Let's go ahead and create our four closing entries. Our first closing entry is to close revenue to income summary. Again, we get that information from the adjusted trial balance. To close revenue, since it has a normal credit balance, we must debit it. So we will debit service revenue for $20,000 and credit income summary. Our second entry is to close expense accounts to income summary. Our expense accounts have a normal debit balance, so to close them and have a zero balance, we will credit them. We will debit income summary for the total of all of the expenses and credit each expense: rent expense, insurance expense, salaries and wages expense, supplies expense, depreciation expense, and interest expense. Take a look at our income statement. The net income of $10,526. We will be closing out the revenue and expenses, which equals net income to retained earnings through the income summary account. Our third closing entry is to close income summary to retained earnings. O we will debit the ending balance in income summary of $10,526, which is our net income to retained earnings. Our fourth closing entry is to close dividends to retained earnings. Dividends has a normal debit balance, so to close it, we will credit it. We will debit retained earnings for $1,000 and credit dividends for $1,000. How do we post our closing entries? It's the same exact procedure as posting any other journal entry that we did in the past. Not only our general journal entries, but also our adjusting entries. If you'd like to review, you can take a look at this slide. Now we're going to be preparing the post-closing trial balance. Let's take another look at our accounting cycle. Look at that. You are at step 9, prepare the post-closing trial balance. Fantastic. How do we prepare the post-closing trial balance? It's the same procedure as the other trial balances that you've done, the regular trial balance, as well as the adjusted trial balance. You have a proper heading, you will list the chart of accounts order, you will put the correct ending balance in the debit or credit column, you will sum the debit or credit column, and you'll make sure that the totals are equal. Here is our post-closing trial balance for Kiki company. Notice that this is the shortest trial balance that you will have created because it only includes the permanent accounts: assets, liabilities, common stock, and retained earnings. The rest are closed, those temporary accounts. One thing I want you to take a look at, notice the ending retained earnings in our post-closing trial balance of $9,526 ties exactly to the retained earnings statement ending balance. That was one of the goals of the closing process to close net income to retained earnings as well as dividends, and we did that. Let's take a look again at the accounting cycle. This is your final step, starting the new fiscal year. Congratulations, you completed the entire accounting cycle. It has been my pleasure to lead you on this journey and I wish you the best. Thank you very much.
