1285735773_409974
Chapter 5
CLOSING ENTRIES AND THE
POST-CLOSING TRIAL
BALANCE
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Learning Objective
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Steps in the Accounting Cycle
Step 1. _____________________________
Step 2. _____________________________
Step 3. _____________________________
Step 4. _____________________________
Step 5. _____________________________
Step 6. _____________________________
Step 7. _____________________________
Step 8. _____________________________
Step 9. _____________________________
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Purpose of Closing Entries
•
The purpose of _________________ is to
______(or ______) the ________________ or ______ accounts.
•
Closing entries are made ______ the last
________________ and ______ the
____________________ have been prepared.
•
Closing entries update the
________________ account.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Purpose of Closing Entries
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Practice Exercise 1
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Learning Objective
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Procedure for Closing
The procedure for closing is simply to balance off the account; in other words, to make the balance ______________ .
An account to be closed has a debit balance of
$870. To make the balance equal to zero, we _____ the account for $870.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Procedure for Closing
The procedure for closing is simply to balance off the account; in other words, to make the balance ______________ .
An account to be closed has a credit balance of
$1,400. To make the balance equal to zero, we
______ the account for $1,400.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Steps in the Closing Procedure
Step 1.
_____________________________________
Step 2. _____________________________________
Step 3. _____________________________________
_____________________________________
Step 4. _____________________________________
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Closing the Accounts for Conner’s Whitewater Adventure
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© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
2,832
1,250
460
620
225
625
512
6,524
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
In case there is a ___________ , Income Summary and
Capital are both _________ . Assume J. Doe Company experienced a $600 ___________.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Computerized Accounting
With accounting software, each time the financials statements are prepared, the capital account is updated. If accounting software is being used, perform the following steps:
1.
____________________________.
2.
____________________________.
3.
___________________________________________
________________.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Closing Entries Taken Directly from the Work Sheet
•
You can gather information for the closing entries either directly from the _________ accounts or from the ______________ .
•
You may plan the closing entries by balancing off all the figures that appear in the
_________________________columns.
•
In the Item column of the ledger account, we write the word “ _____________ ”.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Posting the Closing Entries
• Accountants call the accounts that are to be closed
(such as ___________ , ___________ , ___________
, and ___________ ) ___________
(_______________) accounts.
• Accountants call the accounts that remain ______ from one fiscal period to the next ___________
(___________ ) accounts.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Practice Exercise 2
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© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objective
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The Post-Closing Trial Balance
• To verify the balances of the accounts that remain
_______, a ____________________________ is prepared using the final balance figures from the
_______accounts.
• Note that the accounts listed in the post-closing trial balance are the _______ or _______ accounts.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Tracking Down an Error
If the totals of the post-closing trial balance are not equal, here’s the recommended procedures for tracking down the error.
1.
_________________________________________.
2.
________________________________________________________
____________________________________.
3.
________________________________________________________
____________________________________.
4.
________________________________________________________
________________________________________________________
____________________________________.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Practice Exercise 3
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Learning Objective
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Cash and Accrual Accounting
• Under the ______________________ , _________ is
_________ when it is _________ ___ ___ , and generally _________ are recorded when they are ___
___ ___ .
• Under the ______________________ , _________ is
_________ when it is _________ , and _________ are recorded when they are _________ .
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Cash versus Accrual
Roby Hair Salon pays $6,000 cash in July for the current month (July) and the following five months of rent (August-December). Recording rent expense under cash basis and accrual basis.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Practice Exercise 4
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Learning Objective
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Interim Statements
• Financial statements prepared during the fiscal year, for periods of _____ than _____ _____ , are called
________________________ .
• A business may prepare the financial statements monthly to provide up-to-date information about the results of operations.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Practice Exercise 5
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© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
