Closing Entries and the Postclosing Trial Balance

Size: px
Start display at page:

Download "Closing Entries and the Postclosing Trial Balance"

Transcription

1 6-1

2 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter Closing Entries and the Postclosing Trial Balance 6 Section 1: Closing Entries Section Objectives 1. Journalize and post closing entries.

3 6-3 The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 4 Prepare a worksheet Step 5 Prepare financial statements Step 9 Interpret the financial information Step 8 Prepare a postclosing trial balance Step 7 Journalize and post closing entries Step 6 Journalize and post adjusting entries The seventh step in the accounting cycle is to journalize and post closing entries.

4 6-4 QUESTION: What is the Income Summary account? ANSWER: The Income Summary account is a special owner s equity account that is used only in the closing process to summarize the results of operations.

5 6-5 Income Summary Account Classified as a temporary owner s equity account. Does not have a normal balance. Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period.

6 Objective 1 Journalize and post closing entries There are four steps in the closing process: 1. Transfer the balance of the revenue account to the Income Summary account. 2. Transfer the expense account balances to the Income Summary account. 3. Transfer the balance of the Income Summary account to the owner s capital account. 4. Transfer the balance of the drawing account to the owner s capital account. 6-6

7 JT s Consulting Services Worksheet Month Ended December 31, 2010 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Rent Equipment Accum. Depr. Equip. Accounts Payable Jason Taylor, Cap. Jason Taylor, Draw. Fees Income Salaries Expense Utilities Expense Supplies Expense Rent Expense Depr. Exp. Equip. Totals Net Income TRIAL BALANCE ADJUSTMENTS 6-7 ADJ. TRIAL BAL. DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT 83,500 5,000 3,000 7,000 22,000 4,000 7, ,000 90,000 35,000 (a) 1,000 (b) 3,500 (c) ,500 5,000 (a) 1,000 2,000 (b) 3,500 3,500 22,000 (c) , ,000 4,083 4,083 4,000 7, ,000 3, , ,000 90,000 35, ,583 INCOME STMT. Fees Income has a credit balance of $35,000. DEBIT CREDIT DEBIT 83,500 5,000 2,000 BALANCE SHEET 3,500 22,000 4,000 CREDIT 367 7,000 90,000 35,000 7, ,000 3, ,367 35, ,000 97,367 22,633 22,633 35,000 35, , ,000

8 6-8 Step 1: Close Revenue Fees Income Income Summary Closing 35,000 Balance 35,000 Closing 35,000

9 6-9 GENERAL JOURNAL PAGE 4 DATE DESCRIPTION POST. DEBIT CREDIT REF Closing Entries Step 1: Close Revenue Dec. 31 Fees Income 35,000 Income Summary 35,000 The words Closing Entries are written in the Description column of the general journal.

10 6-10 Step 2: Close Expenses The Income Statement section of the worksheet for JT s Consulting Services lists five expense accounts. Since expense accounts have debit balances, enter a credit in each account to reduce its balance to zero. This closing entry transfers total expenses to the Income Summary account.

11 6-11 Step 2: Close Expenses The five expense account balances are reduced to zero. The total, $12,367 of expenses are transferred to the temporary owner s equity account, Income Summary.

12 Step 2: Close Expenses 6-12 Closing 12,367 Income Summary BAL 35,000 Balance 7,000 Salaries Expense Closing 7,000 Utilities Expense Supplies Expense Balance 500 Balance 1000 Closing 500 Closing 1000 Rent Expense Depr. Expense Equip. Balance 3,500 Balance 367 Closing 3,500 Closing 367

13 6-13 Step 2: Close Expenses GENERAL JOURNAL PAGE 4 DATE DESCRIPTION POST. DEBIT CREDIT REF Closing Entries Dec. 31 Income Summary 12, Salaries Expense 7, Utilities Expense Supplies Expense 1, Rent Expense 3, Depreciation Exp.-Equip

14 6-14 The Income Summary account reflects all entries in the Income Statement section of the worksheet. Income Summary Dr. Closing 12,367 Cr. Closing 35,000 Balance 22,633 Net Income

15 6-15 Step 3: Close Net Income to Capital The journal entry to transfer net income to owner s equity is a debit to Income Summary, and a credit to Jason Taylor, Capital. The balance of Income Summary is reduced to zero; the owner s capital account is increased by the amount of net income. The Income Summary account is reduced to zero. The net income amount, $22,633, is transferred to the owner s capital account. Jason Taylor, Capital is increased by $22,633.

16 6-16 Step 3: Close Net Income to Capital Closing 22,633 Income Summary Balance 22,633 Jason Taylor, Capital Balance 90,000 Closing 22,633

17 6-17 Step 3: Close Net Income to Capital GENERAL JOURNAL PAGE 4 DATE DESCRIPTION POST. DEBIT CREDIT REF. Closing Entries Dec. 31 Income Summary 22, Jason Taylor, Capital 22,633.00

18 6-18 Step 4: Close Drawing to Capital Withdrawals appear in the statement of owner s equity as a deduction from capital. The drawing account is closed directly to the capital account. The drawing account balance is reduced to zero. The balance of the drawing account, $4,000, is transferred to the owner s capital account.

19 6-19 Step 4: Close Drawing to Capital Jason Taylor, Capital Jason Taylor, Drawing Closing 4,000 Balance 112,633 Balance 4,000 Closing 4,000

20 6-20 Step 4: Close Drawing to Capital GENERAL JOURNAL PAGE 4 DATE DESCRIPTION POST. DEBIT CREDIT REF. Closing Entries Dec. 31 Jason Taylor, Capital 4, Jason Taylor, Drawing 4,000.00

21 The new balance of the Jason Taylor, Capital account agrees with the amount listed on the balance sheet. Jason Taylor, Drawing Jason Taylor, Capital Dr. Cr. Dr. Cr. Balance 4,000 Closing 4,000 Balance 90,000 Balance 0 Drawing 4,000 Net Inc. 22,633 Balance 108, Jason Taylor, Capital

22 Summary of Closing Entries GENERAL JOURNAL PAGE 4 STEPS 1. CLOSE REVENUE 2. CLOSE EXPENSE ACCOUNTS 3. CLOSE INCOME SUMMARY 4. CLOSE DRAWING ACCOUNT POST. DATE DESCRIPTION REF. DEBIT CREDIT 2010 Closing Entries Dec. 31 Fees Income , Income Summary , Income Summary , Salaries Expense 511 7, Utilities Expense Supplies Expense 517 1, Rent Expense 520 3, Depr. Expense-Equip Income Summary , Jason Taylor, Capital , Jason Taylor, Capital 301 4, Jason Taylor, Draw ,

23 6-23 Posting the Closing Entries All journal entries are posted to the general ledger accounts. Closing is entered in the Description column of the ledger accounts. The ending balances of the drawing, revenue, and expense accounts are zero.

24 6-24 STEPS 1. CLOSE REVENUE 2. CLOSE EXPENSE ACCOUNTS GENERAL JOURNAL PAGE 4 POST. DATE DESCRIPTION REF. DEBIT CREDIT 2010 Closing Entries Dec. 31 Fees Income , Income Summary , Income Summary , Salaries Expense 511 7, Utilities Expense Supplies Expense 517 1, Rent POST. Expense 520 BALANCE 3, Depr. Expense-Equip Income Summary , Jason Taylor, Capital , ACCOUNT Fees Income ACCOUNT NO. 401 DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT CLOSE Dec. INCOME 31 Dec. SUMMARY 31 J2 J2 26, , , , Dec. 4. CLOSE 31 DRAWING ACCOUNT Closing J4 35, Jason Taylor, Capital 301 4, Jason Taylor, Draw ,000.00

25 6-25 STEPS 1. CLOSE REVENUE 2. CLOSE EXPENSE ACCOUNTS GENERAL JOURNAL PAGE 4 POST. DATE DESCRIPTION REF. DEBIT CREDIT 2010 Closing Entries Dec. 31 Fees Income , Income Summary , Income Summary , Salaries Expense 511 7, Utilities Expense Supplies Expense 517 1, POST. Rent Expense 520 BALANCE 3, Depr. Expense-Equip Income Summary , Jason Taylor, Capital , ACCOUNT Income Summary ACCOUNT NO. 309 DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT 3. CLOSE 2010 INCOME Dec. 31 Closing J4 35, , SUMMARY 4. CLOSE DRAWING ACCOUNT 31 Jason Taylor, Cap 301 4, Jason Taylor, Draw ,000.00

26 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter Closing Entries and the Postclosing Trial Balance 6 Section 2: Using Accounting Information 2. Prepare a postclosing trial balance. 3. Interpret financial statements. 4. Review the steps in the accounting cycle.

27 6-27 The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 4 Prepare a worksheet Step 5 Prepare financial statements Step 9 Interpret the financial information Step 8 Prepare a postclosing trial balance Step 7 Journalize and post closing entries Step 6 Journalize and post adjusting entries

28 QUESTION: What is the postclosing trial balance ANSWER: A postclosing trial balance is a statement that is prepared to prove the equality of total debits and credits after the closing process is completed. It verifies that revenue, expense, and drawing accounts have zero balances. 6-28

29 6-29 Postclosing Trial Balance JT s Consulting Services Postclosing Trial Balance December 31, 2010 ACCOUNT NAME DEBIT CREDIT Cash 83, Accounts Receivable 5, Supplies 2, Prepaid Rent 3, Equipment 22, Accumulated Depreciation Equipment Accounts Payable 7, Jason Taylor, Capital 108, Totals 116, ,000.00

30 6-30 Finding and Correcting Errors If the postclosing trial balance does not balance, the accounting records contain errors. Use the audit trail to trace data through the accounting records.

31 6-31 Objective 3 Interpret financial statements.

32 6-32 JT s Consulting Services Balance Sheet December 31, 2010 Assets Cash $83, Accounts Receivable 5, Supplies 2, Prepaid Rent 3, Equipment $ 22, Less Accumulated Depreciation , Total Assets $ 115, What is the How much do the customers owe the Liabilities and Owner s Equity Liabilities cash balance? Accounts Payable business? $7, Owner s Equity Jason Taylor, Capital 108, Total Liabilities and Owner s Equity $115,633.00

33 6-33 JT s Consulting Services Balance Sheet December 31, 2010 Assets Cash $83, Accounts Receivable How much does the business 5, Supplies owe its suppliers? 2, Prepaid Rent 3, Equipment $ 22, Less Accumulated Depreciation , Total Assets $ 115, Liabilities and Owner s Equity Liabilities Accounts Payable $7, Owner s Equity Jason Taylor, Capital 108, Total Liabilities and Owner s Equity $115,633.00

34 6-34 JT s Consulting Services Income Statement Month Ended December 31, 2010 Revenue Fees Income 35, Expenses Salaries Expense 7, Utilities Expense Supplies Expense What is the profit? 1, Rent Expense 3, Depr. Expense--Equipment Total Expenses 12, Net Income for the Month 22,633.00

35 6-35 Objective 4 Review the steps in the accounting cycle The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Prepare financial statements. Income Statement Statement of Owner s Equity Balance Sheet Step 4 Prepare a worksheet Step 5 Prepare financial statements

36 6-36 The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 4 Prepare a worksheet Transfer net income or net loss to owner s equity. Reduce the balances of the temporary accounts to zero. Step 7 Journalize and post closing entries Step 5 Prepare financial statements Step 6 Journalize and post adjusting entries

37 6-37 The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 4 Prepare a worksheet Step 5 Prepare financial statements Step 9 Interpret the financial information Step 8 Prepare a postclosing trial balance Step 7 Journalize and post closing entries Step 6 Journalize and post adjusting entries

38 6-38 Flow of Data Through a Simple Accounting System Source Documents documents General journal General ledger Worksheet Financial statements Source documents are analyzed.

39 6-39 Thank You for using College Accounting, 12th Edition Price Haddock Farina

COMPLETION OF THE ACCOUNTING CYCLE - Closing Entries -

COMPLETION OF THE ACCOUNTING CYCLE - Closing Entries - COMPLETION OF THE ACCOUNTING CYCLE - Closing Entries - Worksheet Overview Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet Account Titles Debit Credit Debit Credit Debit

More information

The General Journal and the General Ledger

The General Journal and the General Ledger 4-1 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 4 The General Journal and the General Ledger Section 1: The General Journal Section Objectives 1. Record transactions in

More information

13 Financial Statements and Closing Procedures

13 Financial Statements and Closing Procedures 13-1 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 13 Financial Statements and Closing Procedures Section 1: Preparing the Financial Statements Section Objectives 1. Prepare

More information

SOLUTIONS. Learning Goal 16

SOLUTIONS. Learning Goal 16 Learning Goal 16: Prepare Closing Entries S1 Learning Goal 16 Multiple Choice 1. d 2. a 3. b 4. d Because drawing is closed directly into the capital account, not into income summary. 5. c 6. b This a

More information

Unit 2 The Basic Accounting Cycle

Unit 2 The Basic Accounting Cycle Unit 2 The Basic Accounting Cycle Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Business Transactions and the Accounting Equation Transactions That Affect Assets, Liabilities, and

More information

Adjustments were analyzed and planned on the work sheet These adjustments must be journalized, so they can be posted to the general ledger accounts

Adjustments were analyzed and planned on the work sheet These adjustments must be journalized, so they can be posted to the general ledger accounts LESSON 8-1 Recording Adjusting Entries Adjustments were analyzed and planned on the work sheet These adjustments must be journalized, so they can be posted to the general ledger accounts Adjusting entries

More information

Chapter 17. Recording Adjusting and Closing Entries for a Partnership. South-Western Educational Publishing

Chapter 17. Recording Adjusting and Closing Entries for a Partnership. South-Western Educational Publishing Chapter 17 Recording Adjusting and Closing Entries for a Partnership PARTIAL WORK SHEET SHOWING ADJUSTMENTS Lesson 17-1, page 431 ADJUSTING ENTRIES RECORDED IN A JOURNAL 2 1 5 3 4 6 1. Heading 4. Debit

More information

Completing the Accounting Cycle

Completing the Accounting Cycle HOSP 1210 (Financial Acct) Learning Centre Completing the Accounting Cycle At the end of the accounting cycle, the final steps are to journalize and post closing entries and to prepare a post-closing trial

More information

Chapter 4. Completing the accounting cycle

Chapter 4. Completing the accounting cycle 1 Chapter 4 Completing the accounting cycle 2 Learning objectives 1. Prepare an accounting worksheet and describe its purpose 2. Prepare a classified balance sheet and explain the major headings 3. Explain

More information

TRANSACTIONS ANALYSIS EXAMPLE. Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations:

TRANSACTIONS ANALYSIS EXAMPLE. Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations: TRANSACTIONS ANALYSIS EXAMPLE Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations: 1. Billings to clients for services provided: $350,000

More information

b. Do not recognize revenue until steel is shipped. c. Do not recognize revenue until next year after the games are played.

b. Do not recognize revenue until steel is shipped. c. Do not recognize revenue until next year after the games are played. CHAPTER FOUR SE4-2 Revenue recognition a. Recognize revenue from car sales for 12,000. Notes receivable $12,000 Sales revenue $12,000 b. Do not recognize revenue until steel is shipped. c. Do not recognize

More information

SOLUTIONS TO EXERCISES SET B

SOLUTIONS TO EXERCISES SET B SOLUTIONS TO EXERCISES SET B EXERCISE 4-1B GREEN COMPANY Worksheet For the Month Ended June 30, 2008 Account Titles Trial Balance Adjustments Adj. Trial Balance Income Statement Balance Sheet Dr. Cr. Dr.

More information

Recording Adjusting and Closing Entries for a Service Business

Recording Adjusting and Closing Entries for a Service Business 1 Chapter 8 Mindy Boyd - HHS Recording Adjusting and Closing Entries for a Service Business 2 Vocabulary Words Chapter 8 Adjusting Entries = journal entries recorded to update general ledger accounts at

More information

Supplement to CHAPTER 3 CLOSING ENTRIES AND THE WORK SHEET

Supplement to CHAPTER 3 CLOSING ENTRIES AND THE WORK SHEET Supplement to CHAPTER 3 CLOSING ENTRIES AND THE WORK SHEET Answers to Review Questions 1. No, the work sheet cannot be used as a substitute for the financial statements. It is a tool used in preparing

More information

Chapter 6: Closing Entries and the Postclosing Trial Balance

Chapter 6: Closing Entries and the Postclosing Trial Balance Chapter 6: Closing Entries and the Postclosing Trial Chapter Opener: Thinking Critically Students should recognize that financial statements can be used to evaluate net profit or loss, return on investments,

More information

SOLUTIONS TO BRIEF EXERCISES

SOLUTIONS TO BRIEF EXERCISES SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 4-1 1. Prepare a trial balance on the work sheet 2. Enter adjustment data 3. Enter adjusted balances 4. Enter adjusted balances in appropriate statement columns

More information

(a) Prepaid Insurance to recognize insurance expired during the period.

(a) Prepaid Insurance to recognize insurance expired during the period. BRIEF EXERCISE 4-1 (a) (b) (c) (d) (e) (f) Cash $ 100 0 0 +800 2,500 0 Net Income $0 20 +1,300 0 0 600 BRIEF EXERCISE 4-2 (a) Prepaid Insurance to recognize insurance expired during the period. (b) Depreciation

More information

Accounting Basics, Part 2

Accounting Basics, Part 2 Accounting Basics, Part 2 The Accounting Cycle, T-Accounts, Trial Balance, and from Ledger to Trial Closing Balance Part 2 What s Here Introduction The Accounting Cycle T-Accounts Trial Balance Adjusting

More information

Accounting 1 Semester 1 Final Exam Review Practice

Accounting 1 Semester 1 Final Exam Review Practice Accounting 1 Semester 1 Final Exam Review Practice True/False Indicate whether the sentence or statement is true or false. 1. Accounting is the language of business. 2. The relationship among assets, liabilities,

More information

CHAPTER 4. Completing the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE. Brief. A Problems. B Problems 1, 2, 3 1, 2, 3, 5, 6, 17 1B, 2B, 3B, 4B, 5B

CHAPTER 4. Completing the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE. Brief. A Problems. B Problems 1, 2, 3 1, 2, 3, 5, 6, 17 1B, 2B, 3B, 4B, 5B CHAPTER 4 Completing the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems *1. Prepare a worksheet. 1, 2, 3, 4, 5 1, 2, 3 1, 2,

More information

Take-Off Trial Balance

Take-Off Trial Balance Closing Entries, and Accounting Worksheet Created 2007 By Michael Worthington Elizabeth City State University Take-Off is initial stage of 1. Copy (take-off) unadjusted from General Ledger to the worksheet

More information

CHAPTER 5. Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE. Brief. B Problems. A Problems 2, 3, 4 1 1

CHAPTER 5. Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE. Brief. B Problems. A Problems 2, 3, 4 1 1 CHAPTER 5 Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems *1. Identify the differences between service

More information

CHAPTER 3. Understanding the Accounting Information System. 3. Trial balance. 6, 10 3, 4, 5 1, 2, Closing , 15, 16 1, 4, 8, 9, 11

CHAPTER 3. Understanding the Accounting Information System. 3. Trial balance. 6, 10 3, 4, 5 1, 2, Closing , 15, 16 1, 4, 8, 9, 11 CHAPTER 3 Understanding the Accounting Information System ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems 1. Transaction identification. 1, 2, 3, 5, 6, 7,

More information

Accounting Cycle. Matching Principle

Accounting Cycle. Matching Principle CHAPTER 3 Accounting Cycle Analyze and record the transactions Post the transactions and prepare trial balance Adjust the accounts and prepare trial balance Prepare the financial statements Close the accounts

More information

Chapter 3 Adjusting the Accounts

Chapter 3 Adjusting the Accounts Bennett S. LeBow College of Business Financial Accounting Professor Jane Kaplan Professor Notes Chapter 3 Adjusting the Accounts Measuring Revenues and Expenses o Accrual accounting is a form of accounting

More information

ANSWERS TO SAMPLE TEST #4

ANSWERS TO SAMPLE TEST #4 ANSWERS TO SAMPLE TEST #4 PART A: 1 F 21 C 41 B 2 T 22 D 42 A 3 T 23 D 43 A 4 F 24 A 44 C 5 T 25 B 45 B 6 F 26 A 46 D 7 F 27 C 47 C 8 T 28 B 48 A 9 T 29 B 49 C 10 F 30 C 50 A 11 T 31 A 12 F 32 D 13 F 33

More information

CHAPTER 3. The Accounting Information System. 3. Trial balance. 6, 10 2, 3, 4 1, 2, Adjusting entries. 8, 11, 13, 14 3, 4, 5, 6, 7, 8, 9, 10

CHAPTER 3. The Accounting Information System. 3. Trial balance. 6, 10 2, 3, 4 1, 2, Adjusting entries. 8, 11, 13, 14 3, 4, 5, 6, 7, 8, 9, 10 CHAPTER 3 The Accounting Information System ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems 1. Transaction identification. 1, 2, 3, 5, 6, 7, 8 1, 2 1, 2,

More information

Accrual accounting ACCRUAL VERSUS CASH BASIS OF ACCOUNTING. ACCRUAL VERSUS CASH BASIS OF ACCOUNTING continued. Chapter 3

Accrual accounting ACCRUAL VERSUS CASH BASIS OF ACCOUNTING. ACCRUAL VERSUS CASH BASIS OF ACCOUNTING continued. Chapter 3 Chapter 3 Accrual accounting concepts PowerPoint presentation by Anne Abraham University of Wollongong 2009 John Wiley & Sons Australia, Ltd ACCRUAL VERSUS CASH BASIS OF ACCOUNTING Accrual-based accounting

More information

Adjusting Entries and the Work Sheet

Adjusting Entries and the Work Sheet Heintz & Parry th Edition Chapter 5 th Edition College Accounting Adjusting Entries and the Work Sheet 1 Prepare end-of-period adjustments. END-OF-PERIOD ADJUSTMENTS Changes occur that affect the business

More information

ACCT1115. Review Package - Midterm SOLUTION Fall 2013

ACCT1115. Review Package - Midterm SOLUTION Fall 2013 ACCT1115 Review Package - Midterm SOLUTION Fall 2013 Part I Multiple Choice 1) How should you record the purchase of an expensive automobile? a) Decrease cash, increase assets b) Decrease cash, increase

More information

CHAPTER 3. The Accounting Information System. 1. Transaction identification. 1, 2, 3, 5 1, 2 1, 2, 3, 4, Trial balance. 6, 10 2, 3, 4 1, 2, 7

CHAPTER 3. The Accounting Information System. 1. Transaction identification. 1, 2, 3, 5 1, 2 1, 2, 3, 4, Trial balance. 6, 10 2, 3, 4 1, 2, 7 CHAPTER 3 The Accounting Information System ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems 1. Transaction identification. 1, 2, 3, 5 1, 2 1, 2, 3, 4, 17

More information

CHAPTER. Closing Entries and the Postclosing Trial Balance

CHAPTER. Closing Entries and the Postclosing Trial Balance pri30597_sm_ch06.qxd 8/2/08 1:24 PM Page 121 CHAPTER 6 Closing Entries and the Postclosing Trial Balance Chapter Opener: Students should recognize that financial statements can be used to evaluate Thinking

More information

CHAPTER 6. Accounting for retailing CONTENTS

CHAPTER 6. Accounting for retailing CONTENTS CHAPTER 6 Accounting for retailing CONTENTS 6.1 Journal entries periodic inventory system 6.2 Journal entries involving discounts, closing entries and statements of financial performance both perpetual

More information

Chapter 13 Financial Statements and Closing Procedures

Chapter 13 Financial Statements and Closing Procedures Chapter 13 - Financial Statements and Closing Procedures Chapter 13 Financial Statements and Closing Procedures TEACHING OBJECTIVES 13-1) Prepare a classified income statement from the worksheet. 13-2)

More information

Most of us have had to file a personal tax return. At

Most of us have had to file a personal tax return. At C H A P T E R Completing the Accounting Cycle AP Photo/Gregory Bull E L E C T R O N I C A R T S I N C. Most of us have had to file a personal tax return. At the beginning of the year, you estimate your

More information

Objective Evidence. Unit of Measurement. Accounting Period Cycle. Business Entity. Going Concern. Adequate Disclosure. Matching Expenses with Revenue

Objective Evidence. Unit of Measurement. Accounting Period Cycle. Business Entity. Going Concern. Adequate Disclosure. Matching Expenses with Revenue Accounting Concept: A source document is prepared for each transaction Objective Evidence Accounting Concept: Business transactions are stated in numbers that have common values; that is, using a common

More information

Completing the Accounting Cycle

Completing the Accounting Cycle C H A P T E R 4 Completing the Accounting Cycle Financial Accounting 14e Warren Reeve Duchac human/istock/360/getty Images Flow of Accounting Information (slide 1 of 5) End-of-Period Spreadsheet (Work

More information

Chapter 5: Adjustments and the Worksheet

Chapter 5: Adjustments and the Worksheet Chapter 5: Adjustments and the Worksheet Chapter Opener: Thinking Critically Students should suggest that accountants estimate the amount of wear and tear on the equipment. This expense should be charged

More information

Chapter 5 Accounting for Merchandising Operations

Chapter 5 Accounting for Merchandising Operations Chapter 5 Accounting for Merchandising Operations Purchase Transactions Purchaser records goods at cost. When goods are returned, purchaser reduces Inventory. On September 5, De La Hoya Company buys merchandise

More information

Time Period Assumption

Time Period Assumption ILLUSTRATION 3-1 GUIDELINES TO REPORT REVENUE AND EXPENSES Time Period Assumption Economic life of business can be divided into artificial time periods Revenue Recognition Principle Revenue recognized

More information

SOLUTION DISCUSSION QUESTIONS. Suggested Responses GENERAL JOURNAL Closing Entries

SOLUTION DISCUSSION QUESTIONS. Suggested Responses GENERAL JOURNAL Closing Entries SOLUTION GENERAL JOURNAL PAGE 4 1 20 Closing Entries 1 2 Dec. 31 Commissions Earned 92,824.00 2 3 Income from Services 23,050.00 3 4 Income Summary 115,874.00 4 5 5 6 31 Income Summary 37,194.00 6 7 Salary

More information

Unit 2 The Basic Accounting Cycle

Unit 2 The Basic Accounting Cycle Unit 2 The Basic Accounting Cycle Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Business Transactions and the Accounting Equation Transactions That Affect Assets, Liabilities, and

More information

Advanced Accounting. Chapter 4: Financial Reporting for a Departmentalized Business

Advanced Accounting. Chapter 4: Financial Reporting for a Departmentalized Business Advanced Accounting Chapter 4: Financial Reporting for a Departmentalized Business Financial statements are used to summarize financial info and then are used to evaluate the financial position and progress

More information

Chapter 4 20/09/2012. Why Adjustments Are Needed. The Need for Adjustments. Adjustments. Types of Deferral Adjustments.

Chapter 4 20/09/2012. Why Adjustments Are Needed. The Need for Adjustments. Adjustments. Types of Deferral Adjustments. Chapter 4 Adjustments, Financial Statements, and the Quality of Financial Reporting Adjustments: How, When and Why? Preparing the Adjusted Trial Balance Preparing Adjusted Financial Statements The Closing

More information

CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE

CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE COMPLETING THE ACCOUNTING CYCLE DISCUSSION QUESTIONS 1. The end-of-period spreadsheet illustrates the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and

More information

Unit 1: Accounting for a Service Business Organized as a Proprietorship (Chapters 2 10)

Unit 1: Accounting for a Service Business Organized as a Proprietorship (Chapters 2 10) Unit 1: Accounting for a Service Business Organized as a Proprietorship (Chapters 2 10) I. Analyzing Business Transactions A. Effect of business transactions on the fundamental accounting equation B. Principles

More information

CHAPTER 4. Completion of the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE. Brief Exercises 1, 2, 3 1, 2, 3, *11 7, 8 4, *17, *18 *10, *11, *12

CHAPTER 4. Completion of the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE. Brief Exercises 1, 2, 3 1, 2, 3, *11 7, 8 4, *17, *18 *10, *11, *12 CHAPTER 4 Completion of the Accounting Cycle ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises Problems Set A Problems Set B 1. Prepare closing entries and a postclosing

More information

Accounting 300A-10A The Operating Cycle: Worksheet/Closing Entries Page 1

Accounting 300A-10A The Operating Cycle: Worksheet/Closing Entries Page 1 Accounting 3A-1A The Operating Cycle: Worksheet/Closing Entries Page 1 THE WORKSHEET and CLOSING ENTRIES I. Review of Key Concepts and Terms: A. The purpose of the worksheet 1. To show that the accounts

More information

Chapter 5. Accounting for merchandising operations. Appendix 5A: Periodic inventory system

Chapter 5. Accounting for merchandising operations. Appendix 5A: Periodic inventory system 1 Chapter 5 Accounting for merchandising operations Appendix 5A: Periodic inventory system 2 Learning objectives 1. Record purchase and sales transactions under the periodic inventory system 2. Prepare

More information

Financial Statements and Year-End Accounting for a Merchandising Business woot was originally a truncated expression commonly used by players

Financial Statements and Year-End Accounting for a Merchandising Business woot was originally a truncated expression commonly used by players Chapter 15 COURTESY OF WOOT.COM LEARNING OBJECTIVES Careful study of this chapter should enable you to: LO1 Prepare a single-step and multiple-step income statement for a merchandising business. LO2 Prepare

More information

Assignment 6: Adjusting Journal Entries and

Assignment 6: Adjusting Journal Entries and Name: Due Date: December 12, 2011 Score: out of a possible 47 Course value: 7.5% Assignment 6: Adjusting Journal Entries and Worksheets A series of transactions are presented and their journal entries

More information

Accounting for Purchases and Accounts Payable

Accounting for Purchases and Accounts Payable 8-1 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter Accounting for Purchases and Accounts Payable 8 Section 1: Merchandise Purchases Section Objectives 1. Record purchases

More information

Accounting Self Study Guide for Staff of Micro Finance Institutions

Accounting Self Study Guide for Staff of Micro Finance Institutions Accounting Self Study Guide for Staff of Micro Finance Institutions LESSON 5 Summarizing Changes in Financial Position OBJECTIVES The purpose of this lesson is to show how to summarize the transactions

More information

CHAPTER 3 ADJUSTING THE ACCOUNTS

CHAPTER 3 ADJUSTING THE ACCOUNTS CHAPTER 3 ADJUSTING THE ACCOUNTS TIME PERIOD ASSUMPTION The time period (or periodicity) assumption assumes that the economic life of a business can be divided into artificial time periods generally a

More information

CHAPTER 12 ACCRUALS, DEFERRALS, AND THE WORKSHEET

CHAPTER 12 ACCRUALS, DEFERRALS, AND THE WORKSHEET CHAPTER 12 ACCRUALS, DEFERRALS, AND THE WORKSHEET Chapter Opener: Thinking Critically Students may assess that an unexpected decline in sales would mean surplus inventory which would have to be reduced

More information

Closing the Books Section 7 Accounting 11

Closing the Books Section 7 Accounting 11 Closing the Books At the end of a fiscal year once all the transactions for the entity have been recorded, the revenue and expense accounts must be closed out to a zero balance. These accounts have been

More information

CHAPTER 4. Adjusting the accounts and preparing financial statements CONTENTS

CHAPTER 4. Adjusting the accounts and preparing financial statements CONTENTS CHAPTER 4 Adjusting the accounts and preparing financial statements CONTENTS Demonstration problem 4.1 Adjusting entries and corrections 4.2 Adjusting centries and effect on financial statements 4.3 Adjusting

More information

Assessment Schedule 2010 Accounting: Prepare financial statements and related accounting entries for sole proprietors (90224)

Assessment Schedule 2010 Accounting: Prepare financial statements and related accounting entries for sole proprietors (90224) NCEA Level 2 Accounting (90224) 2010 page 1 of 7 Assessment Schedule 2010 Accounting: Prepare financial statements and related accounting entries for sole proprietors (90224) Evidence Statement ONE Part

More information

The Work Sheet and the Closing Process

The Work Sheet and the Closing Process C H A P T E R 4 The Work Sheet and the Closing Process A systematic approach is essential for efficient and accurate processing of large amounts of information. Whether work sheets are on paper or computerized,

More information

The worksheet for Hancock Company shows the following in the financial statement

The worksheet for Hancock Company shows the following in the financial statement Chapter 4 Do it! Susan Elbe is preparing a worksheet. Explain to Susan how she should extend the following adjusted trial balance accounts to the financial statement columns of the worksheet. Cash Accumulated

More information

Chapter 2. Analyzing transactions

Chapter 2. Analyzing transactions 1 Chapter 2 Analyzing transactions 2 Learning objectives 1. Explain the steps in the accounting cycle and each step s supporting documentation 2. Explain the purpose of source documents 3. Describe an

More information

Accumulated Depreciation Equipment

Accumulated Depreciation Equipment Chapter 4 Completing the Accounting Cycle > DO IT! Worksheet Balance sheet: Extend assets to debit column. Extend liabilities to credit column. Extend contra assets to credit column. Extend drawings account

More information

WHY ADJUSTING JOURNAL ENTRIES? CHAPTER FIVE. ADJUSTING ENTRIES Page 145 MATCHING PRINCIPLE WHY ENDING BALANCE NOT CORRECT?

WHY ADJUSTING JOURNAL ENTRIES? CHAPTER FIVE. ADJUSTING ENTRIES Page 145 MATCHING PRINCIPLE WHY ENDING BALANCE NOT CORRECT? CHAPTER FIVE ADJUSTING ENTRIES Page 1 WHY ADJUSTING JOURNAL ENTRIES?! All amounts must be correct before financial statements printed! Test ending balance in each account! Auditing! Test accounting system,

More information

Completing the Accounting Cycle

Completing the Accounting Cycle CHAPTER 4 Completing the Accounting Cycle Making a Statement INCOME STATEMENT Revenues Expenses = Net Income STATEMENT OF OWNER S EQUITY Beginning Balance + Net Income Withdrawals = Ending Balance BALANCE

More information

Chapter 4. Completing the accounting cycle. Appendix 4A: Reversing entries

Chapter 4. Completing the accounting cycle. Appendix 4A: Reversing entries 1 Chapter 4 Completing the accounting cycle Appendix 4A: Reversing entries 2 Learning objective 1. Prepare reversing entries and describe their purpose 3 Reversing entries Reversing entries are optional

More information

CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives

CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives Chapter 1 Starting A Proprietorship: Changes that Affect the Accounting Equation After studying Chapter 1, you will be able to: 1. Define accounting

More information

Baseline Assessment. Date Accounting 1

Baseline Assessment. Date Accounting 1 Name Baseline Assessment Date Accounting 1 Part 1: Instructions: Place a check mark under the column for each account to determine which Financial the accounts belongs on. Financial Information 1. Cash

More information

The Accounting Cycle Completed

The Accounting Cycle Completed 5 The Accounting Cycle Completed Adjusting, Closing, and Post-Closing Trial Balance THE BIG PICTURE You are planning your school schedule for next term. Your goal is to take a full course load and find

More information

Chapter 2. Use accounting terms. Learning Objectives. Objective 1. Recording business transactions

Chapter 2. Use accounting terms. Learning Objectives. Objective 1. Recording business transactions PowerPoint to accompany Chapter 2 Recording business transactions Learning Objectives 1. Use accounting terms 2. Apply the rules of debit and credit 3. Record transactions in the journal 4. Post from the

More information

The Accounting Cycle. Chapters 4 and 3

The Accounting Cycle. Chapters 4 and 3 The Accounting Cycle Chapters 4 and 3 Accumulate... Accumulate... Communicate! Business Transactions Source Documents Analyzed Journalized Posted The Accounting Cycle 1. Business transactions create source

More information

Chapter 4: Adjusting the accounts and preparing Financial statements. 4.1 Measurement of Profit Income Expense = profit

Chapter 4: Adjusting the accounts and preparing Financial statements. 4.1 Measurement of Profit Income Expense = profit Chapter 4: Adjusting the accounts and preparing Financial statements 4.1 Measurement of Profit Income Expense = profit Cash basis Income is recorded wen cash is received Expenses are recorded when cash

More information

Review of the Accounting Process THE BASIC MODEL

Review of the Accounting Process THE BASIC MODEL THE BASIC MODEL The accounting information system is designed to collect and organize data into information that is useful for stakeholders. The Accounting Equation The basic accounting equation is what

More information

CHAPTER 2 REVIEW OF THE ACCOUNTING PROCESS. Lecture Outline

CHAPTER 2 REVIEW OF THE ACCOUNTING PROCESS. Lecture Outline CHAPTER 2 REVIEW OF THE ACCOUNTING PROCESS Overview Chapter 1 explained that the primary means of conveying financial information to investors, creditors, and other external users is through financial

More information

Review of Accounting Principles

Review of Accounting Principles Appendix A Review of Accounting Principles Appendix A is a review of basic accounting principles and procedures. Standard accounting procedures are based on the double-entry system. This means that each

More information

7 Accounting for Sales and Accounts Receivable

7 Accounting for Sales and Accounts Receivable 7-1 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 7 Accounting for Sales and Accounts Receivable Section 1: Merchandise Sales Section Objectives 1. Record credit sales in

More information

ACCOUNTING LIFEPAC 7 ADJUSTING & CLOSING ENTRIES

ACCOUNTING LIFEPAC 7 ADJUSTING & CLOSING ENTRIES Unit 7 ACCOUNTING LIFEPAC 7 ADJUSTING & CLOSING ENTRIES CONTENTS I. ADJUSTING ENTRIES.............................. 3 The Purpose of the Worksheet....................... 3 The Need for Adjustments..........................

More information

ACC Financial Accounting Review for Test 1 (includes chapters 1, 2 and 3)

ACC Financial Accounting Review for Test 1 (includes chapters 1, 2 and 3) ACC 201 - Financial Accounting Review for Test 1 (includes chapters 1, 2 and 3) From the following list of questions, I will pick 27 multiple choice questions(each worth 1.5 points=40.5points) and one

More information

PART A: TRUE/FALSE (1 point each):

PART A: TRUE/FALSE (1 point each): CHABOT COLLEGE General Accounting (BUS-7) Dmitriy Kalyagin PART A: TRUE/FALSE (1 point each): EXAM #4 (Chapters 10, 12, 13) 1. Employees who are exempt from the FLSA are entitled for overtime pay for hours

More information

CHAPTER 4. Adjusting the accounts and preparing financial statements CONTENTS

CHAPTER 4. Adjusting the accounts and preparing financial statements CONTENTS CHAPTER 4 Adjusting the accounts and preparing financial statements CONTENTS Demonstration problem 4.1 Adjusting entries and corrections 4.2 Adjusting centries and effect on financial statements 4.3 Adjusting

More information

Accruals, Deferrals,

Accruals, Deferrals, 12-1 McGraw-Hill 2007 The McGraw-Hill Companies, Inc. All rights reserved. Chapter Accruals, Deferrals, 12 and the Worksheet Section 1: Calculating and Recording Adjustments Section Objectives 1. Determine

More information

CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY. True-False Statements

CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY. True-False Statements CHAPTER 4 COMPLETING THE ACCOUNTING CYCLE SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT True-False Statements 1. 1 K 9. 2 K 17. 4

More information

PrinciplesofAccounting HelpLesson #5. Closing Entries. By Laurie L. Swanson

PrinciplesofAccounting HelpLesson #5. Closing Entries. By Laurie L. Swanson PrinciplesofAccounting HelpLesson #5 Closing Entries By Laurie L. Swanson PrinciplesofAccounting HelpLesson #5 Viewing this Presentation Press the F11 key to expand the screen. Click the button below to

More information

CHAPTER 5. Accounting for Merchandising Operations 1, 12, 13, 14 15, 16, 17, 18

CHAPTER 5. Accounting for Merchandising Operations 1, 12, 13, 14 15, 16, 17, 18 CHAPTER 5 Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems *1. Identify the differences between

More information

Mini-Practice Set 2 Merchandising Business Accounting Cycle. The Fashion Rack

Mini-Practice Set 2 Merchandising Business Accounting Cycle. The Fashion Rack Mini-Practice Set 2 Merchandising Business Accounting Cycle The Fashion Rack The Fashion Rack is a retail merchandising business that sells brand-name clothing at discount prices. The firm is owned and

More information

Horngren's Accounting,11e (Miller-Nobles) Chapter 2 Recording Business Transactions. Learning Objective Copyright 2016 Pearson Education, Inc.

Horngren's Accounting,11e (Miller-Nobles) Chapter 2 Recording Business Transactions. Learning Objective Copyright 2016 Pearson Education, Inc. Horngren's Accounting,11e (Miller-Nobles) Chapter 2 Recording Business Transactions Learning Objective 2-1 1) Which is a true statement regarding the accounting equation? A) The equation can be stated

More information

Problem Solutions: Topics 1 and 2 ACCT Evaluating Financial Performance Fall 2015

Problem Solutions: Topics 1 and 2 ACCT Evaluating Financial Performance Fall 2015 Problem Solutions: Topics 1 and 2 ACCT 60601 Evaluating Financial Performance Fall 2015 Note: All problems are organized by Topic. Each problem is numbered with the topic number first followed by a dash

More information

The Double-Entry System EFFECTS OF TRANSACTIONS ON THE BALANCE SHEET. Initial Paid-in Capital. An Example Entity. Transaction 2.

The Double-Entry System EFFECTS OF TRANSACTIONS ON THE BALANCE SHEET. Initial Paid-in Capital. An Example Entity. Transaction 2. The Double-Entry System EFFECTS OF TRANSACTIONS ON THE BALANCE SHEET 2001 Richard S. Barr Transaction: Any event that affects the entity's financial position and requires recording Every accounting transaction

More information

Vol. 1, Chapter 3 - Accounting Adjustments

Vol. 1, Chapter 3 - Accounting Adjustments Vol. 1, Chapter 3 - Accounting Adjustments Problem 1 1. ($20,000 2,000) 48 = $375 per month 2. Jan. 31 Depreciation Expense $375 Accumulated Depreciation Van $375 To record depreciation expense for January

More information

The Nature of Accounting Systems

The Nature of Accounting Systems Basic Accounting & Budgeting February 4, 2009 The Nature of Accounting Systems Accounting is the process of recording, classifying, summarizing, reporting and interpreting information about the economic

More information

Self-test Comprehensive Problems II 综 合 自 测 题 II

Self-test Comprehensive Problems II 综 合 自 测 题 II Self-test Comprehensive Problems II 综 合 自 测 题 II Part One (30%) 1. Give the Chinese/English of the following terms: (5%) subsidiary ledger 统 制 账 户 purchase requisition 现 金 溢 缺 petty cash fund 永 续 盘 存 制

More information

Accounting Notes. Cash - includes money and any medium of exchange that a bank accepts at face value

Accounting Notes. Cash - includes money and any medium of exchange that a bank accepts at face value Asset Accounts: Cash - includes money and any medium of exchange that a bank accepts at face value Accounts Receivable - a record of an oral or implied promise of future cash receipts in exchange for goods

More information

The Measurement of the Business Income. 1 by recording revenues when earned and expenses when incurred. 2 by adjusting accounts

The Measurement of the Business Income. 1 by recording revenues when earned and expenses when incurred. 2 by adjusting accounts Recap from Week 3 The Measurement of the Business Income The primary objective of accounting is measuring the net income of the businesses according to the generally accepted accounting principles. Net

More information

COMPLETING THE ACCOUNTING CYCLE

COMPLETING THE ACCOUNTING CYCLE 4 COMPLETING THE ACCOUNTING CYCLE objectives After studying this chapter, you should be able to: Review the seven basic steps of the accounting cycle. Prepare a work sheet. Prepare financial statements

More information

T Accounts, Debits and Credits, Trial Balance, and Financial Statements

T Accounts, Debits and Credits, Trial Balance, and Financial Statements 2 T Accounts, Debits and Credits, Trial Balance, and Financial Statements DEMONSTRATION PROBLEM maintains an office for the practice of veterinary medicine. The account balances as of September 1 are given

More information

EXERCISES. Does not normally require adjustment. Normally requires adjustment (AE).

EXERCISES. Does not normally require adjustment. Normally requires adjustment (AE). EXERCISES Ex. 3 1 1. Prepaid expense 2. Accrued revenue 3. Unearned revenue 4. Accrued expense 5. Unearned revenue 6. Prepaid expense 7. Accrued expense 8. Accrued expense Ex. 3 2 Account Accounts Receivable...

More information

Accounting I Lesson Plan

Accounting I Lesson Plan Accounting I Lesson Plan Name: Terry Wilhelmi Day/Date: Topic: Recording Adjusting and Closing Entries for a Unit: Chapter 10 Service Business I. Objective(s): By the end of today s lesson, the student

More information

> DO IT! Chapter 3 Adjusting the Accounts. Timing Concepts. Adjusting Entries for Deferrals D-12. Solution

> DO IT! Chapter 3 Adjusting the Accounts. Timing Concepts. Adjusting Entries for Deferrals D-12. Solution Chapter 3 Adjusting the Accounts Timing Concepts Review the glossary terms. Study carefully the revenue recognition principle, the expense recognition principle, and the time period assumption. Several

More information