Chapter 7
Inventory: Merchandising Transactions
190
Journal
Page 1
date
2016
account title and explanation
debit Credit
Jan 31 Income Summary
178,000
Sales Returns & Allowances
4,000
Sales Discounts
2,000
Cost of Goods Sold
100,000
Depreciation expense
5,000
Interest expense
4,000
Rent expense
10,000
Salaries expense
40,000
Supplies expense
7,000
utilities expense
6,000
Close expense and contra-revenue accounts
______________
fIGuRe 7.25
Step 3 closes the income summary account. Recall from a previous chapter that the income
summary account is closed to owner’s capital, as shown in Figure 7.26.
Journal
Page 1
date
2016
account title and explanation
debit Credit
Jan 31 Income Summary
30,000
Sanders, Capital
30,000
Close income summary
______________
fIGuRe 7.26
The end result, just as in a service company, is that the equity in the business is updated with the
net income as shown in Figure 7.27.
30,000
+
INCOME SUMMARY
DECREASE (DR)
INCREASE (CR)
–
48,000 Current balance
78,000 Ending balance
30,000 Balance
+
SANDERS, CAPITAL
DECREASE (DR)
INCREASE (CR)
–
208,000 Closing Revenue
Closing Expenses 178,000
30,000
______________
fIGuRe 7.27
