What is the purpose of closing the books

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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