There may well be no actual balancing off of the income and expense accounts in the ledger at the year end. They may well just be ruled off and started again from zero at the start of the next accounting year. This is particularly the case if the accounts are kept in a 3 column format.
Remember however that double entry has taken place even if it has not been written into the ledger.
This figure shows the transfer of the sales for the year (highlighted row).
The other side of this entry will be the credit of the sales in the Profit and loss account.
6000 | SALES | 20 Nov 2008 | |||
2008 | Dr | Cr | Bal | ||
Sept | 30 | Bal b/f | 13,450- | ||
Oct | 10 | Debtors | 1,250 | 14,700- | |
Oct | 20 | Debtors | 825 | 15,525- | |
Oct | 25 | Debtors | 130 | 15,395- | |
Oct | 31 | Cash | 200 | 15,595- | |
Oct | 31 | Profit and loss acc | 15,595 | 0 | |
YEAR END | |||||
2008 | |||||
Nov | 10 | Debtors | 850 | 850- |
In computerised ledgers, the year end procedure is run after all the entries have been posted for the old year and the accounts have been drawn up. In the year end routine, income and expense accounts are set back to zero. As we have seen above, there may be no actual double entry shown in the accounts to transfer the balances to the profit and loss account. The income and expense accounts then start from zero in the next accounting year.
The balances will be carried forward in the asset, liability and capital accounts. The net profit (or loss) for the year will be automatically added to or subtracted from the designated Capital account.