How to Prepare Closing Entries

Video Transcript

"My name is Miranda Chook, a CPA. Closing entries and adjusting journal entries are sometimes used interchangeably. These entries are typically made to close out an accounting period therefore, the term closing entries. A best practice which is also Surbanes-Oxley Compliant is to have a list of recurring closing entries available. This way the work is eliminated because you have the list of entries that you want to consider to be made, you have already validated the correct account numbers and you have also identified the source of the information and/or the calculation that needs to be done to prepare the entry. Some common closing entries or adjusting journal entries include an accrual for salaries between the period that salaries were last paid to the period end. There are also typical closing entries such as fixed assets, depreciation and amortization. There are also some closing entries that may only be made at quarter end. These would include an evaluation of the allowance for doubtful accounts and a truip of the tax accounts and finally there are year end specific closing entries and the main one here would be the closing out of income and expense accounts for the year."