Closing Entries and Post-Closing Trial Balance

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Accounting Closing Entries

After preparing the financial statement, all the temporary accounts must be closed at the end of accounting period. The accounts which collected information about revenue and expenses for the accounting period are temporary. For closing temporary accounts the Income Summary account will be used for the definition of financial result of the company activity.

The credit balances of revenue accounts will be credited to the Income Summary while the balances of expense account will be closed to the debit side of this account. As the result of these records, all revenue and expense accounts will have zero balances at the end of the accounting period.


The resulting balance of Income Summary account will show the financial returns for the period. If the ending balance is credit, the Company has earned net income; otherwise, the net loss is recognized. The ending balance of the Income Summary is closed to the credit or debit side of Retained Earnings.

The distribution of net income to the company shareholders is shown as the debit balance of Dividends account which must be closed to the debit of Retaining Earnings.

The closing entries are presented in the screenshot below and show that the ABC Consulting Inc. has earned the total revenue of $85,000, while spent on its operating activity total expenses of $67,700, and finished the current period with net income of $17,300. The company decided to distribute to its shareholders’ dividends on the amount of $1,200, so the Retained Earnings raised by $16,100.

accounting closing entries sample

Post-Closing Trial Balance Accounts

After closing all temporary accounts and calculation the new balance of Retained Earnings account, the post-closing trial balance will be prepared for controlling purpose. The post-closing trial balance includes permanent accounts from ledger journal. The temporary accounts must be closed at the end of the accounting period. The corrected post-closing trial balance has the debit balances which equal credit balances.

Post-Closing Trial Balance Example

The post-closing trial balance for ABC Consulting Inc. is presented in the screenshot below. The screenshot presents the post-closing trial balance which includes only permanent accounts from the general ledger. The temporary accounts are absent as they were closed to the Retained Earnings and their balances are equal zero. Keep your accounting record accurately.

post closing trial balance example

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Closing Entries and Post-Closing Trial Balance
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