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What is the purpose of closing the books

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Reference no: EM13257587

 

On December 31, 2007, Bert's Farm Store had the followingaccount balances in its accounting system. All year-end adjustmentshad been entered, but the books had not yet been closed.

Bert's FarmStore

Account BalancesBefore Closing

December 31, 2007

Account                         Balance                  Account                              Balance

Cash                             $700                      SalesRevenue                         $2,200

Merchandise                   2,800                      Cost of GoodsSold                    900

Supplies                         925                      WagesExpense                           400

PrepaidInsurance             450                      UtilitiesExpense                           150

Equipment                      3,550                    DepreciationExpense                      50

AccumulatedDepreciation  1,750                    InsuranceExpense                         100

InterestPayable               150                    SuppliesExpense                             150

NotesPayable                  2.000                    Interest Expense                           100

Owner'sEquity                 4,175

a. What is the purpose of closing the books?

b. Prepare all necessary closingentries.

c. After closing, what is the amount of owner's equity that will be reported on the balance sheet?

Reference no: EM13257587

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