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69
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Dec 18, 2025
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Knowunity Philippines
@knowunityphilippines
You've probably wondered how businesses "close their books" at year-end... Show more
Think of closing entries like clearing your phone's cache - you're wiping temporary data clean to start fresh. These entries transfer balances from temporary accounts (like sales and expenses) to permanent accounts, officially ending one accounting period and preparing for the next.
Temporary accounts include all revenue, expenses, Income Summary, and owner's drawings - these get zeroed out every period. Permanent accounts are your assets, liabilities, and capital accounts that carry forward their balances year after year.
Here's a practical example: Maria's sari-sari store earned ₱150,000 in sales revenue and had ₱125,000 in expenses during 2023. These temporary balances must be closed so 2024 can start with a clean slate.
Remember: Temporary accounts must start each new accounting period with zero balances to properly measure that period's performance.
The closing process follows four systematic steps that work like dominoes - each entry sets up the next one perfectly.
Closing Entry #1 moves all revenue accounts to Income Summary. Since revenues normally have credit balances, you debit each revenue account and credit Income Summary. For Maria's store: debit Sales Revenue ₱150,000, credit Income Summary ₱150,000.
Closing Entry #2 transfers all expense accounts to Income Summary. Since expenses have debit balances, you credit each expense account and debit Income Summary for the total. Maria's expenses of ₱125,000 get closed this way.
Closing Entry #3 is where the magic happens - Income Summary (showing net income or loss) gets transferred to the owner's capital account. Maria's ₱25,000 net income increases her capital account.
Key Point: After entries 1 and 2, Income Summary shows your profit or loss - a credit balance means profit, debit means loss.
Let's walk through a complete example using JM Electronics Store to see how all four closing entries work together seamlessly.
Starting with their pre-closing trial balance showing ₱380,000 in sales revenue and ₱261,000 total expenses, we can calculate net income of ₱119,000. The owner also withdrew ₱24,000 during the year.
Entry #1: Close Sales Revenue ₱380,000 to Income Summary. Entry #2: Close all expenses totaling ₱261,000 to Income Summary. Entry #3: Close the ₱119,000 net income from Income Summary to J. Mendoza, Capital. Entry #4: Close ₱24,000 drawings to reduce J. Mendoza, Capital.
After all entries, the owner's capital increases by ₱95,000 (₱119,000 profit minus ₱24,000 drawings), resulting in an ending capital balance of ₱375,000.
Pro Tip: Always calculate net income first (revenues minus expenses) to know whether Income Summary will have a credit or debit balance.
The post-closing trial balance is your victory lap - it proves everything balanced correctly after closing entries and shows only permanent accounts with their year-end balances.
This trial balance serves three crucial purposes: it confirms debits still equal credits after closing, provides opening balances for next year, and contains only permanent accounts (proving temporary accounts are properly closed).
JM Electronics' post-closing trial balance shows only assets, liabilities, and the updated capital account totaling ₱450,000 on each side. Notice how all revenue, expense, and drawing accounts have disappeared - they now have zero balances.
Checkpoint: If any revenue, expense, or drawings accounts appear on your post-closing trial balance, you've made an error in the closing process.
Even experienced students make predictable mistakes with closing entries - knowing these pitfalls helps you avoid them completely.
The biggest error is confusing temporary versus permanent accounts. Only revenues, expenses, Income Summary, and drawings get closed. Many students accidentally try to close asset or liability accounts - don't fall into this trap!
Another common mistake happens when closing Income Summary. Always check whether it has a debit or credit balance first. Credit balance (net income) = debit Income Summary, credit Capital. Debit balance (net loss) = debit Capital, credit Income Summary.
Verification techniques can save you: ensure Income Summary has zero balance after entry #3, confirm all temporary accounts show zero in the ledger, and double-check that your ending capital balance equals beginning capital plus net income minus drawings.
Quick Check: Your post-closing trial balance should contain zero temporary accounts and show debits equaling credits.
Our AI companion is specifically built for the needs of students. Based on the millions of content pieces we have on the platform we can provide truly meaningful and relevant answers to students. But its not only about answers, the companion is even more about guiding students through their daily learning challenges, with personalised study plans, quizzes or content pieces in the chat and 100% personalisation based on the students skills and developments.
You can download the app in the Google Play Store and in the Apple App Store.
That's right! Enjoy free access to study content, connect with fellow students, and get instant help – all at your fingertips.
App Store
Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
Knowunity Philippines
@knowunityphilippines
You've probably wondered how businesses "close their books" at year-end - it's not as mysterious as it sounds! Closing entries are the final step in the accounting cycle that transfers temporary account balances to permanent ones, essentially resetting the scorecard... Show more
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Think of closing entries like clearing your phone's cache - you're wiping temporary data clean to start fresh. These entries transfer balances from temporary accounts (like sales and expenses) to permanent accounts, officially ending one accounting period and preparing for the next.
Temporary accounts include all revenue, expenses, Income Summary, and owner's drawings - these get zeroed out every period. Permanent accounts are your assets, liabilities, and capital accounts that carry forward their balances year after year.
Here's a practical example: Maria's sari-sari store earned ₱150,000 in sales revenue and had ₱125,000 in expenses during 2023. These temporary balances must be closed so 2024 can start with a clean slate.
Remember: Temporary accounts must start each new accounting period with zero balances to properly measure that period's performance.
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
The closing process follows four systematic steps that work like dominoes - each entry sets up the next one perfectly.
Closing Entry #1 moves all revenue accounts to Income Summary. Since revenues normally have credit balances, you debit each revenue account and credit Income Summary. For Maria's store: debit Sales Revenue ₱150,000, credit Income Summary ₱150,000.
Closing Entry #2 transfers all expense accounts to Income Summary. Since expenses have debit balances, you credit each expense account and debit Income Summary for the total. Maria's expenses of ₱125,000 get closed this way.
Closing Entry #3 is where the magic happens - Income Summary (showing net income or loss) gets transferred to the owner's capital account. Maria's ₱25,000 net income increases her capital account.
Key Point: After entries 1 and 2, Income Summary shows your profit or loss - a credit balance means profit, debit means loss.
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Let's walk through a complete example using JM Electronics Store to see how all four closing entries work together seamlessly.
Starting with their pre-closing trial balance showing ₱380,000 in sales revenue and ₱261,000 total expenses, we can calculate net income of ₱119,000. The owner also withdrew ₱24,000 during the year.
Entry #1: Close Sales Revenue ₱380,000 to Income Summary. Entry #2: Close all expenses totaling ₱261,000 to Income Summary. Entry #3: Close the ₱119,000 net income from Income Summary to J. Mendoza, Capital. Entry #4: Close ₱24,000 drawings to reduce J. Mendoza, Capital.
After all entries, the owner's capital increases by ₱95,000 (₱119,000 profit minus ₱24,000 drawings), resulting in an ending capital balance of ₱375,000.
Pro Tip: Always calculate net income first (revenues minus expenses) to know whether Income Summary will have a credit or debit balance.
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
The post-closing trial balance is your victory lap - it proves everything balanced correctly after closing entries and shows only permanent accounts with their year-end balances.
This trial balance serves three crucial purposes: it confirms debits still equal credits after closing, provides opening balances for next year, and contains only permanent accounts (proving temporary accounts are properly closed).
JM Electronics' post-closing trial balance shows only assets, liabilities, and the updated capital account totaling ₱450,000 on each side. Notice how all revenue, expense, and drawing accounts have disappeared - they now have zero balances.
Checkpoint: If any revenue, expense, or drawings accounts appear on your post-closing trial balance, you've made an error in the closing process.
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Even experienced students make predictable mistakes with closing entries - knowing these pitfalls helps you avoid them completely.
The biggest error is confusing temporary versus permanent accounts. Only revenues, expenses, Income Summary, and drawings get closed. Many students accidentally try to close asset or liability accounts - don't fall into this trap!
Another common mistake happens when closing Income Summary. Always check whether it has a debit or credit balance first. Credit balance (net income) = debit Income Summary, credit Capital. Debit balance (net loss) = debit Capital, credit Income Summary.
Verification techniques can save you: ensure Income Summary has zero balance after entry #3, confirm all temporary accounts show zero in the ledger, and double-check that your ending capital balance equals beginning capital plus net income minus drawings.
Quick Check: Your post-closing trial balance should contain zero temporary accounts and show debits equaling credits.
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Our AI companion is specifically built for the needs of students. Based on the millions of content pieces we have on the platform we can provide truly meaningful and relevant answers to students. But its not only about answers, the companion is even more about guiding students through their daily learning challenges, with personalised study plans, quizzes or content pieces in the chat and 100% personalisation based on the students skills and developments.
You can download the app in the Google Play Store and in the Apple App Store.
That's right! Enjoy free access to study content, connect with fellow students, and get instant help – all at your fingertips.
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The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
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