Question

Presented below are selected account balances for Headland Co. as of December 31, 2017 Inventory 12/31/17 Common Stock Retained Earnings Dividends Sales Returns and Allowances Sales Discounts Sales Revenue $60,050Cost of Goods Sold 74,370 Selling Expenses 45,010 Administrative Expenses 17,920 Income Tax Expense 12,116 14,740 $229,610 15,940 37,625 29,930 410,200

Answer 1

Closing Entries:

The journal entries recorded to close all the temporary account and transfer its balance to the parmanent account is called closing entries. These journal entries are prepared at the end of every accounting year. The primary purpose behind journalizing the closing entries is to show accurate revenues and expenses for a particular accounting period and start all the temporary accounts with zero balance for next accounting period.

No.	Account titles & explanation	Debit	Credit
1	Sales Revenue	$410,200
	Income Summary		$410,200
2	Income Summary	339,961
	Sales Return and Allowances		12,116
	Sales Discounts		14,740
	Cost of goods sold		229,610
	Selling expenses		15,940
	Administrative expenses		37,625
	Income tax expense		29,930
3	Income Summary	70,239
	Retained Earnings		70,239
4	Retained Earnings	17,920
	Dividends		17,920

Explanation

Revenue Account:

The revenue account has credit balance and it is closed by debiting the Revenue account and crediting the Income Summary account.

Expense Account:

The expenses incurred during an accounting period always have debit balance and these accounts are closed by debiting Income Summary account and crediting all the Expense account.

Income/(loss) account:

The difference between the revenue and expense accounts is transfer to Retained Rarnings (Parmanent Account) by debiting the Income Summary account and crediting the Retained Earnings account.

Dividend Account:

Dividends are portion of profit which divided amongst the shareholders. The dividend declared by a company is debited to Dividend Account and it is close by debiting the Retained Earnings account and crediting the Dividends Account.