This time we will discuss the meaning of a closing journal and its purpose or function and also how to work on a closing journal. Happy reading …
Table of contents :
Definition of Closing Journal
Functions and Objectives in Making a Closing Journal
Closed accounts
How to do a closing journal
Estimates That Need to Be Closed
The way to close the estimate is:
Example of Closing Journal
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Definition of Closing Journal
definition of closing journal
The closing journal is an accounting record which serves to close the company’s nominal accounts at the end of the period.
The nominal account is an account that is temporary in nature where the account functions only until the end of the accounting period.
Functions and Objectives in Making a Closing Journal
To separate transactions, income and expense accounts are not mixed with the nominal amount of income and expenses in the following year.
Make it easier at the time of inspection, because transactions in the current period and the next accounting period have been separated.
Present the balance sheet at the beginning of the next period after closing the book.
In order to close the balance on all interim estimates, the forecast balance becomes zero. So that it can separate from the amount of the temporary account balance for this period with the number of temporary accounts in the next period.
To present real financial information after the company closes the book. The closing journal account consists of assets, liabilities and equity.
Shows the amount in accordance with the circumstances at the end of the period, so that the capital account balance will equal the total ending capital reported on the balance sheet.
Closed accounts
There are several accounts that usually need to be closed at the end of the period, namely:
income account,
expense account,
profit / loss summary or profit / loss balance account, and
prive account.
Also Read: Examples of Bank Reconciliation Questions
How to do a closing journal
We can easily make a company closing journal by following these steps:
How to do a closing journal
The income account in the income statement is recorded on the debit and crediting the income statement with the amount shown in the income account.
Account for expenses on credit with the respective amounts listed in the profit / loss statement and debit the income statement for the total cost.
Estimate prive with the amount contained in the balance sheet column in credit and debit the capital account with the same amount.
If the company is making a profit, the journal that is made is the amount of profit with an estimated summary of income on debit and crediting the capital account for the same amount. Likewise, vice versa if the company experiences a loss.
Estimates That Need to Be Closed
Some of the estimates that include the nominal estimate that needs to be closed are:
Revenues.
Loads.
Retained profit or loss balance.
Prive balance (for individual companies) or dividend balance (for limited liability companies).
The way to close the estimate is:
Closing income The
estimated normal income is on a credit balance (on the balance sheet on the credit line), so to close it by moving to the debit side and crediting the income statement as follows:
