Closing Entries Merchandising Business Nominal Accounts Lets remind

Closing Entries Merchandising Business

Nominal Accounts Let’s remind ourselves which types of accounts need to be closed each fiscal period, in order to start off at $0 for the new period: • Revenues • Expenses • Drawings The same is necessary for our new merchandising accounts

Closing Entries In order to complete closing entries for a merchandising business, we need to consider all of the NEW accounts that we now have, and what their balance would be: Ø Purchases Ø Purchase Discounts Ø Purchase Returns and Allowances Ø Sales Discounts Ø Freight- In Ø Merchandise Inventory (Beginning & Ending)

Close out the Following Accounts • Purchases • Merchandise Inventory, Jan 1/16 • Sales Returns and Allowances • Freight-in • Merchandise Inventory, Dec 31/16 • Sales • Purchase Returns and Allowances $18, 575 $24, 500 $3, 600 $1, 900 $25, 350 $55, 325 $1, 750

Closing Entries for Merchandising Company Closing Entry #1 General Journal Date Dec. 31 Description Page 88 PR Debit Merchandising Inventory (ending) Sales XXX Purchase Discounts XXX Purchase Returns and Allowances Income Summary XXX To close accounts with credit balances and set up proper balance in ending inventory account. Credit XXX

Closing Entries for Merchandising Company Closing Entry #2 General Journal Date Dec. 31 Description Income Summary Page 88 PR Debit Credit XXX Merchandising Inventory (beginning) XXX Sales Discounts XXX Sales Returns and Allowances XXX Other accounts including all expenses To close accounts with debit balances including the beginning inventory account.