How to Do Closing Entries for Accounting
- 1). Record the business' revenues for the time period in question by debiting Revenue and crediting the same value to Income Summary.
- 2). Record the business' expenses for the time period in question by crediting Expenses and debiting Income Summary by the same amount.
- 3). Record the business' income or loss for the period as the sum of its revenues and expenses for the same. If the business has earned an income, then it debits Income Summary and credits Retained Earnings. If the business has incurred a loss, then it debits Retained Earnings and credits Income Summary.
- 4). Record the dividends paid out by the business if it issued dividends. Dividends is credited, and the same value is debited from Retained Earnings.