Financial Statements - I

inwards account and direct expenses account are closed by transferring to the debit side of the trading and profit and loss account. This is done by recording the following entry : The purchases returns or return outwards are closed by transferring its balance to the purchases account. The following entry is recorded for this Similarly, the sales returns or returns inwards account is closed by transferring its balance to the sales account as : The sales account is closed by transferring its balance to the credit side of the trading and profit and loss account by recording the following entry: Items of expenses, losses, etc. are closed by recording the following entries: Items of incomes, gains, etc.

are closed by recording the following entry: The posting for closing the seven accounts of expenses and revenues as they appear in the trial balance (in our example ) are given below: (i) For closing the accounts of expenses (i) For closing the accounts of revenues