Question

Creative Images Co. offers its services to individuals desiring to improve their personal images. After the accounts have been adjusted at July 31, the end of the fiscal year, the following balances were taken from the ledger of Creative Images Co.:
Violet Lozano, Capital $880,000
Violet Lozano, Drawing 12,000
Fees Earned 702,400
Wages Expense 480,000
Rent Expense 69,000
Supplies Expense 11,000
Miscellaneous Expense 14,600

Required:
Journalize the two entries required to close the accounts.

Answer 1

Answer:

Journal 1

Debit : Fees Earned $702,400

Credit : Income Statement  $702,400

Closing off Revenue against Income Statements

Journal 2

Debit : Income Statement  $574,600

Credit : Wages Expense $480,000

Credit : Rent Expense $69,000

Credit : Supplies Expense $11,000

Credit : Miscellaneous Expense $14,600

Closing off Expenses against Income Statements

Explanation:

The Income Statement accounts for Incomes and expenses. Therefore, close off the Income Accounts against the Income Statement as well as  Expenses Accounts.