CLOSING ENTRIES :

In order to prepare final accounts, all nominal accounts have to be transferred to Trading and Profit and Loss Account. It is done by passing journal entries which are called closing entries as they close the nominal accounts. The entry to transfer the balance of profit and loss account itself is also one of the closing entries. Some of the closing entries are given below:

(i) Trading Account                                  Dr.
To Stock
         To Purchases
               To Sale Returns
                        To Carriage Inwards
(Transfer of various accounts to Trading Account)
(ii) Sales Account                                       Dr.
        Purchase Returns                               Dr.

Closing Stock                                               Dr.
To Trading Account
(Transfer of sales account and purchases returns account
to trading account and recording of closing stock)
(iii) Trading Account                                   Dr.
         To Profit and Loss Account
(Transfer of gross profit from trading account to profit and loss account)

or
Profit and Loss Account                                  Dr.
 To Trading Account
(Transfer of gross some loss from trading account to
profit and loss account)
 (iv) Profit and Loss Account                               Dr.
To Rent
       To Salaries
                       To Sundry Expenses
               To Depreciation
(Transfer of various nominal accounts to profit and loss
account)
(v) Interest Received                                        Dr.
   To Profit and Loss A/c
(Transfer of credit balance of interest received account
to profit and loss account)
(v) Profit and Loss Account                                  Dr.
 To Capital Account
(Transfer of net profit to capital account)

In case of no loss, the above mentioned entry will be the reversed one.