Module

AUXILIARY SERVICES OF
ACCOUNTING
6
CLOSING OF BOOKS AND BALANCE
POST-CLOSURE
Module No.6 Closing of Books and Post-Closing Balance

Content
INTRODUCTIONN ................................................................................................................................ 3
[Link] Closures ........................................................................................................................ 3
[Link] FOR THE CLOSURE PROCESS ....................................................................... 3
[Link] OF CLOSING ENTRIES...................................................................................... 4
[Link] SRL NOMINAL ACCOUNTS EXTRACTED ADJUSTED TRIAL BALANCE ...... 5
[Link] PROCESSES ............................................................................................................. 10
[Link] LOCATION:..................................................................................................... 10
[Link]............................................................................................................................ 12

INFOTEP Page 2
Module No. 6 Closing of Books and Post-Closing Balance

1. INSTRUCTION

At the end of each fiscal year, companies prepare their financial statements, with
the purpose of determining your gains or losses, retained earnings, as well as
present their financial situation. Organized companies can prepare their
periodic financial statements, without the need to make closing entries,
but upon completing a period of twelve months, the closing of accounts is mandatory for
to be able to measure the results for each commercial year and present them to the interested parties
these results.

2. Account Closure

The accounts that are usually closed at the end of each trading period (one year) are those of
income, costs and expenses (nominal accounts), through an account called
Summary of gains or losses and the balance that results from this account.
closes in turn against the account of 'retained earnings'.

3. PROCEDURES FOR THE CLOSURE PROCESS:

1-The initial inventory that appears in the books is closed by debiting the account.
summary of gains or losses and crediting the inventory account for its amount.
Then the final inventory is recorded, according to the information provided, debiting
to the Inventory account and crediting the profit summary account
losses.

All nominal accounts with credit balances are debited for their respective amounts.
amounts and the summary account of profits or losses is credited.

3-The summary account of gains or losses is debited by the sum of the balances.
debtors of the nominal accounts and the nominal accounts are credited for their
respective balances.

INFOTEP Page 3
Module No.6 Closing of Books and Post-Closing Balance

4-The debits and credits of the summary account of operating gains and losses are added up.
its balance is obtained. If such balance corresponds to the credit side, it is a profit,
Change, if it is on the debit side, it is a loss. The balance that results at the end in the account.
The summary of gains or losses is closed through the retained earnings account.

If there were any member withdrawal accounts or dividends paid, the latter in
in the case of stock companies, their balance would be closed through the profit account.
retained, debiting the latter and crediting to the member's withdrawal account or to the
dividends paid account.

4. SUMMARY OF CLOSING ENTRIES.

The procedure for closing books, that is, the closing of income accounts,
Costs, expenses, and withdrawals of the partners can be condensed as follows:

a) The income, cost, and expense accounts are closed against the summary account of
gains or losses. The balance of this last account shows the profit or loss of
period, which must be equal to the value presented in the income statement.

b) The summary account of profits or losses and the account of partner withdrawals or
dividends paid are closed through the retained earnings account, the balance of
this last account must be equal to the value presented in the income statement
held.

The complete closing procedure is shown with numerical references.

INFOTEP Page 4
 Module No. 6 Closing of Books and Post-Closing Balance

5. NOMINAL ACCOUNTS OF THE PIONEERS SRL

EXTRACTED FROM THE TRIAL BALANCE
ADJUSTED

INVENTORY INCOME FROM SERVICES

DR CR DR CR
35,500.00 35,500.00 190,000.00 190,000.00
5,000.00

Salary expenses Advertising Expenses

DR CR DR CR
45,000.00 45,000.00 21,300.00 21,300.00

EXPENSE FOR ELECTRICITY FUEL EXPENSE

DR CR
DR CR
2,150.00 2,150.00
5,000.00 5,000.00

EXPENSE FOR FIXED ASSET MAINTENANCE

DR CR
27,0000.00 27,000.00

DEPRECIATION EXPENSE

DR CR
25,000.00 25,000.00

OFFICE SUPPLIES EXPENSE

DR CR
30,500.00 30,500.00

INFOTEP Page 5
Module No. 6 Closing of Books and Post-Closing Balance

EXPENSE FOR INTERESTS

DR CR
1,800.00 1,800.00

INSURANCE EXPENSE
DR CR
4,500.00 4,500.00

SUMMARY OF GAINS OR LOSSES

DR CR
190,000.00 45,000.00

35,500.00 21,300.00
2,150.00
5,000.00
27,000.00
25,000.00
30,500.00
4,500.00
1,800.00
225,500.00 167,250.00
58,250.00 58,250.00

RETAINED EARNINGS
DR CR
58,250.00

After outlining the closing process, observe, in the case of LosPioneros

SRL, where the Inventory account reflects a balance of RD$ 5,000.00, which is
corresponds with the final balance of the inventory account presented in the balance sheet
general, the closed balance of the account
INFOTEP Page 6
 Module No.6 Book Closing and Post-Closing Balance

Summary of gains or losses (RD$58,250.00) is equal to the balance presented in

the income statement and finally, the balance of the retained earnings account by
RD$58,250.00 matches the value presented in the statement of retained earnings, the
which in turn passes to the equity section of the balance sheet.

Journal Entries for Inventory Adjustment and Closing of Nominal Accounts

The Pioneers SRL.

Sub-
Date Accounts and details Auxiliary Reference Debtor Auxiliary Credit
201
2 3 Summary of earnings or 35,500.00
Dic. 1 losses
Inventories to close the 35,500.00
initial inventory.

Inventories
5,000.00
Summary of profits and losses.
5,000.00
Dec. 3
1 To register the inventory
final.

Income from services

190,000.00
Summary of gains and losses.
Account closure with balances
Dic. creditors. 190,000.00
3
1
Summary of gains and losses. 162,250.00
45,000.00
Salary expense
Advertising expenses
21,300.00
Fuel expenses. 5,000.00
Energy expenses 2,150.00
Maintenance expenses 27,000.00
Depreciation expenses 25,000.00
Dec. Office material expenses 1,800.00
Insurance expenses
Interest expense

INFOTEP Page 7
 Module No.6 Closing of Books and Post-Closing Balance

3 Closure of accounts with balances

1 debtors.

58,250.00

58,250.00

Dec.

3
Summary of gains and losses.
1
Retained earnings
Account closure
Summary of earnings and
Dic. losses.

Retained Earnings Mr.

Pérez withdrawals
3 Closure of the withdrawal account
1 from Mr. Pérez

6. TRIAL BALANCE AFTER CLOSURE

After closing the books, a new trial balance must be prepared to

to ensure that the equality between the charges and the credits in the ledger has not been
broken by mistakes made when closing the books. Furthermore, this balance shows the
final balances of each account in an accounting period, which will be converted into the balances
initials for the next exercise.

Below we present the trial balance of Los Pioneros SRL

December 2012, after the closing.

INFOTEP Page 8
Module No.6 Closing of Books and Post-Closing Balance

THE PIONEERS SRL

TRIAL BALANCE AFTER CLOSURE
AS OF DECEMBER 31, 2012
(VALUES IN RD$)

ACCOUNT NAMES DEBT CREDIT

Popular Bank 157,900.00

Accounts Receivable 128,000.00

Inventory of the material 5,000.00

Secure online payment 49,500.00

Transport team 180,000.00

Accumulated Depreciation 10,000.00

Office furniture and equipment 150,000.00

Accumulated depreciation 15,000.00

Accounts payable to suppliers 84,350.00

Deferred revenue from customers 50,000.00

Tax to be paid 61,500.00

Interest payable 1,800.00

Long-term payables 120,000.00

Social capital 300,000.00

Retained Earnings 27,750.00

670,400.00 670,400.00

INFOTEP Page 9
Module No.6 Closing of Books and Post-Closing Balance

7. ACCOUNTING PROCESSES

At the end of this chapter, we outline in an orderly manner the steps that have been
explained so far for the development of accounting processes:

Transactions.
2) Record of entries in the General Journal
3) Passes to the seniors (general senior, assistants, and sub-assistants).
4) Balancing of the main accounts.
5) Reconciliation of the ledgers (in case it is required).
6) Trial balance.
7) Adjustment entries (for those cases deemed necessary).
8) Adjusted trial balance.
9) Preparation of financial statements (cost of sales statement, income statement,
statement of retained earnings and balance sheet.
10) Record in the General Journal and post to the Ledger the necessary entries to close
the books.
Preparation of the trial balance after the closing.

8. ERROR LOCATING:

If a trial balance does not balance, the amount must be determined of the
difference and carry out the following steps to locate the error:

The value columns of the balance are added again.

One ensures that the balances have been correctly carried from the ledger to the trial balance.
observing the following:

a) Differences between the account balances and the balances shown in the balance sheet.
b) Debtor balances in the accounts, which would have been recorded in the credit side of the balance or
vice versa.
C) Balances in the ledger omitted in the balance.

3) The balances of the ledger are recalculated, which requires doing the following:
a) Sum again the debits and credits of each account.
b) Recalculate the difference between the debit and credit of each account

INFOTEP Page 10
Module No. 6 Book Closing and Post-Closing Balance

4) The entries from the journal are posted to the ledger, starting with the first journal entry.
It can be seen if each and every debit and credit has been correctly transferred to the ledger.

When this check is carried out, attention is drawn to the following:

Errors in these amounts.
b) Recording of any debit from the journal in the credit of the general ledger account; or the notation of
a credit from the daily in the debit of the ledger account.

As the correct entry of each journal transaction into the ledger is verified, it is set
a mark (J) next to the quantity, both in the daily and in the major. This tide
it is generally noted to the right of the quantity. Once it has been completed the
verification of passes, the following is sought:

a) Items not recorded in the journal. It can be seen if they have been transferred to the ledger.
b) Quantities not marked in the ledger. It is seen if such items do not constitute passes.
duplicates, as it could happen that a journal entry has been recorded twice.
the mayor and one of the passes may have already been marked in the above-mentioned verification.

5) It is checked if the debits and credits of each journal entry balance each other.

When looking for errors, one must remain constantly alert to what is indicated to
continuation:

- The transpositions. For example: the amount $69.00, when passed to the major, could have been
registered as: $96.00.

- The decimal points moved. Instead of writing $57.00, by misplacing this item it could have
$0.57.

In the accounting records, there should be no erasures or scratch-outs. When it is discovered

an error, the amount or any other incorrect data must be crossed out with a line and
note the correct data above the one that was crossed out.

INFOTEP Page 11
Module No.6 Closing of Books and Post-Closing Balance

9. BIBLIOGRAPHY

• ANTHONY, ROBERT [Link] in administration

companies, text and [Link], Limusa Editorial, Noriega Publishers,
1995, 717 pp.
• MORENO FERNÁNDEZ, JOAQUÍ[Link] [Link]
Financial Accounting, number 1. Mexico, Mexican Institute Publishing
of Public Accountants, AC, 1997, 312 pp.
• MORENO FERNÁNDEZ, JOAQUÍ[Link] AccountingSeries
Financial Accounting, number 2. Mexico, Editorial Instituto Mexicano
of Public Accountants, AC, 1996, 208 pp.

INFOTEP Page 12