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

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1 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 journal entries recorded to update general ledger accounts at the end of a fiscal period Go to the next page in a journal to record adjusting entries Remember, account balances will not change until they are posted.

2 2 ADJUSTING ENTRY FOR SUPPLIES page Write the heading. 2. Write the date. 3. Write the title of the account debited. Record the debit amount Write the title of the account credited. Record the credit amount. LESSON 8-1

3 ADJUSTING ENTRY FOR PREPAID INSURANCE page Write the date. 2. Write the title of the account debited. Record the debit amount. 3. Write the title of the account credited. Record the credit amount. 3 LESSON 8-1

4 LESSON Recording Closing Entries Permanent accounts Accounts used to accumulate information from one accounting period to the next Also referred to as real accounts Asset, liability, and the owner s capital account Ending balances for one fiscal period become the beginning balances of the next fiscal period

5 LESSON Recording Closing Entries Temporary accounts Accounts used to accumulate information until it is transferred to the owner s capital account Also referred to as nominal accounts Revenue, expense, owner s drawing, and income summary accounts Show changes in the owner s capital for a SINGLE fiscal period Balances of temporary accounts are summarized and transferred to the owner s capital account at the end of the fiscal period Begin a new fiscal period with zero balances Closing entries Journal entries used to prepare temporary accounts for a new fiscal period Temporary accounts must be reduced back to zero (Concept: matching expenses with revenue) Income Summary temporary account used to summarize closing entries for the revenue and expense accounts (no normal balance side depends on net income)

6 NEED FOR THE INCOME SUMMARY ACCOUNT page LESSON 8-2

7 7 CLOSING ENTRY FOR AN INCOME STATEMENT ACCOUNT WITH A CREDIT BALANCE page 208 (Debit to close) Write the heading. 2. Write the date. 3. Write the title of the account debited. Record the debit amount. 4. Write the title of the account credited. Record the credit amount. LESSON 8-2

8 CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCES page Date 2. Income Summary 3. Credit 4. Debit amount (Credit to close) LESSON 8-2

9 CLOSING ENTRY TO RECORD NET INCOME OR LOSS AND CLOSE THE INCOME SUMMARY ACCOUNT page Date 2. Debit 3. Credit (Capital: credit to record net income) (Income Summary: debit to close) LESSON 8-2

10 CLOSING ENTRY FOR THE OWNER S DRAWING ACCOUNT page Date 2. Debit 3. Credit (Credit to close) LESSON 8-2

11 11 TERMS REVIEW page 212 permanent accounts temporary accounts closing entries LESSON 8-2

12 LESSON 8-3 Preparing a Post-Closing Trial Balance

13 GENERAL LEDGER ACCOUNTS AFTER ADJUSTING AND CLOSING ENTRIES ARE POSTED page LESSON 8-3

14 14 POST-CLOSING TRIAL BALANCE Post-closing trial balance Trial balance prepared AFTER the closing entries are posted to verify that debits equal credits in the general ledger post means after Only general ledger accounts with balances are included on a post-closing trial balance Permanent accounts have balances and DO appear on the post-closing TB; temporary accounts do NOT have balances nor do they appear on the post-closing TB LESSON 8-2

15 15 POST-CLOSING TRIAL BALANCE page Heading 2. Account titles 3. Account balances 4. Single rule 5. Compare totals 6. Totals 7. Record totals 8. Double rule LESSON 8-3

16 16 Accounting cycle The series of accounting activities included in recording financial information for a fiscal period LESSON 8-3

17 ACCOUNTING CYCLE FOR A SERVICE BUSINESS page Analyzes transactions 2. Journalize 3. Post 4. Prepare work sheet 5. Prepare financial statements 6. Journalize adjusting and closing entries 7. Post adjusting and closing entries 8. Prepare post-closing trial balance LESSON 8-3

18 18 TERMS REVIEW page 219 post-closing trial balance accounting cycle LESSON 8-3

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