CLOSING TRANSFERS GRADE 10 ACCOUNTING MODULE 9 LESSON

CLOSING TRANSFERS GRADE 10 ACCOUNTING MODULE 9 LESSON 7

CLOSING TRANSFERS WHAT INFORMATION IS NEEDED? Post-adjustment Trial Balance for the year WHY DO CLOSING TRANSFERS ? According the matching principle all income and expenses can only be recorded and reflected in the year in which they accrue. Calculate NET PROFIT. WHICH ACCOUNTS ARE INVOLVED ? All income & expense accounts need to be closed off. NIE WHICH ACCOUNTS ARE WE THEN LEFT WITH ? Post-Closing Trial Balance with the Balance Sheet accounts: Assets, Owner’s Equity & Liabilities

CLOSING TRANSFERS STEPS 1. Close off DEBTORS ALLOWANCES to SALES Calculation of 2. Close off SALES to TRADING ACCOUNT Gross Profit 3. Close off COST OF SALES to TRADING ACC 4. Transfer GROSS PROFIT to PROFIT & LOSS FROM T/A 5. Close off ALL INCOME acc to PROFIT & LOSS Calculation of NET Profit 6. Close off ALL EXPENSES to PROFIT & LOSS 7. Transfer NET PROFIT to CAPITAL from P&L account Calculation of 8. Close off DRAWINGS to CAPITAL Owner’s Equity 9. Draw up Post –Closing Trial Balance

EXAMPLE PAGE 318 -322 1. Close off DEBTORS ALLOWANCES to SALES Debtors allowances GJ 2 000 TOTAL b/d 268 400 DEBTORS ALLOWANCES TOTAL b/d 2 000 Sales GJ 2 000 2. Close off NET SALES to TRADING ACCOUNT SALES Debtors allowances GJ 2 000 TOTAL TRADING ACCOUNT GJ 266 400 TRADING ACCOUNT SALES b/d 268 400 GJ 266 400

EXAMPLE PAGE 318 -322 3. Close off COST OF SALES to TRADING ACC Dr TRADING account Cr COST OF SALES TOTAL b/d 90 000 TRADING ACCOUNT GJ 90 000 TRADING ACCOUNT COST OF SALES GJ 90 000 SALES GJ 266 400 4. Transfer GROSS PROFIT to PROFIT & LOSS FROM T/A TRADING ACCOUNT COST OF SALES PROFIT & LOSS GJ 90 000 GJ 176 400 SALES GJ 266 400 PROFIT & LOSS TRADING ACCOUNT GJ 176 400

EXAMPLE PAGE 318 -322 5. Close off ALL INCOME accounts to PROFIT & LOSS account. Dr “Income” Cr P & L INTEREST ON FIXED DEPOSIT PROFIT & LOSS GJ 2 550 TOTAL b/d 2 550 RENT INCOME PROFIT & LOSS GJ 24 000 TOTAL b/d 24 000 PROFIT & LOSS TRADING ACCOUNT GJ 176 400 Interest on fixed deposit GJ 2 550 RENT INCOME GJ 24 000

EXAMPLE PAGE 318 -322 Dr P & L Cr “Expense” 6. Close off ALL EXPENSES to PROFIT & LOSS SALARIES & WAGES TOTAL b/d 59 000 PROFIT & LOSS GJ 59 000 BAD DEBTS TOTAL b/d 3 100 PROFIT & LOSS GJ 3 100 GJ 4 000 CONSUMABLE STORES TOTAL b/d 4 000 PROFIT & LOSS NOTE: NOT all expense accounts are shown PROFIT & LOSS SALARIES & WAGES GJ 59 000 TRADING ACCOUNT BAD DEBTS GJ 3 100 Consumable Stores GJ 4 000 RENT INCOME GJ 176 400 Interest on fixed deposit GJ 2 550 GJ 24 000

EXAMPLE PAGE 318 -322 7. Transfer NET PROFIT to CAPITAL from P&L account. Dr P & L Cr Capital + PROFIT & LOSS SALARIES & WAGES GJ 59 000 TRADING ACCOUNT BAD DEBTS GJ 3 100 Consumable Stores GJ 4 000 RENT INCOME GJ 176 400 Interest on fixed deposit GJ 2 550 GJ 24 000 (all other expenses) CAPITAL GJ 20 100 202 950 CAPITAL BALANCE PROFIT & LOSS 100 b/d 270 000 GJ 20

8. 9. EXAMPLE PAGE 318 -322 Close off DRAWINGS to CAPITAL. Dr Capital - Cr Drawings CAPITAL DRAWINGS BALANCE GJ 20 000 BALANCE GJ 270 010 PROFIT & LOSS 290 010 BALANCE b/d 270 000 GJ 20 100 290 010 GJ 270 010 DRAWINGS BALANCE b/d 20 000 CAPITAL GJ 20 000 Draw up Post –Closing Trial Balance Consists of Balance sheet accounts only Excluding Drawings as it has been closed off to Capital

GENERAL JOURNAL e. g. 320 Please note the format of the General Journal on page 320 Post-Closing Trial Balance on page 321