Question

on january 1, 2024, the general ledger of dynamite fireworks includes the following account balances: record closing entries.

Answer 1

The student's question pertains to creating closing entries at year-end in accounting to transfer temporary account balances to the retained earnings account, thereby resetting income and expense accounts for the new fiscal year.

Step-by-step explanation:

The question relates to the preparation of closing entries in accounting. The process involves transferring the balances of temporary accounts (such as revenues, expenses, and dividends) to the retained earnings account. This is done at the end of an accounting period to prepare the accounts for the next period. The steps typically involve:

1. Identifying all income statement accounts with balances.
2. Debiting each revenue account for its balance and crediting income summary.
3. Crediting each expense account for its balance and debiting income summary.
4. Closing income summary to retained earnings (debit income summary if it has a credit balance or credit it if it has a debit balance).
5. Finally, close dividends to retained earnings by debiting retained earnings and crediting dividends.

These entries ensure that the company's income and expense accounts begin the next fiscal year with zero balances, making it easier to track the new year's activity.