Explain why closing entries are necessary at the end of the accounting period.

Closing Entries Using T Accounts and Preparation of Financial Statements

The adjusted trial balance for Settles Tennis Club, Inc., at the end of the company’s fiscal year appears below.

Required

1. Prepare T accounts and enter the balances for Retained Earnings, Dividends,

Income Summary, and all revenue and expense accounts.

2. Enter the four required closing entries in the T accounts, labeling the components a, b, c, and d, as appropriate.

3. Prepare an income statement, a statement of retained earnings, and a balance sheet for Settles Tennis Club, Inc.

4. Explain why closing entries are necessary at the end of the accounting period.

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