USA Starting new year accounts

[robert424424]

Using T accounts in closing the current year do not understand how assets, Liability and equity are transfer over to the new year. I have read and understand how closing works .

example:
for equity have 1000 beginning balance and a 100 increase equals 1100 for the new year.
So for the new year credit equity 1100 and debit ?? for the beginning balance . When you first started your finance accounting you would debit cash or a checking account. Doing that now would increase your cash account and if your cash account was 200 from the last year it would add 1100 to 200.

The same for assets and liability accounts??

 

[kirby]

I have read and understand how closing works .

"Allow me to retort" (Pulp Fiction): Well, close but not fully there yet.

When you close the books you will zero out all the non-balance sheet accounts: all revenue, expenses and taxes as the last entry for that closed year. So if a revenue acct shows a credit balance you will debit it to bring it to zero. Let's say the net of all that is a credit balance of $100. That you post to equity as the last entry to equity for that closed year. This describes the manual closing process. Using an automated GL makes this very easy.

 

[robert424424]

kirby, thanks for the reply
my question might not have been understood, so working on a better example which will be on about
2 images (saw that you can up load files).

here briefly is what I am doing that brings up my question.

I have had a finance program which I wrote since 1995. Never liked other software out there.
These program is used mainly to set up accounts for expense and income, etc . Now I am completing the program with closing the current year and starting a new year. Now manually entered new year balances and
capital account was never really up to date.

 

[kirby]

Ok will look at images when you upload them

 

[robert424424]

here is pdf , image blocky, sample for closing and new year. correct?

 

[kirby]

Not correct.

1. When you take out a loan you credit Loans Payable as you did and you debit CASH, not capital. You took out the loan to get cash, yes?
2. When you withdrew the $600 draw there was no cash effect. that is - nothing much happened but usually you DR drawing and CR cash to get the cash. But let's leave that alone for now.
3. Error. You posted the $600 credit balance in the Drawing acct as a Debit to the balance sheet.
4. After fixing error 3 you will see that the balance sheet is out of balance by $2,200 credit which is the net of the revenue and expense accounts. You add that $2,200 credit to the equity section of the balance sheet in its own account called "Retained Earnings" AND - very important - you make that entry NOT in the New year but in the old year you are closing.

 

[robert424424]

No. 1, understood. must be an asset cash, inventory, supplies or expense such as delivery
expense.

No. 2, debit drawing and credit cash. ok

No. 3, and 4 , from several reference material, drawing is debited on balance sheet.
should be debit on drawing account also.

No. 4, "Retained Earnings" ??
Under what is this recorded , asset or capital account?
Do I need this account for a sole proprietorship?
I am first writing my software for sole proprietorship, later on will add for LLC
multiple members and partnerships. Corp., may do this type of business.

When info is complete will redo Pdf image. Will do some more research on Retained Earnings.

 

[kirby]

I don’t think I can be of any more help here.

Good luck and perhaps another Forum member can pick this up from here.