Preparing Closing Entries, Page 6

Steps in the Closing Process

The steps in the closing process are: 

1. Prepare the income statement and find the net income or net loss. 
2. Transfer the net income or net loss to the statement of changes in the Owner’s Equity Account. 
3. Transfer the balance from the Owner’s Equity Account to the Balance Sheet.

Click the Play button to view an animation depicting the closing process.