 Note that all the other expense accounts are expense accounts. So expense accounts are usually a lot of them, but they all act the same way in that they generally all have debit balances. We need to make them all go to zero. So you're going to start to see a trend here, but we'll do this one by one for now. So we see a 800 here debit in salaries expense. It's an expense account. All expense accounts have debit accounts represented by the fact that they do not have brackets. We need to make it go down. I'm going to do the opposite thing to it, which in this case would be a credit. So I'm going to copy this. I'm going to put this under the date. So the dates here, I'm going to put it underneath and sell C9, right-click and paste it to 123. We're going to credit this amount because that's what we need to make it to go to zero. So I'm going to make it a credit in the credit column and a negative 880 and enter. So before we post it, I'll just keep moving down. We're going to go to the rent expense. Once again, it's an expense. We need to make it go to zero. That means we need to make it go down, which means we're going to do the opposite thing to it as what it is. All expense have debits of balances represented by the fact that they do not have brackets. In order to make it go down, we'll do the opposite, which is a credit. So I'm going to copy that, put it underneath, right-click, paste 123. This journal entry will be fairly long. It's got more than two accounts. So I'm going to put all these accounts in there first and then we'll put the debit half in there. So here's a credit of 160.0. We're not putting the balancing debit in yet until we complete closing out all the expense accounts. Next expense account. Supplies expense. Once again, it's an expense. Expenses have debit balances. We need to make it go down to zero. So we're going to do the opposite thing to it as what it is, which in this case would be another credit. So I'm going to copy that, put it under the right-click, paste 123. And then the amount will be a credit of 8100. Next account. We add depreciation expense. All expenses have debit balances represented by the fact that they do not have brackets in this worksheet. We need to make it go down. We make something go down by doing the opposite thing to it, which in this case would be a credit. So I'm going to copy that. I'm going to put it underneath, right-click, paste 123. And we'll put in a negative for the credit, 330. We're starting to see the trend here and then we've got insurance expense. All expenses have debit balances. We need to make it go down. So we're going to do the opposite thing to it, which in this case would be a credit. So I'm going to copy that. I'm going to put it underneath, right-click, and paste 123. And the amount will be negative 300. Next one. Last one. Miscellaneous expense, 950 has a debit balance in it. We need to make it go down. We're going to do the opposite thing to it, which in this case will be a credit. So we're going to put that underneath, right-click, paste it 123. And in E14, negative 950. All right. So now we have all these credits in our journal entry. We need to balance that out with a debit, which we have this nice space on top that we left up here for the debit. And that debit's going to go into Income Summary, our new account here. So I'm going to right-click on the Income Summary. We're going to put that on top and sell C8, right-click, paste it 123. All right. Now we need to add this up. There's a few ways to add this up. If I highlight all these, we can see that that adds up to 12, 160. We need a debit of 12, 160. If we took out the handy calculator here, we could do it by hand, which we don't need to do if we have an Excel, but just for comparison. So 12, 160, we could sum it up. And I would use the sum function like this. Sum and note that you can move this thing around if you want, or you could just sum from the bottom. I recommend getting used to summing both sides of the row here, just in case we have debits and credits in the future, and then enter. Now we have that, but it's going the wrong way. It's a credit format. How can we make it a debit? Well, we could go up to the Formula tab here and put a negative sign in front of it, and that would flip the sign. So that's one way we could do it. The fastest way to do it, if you want to do that plug formula, is instead of hitting equals, just put negative, SUM. And then, again, you could move that aside or just start at the bottom and sum them all up. So that means I want you to sum it up and take the negative. How do we know that this is in balance? Well, the debits minus the credits, if I highlight both of them, will sum up to zero. Okay, so then if we post that then, we could post the income summary. There's something in this cell already. So I'm going to double-click on it. I'm going to go to the end of it. I see this cell in there, and I'm just going to say plus and point to the 12, 160, that we want to post there and enter. And then we can see that there should be two postings in there. There they are. So there's the formula. And if you want to know where these characters are, they're in the data tab. They are in the formulas tab, I should say, and the formula auditing in right here. All right, then we're going to do the salaries expense, and I'm just going to go through here one by one. So we're going to say this equals the 880, it's going to take this down to zero. Now we're in rent expense. You can say this equals the 1600, it's going to take this down to zero, which is what we're looking for. Now we're in salaries expense equals the 8100, it's going to take this down to zero. Now in depreciation expense, we're going to say this equals the 330, it's going to take this down to zero. And now we're in insurance equals this 300, it's going to take this down to zero. And now we're in miscellaneous equals the 950, taking this down to zero. You might be asking, is there a faster way to do that? Yes, there is. We're going to use the auto fill. So if we delete this, and we have this one happening, and we just want to auto fill it down, we can click on there and put our cursor on the auto fill handle, and then auto drives it down and Dr. Phil calculates it. And there we have that. So now we're in all zeros over here, and we see what is in the income summary now. We can kind of verify that the income summary is correct. How do we know? Well, one, all these are zero, and two, the income summary should now be holding net income. Net income is in income summary now, why? Because we closed out both the income and the expenses to it. That's important to know for later problems because a lot of books will actually reference the income summary instead of telling you what net income is. So for example, if I'm trying to see how much we should allocate to a partnership, it might say, well, in the income summary before we close it out to the capital account, and you're supposed to know, well, that's net income that we're supposed to split up to the partnership. So it's important to know that what's in the income summary now is net income before we close it out. Now we're going to close out the income summary. So as a 531, we are now going to take this clearing account, make it go to zero again. So now that we've verified that these are zero and it's in there correctly, we're going to close it out and put it into where we really want it to go, which is the capital account. So I'm going to say this is a credit. We're going to make it go down by doing the opposite thing to it, which in this case would be a debit. So I'm going to right click and copy that, put that in cell C16, right click, paste it one, two, three. The amount will be for the 24640 and in this case, we're going to have a credit of 24640, only two accounts in this journal entry. And that's going to go to the owner's capital account. So the owner's capital account, we're going to copy that and we're going to paste it one, two, three in C17, right click, paste one, two, three. And then if we post that out, let's see if it does what we want it to do, what do we want it to do? We want this to go to zero. So we could go to the income summary, double click on it, go to the end of it. I can see what is in there right now. These two income summary accounts, we're going to say plus, it's always a plus in the trial balance and point to this 24640 and enter. That should make this go to zero. The other side is going to go to the I-15 equals and we're going to point to the credit in the capital account, going to the capital account, takes the capital account up. And now we can think about that. Why does that make sense? Well, that's the net income. This capital account represents the net value of the company or the amount owed to the owner and the net value of the company went up by the amount that the company earned during the last month to 66940. So the net book value of the company went up by that and or you can think of it of that's what the owners could kind of walk away with if they liquidate the company in theory. All right. So now we have this one last account. This is the last step of the four step process of the closing entries. We're going to close out the draws. So draws represents the amount of money that the owners have taken out of the company. And so in this case, we have the one owner of the capital account. The draws are the debit balance. We need to make it go to zero. So I'm going to make it go down by doing the opposite thing to it. So I'm going to copy that. We're going to put it on the bottom. So here's the date. I'm going to put it on the bottom of the date. Right click and paste it one, two, three. The amount will be a credit in the credit column of negative 10,000. We're going to need a debit of the same amount of 10,000. That debit will go to capital. So we're going to also close out the draws to the capital account. Right click, copy, and paste one, two, three, and see 19. And let's post this out and see if it does what we want it to do. What do we want it to do? We want this to go to zero. So we're going to put our cursor. We could post this site first. So I'm going to post the credit first in this case. So I'm in I-16 equals. I'm going to point to that draws. That's a credit. And that'll make this amount go down to zero. So now we have all zeros here. I'm going to double click on the owner's capital, double click. And we can see what is in there already, this prior journal entry. And plus, and we're going to point to the capital account that 10 and entered. What did it do? It brought the capital account down. Why? Because that's the amount that the money or something that was drawn out of the corporation. And therefore, the value of the corporation has gone down, the book value being the assets minus the liabilities 56,950 went down by this 10,000 that was drawn out. So you'll note that now we can see that the assets minus liabilities is just one number now, the capital account in this case. And we are ready to start over and start in the next month and count up from the next time period forward.