Closing a corporation's account for the year Question?

Question

I'm stuck on closing corporation accounts
This I understand
1. You would Debit your revenue and Credit Income Statement
2. Debit Income Summary and Credit the Expenses

However, this is the part I am not to sure on:
3. Debit Income Summary and Credit Retained Earnings?
4. Debit Retained Earnings and Credit "?" ?

It would be appreciated if someone could tell me what that "?" -Thanks

Answer 1

You stop after point 3. Once you've added your net income (less dividends, if any) to retained earnings, it stops there. Retained earnings (RE) is one of the components of Stockholders' Equity and must be disclosed in the Statement of Stockholders' Equity. This yr's closing RE will be next yr's opening RE. You don't take it anywhere. I've attached IBM's statement of stockholders' equity so you can see how it looks like. Note how RE is one of the components of stockholders' equity, like common stock.

Answer 2

in case you do no longer decide on the sub-S election, your 3 hundred and sixty 5 days starts off the month as your incorporation. So in case you incorporate in April 2011, your 3 hundred and sixty 5 days end is March 31, 2012. in case you do no longer record the sub-S election, you're able to would desire to record a quick 3 hundred and sixty 5 days return and alter of accounting era to apply the calendar 3 hundred and sixty 5 days end.

Answer 3

Your final credit will be to owner's equity.