Closing Entries in Journal Proper

 

Journal proper refer to the special types of journals which occur occasionally. Journal proper contents opening entries and closing entries.

 

Closing Entries

Journal entries made at the end of the accounting period is known closing entries.

The closing entry is used to transfer data in the temporary accounts to permanent account.

These entries are related to balance sheet or income statement accounts.

The purpose of the closing entry in the income statement is to bring the temporary journal account balances to zero for the next accounting period.

 

The sequence of the closing process and the associated closing entries are as under:

Transfer all expenses and income related to trading account:

Debited trading account and credited opening stock, sales return and all expenses of trading account.

Debited purchase return, sales, closing stock and credited trading account.

 

Transfer gross profit or gross loss to profit and loss account:

If gross profit, trading account is debited and profit and loss account is credited.

If gross loss, profit and loss account is debited and trading account is credited.

 

Transfer all expenses income related to profit and loss account:

Debited profit and loss account and credited all expenses of profit and loss account.

Debited all the incomes and credited profit and loss account

 

Transfer net profit or net loss to capital account:

If net profit, profit and loss account is debited and capital account is credited.

If net loss, capital account is debited and profit and loss account is credited.

 

PROBLEM: 3

Following extracted information is given to you:

 

Opening stock Purchase Insurance Wages Import duty Sales return Carriage inward Carriage outward Salary

35,000 100,000 2,000 10,000 5,000 10,000 3,000 5,000 50,000

Depreciation Discount received Discount allowed Interest paid Commission received Purchase return Closing stock Sales

10,000 3,000 4,000 1,000 4,000 2,000 50,000 250,000

Required: (1) Training account; (2) Profit and loss account; (3) Closing entry

 

Trading Account

Particulars		Amount	Particulars		Amount
To Opening stock To Purchase              Less: Return To Wages To Import duty To Carriage inward To Gross profit	100,000 -2,000	35,000   98,000 10,000 5,000 3,000 139,000	By Sales       Less: Return   By Closing stock	250,000 -10,000	240,000 50,000
		290,000			290,000

 

Profit and Loss Account

Particulars	Amount	Particulars	Amount
To Salary To Insurance To Carriage outward To Depreciation To Discount allowed To Interest paid To Net profit	50,000 2,000 5,000 10,000 4,000 1,000 74,000	By Gross profit By Discount received By Commission received	139,000 3,000 4,000
	146,000		146,000

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BASIC JOURNAL ENTRIES IN NEPALI http://tiny.cc/uaakkz

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TRIAL BALANCE & ADJUSTED TRIAL BALANCE http://tiny.cc/c59jkz

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CAPITAL AND REVENUE http://tiny.cc/peakkz

SINGLE ENTRY SYSTEM http://tiny.cc/n19jkz

NON-PROFIT ORGANIZATION (NON-TRADING CONCERN http://tiny.cc/j09jkz

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Journal Entries

Date	Particulars		LF	Amount	Amount
	Trading account                     To Opening stock           To Purchase           To Wages           To Import duty           To Carriage inward           To Sales return (Being- accounts transferred to trading account)	Dr		1,63,000	35,000 1,00,000 10,000 5,000 3,000 10,000
	Sales account Purchase return Closing stock           To Trading account  (Being- accounts transferred to trading account)	Dr Dr Dr		2,50,000 2,000 50,000
	Trading account           To Profit and loss account (Being- gross profit transferred to P&L account)	Dr		1,39,000	1,39,000
	Profit and loss account           To Salary           To Insurance           To Carriage outward           To Depreciation           To Discount allowed           To Interest paid (Being- accounts transferred to P&L  account)	Dr		72,000	50,000 2,000 5,000 10,000 4,000 1,000
	Discount received Commission received           To Profit and loss account  (Being- accounts transferred to P&L account)	Dr Dr		3,000 4,000	7,000
	Profit and loss account           To Capital account (Being- profit transferred to capital account)	Dr		74,000	74,000

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PROBLEMS   AND   ANSWERS

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

Basic Problem: 3

The following information is given by BG Traders on 31^st December:

Trading, Profit and Loss account

Particulars	Amount	Particulars	Amount
To Opening stock To Purchase To Wages To Carriage To Gross profit c/d	85,000 325,000 35,000 20,000 260,000	By Sales By Closing stock	650,000 75,000
	725,000		725,000
To Salary To Advertisement To Carriage outward To Depreciation To Printing and stationery To Rent  To Net Profit c/d	155,000 14,000 12,000 15,000 4,500           27.500 54,500	By Gross profit b/d By Commission earned By Dividend received	260,000 7,500 15,000
	282,500		282,500

Required: Closing entries

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