Lesson Plan 2.6 Closing the Fiscal Period

Transcription

1 Lesson Plan 2.6 Closing the Fiscal Period Course Title Accounting I Lesson Purpose Journalize and post closing entries and check for accuracy. Behavioral Objectives Journalize and post adjusting entries. Journalize and post closing entries. Prepare a Post-Closing Trial Balance Preparation OLD TEKS Correlations: C 1.b. - apply information from source documents 1.c. - demonstrate the effects of transactions on the accounting equation, for example, T accounts; 1.f. post general journal entries 1.g. prepare a Trial Balance 7.a. - follow oral and written instructions; 7.b. - develop time management skills by setting priorities for completing work as scheduled 7.c. - make decisions using appropriate accounting concepts; 7.e. - perform accounting procedures using manual and automated methods TEKS Correlations: C 3.e. use T accounts 3.g. post journal entries to general ledger accounts; 3.i. journalize and post adjusting and closing entries; 3.j. prepare a post-closing trial balance TAKS Correlation: MATH Objective 10: The student will demonstrate an understanding of the mathematical processes and tools used in problem solving. Lesson Plan 2.6 Closing the Fiscal Period

2 Materials, Equipment and Resources: Textbook Bean Bag Teaching Strategies: Demonstration Lesson Plan 2.6 Closing the Fiscal Period

3 Learner Preparation: Arrange the chairs in the classroom in a circle. Draw numbers to get started. The student with the lowest number begins the game. Have them say either temporary or open and toss the bean bag to someone. That person must name an account of the type the tosser named. If they miss it, they stay in and say either temporary or open and toss the bean bag. This continues until there is only one left in the circle. Students cannot repeat account names. Lesson Content: Demonstrate journalizing adjusting and closing entries and then posting those entries to the general ledger. Prepare the accounting system for the beginning of the next fiscal period by preparing a Post-Closing Trial Balance. Assessment: Verbal Checking for Understanding Graded Assignments Additional Resources: Textbooks: Guerrieri, Donald J., Haber, Hoyt, Turner. Glencoe Accounting Real- World Applications and Connections. Glencoe McGraw-Hill ISBN/ISSN X. Ross, Kenton, Gilbertson, Lehman, and Hanson. Century 21 Accounting Multicolumn Journal Anniversary Edition, 1st Year Course. South- Western Educational and Professional Publishing, ISBN/ISSN: Ross, Kenton, Gilbertson, Lehman, and Hanson. Century 21 General Journal Accounting Anniversary Edition, 7th Edition. South- Western Educational and Professional Publishing, ISBN/ISSN: Lesson Plan 2.6 Closing the Fiscal Period

4 Activity Income Summary Course Title Accounting I Lesson Title Closing the Fiscal Period Activity Purpose Journalize and post closing entries and check for accuracy. OLD TEKS Correlations: C 1.b. - apply information from source documents 1.h. calculate and record end-of period adjustments 1.i. - update accounts through adjusting and closing entries 7.a. - follow oral and written instructions; 7.b. - develop time management skills by setting priorities for completing work as scheduled 7.c. - make decisions using appropriate accounting concepts; 7.e. - perform accounting procedures using manual and automated methods TEKS Correlations: C 3.e. use T accounts 3.i. journalize and post adjusting and closing entries; TAKS Correlation: MATH Objective 10: The student will demonstrate an understanding of the mathematical processes and tools used in problem solving. Materials, Equipment and Resources: Textbook Teaching Strategies: Activity Income Summary

5 Demonstration Observation Activity Income Summary

6 Activity Outline: Introduce the Income Summary account. This account is sometimes called Income and Expense Summary. It is in the capital section of the general ledger, but is a temporary capital account. In other words, it is closed at the end of the fiscal period. It is used as a temporary holding place for income and expenses so a business owner can go to one account in the ledger and see the income and expenses matched with the net income or net loss balance. This can be crucial for making business decisions. Income Summary is different from most accounts because it does not have a normal balance side. We hope it has a credit balance because that side represents the revenue that means we have a net income. If it has a debit balance the expenses are larger, which means we have a net loss. Have your students place the following transactions in a T account figuring a balance for the T account. 1. Jamie Chaplin has $1, in the fees account and $1, in total expenses. Draw a T account for Income Summary to demonstrate what looks like. Calculate the new balance and write it on the correct side of the T account. 2. Blake Boswell has fares earned in his taxi company of $3, He has total expenses of $2, Draw a T account to demonstrate this and calculate the new balance. 3. Gidget Goovers has fees in her ballet company of $4, and expenses of $ Draw a T account to demonstrate this and calculate the new balance. 4. Howard Hopper has fees in his tire service company of $6, and expenses of $3, Draw a T account to demonstrate this and calculate the new balance. 5. Joann Jaggers has fees in her after-school tutoring business of $ and expenses of $ Draw a T account to demonstrate this and calculate the new balance. Assessment: Verbal Checking for Understanding. Activity Income Summary

7 Activity Journalizing and Posting Adjusting Entries Course Title Accounting I Lesson Title Journalizing and Posting Adjusting Entries Activity Purpose Journalize and post closing entries and check for accuracy. OLD TEKS Correlations: C 1.b. - apply information from source documents 1.i. - update accounts through adjusting and closing entries 7.a. - follow oral and written instructions; 7.b. - develop time management skills by setting priorities for completing work as scheduled 7.c. - make decisions using appropriate accounting concepts; 7.e. - perform accounting procedures using manual and automated methods TEKS Correlations: C 3.i. journalize and post adjusting and closing entries; TAKS Correlation: WRITING Objective 5: The student will produce a piece of writing that demonstrates a command of the conventions of spelling, capitalization, punctuation, grammar, usage, and sentence structure. Objective 6: The student will demonstrate the ability to revise and proofread to improve the clarity and effectiveness of a piece of writing. Activity Journalizing and Posting Adjusting Entries

8 MATH Objective 10: The student will demonstrate an understanding of the mathematical processes and tools used in problem solving. Materials, Equipment and Resources: Textbook Teaching Strategies: Demonstration Activity Journalizing and Posting Adjusting Entries

9 Activity Outline: Demonstrate journalizing and posting adjusting entries. Emphasize that the adjustments come from the Adjustments column of the worksheet. Review calculating account balances and paying attention to detail with completing the post references. Have your students journalize and post adjusting entries on their own. Ask them to have it checked off with the instructor before going to the next assignment. Have your students answer these questions about adjusting entries? 1. Why is it necessary to adjust entries? To match expenses with revenue during the same fiscal period 2. When do you make adjusting entries? at the end of the fiscal period on the worksheet 3. Which columns have the amounts for journalizing the adjusting entries? Adjustments debit and credit columns 4. What type of account is usually the debit in an adjusting entry? Expense 5. What type of account is usually the credit in an adjusting entry? Asset 6. If we did not make adjustments at the end of the fiscal period, what would the results be for a net income? Higher, which would result in paying more taxes 7. What is the difference between journalizing and posting adjusting entries? Journals are in chronological order; whereas posting places the entries by account. Assessment: Graded Assignment. Activity Journalizing and Posting Adjusting Entries

10 Activity Journalizing and Posting Closing Entries Course Title Accounting I Lesson Title Journalizing and Posting Closing Entries Activity Purpose - Demonstrate skill in journalizing and posting closing entries. OLD TEKS Correlations: C 1.b. - apply information from source documents 1.h. - calculate and record end-ofperiod adjustments 1.i. - update accounts through adjusting and closing entries 7.a. - follow oral and written instructions; 7.b. - develop time management skills by setting priorities for completing work as scheduled 7.c. - make decisions using appropriate accounting concepts; 7.e. - perform accounting procedures using manual and automated methods TEKS Correlations: C 3.e. use T accounts 3.i. journalize and post adjusting and closing entries; TAKS Correlation: WRITING Objective 5: The student will produce a piece of writing that demonstrates a command of the conventions of spelling, capitalization, punctuation, grammar, usage, and sentence structure. Objective 6: The student will demonstrate the ability to revise and proofread to Activity Journalizing and Posting Closing Entries

11 improve the clarity and effectiveness of a piece of writing. MATH Objective 10: The student will demonstrate an understanding of the mathematical processes and tools used in problem solving. Materials, Equipment and Resources: Textbook Teaching Strategies: Demonstration Activity Journalizing and Posting Closing Entries

12 Activity Outline: Demonstrate the effects of closing entries using T accounts. You might want to include an activity like the M&M activity at Use analogies like when we time someone running a race, we start the clock at 0 so we know how long it takes him during that race. In accounting, we have to start the temporary accounts at 0 so know how much revenue, expense or drawing occurs during that fiscal period. Focus on these points by asking your students questions: 1. What accounts end up with a 0 balance? Revenue, expenses, drawing and income summary 2. What account is affected by closing entries but remains open? Capital 3. When you close an expense account, is it a debit or a credit? It is a credit, because it is the opposite of its normal balance side. 4. When you close revenue, is it a debit or credit? It is a debit, because revenue is a normal credit balance and it has to be the opposite. 5. Explain the normal balance side of Income Summary. Income Summary does not have a normal balance side, although we hope it has a credit balance because that represents more income than expenses. 6. What does closing an expense account do to capital? Decreases it 7. What does closing a revenue account do to capital? Increases it 8. What does closing drawing do to capital? Decreases it 9. What types of accounts are still open at the end of the fiscal period? Assets, Liabilities and Capital Have your students journalize and post closing entries for a problem on their own. Assessment: Graded Assignment. Quality Feature Answers questions accurately Journal entries accurate for closing entries Posting accurate for closing entries with proper closing of accounts Legible writing All details included Completes in a timely manner Score Activity Journalizing and Posting Closing Entries

13 Activity Post-Closing Trial Balance Course Title Accounting I Lesson Title Closing the Fiscal Period Activity Purpose - Demonstrate skill in preparing a post-closing Trial Balance after posting the closing entries to the general ledger. OLD TEKS Correlations: C 1.b. - apply information from source documents 1.j. - prepare a post-closing Trial Balance 7.a. - follow oral and written instructions; 7.b. - develop time management skills by setting priorities for completing work as scheduled 7.c. - make decisions using appropriate accounting concepts; 7.e. - perform accounting procedures using manual and automated methods TEKS Correlations: C 3.i. journalize and post adjusting and closing entries; 3.j. prepare a post-closing trial balance TAKS Correlation: WRITING Objective 6: The student will demonstrate the ability to revise and proofread to improve the clarity and effectiveness of a piece of writing. MATH Objective 10: The student will demonstrate an understanding of the mathematical processes and tools used in problem solving. Materials, Equipment and Resources: Textbook Teaching Strategies: Activity Post-Closing Trial Balance

14 Demonstration Observation Activity Post-Closing Trial Balance

15 Activity Outline: Because it is easy to make errors that carry over in many places, accounting practices require preparing a Trial Balance after posting. At the end of the fiscal period, this is called the Post-Closing Trial Balance. Demonstrate a Post-Closing Trial Balance focusing on the fact that the account balances come from the general ledger. If an account has a zero balance, it is not necessary to list it. Put the accounts in the same order as the ledger. Have your students create a Post-Closing Trial Balance using a Post Closing Trial Balance spreadsheet with AutoSum for the totals. They need to put the accounts in correct order and total the two columns. If there is an error, have them find the error using the tips they learned on the Trial Balance on the worksheet. Ask your students to place the balance on the normal balance side of the account. 1. Cash Advertising Expense Fees 7, Utilities Expense Ann Long, Drawing Ann Long, Capital 24, Supplies Equipment 8, Petty Cash Prepaid Insurance Loan Bank 4, Sam s Office Depot Miscellaneous Expense Rent Expense 2, Assessment: Graded Assignment. Quality Feature No errors in typing the account names or amounts Accounts in correct order Amounts on the correct side debit or credit Totals correct Completes in a timely manner Score Activity Post-Closing Trial Balance