1. Close Dividends Account:
- Debit Retained Earnings
- Credit Dividends
2. Close Fees Earned Account:
- Debit Fees Earned
- Credit Retained Earnings
Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts (revenue, expense, and dividend accounts) to the Retained Earnings account.
What inform the entries?
In the given data, there are two temporary accounts to close: Dividends and Fees Earned.
1. Close Dividends Account:
- Debit Retained Earnings
- Credit Dividends
Date Account Debit ($) Credit ($)
-----------------------------------------------------------------------------------------
Jan 31 Retained Earnings 6,000
Dividends 6,000
2. Close Fees Earned Account:
- Debit Fees Earned
- Credit Retained Earnings
Date Account Debit ($) Credit ($)
-------------------------------------------------------------------------------------
Jan 31 Fees Earned 124,600
Retained Earnings 124,600
These entries ensure that the temporary accounts (Dividends and Fees Earned) are zeroed out, and their balances are transferred to the Retained Earnings account. The Retained Earnings account now reflects the net income for the period and is ready to accumulate the results of the next accounting period.
Complete question:
After the accounts have been adjusted at January 31, the end of the fiscal year, the following balances are taken from the ledger of Harrison's Dog Walking Service Company:
Retained Earnings $9,000
Dividends 6,000
Fees Earned 124,600
Wages Expense 2,900
Rent Expense 43,000
Supplies Expense 7,300
Miscellaneous Expense 5,700
Journalize the two entries required to close the accounts.