Question

FORUM DESCRIPTION Anne Marie, the owner of Anne's Beauty Salon, comes to see you again. She tells you that she has one more question for you. She told you that her accountant tried to explain to her the closing process in the accounting cycle. The more he talked, the more confusing it got. How would you explain the closing process to Anne Marie? She also asked about dividends. What are they? Will they increase expense? Grading Information

Answer 1

Following are the basic steps of closing books:-

1.Close the revenue accounts by moving balances to income summary account

2. Close the expense accounts by transferring account balance to income summary account.

3.Close the income summary account by transferring the balance to retained earning account.

Dividend is the distribution of reward from the portion of company's income to the shareholders.

Dividend is neither expense nor income. Hence, they will not increase expense.

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