Mr. Belolan
Objectives
 1. Explain the purpose of adjusting and closing
entries by journalizing and posting several
transactions
 2. Using the completed book work, pinpoint and
make recommendations based on the fiscal year’s
adjusting and closing entries
The Accounting Cycle
1.
2.
3.
4.
5.
6.
7.
Collect source documents
Analyze each transaction
Journalize transactions in the general journal
Post to general ledger
Prepare the trial balance
Prepare a work sheet
Prepare financial statements (income statement and
balance sheet)
8. Journalize and post adjusting and closing entries
9. Prepare post-closing trial balance
Permanent and Temporary Accounts
 Permanent Accounts
 Accounts used to accumulate information from
one fiscal period to the next
 Examples?
 Temporary Accounts
 Accounts used to accumulate information until it is
transferred to the owner’s capital account
 Each account starts over with a zero balance each
fiscal period
 Examples?
Closing Entries
Closing Entries
Journal entries used to prepare temporary accounts
for a new fiscal period
1. Revenue
2. Expenses
3. Net income or loss
4. Drawing
Post-Closing Trial Balance
Post-Closing Trial Balance
Prepared after the closing entries are posted
Lists all permanent accounts and their balances
Odds and Ends
 The source document for closing entries is the
work sheet
 A business’ fiscal period can run from Jan. 1st
through Dec. 31st, but it doesn’t have to
 Examples?
Concept Review
1. How many steps are there in the
accounting cycle?
2. Why do we “close” accounts?
3. What are the 4 closing entries?
4. Explain why a fiscal period is not always
from Jan-Dec?