 Hello. In this presentation, we will enter the closing process into our worksheet with one journal entry. In order to do this, we want to take a look at what we have so far in terms of the process in terms of the worksheet. What we have here is our worksheet. It's starting with the adjusted trial balance. Remember where that came from? That means that we have done the financial statements from the adjusted trial balance. Everything has been entered for the month or year, and now we need to set ourselves up for the next month or year. And therefore change this from the adjusted trial balance to a post-closing trial balance. We'll do this with a similar worksheet as we've seen with the adjusted trial balance where, in this case, we start with the adjusted trial balance. We will post our closing journal entries, in this case, one journal entry from one big journal entry, and then we'll have our post-closing trial balance once this has been completed. We also see our accounting equation up top, which is just picking up the information in each section. We see that assets equal liabilities as in and equity, and that'll be the case as we go through this process. Squirling down, we see the format of this. We have the asset accounts in green, liabilities in orange, and then the equity light blue, and then the income statement accounts, revenue, and expenses in the dark blue. We see net income at $577,000. That is the $800,000 minus the $120,000 minus the $48,000 minus the $12,000 minus the $36,000 summed up here, meaning the credit and revenue minus all the debits and the expenses gives us the net income. So these are going to be the temporary accounts that we want to close out, all the revenue accounts and the draws. We're going to close those out to the capital account. Our ending goal being to have all these accounts zero after this process, and the capital account is the account that will be used to make up the difference. So just to see what's going to happen, and if we could see this very easily without doing a journal entry, what this number needs to be, so don't do this, I'm just going to do this demonstration. We're going to say if we just delete all these numbers, we'll be out of balance by $568,000. That means that the assets, if we add all these up, minus the $70,000 a contra asset is $587,100, minus the liabilities, debits of assets, minus the liabilities of credits and the contra account of a credit, gives us the $568,000. That's what we need to be in balance here. So that means that this capital account, if we make all these zero, this capital account needs to be a credit of $568,000. And that will put us back in balance. So this in essence is our post-closing trial balance. That's what we want to do, but we want to do it by not just deleting everything and putting in a number there. We want to do that by doing adjusting entries or closing entries. So I'm going to undo this. We're going to get back to this process. That's where we want to be. So in order to do this, we're going to do this with a one-step process. The one-step process is really nice because it's the quickest way to get to where we want to be. And you can see to do that, all we have to do is just change all these accounts to get to where we want to be. It's also useful because when you're thinking about different processes, you got to know what the closing process does. And this is the quickest way to kind of just visualize in your mind what's happening. The four-step process, which we'll go over later and as in most textbooks, will give a good understanding and has its purposes and its reasons, which we'll discuss. But the one-step process can give you that quick visualization as you work more complex problems that are going over time periods, over more than just one time period, so you can know what's happening with that closing process. So I'm going to post this. We're just going to build this journal entry. We're going to post it here. But I'm actually going to post it down here. We'll post it right here, starting just so we're close to the accounts that we'll be dealing with, which will be these revenue accounts. And since we only have one journal entry, we should have plenty of room. So we're going to start with this revenue. We're going to start, sorry, with draws. Everything from the draws on down will be closed out. All of the income statement accounts and this temporary account of draws. So we'll start with draws. It's got a debit balance. Draws is kind of the most confusing account most of the time because it's not part of the income statement. You can see it's not included in the income statement of the net income calculation, but it's still temporary. And we need to know that draws is bringing down equity. We need to just know that draws has a debit balance. How do we make it go down then? We do the opposite thing to it, which in this case is a credit. So I'm going to copy the draws. So I'll right-click and copy the draws. I'm going to put that up top in cell B11. I'm in cell B11. Right-click and I'm going to paste just the formatting, pasting one, two, three. Now I'm going to use some formatting to show the indentation. You don't have to do this, but I'm going to go to the home tab, alignment, increase the indentation. And you could do that if they're blocking the formatting because of a safe protected worksheet. You can double-click and just spacebar three times to indent it a bit. And we're going to put a credit here in cell B11. We're going to represent our credit both in the outer column and with a negative of 10,000. That's what we're going to need to make this zero. Now I'm starting with a credit note. We're kind of violating the rule of putting the debits on top and the credits on the bottom. And that's going to be the case because it's going to be easier for us to build it. And ease of building and ease of going back and seeing what you did really kind of trumps that rule a lot of the time. But we can go back and then adjust it after we have built it to put the debits on top and the credits on the bottom. So we're going to post this now. So we are in cell H16. We're in cell H16. We're going to say equals and then point to that 10,000. And that'll bring this balance to debit down by the 10,000 to zero. That puts us out of balance here. We've achieved our first goal of making the draws account zero. We're just going to continue with that goal as we go down the rest of the statement. So next we have the income statement accounts starting with revenue. Revenue has a credit of 800,000 in it. We need to make it to go down. We're going to do the opposite thing to it therefore. So we're going to debit revenue. So I'm going to copy revenue, right-click and copy revenue. We're going to put that in cell B12. So we're in B12, right-click. We're going to paste that one, two, three values only. So we will paste that there and I'm going to put the amount. It's a credit here. So we're going to do the opposite debit in order to make it to go down 800,000. Now we're not in balance. We're just building this journal entry, but I'm going to post it as we go because that will give us an idea of what we're doing as we go, why we're doing it as we go. We're just building a journal entry doing whatever we need to do in order to make all these accounts go to zero. And then we're going to have to do whatever we have to do at the balance to make our journal entry in balance. We'll discuss that when we get there. We are in cell H17. We're going to post this. So we're going to say this equals and point to that 800,000 that bringing this credit balance down by that debit to zero. So we've achieved the goal of bringing that down to zero. Now we have all the expenses. Note all the expenses are debit to balance accounts. All then needing credits in order to make them go down. So we'll have some repetition in our process here. We've got wages expense. It has a debit. We need to credit it to make it to go down. So I'm going to copy wages expense. We're going to bring this up top in B13. Right click and paste 123. I'm going to end in by going to the home tab. Alignment group increase indentation. And we're going to put this in the credit column in D13. D13. There's a debit here. We need to make it go down with a credit represented in the outer column as well as in our worksheet with a negative number. So negative one two zero zero zero zero and enter Excel formats it for us, which is nice. Then we're going to go down to H18. We're in cell H18 equals and we're going to point to that 120. That's a credit. This is a debit. Those are opposites. It's going to make it go down to zero. So we're brought that one to zero. Going to do the same thing for the utilities. Now note that we could use some copying and pasting in Excel to make this go faster, but we're learning the process here not just of Excel, but of posting this. So we're going to go through the TDM of each account and do this each time. So we're going to say that we got the 40 and by the way, I will show you how to do it a bit quicker once we have completed this process. All right. So this one's going to be 48,000 debit. We need to do the opposite thing to it credit. So we're going to copy utilities expense. I'm going to put that in cell B14. Right click and paste 123. Going to go up to the home tab. Alignment group. Increase the indentation. Then we're going to go in the outer column D14 and we're going to put negative 48,000. Then we're going to post that. So we're going to be over here in H19 equals in H19 and just point to that 48,000. That's a credit. This is a debit. Those opposites making this account go down to zero. Next, we'll do the same for insurance, which is building our journal entry over here step by step doing what we need to do to make these go down to zero. So insurance has a debit of 12,000. We need to credit it to make it go down. So we're going to copy the insurance expense. Put that in cell B15 next area in our journal entry. Paste it. And we're going to put that in the credit column and also represent it with a negative number of 12,000. Then we'll post that. We're going to go over here to H20. We're going to say equals and then scroll over here to the 12,000. That's a credit. This is a debit. Those are opposites making the account go from 12,000 debit down by 12,000 credit to zero. Two more times. We've got the supplies here. Supplies as a debit balance of 7,000. We need to make it go down. We're going to do the opposite thing to it. A credit. Going to copy the supplies. Right-clicking on supplies. Copy those supplies. Putting them in the next spot in our journal entry B16. Right-click and paste 123 values only. I'm also going to indent these two cells. I'm going to highlight these two. Home tab, alignment, increase and indent because they are credits. You could do that by double-clicking and hitting the space bar three times. Going to put our cursor in D16, negative 7,000. We're going to post that out then. Let's enter. Here's the 7,000 formatted. We'll be over here in H21. Within H21 we will say equals. Point to that 7,000. Bringing the debit balance down by the credits of 7,000 to zero. One more time. We'll do this for depreciation. Here's depreciation. 36,000 debit balance. We're going to bring it down by doing the opposite thing to it. A credit. Copy and depreciation expense. Right-click and copy. Paste that in the next available space which is in B17. Right-click and paste 123. Then we're going to go to the home tab. Alignment, increase and indent. Then we're going to go to D17 and put the amount of a credit represented in the outer column and with a negative 36,000. Then we'll post that out. We're going to post that to H22. We are in H22. Equals and point to that 36,000. This is a debit. That's a credit. That's going to make this go down to zero. Now we have achieved the goal. We've made all of these go down to zero. However, we are out of balance by the 567,000. That's what we need to do to put this back in balance. You don't have to do this, but I'm going to just show you that in one other format. We're going to sum up the debits. We're going to sum up the credits. We're going to see what the difference is, what we need to do to make this in balance. I'm just going to sum the credits here and sum the debits. You don't have to do this. I'm doing this very quickly. I understand, but we're just going to sum those up and notice they're obviously not in balance. We can also see that very quickly by just highlighting these cells and Excel will highlight and sum up everything in that highlighted area or the selected area, and that's 567,000. If we subtract this out, we get the same thing, the 8 plus the negative number subtracting the 2. The difference between the 800 and the 233 is that 567,000. That's what we need to make us in balance. That's our 567 we need to put this journal tree in balance. We're just going to plug that in here and that's going to go right here. I'm going to do that with a formula. I could just type in negative 567, but I'm going to use a formula to do that. What I want to do is sum this up. If I sum this up, it'll give me a positive 567. We want a negative 567, so instead of hitting equals, I'm going to select negative and then type in SUM. That's the SUM function and select the SUM function. Then we want this whole two columns. We want from here C11 all the way down to D17. C11 to D17 and Enter and there it is. There's the 567. Now we just need to know where it should go. We're going to put that to the capital account. I'm going to copy the capital. I'm going to put that in B18, right click and paste 123. Then I'm going to increase the indentation, home tab, alignment, increase indentation. Then we're going to post that to the capital account. We're here in H15. We're going to say equals and then we're going to point to that to 567. This is a credit. That's a credit. Those are the same things. It's going to make this capital account go up to 568,000. Here's at the end of the day now that we've achieved our goal. We've made all of these zero, yet we're still in balance. How? Because we entered all of that information into the owner capital account. Here it is in the capital account. Note this process. You want to be able to visualize this process very easily or very quickly because when you're working with different problems and you're seeing how reports are relating, you got to know that from one time period to the next time period, these temporary accounts will close and then start over again. Even if you're using software, you need to be able to do that pretty quickly and be able to say, ah, that's because these temporary accounts are only being represented for this certain time period. The single step process is the quickest way to visualize that or put that into a worksheet for understanding or working through problems. So note here though the capital account went up by, and you can compare this to the calculation of the statement of owner's equity. This is basically the beginning balance, and then it went up by net income, which is this minus this, or 577,000, 577,000. And it went down by the draws. So we just did it all in one lump sum rather than breaking out income and draws as is done in the statement of owner's equity. And then so when we took that and we increased it by the net income, decreased it by the draws to get to our ending equity balance. Now last thing to consider is that, notice our journal entry of course is not quite in the perfect format, meaning we don't have the debits on top and the credits on the bottom. We have this one debit down here. We could reformat this. I could move this up to the top and put the credits on the bottom if we so choose. I'm not going to do it at this time, because I do think that if we're doing a long journal entry like this, and if we're doing it by hand or outside of a system, the system will always put the debits on top and the credits on the bottom as basically a computer system rule. If we're creating the financial statements, however, if it's a complex journal entry, we might want to leave it in whatever format helps us to better go back later and see what we did. And to me this basically kind of shows exactly what we did because it starts here at the first account and goes straight down. If we format it so that the revenue is on top because it's a debit, then it could start to get more confusing on what we did in order to put the proper formatting in. So it's up to you to make that kind of judgment call when you're doing these types of transactions.