Wages Payable)
- Owner’s Equity (Owner's Equity, Owner's Draw)

- **Temporary Accounts** (closed):
- Revenues (Service Revenue)
- Expenses (Rent Expense, Business License Expense, Advertising Expense, Wages Expense, Repairs and Maintenance Expense, Utilities Expense, Depreciation Expense)

**Step 2: Closing Revenue Accounts**

We will first close the revenue accounts by debiting Service Revenue and crediting the Owner's Equity account (Retained Earnings).

### Closing Entry for Revenues
```plaintext
Date Account Title Debit Credit
30-Jun Service Revenue 5,525.00
Owner's Equity (Retained Earnings) 5,525.00
```
*(Total Revenue: $1,000 + $1,500 + $800 + $2,225 = $5,525)*

**Step 3: Closing Expense Accounts**

Next, we close all expense accounts by debiting Owner's Equity (Retained Earnings) and crediting each individual expense account.

### Closing Entries for Expenses
```plaintext
Date Account Title Debit Credit
30-Jun Owner's Equity (Retained Earnings) 2,060.00
Rent Expense 1,195.00
Business License Expense 250.00
Advertising Expense 250.00
Wages Expense 650.00
Repairs and Maintenance Expense 210.00
Utilities Expense 155.00
Depreciation Expense 250.00
```
*(Total Expenses: $1,195 + $250 + $250 + $650 + $210 + $155 + $250 = $2,060)*

**Step 4: Closing the Withdrawals or Draws**

Finally, we will also close the Owner's Draw account to Owner’s Equity.

### Closing Entry for Owner’s Draw
```plaintext
Date Account Title Debit Credit
30-Jun Owner's Equity (Retained Earnings) 1,000.00
Owner's Draw 1,000.00
```

**Final Summary of Closing Entries:**
- Close revenue accounts to Owner's Equity.
- Close expense accounts to Owner's Equity.
- Close Owner’s Draw account to Owner's Equity.

The final balances in the temporary accounts will be $0, and you will have updated the Owner's Equity (Retained Earnings) to reflect the net income or loss and withdrawals for the period.