The adjusted trial balance for Patch Consultant Company at the end of its fiscal year is shown below.

1. Prepare the required closing entries.
2. Explain why closing entries are necessary at the end of the accounting period.

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Patch Consultant Company Adjusted Trial Balance December 31, 2011 Accounts Receivable Prepaid Insurance Office Supplies Office Equipment Accumulated Depreciation-Office Equipment Automobile Accumulated Depreciation-Automobile Accounts Payable Unearned Consulting Fees S. Patch, Capital S. Patch, Withdrawals Consulting Fees Earned Office Salaries Expense Advertising Expense Rent Expense Telephone Expense 2,325 585 6,300 6,750 5 765 750 1,700 1,500 14,535 7,000 31,700 13,500 2,525 6 1,600 $50,950 $50,950