🚀

Journal Entries to Memorize

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Pro Tip: Rotate your smartphone to landscape mode or use a laptop for proper display of journal entries.

Ch. 4 Journal Entries to Master

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🔹 Journal Entries (Perpetual Inventory)

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🔹Buyer-Side Journal Entries (Perpetual)

Transaction: Buying inventory using cash:

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Merch. Inventory $$$ Cash $$$

Transaction: Acquiring inventory on credit:

📝

Merch. Inventory $$$ Accounts Payable $$$

Transaction: Covering shipping costs with cash as the buyer:

📝

Merch. Inventory $$$ Cash $$$

Transaction: Returning inventory or obtaining a price discount from the supplier:

📝

Accounts Payable $$$ Merch. Inventory $$$

Note: This entry is simply a “flip” of the purchase entry!

Transaction: Paying an invoice with cash (outside the discount window) for inventory first acquired on credit:

📝

Accounts Payable $$$ Cash $$$

Transaction: Paying with cash (within the discount timeframe) for inventory initially taken on credit:

📝

Accounts Payable $$$ Merch. Inventory $$$ Cash $$$

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🔹Seller-Side Journal Entries (Perpetual)

Transaction: Selling inventory and collecting cash:

📝

Cash $$$ Sales $$$

📝

Cost of Goods Sold $$$ Merch. Inventory $$$

Important: In a Perpetual Inventory System, you’ll make TWO entries:

Record the sales (what you charged the customer).
Account for the cost (your original purchase price of the inventory).

This method ensures COGS is updated in real-time!

Transaction: Selling inventory on credit:

📝

Accounts Receivable $$$ Sales $$$

📝

Cost of Goods Sold $$$ Merch. Inventory $$$

Important: In a Perpetual Inventory System, you’ll make TWO entries:

Record the sales (what you charged the customer).
Account for the cost (your original purchase price of the inventory).

This method ensures COGS is updated in real-time!

Transaction: Paying shipping costs as the seller:

📝

Shipping Expense $$$ Cash $$$

Transaction: Customer returning inventory (goods shipped back):

📝

Sales Returns & Allowances $$$ Accounts Receivable $$$

📝

Merch. Inventory $$$ Cost of Goods Sold $$$

Important: Record TWO entries: One for the sales return and another for the cost.

Transaction: Customer returning inventory (accepting a price reduction but keeping the goods):

📝

Sales Returns & Allowances $$$ Accounts Receivable $$$

Note: Only ONE entry is required, as only the sales are affected.

Transaction: Receiving cash for inventory sold on credit (outside the discount period):

📝

Cash $$$ Accounts Receivable $$$

Transaction: Receiving cash for inventory sold on credit (within the discount period):

📝

Cash $$$ Sales Discount $$$ Accounts Receivable $$$

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🔹Closing Entries (Perpetual)

First, review closing entries from Chapter 3.

💯

Pro Tips for Exams

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Closing Entries

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Closing Revenue Accounts using R.E.I.D.

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing Revenue Accounts

With a solid understanding of debits & credits for each account type, closing entries become very straightforward. Let's reference the following framework from Chapter 2 for debits & credits: Assets = Liabilities + Equity Revenues / Expenses (+/-) (-/+) (-/+) (-/+) (+/-)

Revenues operate on a (-/+) basis, meaning to close (i.e., reduce to zero), we must DEBIT THEM.
Then, we total the closed revenue accounts, and “dump” them into the Income Summary on the other side of the entry — ensuring debits are equal to credits.

📝

Revenue #1 50,000 Revenue #2 20,000 Revenue #3 30,000 Income Summary 100,000

‣

Wondering why there are three revenue accounts?

This is simply a hypothetical scenario.
Depending on your exam, you may have only one revenue account to close (e.g. Fees Earned), or multiple revenue accounts needing closing (Fees Earned, Consulting Revenue, Rent Revenue, Sales, etc.).
In essence, the point I’m trying to illustrate is that, whatever revenues you see on the income statement — they will ALL need to be closed!

‣

Closing Expense Accounts using R.E.I.D.

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing Expense Accounts

With a solid understanding of debits & credits for each account type, closing entries become very straightforward. Let's reference the following framework from Chapter 2 for debits & credits: Assets = Liabilities + Equity Revenues / Expenses (+/-) (-/+) (-/+) (-/+) (+/-)

Expenses work the opposite of revenues, like (+/-), which means to close, i.e. reduce them to zero, — we must CREDIT THEM.
Then, we total the closed expense accounts, and “dump” them into the Income Summary on the other side of the entry — ensuring debits are equal to credits.

📝

Income Summary 75,000 Expense #1 5,000 Expense #2 15,000 Expense #3 25000 Expense #4 30,000

‣

Wondering why there are four expense accounts?

This is simply a hypothetical scenario.
Depending on your exam, you may have only one expense account to close (e.g. Cost of Goods Sold), or multiple expense accounts needing closing (Depreciation Expense, Wages Expense, Rent Expense, Advertising Expense, etc.).
In essence, the point I’m trying to illustrate is that, whatever expenses you see on the income statement — they will ALL need to be closed!

‣

Closing Income Summary (Net Income) using R.E.I.D.

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing the Income Summary Account (Net Income Scenario)

Closing this account depends on whether we had a net income (Revenues > Expenses) or a net loss (Revenues < Expenses) for a given period.
This is best illustrated by using a T Account for Income Summary, which includes entries from the previous steps of closing revenues and expenses (R.E.I.D).
Refer to the example below, drawing on prior examples of closing entries — which lead to Net Income:

📝

Here's the entry to close Income Summary under a NET INCOME scenario: Income Summary 25,000 R. Earnings 25,000

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What does the $25k ending debit balance in Income Summary represent in this example?

Simply put, the "Income Summary" account is a summarization of the Net Income or loss.

Therefore, in this example, context, the $25,000 debit balance in Income Summary represents Net Income!

This ending balance is derived from the debit to Income Summary of $100,000 (closing revenues) minus the credit to Income Summary of $75,000 (closing expenses),

Since Revenues were greater than Expenses, this results in our Net Income of $25,000.

This aligns with the Net Income calculation in an income statement:

Revenues Equals Net Income or Loss

Less Expenses

Making sense?

In my opinion, this understanding of how the Income Summary account functions is crucial — as it provides a much deeper comprehension than simply memorizing the closing entry.

‣

Why is Retained Earnings credited when closing Income Summary (Net Income)?

📝

Income Summary 25,000 R. Earnings 25,000

Remembering the closing entry for Income Summary, in a Net Income scenario, becomes way easier when we focus on why Retained Earnings, an equity account (-/+), is credited.
Recall that crediting an equity account (-/+), like Retained Earnings, will INCREASE that account.
If we have Net Income, why should we increase Retained Earnings when closing Income Summary?

Because Net Income for the period does exactly that—it gets added to the Retained Earnings account!

To illustrate this, reflect on the Statement of Retained Earnings formula from previous chapters:

Beginning R/E

PLUS NET INCOME*

Minus Dividends

Equals Ending R/E

Seeing it?

Notice that when closing the Income Summary account under a Net Income scenario — we need to increase Retained Earnings by crediting it, since we know that Net Income is added to Retained Earnings!
If you remember this, you'll automatically know that the opposite side, the debit, goes to Income Summary.

📝

Income Summary 25,000 R. Earnings 25,000

‣

Closing Income Summary (Net Loss) using R.E.I.D.

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing the Income Summary Account (Net Loss Scenario)

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing the Income Summary Account (Net Loss Scenario)

Closing this account depends on whether we had a net income (Revenues > Expenses) or a net loss (Revenues < Expenses) for a given period.
This is best illustrated by using a T Account for Income Summary, which includes entries from the previous steps of closing revenues and expenses (R.E.I.D).
Refer to the example below, drawing on hypothetical examples of closing entries — which lead to a Net Loss:

📝

Here's the entry to close Income Summary under a NET LOSS scenario: Retained Earnings 25,000 Income Summary 25,000

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What does the $25k ending credit balance in Income Summary represent in this example?

Simply put, the "Income Summary" account is a summarization of the Net Income or loss.

Therefore, in this example, context, the $25,000 credit balance in Income Summary represents a Net Loss!

This ending balance is derived from the debit to Income Summary of $75,000 (closing revenues) minus the credit to Income Summary of $100,000 (closing expenses),

Since Expenses were greater than Revenues, this results in our Net Loss of $25,000.

This aligns with the Net Income calculation in an income statement:

Revenues Equals Net Income or Loss

Less Expenses

Making sense?

In my opinion, this understanding of how the Income Summary account functions is crucial — as it provides a much deeper comprehension than simply memorizing the closing entry.

‣

Why is Retained Earnings debited when closing Income Summary (Net Loss)?

📝

Retained Earnings 25,000 Income Summary 25,000

Remembering the closing entry for Income Summary, in a Net Loss scenario, becomes way easier when we focus on why Retained Earnings, an equity account (-/+), is debited.
Recall that debiting an equity account (-/+), like Retained Earnings, will DECREASE that account.
If we have a Net Loss, why should we decrease Retained Earnings when closing Income Summary?

Because Net Loss for the period does exactly that—it gets subtracted from the Retained Earnings account!

To illustrate this, reflect on the Statement of Retained Earnings formula from previous chapters:

Beginning R/E

MINUS NET LOSS*

Minus Dividends

Equals Ending R/E

Seeing it?

Notice that when closing the Income Summary account under a Net Income scenario — we need to decrease Retained Earnings by debiting it, since we know that Net Income is added to Retained Earnings!
If you remember this, you'll automatically know that the opposite side, the credit, goes to Income Summary!

📝

Retained Earnings 25,000 Income Summary 25,000

‣

Closing Dividends using R.E.I.D.

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing Dividends (Contra Equity)

With a solid understanding of debits & credits for each account type, closing entries become very straightforward. Let's reference the following framework from Chapter 2 for debits & credits: Assets = Liabilities + Equity Revenues / Expenses (+/-) (-/+) (-/+) (-/+) (+/-)

Contra — i.e. opposite of — Equity? (+/-)

Dividends operates on a (+/-) basis, meaning to close (i.e., reduce to zero), we must CREDIT the account.

📝

Retained Earnings 10,000 Dividends 10,000

‣

Why is Retained Earnings debited when closing Dividends?

Recall that debiting an equity account (-/+), like Retained Earnings, will DECREASE that account.
If we’ve paid Dividends, why does this decrease Retained Earnings?

Because Dividends for the period do exactly that—they gets subtracted from the Retained Earnings account!

To illustrate this, reflect on the Statement of Retained Earnings formula from previous chapters:

Beginning R/E

Plus Net Income

Minus Dividends*

Equals Ending R/E

Seeing it?

Connecting the closing of Dividends to the idea that Dividends are subtracted in the Statement of Retained Earnings can be a super useful memorization tool.
If you remember that Dividends decrease Retained Earnings — it will help you recall that Retained Earnings must be debited when closing out Dividends!

📝

Retained Earnings 10,000 Dividends 10,000

Now, see below for how closing entries translate to a merchandising scenario.

Closing Revenues:

📝

Sales 200,000 Income Summary 200,000

Closing Expenses:

📝

Income Summary 130,000 Sales Discounts 4,000 Sales Returrns/Allowance 1,000 Cost of Goods Sold 50,000 Expense #1 5,000 Expense #2 15,000 Expense #3 25,000 Expense #4 30,000

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Wondering why there are four expense accounts?

This is simply a hypothetical scenario.
Depending on your exam, you may have only one expense account to close (e.g. Cost of Goods Sold), or multiple expense accounts needing closing (Depreciation Expense, Wages Expense, Rent Expense, Advertising Expense, etc.).
In essence, the point I’m trying to illustrate is that, whatever expenses you see on the income statement — they will ALL need to be closed!

Closing Income Summary (if net income, like above):

📝

Income Summary 70,000 Ret. Earnings 70,000

Closing Income Summary (if net loss):

📝

Ret. Earnings 70,000 Income Summary 70,000

Closing Dividends:

📝

Ret. Earnings 10,000 Dividends 10,000

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🔹 Journal Entries (Periodic Inventory)

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🔹Buyer-Side Journal Entries (Periodic)

Transaction: Buying inventory using cash:

📝

Purchases $$$ Cash $$$

Transaction: Acquiring inventory on credit:

📝

Purchases $$$ Accounts Payable $$$

Transaction: Covering shipping costs with cash as the buyer:

📝

Freight-In $$$ Cash $$$

Or, sometimes you’ll see this:

📝

Transportation-In $$$ Cash $$$

Transaction: Returning inventory or obtaining a price discount from the supplier:

📝

Accounts Payable $$$ Purchase Returns $$$

Note: This entry is simply a “flip” of the purchase entry!

Transaction: Paying an invoice with cash (outside the discount window) for inventory first acquired on credit:

📝

Accounts Payable $$$ Cash $$$

Transaction: Paying with cash (within the discount timeframe) for inventory initially taken on credit:

📝

Accounts Payable $$$ Purchase Discount $$$ Cash $$$

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🔹Seller-Side Journal Entries (Periodic)

Transaction: Selling inventory and collecting cash:

📝

Cash $$$ Sales $$$

Important: In a Periodic Inventory System, you’ll only make ONE entry:

Record the sales (what you charged the customer).
You won’t account for the cost (your original purchase price of the inventory) until the end of the period.

COGS is only updated in real-time in Perpetual Inventory Systems!

Transaction: Selling inventory on credit:

📝

Accounts Receivable $$$ Sales $$$

Important: In a Periodic Inventory System, you’ll only make ONE entry:

Record the sales (what you charged the customer).
You won’t account for the cost (your original purchase price of the inventory) until the end of the period.

COGS is only updated in real-time in Perpetual Inventory Systems!

Transaction: Paying shipping costs as the seller:

📝

Shipping Expense $$$ Cash $$$

Transaction: Customer returning inventory (goods shipped back):

📝

Sales Returns & Allowances $$$ Accounts Receivable $$$

Important: In a Periodic Inventory System, you’ll only make ONE entry:

Record the sales-side (the amount of your customer return).
You won’t account for the cost (your original purchase price of the goods shipped back) until the end of the period.

COGS is only updated in real-time in Perpetual Inventory Systems!

Transaction: Customer returning inventory (accepting a price reduction but keeping the goods):

📝

Sales Returns & Allowances $$$ Accounts Receivable $$$

Note: Only ONE entry is required, as only the sales are affected.

Transaction: Receiving cash for inventory sold on credit (outside the discount period):

📝

Cash $$$ Accounts Receivable $$$

Transaction: Receiving cash for inventory sold on credit (within the discount period):

📝

Cash $$$ Sales Discount $$$ Accounts Receivable $$$

‣

🔹Closing Entries (Periodic)

First, review closing entries from Chapter 3.

💯

Pro Tips for Exams

‣

Closing Entries

‣

Closing Revenue Accounts using R.E.I.D.

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing Revenue Accounts

Revenues operate on a (-/+) basis, meaning to close (i.e., reduce to zero), we must DEBIT THEM.
Then, we total the closed revenue accounts, and “dump” them into the Income Summary on the other side of the entry — ensuring debits are equal to credits.

📝

Revenue #1 50,000 Revenue #2 20,000 Revenue #3 30,000 Income Summary 100,000

‣

Wondering why there are three revenue accounts?

This is simply a hypothetical scenario.
Depending on your exam, you may have only one revenue account to close (e.g. Fees Earned), or multiple revenue accounts needing closing (Fees Earned, Consulting Revenue, Rent Revenue, Sales, etc.).
In essence, the point I’m trying to illustrate is that, whatever revenues you see on the income statement — they will ALL need to be closed!

‣

Closing Expense Accounts using R.E.I.D.

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing Expense Accounts

With a solid understanding of debits & credits for each account type, closing entries become very straightforward. Let's reference the following framework from Chapter 2 for debits & credits: Assets = Liabilities + Equity Revenues / Expenses (+/-) (-/+) (-/+) (-/+) (+/-)

Expenses work the opposite of revenues, like (+/-), which means to close, i.e. reduce them to zero, — we must CREDIT THEM.
Then, we total the closed expense accounts, and “dump” them into the Income Summary on the other side of the entry — ensuring debits are equal to credits.

📝

Income Summary 75,000 Expense #1 5,000 Expense #2 15,000 Expense #3 25000 Expense #4 30,000

‣

Wondering why there are four expense accounts?

This is simply a hypothetical scenario.
Depending on your exam, you may have only one expense account to close (e.g. Cost of Goods Sold), or multiple expense accounts needing closing (Depreciation Expense, Wages Expense, Rent Expense, Advertising Expense, etc.).
In essence, the point I’m trying to illustrate is that, whatever expenses you see on the income statement — they will ALL need to be closed!

‣

Closing Income Summary (Net Income) using R.E.I.D.

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing the Income Summary Account (Net Income Scenario)

Closing this account depends on whether we had a net income (Revenues > Expenses) or a net loss (Revenues < Expenses) for a given period.
This is best illustrated by using a T Account for Income Summary, which includes entries from the previous steps of closing revenues and expenses (R.E.I.D).
Refer to the example below, drawing on prior examples of closing entries — which lead to Net Income:

📝

Here's the entry to close Income Summary under a NET INCOME scenario: Income Summary 25,000 R. Earnings 25,000

‣

What does the $25k ending debit balance in Income Summary represent in this example?

Simply put, the "Income Summary" account is a summarization of the Net Income or loss.

Therefore, in this example, context, the $25,000 debit balance in Income Summary represents Net Income!

This ending balance is derived from the debit to Income Summary of $100,000 (closing revenues) minus the credit to Income Summary of $75,000 (closing expenses),

Since Revenues were greater than Expenses, this results in our Net Income of $25,000.

This aligns with the Net Income calculation in an income statement:

Revenues Equals Net Income or Loss

Less Expenses

Making sense?

In my opinion, this understanding of how the Income Summary account functions is crucial — as it provides a much deeper comprehension than simply memorizing the closing entry.

‣

Why is Retained Earnings credited when closing Income Summary (Net Income)?

📝

Income Summary 25,000 R. Earnings 25,000

Remembering the closing entry for Income Summary, in a Net Income scenario, becomes way easier when we focus on why Retained Earnings, an equity account (-/+), is credited.
Recall that crediting an equity account (-/+), like Retained Earnings, will INCREASE that account.
If we have Net Income, why should we increase Retained Earnings when closing Income Summary?

Because Net Income for the period does exactly that—it gets added to the Retained Earnings account!

To illustrate this, reflect on the Statement of Retained Earnings formula from previous chapters:

Beginning R/E

PLUS NET INCOME*

Minus Dividends

Equals Ending R/E

Seeing it?

Notice that when closing the Income Summary account under a Net Income scenario — we need to increase Retained Earnings by crediting it, since we know that Net Income is added to Retained Earnings!
If you remember this, you'll automatically know that the opposite side, the debit, goes to Income Summary.

📝

Income Summary 25,000 R. Earnings 25,000

‣

Closing Income Summary (Net Loss) using R.E.I.D.

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing the Income Summary Account (Net Loss Scenario)

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing the Income Summary Account (Net Loss Scenario)

Closing this account depends on whether we had a net income (Revenues > Expenses) or a net loss (Revenues < Expenses) for a given period.
This is best illustrated by using a T Account for Income Summary, which includes entries from the previous steps of closing revenues and expenses (R.E.I.D).
Refer to the example below, drawing on hypothetical examples of closing entries — which lead to a Net Loss:

📝

Here's the entry to close Income Summary under a NET LOSS scenario: Retained Earnings 25,000 Income Summary 25,000

‣

What does the $25k ending credit balance in Income Summary represent in this example?

Simply put, the "Income Summary" account is a summarization of the Net Income or loss.

Therefore, in this example, context, the $25,000 credit balance in Income Summary represents a Net Loss!

This ending balance is derived from the debit to Income Summary of $75,000 (closing revenues) minus the credit to Income Summary of $100,000 (closing expenses),

Since Expenses were greater than Revenues, this results in our Net Loss of $25,000.

This aligns with the Net Income calculation in an income statement:

Revenues Equals Net Income or Loss

Less Expenses

Making sense?

In my opinion, this understanding of how the Income Summary account functions is crucial — as it provides a much deeper comprehension than simply memorizing the closing entry.

‣

Why is Retained Earnings debited when closing Income Summary (Net Loss)?

📝

Retained Earnings 25,000 Income Summary 25,000

Remembering the closing entry for Income Summary, in a Net Loss scenario, becomes way easier when we focus on why Retained Earnings, an equity account (-/+), is debited.
Recall that debiting an equity account (-/+), like Retained Earnings, will DECREASE that account.
If we have a Net Loss, why should we decrease Retained Earnings when closing Income Summary?

Because Net Loss for the period does exactly that—it gets subtracted from the Retained Earnings account!

To illustrate this, reflect on the Statement of Retained Earnings formula from previous chapters:

Beginning R/E

MINUS NET LOSS*

Minus Dividends

Equals Ending R/E

Seeing it?

Notice that when closing the Income Summary account under a Net Income scenario — we need to decrease Retained Earnings by debiting it, since we know that Net Income is added to Retained Earnings!
If you remember this, you'll automatically know that the opposite side, the credit, goes to Income Summary!

📝

Retained Earnings 25,000 Income Summary 25,000

‣

Closing Dividends using R.E.I.D.

Use the R.E.I.D acronym to easily recall the accounts closed at the end of each period!

Revenues
Expenses
Income Summary
Dividends

Closing Dividends (Contra Equity)

With a solid understanding of debits & credits for each account type, closing entries become very straightforward. Let's reference the following framework from Chapter 2 for debits & credits: Assets = Liabilities + Equity Revenues / Expenses (+/-) (-/+) (-/+) (-/+) (+/-)

Contra — i.e. opposite of — Equity? (+/-)

Dividends operates on a (+/-) basis, meaning to close (i.e., reduce to zero), we must CREDIT the account.

📝

Retained Earnings 10,000 Dividends 10,000

‣

Why is Retained Earnings debited when closing Dividends?

Recall that debiting an equity account (-/+), like Retained Earnings, will DECREASE that account.
If we’ve paid Dividends, why does this decrease Retained Earnings?

Because Dividends for the period do exactly that—they gets subtracted from the Retained Earnings account!

To illustrate this, reflect on the Statement of Retained Earnings formula from previous chapters:

Beginning R/E

Plus Net Income

Minus Dividends*

Equals Ending R/E

Seeing it?

Connecting the closing of Dividends to the idea that Dividends are subtracted in the Statement of Retained Earnings can be a super useful memorization tool.
If you remember that Dividends decrease Retained Earnings — it will help you recall that Retained Earnings must be debited when closing out Dividends!

📝

Retained Earnings 10,000 Dividends 10,000

Now, see below for how closing entries translate to a merchandising scenario.

Closing Revenues:

📝

Sales 200,000 Merch. Inventory (ending) 20,000 Purchase Discounts 5,000 Purchase Returns / Allow. 2,000 Income Summary 227,000

Closing Expenses:

📝

Income Summary 201,000 Sales Discounts 4,000 Sales Returrns/Allowance 1,000 Cost of Goods Sold 50,000 Merch. Inv. (beginning) 19,000 Purchases 50,000 Transportation-In 2,000 Expense #1 5,000 Expense #2 15,000 Expense #3 25,000 Expense #4 30,000

‣

Wondering why there are four expense accounts?

This is simply a hypothetical scenario.
Depending on your exam, you may have only one expense account to close (e.g. Cost of Goods Sold), or multiple expense accounts needing closing (Depreciation Expense, Wages Expense, Rent Expense, Advertising Expense, etc.).
In essence, the point I’m trying to illustrate is that, whatever expenses you see on the income statement — they will ALL need to be closed!

Closing Income Summary (if net income, like above):

📝

Income Summary 26,000 Ret. Earnings 26,000

Closing Income Summary (if net loss):

📝

Ret. Earnings 26,000 Income Summary 26,000

Closing Dividends:

📝

Ret. Earnings 10,000 Dividends 10,000

⚠️

The list above showcases examples of the most commonly-tested journal entries. While these examples serve as a foundation, they might not encompass every possible scenario. Always consult with your professor regarding any additional or specific entries that might be vital for your exam.