Question

the adjusted trial balance of stone sign company follows. (click the icon to view the adjusted trial balance.) requirements 1. assume stone sign company has a january 31 year - end. journalize stones closing entries at january 31. 2. how much net income or net loss did stone sign company earn for the year ended january 31? how can you tell? requirement 1. assume stone sign company has a january 31 year - end. journalize stones closing entries at january 31. (record debits first, then credits. select the explanation on the last line of the journal entry table.) first, we will close the service revenue account. date accounts and explanation debit credit jan. 31

Explanation:

Step1: Close Service Revenue

Debit Service Revenue (to zero - it out) and credit Income Summary. The amount is the balance of Service Revenue from the adjusted trial - balance.
Debit: Service Revenue <Amount from adjusted trial balance>
Credit: Income Summary <Amount from adjusted trial balance>

Step2: Close Expense Accounts

Debit Income Summary and credit each expense account (e.g., Rent Expense, Salaries Expense etc.). The amounts are the balances of each expense account from the adjusted trial - balance.
For example, if Rent Expense has a balance of $X$:
Debit: Income Summary $X$
Credit: Rent Expense $X$
Do this for all expense accounts.

Step3: Determine Net Income/Loss

Net income (or loss) is calculated as Service Revenue (total credits) minus total expenses (total debits). If the result of Service Revenue - Total Expenses>0, it is net income. If Service Revenue - Total Expenses < 0, it is a net loss.
Net Income/Loss = Service Revenue - (Rent Expense+Salaries Expense +...+All other expenses)

Step4: Close Income Summary

If there is net income:
Debit: Income Summary <Net income amount>
Credit: Retained Earnings <Net income amount>
If there is a net loss:
Debit: Retained Earnings <Net loss amount>
Credit: Income Summary <Net loss amount>

Answer:

1. Journal Entries:

Date	Accounts and Explanation	Debit	Credit
	Income Summary		<Service Revenue amount from adjusted trial balance>
Jan. 31	Income Summary	<Total of all expense amounts from adjusted trial balance>
	Rent Expense (and other expense accounts one by one)		<Respective expense amounts from adjusted trial balance>
Jan. 31	Income Summary (if net income)	<Net income amount>
	Retained Earnings		<Net income amount>
Jan. 31	Retained Earnings (if net loss)	<Net loss amount>
	Income Summary		<Net loss amount>

1. Net Income/Loss = Service Revenue - (Total of all expense amounts from adjusted trial balance). If the result is positive, it is net income. If negative, it is a net loss. The amount of net income or net loss is the amount transferred to or from the Retained Earnings account through the Income Summary account in the closing entries.