1. Enter January 31, Profit and Loss, $88.95, on the credit side in red ink.

2.

Rule the account with the single and double lines on the same lines of the debit and credit sides.

Is the ledger in balance?

3. Transfer the loss to the debit side of the Profit and Loss account in black ink, writing January 31, Expense $88.95.

The Profit and Loss account would then contain one item on the debit side and one on the credit side.

19

Jan. 31 Expense 1 88.95 Jan. 31

88.95 Jan. 31 Mase.

To Close the Profit and Loss Account:

1. Find the difference between the credit and debit sides of the account.

2. Enter this difference, $41.80, on the debit side in red ink as

S. N. B's Net Profit.

3. Rule the account.

4.

Transfer the Net Profit to the credit side of S. N. Boden's account as follows: January 31, Profit and Loss, $41.80.

The Proprietor's account would then show the investment and the net profit on the credit side and the withdrawal on the debit side.

To Close the Proprietor's Account:

1. Add the credit side and the net profit in pencil.

2. Subtract the debit side from it. The difference is the Net Worth.

3. Enter on the debit side in red ink, January 31, Net Worth, $1501.80.

4. Rule the account.

5.

Restore the ledger to balance by bringing the Net Worth below the lines on the credit side, February 1, Net Worth, $1501.80.

This completes the closing of the nominal and mixed accounts, the Profit and Loss account, and the Proprietor's account.

To Close the Cash Account:

1. Find the difference between the debit and credit sides of the account.

2. Enter this difference in red ink on the credit side as follows: January 31, Balance, $1085.70.

3. Add each side and rule the account.

4.

Bring the Balance down on the debit side in black ink, dating it February 1.

To Close the Personal Accounts that Do Not Balance:

1.

Find the difference between the two sides of the account.

2. Enter the difference as Balance on the smaller side in red ink.

3.

4.

Add and rule the account.

Transfer the Balance to the opposite side of the account in black ink, dating it February 1.

B. D. Foley's account would be closed as follows:

T. A. Carr's account should be closed like B. D. Foley's.

C. S. Baxter's account should be closed by putting the Balance in red ink on the smaller (credit) side of the account. The Balance should be brought down on the opposite side in black ink.

S. N. Good's account balances. It should be ruled with single lines only as it contains but one item on each side.

item.

C. D. Sand's account should not be ruled as it contains but one

Rules for Transferring Red Ink Items:

1. Everything entered in red ink to close must be brought down in black ink on the opposite side of the ledger.

2. Inventories, Balances, and Net Worth are transferred to the opposite side of the same account.

3. Profit and Loss items, including Net Profit, must be transferred to the opposite side of some other account.

Proof Trial Balance. After the ledger has been closed, nothing remains open on the books but assets and liabilities. The sum of the debits (assets) must equal the sum of the credits (liabilities). A Proof Trial Balance is taken to show that all transfers have been brought down properly. The proof trial balance should always be made.

When listed in a balanced table and properly explained the Proof Trial Balance becomes the Balance Sheet of the accountant. This will be explained in the advanced work.

Exercise 13. On a sheet of ledger paper open the following accounts and a Profit and Loss account. Open three accounts on the first page of the ledger and four on the second. The Merchandise inventory is $455. Close the ledger, March 31. Make a Proof Trial Balance.