Accounting: Closing Entries

Accounting

With loads of businesses looking to save money by outsourcing accounting services to qualified individuals, certified public accountants can make a solid income.

Starting a CPA business from home requires relatively low overhead, but it may take a time to land the clients needed to turn a profit. You can market your services through networking, and you might consider starting your business part time until it gets off the ground.

While you can be an accountant without CPA certification, CPAs have a strong advantage over their noncertified peers. Visit the American Institute of CPAs website for information on specific state requirements.

Copyright by Brian R. Lazarus. Check out this website: for other related video lectures.

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23 Comments

  1. TheLogicJunkie says

    A very big reason you have closing entries is because of the reason you created separate accounts to begin with:  because you could’ve just kept all the various transactions in the main bulk journal, instead of ever splitting them up by theme and function into different accounts, in order to make things easier to understand.  But then it would all have been a huge, jumbled mess that you would’ve had to tediously spend time hunting and pecking through in order to find all the various transactions of identical type.  But, instead, for the sake of preserving your sanity, you created separate accounts for each type of transaction, and collected them all in a general ledger.

    However, the very MAIN reason you “close the books” is because your bottom line was always figuring out how much the business made the owner(s).  So you now start pooling all your expense accounts together to have one mass expense summary, and you do the same thing with all sales revenue.  And together, they are put together in the “Income Summary”, where they annihilate each other in terms of purpose, and so you resultingly end up with one net amount of profit or loss that the company has made overall.   

    But then you have to go a bit further and, if it turns out that the net amount is on the plus side (profit), then you have to then split up that profit so that everyone who has invested an actual ownership stake in the company gets their share, and so to accomplish this, you take the final amount from your Income Summary result sheet.and put it on yet another final sheet called the “Retained Earnings” sheet, along with the final amount from a separate sheet where you calculated what investors get what, in terms of dividends.  And so on the final Retained Earnings sheet, you take out what you’re going to have to pay out to peripheral investors in terms of dividends, and that leaves the final, juicy amount that the direct, main owners of the company get in terms of their pure financial payoff from the business.  Because they are the innermost nucleus of why the business exists in the first place.

    So, to make a long story short, you close the books not primarily to clear them out for the next period, but because it’s absolutely necessary to start systematically and logically recombining all the various transaction types in order to ultimately figure out what the big boss man, the principal owner (or owners) actually made in terms of cold, hard cash from the business. 

    1. TheLogicJunkie says

      +Aldon Adkisson
      I don’t think teaching to insiders who already know the subject is even teaching, and I don’t know why most people do things this way — it’s just lazy, self-serving, and perfunctory.  I think if you’re going to teach something, at least make it rich and interesting, because it’s always the case that even most veterans in a field have been taught only the procedural side, and never the philosophical, historical, or even the “romantic” side of things, for lack of a better term.  So even a lot of veterans still don’t understand things as well as they’d probably like to, and so you do even them a huge service by filling in all the gaps in their understanding.

    2. Wood 55 says

      As you stated “I don’t think”, meaning it’s your opinion and you can never be wrong for that opinion. Wether he was teaching or going through a review of the subject, he helped someone in that area of knowledge. If everything was taught only one time from a particular aspect of the subject (i.e. philosophical, historical, romantic, or procedural), we would probably have a universal educational system taught by 5-7 instructors and I think we can agree that people learn too many different ways for that to work. You are absolutely right that a lot of “veterans” don’t know much of what they should and should master their area of knowledge before they try to teach it to someone else but that goes back to what I said before, “it’s up to the individual to pursue that knowledge” wether it’s the teacher or the student.

  2. CandelaZ says

    Get out of accounting…run…just…run

    1. dumpster says

      ?????????? ?

  3. Jacob Beattie says

    thank you based Lazarus

  4. Global Victory says

    Worst….course….of….my…..life!!

    Can’t wait for this semester!

  5. Orlando palza says

    amazing i was cracking head for two days and in just 10 min I GOT IT!!!!!!!

    1. Wood 55 says

      Me too

  6. Kylo Ren says

    This is more helpful than my accounting teacher

  7. Moossey says

    super helpful!!
    we do work our assets off! hah killin me

  8. Chels Y says

    Your handwriting is amazing.

  9. zoe didier says

    Thanks Dr. Lazarus! “We work our assets off!” Haha

  10. Surya Shekhar says

    nice & easy to understand…m

  11. Khaled Sulaiman says

    Amazing .. Thank you

  12. Martin N says

    l a z a r u s b o y s

  13. Ana Lucia Marquez says

    Wooow you are so helpful ! Thank you so much 🙂

  14. Adam Penner says

    this guy is the biggest beauty i’ve ever seen on you tube. saved the day for my quiz tomorrow. Brian Lazarus for prez

  15. Depriest Ingram says

    Thank you

  16. Reyaz Kabiri says

    thank you so much! much easier to understand it when you are explaining it!

  17. Zahid Gul says

    a very great explanation…tnx professor.

  18. angelarrkew says

    thank u u r god sent :—)

  19. Sean says

    thank you!!! this was super helpful

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