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Directions for Closing Ledger Accounts

All Personal accounts are closed to or by Balance. Cash account is closed by Balance for Cash on hand. The other Real accounts are closed by Balance for property or effects on hand as per inventory, and when the amounts on the debtor and credit sides are then unequal, close them to or by

Profit and Loss for the difference, all Representative accounts are closed to or by Profit and Loss. These items being entered in the corresponding sides of the Balance and Profit and Loss accounts we proceed to close them into the Stock or Merchant's account. The debit side of the Profit and Loss account shows the losses, and the credit side the gains. If the debits are greater than the credits close "by Stock for net loss," but if the credits are greater than the debits close "to

Stock for net gain," and enter the amount in each on the corresponding side of the stock account. Next close the Stock into the Balance account, to or by Balance for net capital or net insolvency as the case may be. When the item is entered into the Balance account, the amounts on both sides must be equal, and the account closes. It may be observed that as the debit side of Balance account shows the resources and the credit side the liabilities, the difference between them shows the net capital or the net insolvency, and this difference must agree with the closing item of Stock account. When both sides of Stock account are equal both sides of the Balance account must be equal, which shows that the merchant has no actual capital.

In partnership accounts the process is the same as herein treated, except that in opening the Ledger with Stock account we open accounts in the names of the several partners, and in closing we credit or debit each partner with his pro rata share of the gains or losses as per agreement.

Before closing the Ledger accounts it is judicious to take a Trial Balance, that is to draw off all the debits and credits, the amounts of which must be equal when no mistake or omission in posting occurs. Besides the foregoing principal books it is often found convenient to use others which are auxiliary books, such as the Sales-book, Invoice-book, Time-book, etc.

In opening the Journal for the next business period it should have for its first entries an exact copy of the Balance account, entered the same as all similar items, and included in the totals of the ensuing month.