Question
The adjusted trial balance of Winterhaven Services at December 31, 2025 is shown below.
| Account | Dr | Cr |
|---|
| Cash | 9,800 | |
| Accounts Receivable | 7,200 | |
| Supplies | 1,400 | |
| Equipment | 30,000 | |
| Accumulated Depreciation - Equipment | | 9,000 |
| Accounts Payable | | 4,600 |
| Unearned Service Revenue | | 2,200 |
| Share Capital - Ordinary | | 25,000 |
| Retained Earnings | | 8,200 |
| Dividends | 4,000 | |
| Service Revenue | | 62,000 |
| Salaries and Wages Expense | 41,000 | |
| Rent Expense | 12,000 | |
| Supplies Expense | 2,600 | |
| Depreciation Expense | 3,000 | ____ |
| Totals | 111,000 | 111,000 |
Instructions:
- Prepare the four closing entries at December 31, 2025, using an Income Summary account: close revenues, close expenses, close Income Summary to Retained Earnings, and close Dividends.
- Prepare the post-closing trial balance at December 31, 2025. Only permanent (statement of financial position) accounts survive closing.
Statements in this challenge
- Closing EntriesJournal Entry
- Post-Closing Trial BalanceTrial Balance
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 — Presentation of Financial Statements
Work the cycle in its fixed order: journalise, post to the ledger, extract an unadjusted trial balance, pass adjusting entries, extract an adjusted trial balance, prepare the statements, then close the temporary accounts. Each step consumes the output of the one before it, so an error early on propagates all the way to the closing entries rather than staying local.
Common mistakes
- Preparing the financial statements from the unadjusted trial balance instead of the adjusted one.
- Closing permanent accounts — assets, liabilities and capital carry forward; only revenue, expense and drawings/dividends close.
- Forgetting that the post-closing trial balance should contain no income statement accounts at all.
Further readingIAS 1: what goes where in a full set of statements