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Closing

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					Recording Adjusting and
    Closing Entries
Adjusting Entries

   Remember those from the Worksheet?
    They’re Back!
   The adjustments now need to be journalized
    and posted so that the accounts actually
    have the corrected balances
Closing Entries

   Some accounts carry over balances from
    one accounting period to another
       Ex: Cash, A/P

   Other accounts we’d like to start new
       Sales, Rent Expense

   Closing Entries do just that – Close out an
    account balance so the business can start
    out fresh the next fiscal period
Income Summary

   Businesses use a temporary account called
    Income Summary to capture the revenue and
    expenses account balances
   The closing journal entry for all revenue and
    expenses is to Dr/Cr those accounts and put the
    offset to Income Summary
   When done, the Income Summary account will
    have a Cr balance equal to…the net income
    amount of the worksheet (or a Dr balance equal to
    the net loss)
   The final step is to ‘transfer’ this net income (loss)
    to the Capital account
Drawing Account

   Let’s also ‘transfer’ the balance of the Drawing
    account to the Capital account.
   The Capital account has now been impacted by all
    sales, expenses, and owner withdrawals and now
    accurately reflects the owner’s true financial stake
    in the business
The DEATH of the Current
Accounting Period!
        Sales ( Income Summary)


        Expenses ( Income Summary)


        Income Summary ( Capital)


        Drawing ( Capital)
Post Closing Trial Balance

Because we did make some journal entries since the
  worksheet…
   One last time let’s make sure all of our Dr all of our
    Cr
   Enter the aptly named: Post-Closing Trial Balance
       Only include permanent accounts
The Accounting Cycle
                        Prepare Post
                        Closing Trial     Analyze
                          Balance       Transactions



     Post Adjusting
      and Closing
        Entries                                        Journalize




   Journalize
 Adjusting and                                             Post
 Closing Entries



                       Prepare
                       Financial         Prepare
                      Statements        Worksheet
Practices

   M 9-4

   Crossword 7-9

   Reinforcement Activity Parts A and B

				
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posted:7/22/2012
language:English
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