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Worked-example setupScope and assumptions
- Maple Studio is treated as a simplified corporation using direct closing entries to Retained Earnings.
- The listed balances form its complete adjusted trial balance after all adjustments and before closing.
- No income tax, other comprehensive income, gain, loss, prior-period correction, or other equity change applies.
- Closing entries do not alter the retained journal, ledger, or source-document history.
- Period
- Year-end direct close and post-closing trial balance
- Units
- USD
- Rounding
- Whole US dollars; no rounding required
Try the close first
Maple Studio is a standalone design-services corporation. Its year runs from January 1 through December 31, 2026. Beginning Retained Earnings is $8,000, Common Stock is $20,000, and no shares were issued or retired. Dividends are $2,000. There are no income taxes or other equity changes in this example.
Prepare direct closing entries, then a post-closing trial balance. Use all the adjusted balances below; the Retained Earnings line does not yet include the current year's closing transfers.
| Maple Studio | Amount | Amount |
|---|---|---|
| Adjusted Trial Balance | ||
| December 31, 2026 · US Dollars | Debit | Credit |
| Cash | $19,400 | |
| Accounts Receivable | 9,600 | |
| Equipment | 30,000 | |
| Accumulated Depreciation | $6,000 | |
| Accounts Payable | 7,500 | |
| Wages Payable | 1,500 | |
| Common Stock | 20,000 | |
| Retained Earnings | 8,000 | |
| Service Revenue | 46,000 | |
| Wages Expense | 18,000 | |
| Rent Expense | 6,000 | |
| Depreciation Expense | 4,000 | |
| Dividends | 2,000 | |
| Total | $89,000 | $89,000 |
Calculate the expected ending balance
Expenses total $18,000 + $6,000 + $4,000 = $28,000. Revenue of $46,000 less those expenses gives $18,000 of net income. Ending retained earnings should therefore be $8,000 + $18,000 - $2,000 = $24,000.
The dividend reduces retained earnings without reducing net income. This distinction matters even when an incorrect calculation happens to give the correct ending equity.
Record the entries
Debit Service Revenue to remove its credit balance. Credit Retained Earnings to transfer the revenue's effect on equity:
Credit each expense for its debit balance. The matching debit to Retained Earnings is the $28,000 total:
Close Dividends separately because it is not part of net income:
Each temporary account now has equal debits and credits. Retained Earnings has a $24,000 credit balance: $8,000 + $46,000 - $28,000 - $2,000. The entries do not move Cash or delete the earlier transactions.
List the balances that carry forward
The post-closing trial balance includes the permanent accounts. Accumulated Depreciation remains because it records cost allocated to expense across periods, not just this year's depreciation.
| Maple Studio | Debit | Credit |
|---|---|---|
| Post-closing trial balance, December 31, 2026, US dollars | ||
| Cash | $19,400 | |
| Accounts Receivable | 9,600 | |
| Equipment | 30,000 | |
| Accumulated Depreciation | $6,000 | |
| Accounts Payable | 7,500 | |
| Wages Payable | 1,500 | |
| Common Stock | 20,000 | |
| Retained Earnings | 24,000 | |
| Total | $59,000 | $59,000 |
Check the account list as well as the totals. An omitted expense closing line and its matching equity debit can leave equal column totals while retaining a temporary balance. Comparing Retained Earnings with the independent calculation provides another check on the close.
Verified calculation · journal entry
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- accounts
- 13 fields
Inspect data
{
"accounts_payable": {
"classification": "liability",
"opening": 7500
},
"accounts_receivable": {
"classification": "asset",
"opening": 9600
},
"accumulated_depreciation": {
"classification": "contra-asset",
"opening": 6000
},
"cash": {
"classification": "asset",
"opening": 19400
},
"common_stock": {
"classification": "equity",
"opening": 20000
},
"depreciation_expense": {
"classification": "expense",
"opening": 4000
},
"dividends": {
"classification": "owner-distribution",
"opening": 2000
},
"equipment": {
"classification": "asset",
"opening": 30000
},
"rent_expense": {
"classification": "expense",
"opening": 6000
},
"retained_earnings": {
"classification": "equity",
"opening": 8000
},
"service_revenue": {
"classification": "revenue",
"opening": 46000
},
"wages_expense": {
"classification": "expense",
"opening": 18000
},
"wages_payable": {
"classification": "liability",
"opening": 1500
}
}- entries
- 3 items
Inspect data
[
{
"label": "close revenue",
"lines": [
{
"account": "service_revenue",
"credit": null,
"debit": 46000
},
{
"account": "retained_earnings",
"credit": 46000,
"debit": null
}
]
},
{
"label": "close expenses",
"lines": [
{
"account": "retained_earnings",
"credit": null,
"debit": 28000
},
{
"account": "wages_expense",
"credit": 18000,
"debit": null
},
{
"account": "rent_expense",
"credit": 6000,
"debit": null
},
{
"account": "depreciation_expense",
"credit": 4000,
"debit": null
}
]
},
{
"label": "close dividends",
"lines": [
{
"account": "retained_earnings",
"credit": null,
"debit": 2000
},
{
"account": "dividends",
"credit": 2000,
"debit": null
}
]
}
]Recomputed result
| Measure | Value |
|---|---|
| accounts payable | 7,500 |
| accounts receivable | 9,600 |
| accumulated depreciation | 6,000 |
| cash | 19,400 |
| common stock | 20,000 |
| depreciation expense | 0 |
| dividends | 0 |
| ending credit balances | 59,000 |
| ending debit balances | 59,000 |
| equipment | 30,000 |
| rent expense | 0 |
| retained earnings | 24,000 |
| service revenue | 0 |
| total credits | 76,000 |
| total debits | 76,000 |
| trial balance difference | 0 |
| wages expense | 0 |
| wages payable | 1,500 |