1 Net Revenue a/c Dr 188000 To Income Summary 188000 2 Income Summary a/c Dr 160400 To Cost of Goods Sold 137400 To All other expenses 23000 3 Income Summary a/c Dr 27600 To Retained Earnings 27600 (Bal Fig ie 188000-160400)
|31 July 2017||By Balance b/d||31900|
|31 July 2018||To Balance c/d||59500||31 July 2018||By Income Summary||27600|
|1 July 2018||By Balance b/d||59500|
3. The balance shown in the trial balance ie $ 31900 was the opening balance for the current year. It includes profits accumulated up to the previous year (and not the current year). The current year addition of profits is obtained by computing the closing entries as in Question 1. The excess of Income over expenditure or profits are transferred at the end as a part of closing entries.
Hence $ 27600 is trfd at the end of the year. Thus closing balance is $ 59500.
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