How to Pass Closing Journal Entries

Closing journal entries are helpful for closing the accounts in any financial year of any organisation. These entries are relating to revenue, expenses and drawing because next financial year, we have to open these account with zero balance.

1. To Pass the Journal Entries to Close the Revenue Accounts 

To close the revenue accounts are necessary because we have earned the amount, so, we can use it for our business. No one can ask for same money. It can be used for business promotion. Now, you should pass the following journal entries.

Respected Revenue account Debit

Profit and Loss account Credit

There may be lots of revenues. Each revenue account will Debit because we are closing it. When we have started revenue account, we have credited it because it was our gain. Gain will always credit. Now, its account's closing balance will show. But we have to close it. So, we credited profit and loss account. It means, simply total earning are still credit with a new name which will club small and small revenues and credit in profit and loss account with single name. Now, there will no identity of any revenue account in next financial year.

2. To Pass the Journal Entries to Close the Expenses Accounts

To close the revenue accounts are necessary because we have paid same amount and we have gained its service benefit in this year, so, for calculating our net incomes, we need to close all expenses account. No one can demand money in next year because we have proof of payment.  Now, you should pass the following journal entries.

Profit and Loss Account Debit

Respected Expenses Account Credit

There may be lots of expenses. Each expense account will credit in this journal entry  because we are closing it. When we have started expense  account, we have debited for showing expenses in book. Now, we need to close, so all expenses will debited in profit and loss account. That is the reason, we are debiting profit and loss account.

3. To Pass the Journal Entry for Close the Profit and Loss Account 

After find the balance by deducting expenses side from income side in profit and loss account, we will transfer same net profit to capital account. If there is net loss, still, it will transfer to capital account. On this basis, capital account will show correct amount.

If Net profit

Profit and loss account Debit

Capital Account Credit

If Net Loss

Capital Account Debit

Profit and Loss Account Credit

4. To Pass the Journal Entries to Close the Drawing Account 

Our drawing account's balance will be the loss of our business's capital. So, it will be closed by transferring capital account. With this, our capital will decrease. So, capital account must be debited and drawing account will credited with its closing balance amount.

Capital Account Debit

Drawing Account Credit


Following is the example of Closing Entries 


March 31Sale Revenue 100,000
Profit and Loss Account100,000
2March 31Profit and Loss Account 50,000
Salaries Expense30000
Internet Expense10000
Domain Hosting Expense5000
Electricity Expense5000

3March 31Profit and Loss Account50000
Capital Account 50000
4March 31Capital Account 10000
Drawing Account 10000

Other People are Also Reading 


Comments on this Website
Share above Content to Your Friends


access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
Accounting Education: How to Pass Closing Journal Entries
How to Pass Closing Journal Entries
Accounting Education
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock