Ch04 — Closing + post-close trial balance

Closing the month (Jan 2026)

You’ve recorded January’s transactions and adjustments for Harborview Bike Repair. Now we do the final “reset” step of the accounting cycle:

  • Temporary accounts (Revenue / Expenses / Draws) get closed to zero.

  • The period’s result (net income or net loss) is transferred into Equity:RetainedEarnings.

In workbook mode, LedgerLoom generates the closing lines for you from the adjusted trial balance so you can compare your spreadsheet method against a deterministic reference.

What you’ll learn

  • Explain what “closing” means and why we do it

  • Read closing_entries.csv

  • Read trial_balance_post_close.csv

  • Understand the Balance-Sheet-only invariant

Key accounting terms

  • Temporary accounts: Revenue, Expenses (and often Dividends/Draws) — they reset each period.

  • Permanent accounts: Assets, Liabilities, Equity — they carry forward to the next period.

  • Closing entries: entries that move the period’s net income into equity and bring temporary accounts to zero.

  • Post-close trial balance: the trial balance after closing; it should include only permanent accounts.

  • Income summary: some courses use an intermediate “Income Summary” account. LedgerLoom can generate closing lines either through Income Summary or directly. In this workbook we keep it simple: closing entries go straight to Equity:RetainedEarnings (no Income Summary account required).

What to do in your spreadsheet

  1. Confirm your adjusted trial balance is correct (Chapter 3).

  2. Compute net income (revenues - expenses).

  3. Draft closing entries in the spreadsheet (or follow your course method).

Export CSVs

Export:

  • inputs/<period>/transactions.csv

  • inputs/<period>/adjustments.csv

(Closing entries are generated by LedgerLoom from the adjusted trial balance in workbook mode.)

Run LedgerLoom

ledgerloom check --project .
ledgerloom build --project . --run-id ch04

What to look at

  • closing_entries.csv: generated closing entries (entry_kind = closing)

  • trial_balance_post_close.csv: post-close TB (only Assets / Liabilities / Equity)

The key invariant: the post-close TB must contain no Revenue or Expense accounts. If it does, something in the closing step is wrong.

Compare against the answer key

If you want a known-good reference:

Common mistakes

  • Revenue/Expense accounts still present after closing (should be zeroed out)

  • Using the wrong equity account for net income (depends on your course)

  • Forgetting that closing happens after adjustments

  • Confusing “cash basis” intuition with accrual-period reporting

Downloads

Where we go next

From here, you can branch into practical bookkeeping subsystems (AR/AP/inventory) or build additional workbook chapters. See Workbook Learning Path (Spreadsheet + LedgerLoom).