Ch 10

Question 1

Why Close Accounts

Answer 1

The P&L summary account uses the revenue and expense accounts to determine the net profit or loss for the period.

Revenue and expense accounts are returned to zero balances, ready for the new reporting period. This ensures that this period’s revenues and expense are not counted again in the subsequent period.

Question 2

Closing a revenue account - General Journal & Ledger

Answer 2

General ledger
Credit Balance
Debit amount needed to balance credit side as P&L Summary

General Journal
Debit revenue
Credit P&L Summary

Question 3

Closing Expenses Account - General Journal & Ledger

Answer 3

General Journal
P&L Summary Debit
Expenses Credit

General Ledger
P&L Summary Credit
Expenses Debit

Question 4

P&L Summary Account

Answer 4

Expenses debit

Revenue Credit

Question 5

Transferring the net profit for the period - General Journal & P&L Summary

Answer 5

General Journal
P&L Summary debit
Capital Credit

P&L Summary
Capital Debit

Question 6

Transferring drawings to capital - General Journal & Capital Ledger

Answer 6

General Journal
Capital Debit
Drawings Credit

Capital Ledger 
Drawings Debit 
Balance Debit 
Balance Credit 
P&L Summary Credit 
Balance Credit