The Accounting Cycle Completed –
Adjusting, Closing, and
Post-Closing Trial Balance
Chapter 5
5-1
End of the Period Activities
Adjusting entries must be entered in the
journal and posted.
 Closing entries must be journalized at the
end of the accounting period so that income
can be measured for the new period.
 Temporary accounts are closed.

5-2
End of the Period Activities
Accounting Cycle
Analyze Transactions
Record, Journalize,
and Post
Prepare
Trial Balance
5-3
End of the Period Activities
Prepare Adjustments
Complete Worksheet
Prepare Reports
Close the Accounting
Period
5-4
Learning Objective 1
Journalizing and posting
adjusting entries.
5-5
Learning Unit 5-1
Adjusting entries
 Assets must be adjusted to show amounts
used or allocated to periods and recorded
as expenses.
– supplies used
– prepaid rent expired over time
– equipment depreciated
5-6
Learning Unit 5-1
Journalizing and posting adjusting entries
 The worksheet is complete.
 The books are not up to date.
 Adjusting entries are taken from the
worksheet and journalized.
 The journal entries must be posted.
5-7
Learning Objective 2
Journalizing and posting
closing entries.
5-8
Learning Unit 5-2
Journalizing and posting closing entries
 Closing is a mechanical step which sets
temporary accounts to zero so that they
are ready for a new measurement period.
5-9
Learning Unit 5-2

–
–
–
–
What are permanent accounts?
assets
liabilities
capital
balance sheet accounts
5 - 10
Learning Unit 5-2
Permanent accounts are also called
real accounts.
 Balances are carried forward.

5 - 11
Learning Unit 5-2

–
–
–
What are temporary accounts?
revenue
expenses
withdrawals
5 - 12
Learning Unit 5-2
New data is accumulated each period.
 Temporary accounts are also called
nominal accounts.
 Balances are set to zero.

5 - 13
Learning Unit 5-2
Closing entries:
 There are four steps to perform.
1 Debit revenue accounts and credit the
Income Summary account.
2 Debit the Income Summary account and
credit expense accounts.
5 - 14
Learning Unit 5-2
3
4
Debit or credit the Income Summary
account and debit or credit the Capital
account.
Debit the Capital account and credit the
Withdrawals account.
5 - 15
Learning Unit 5-2
Four Steps in Journalizing Closing Entries
Step 2:
Expenses
Step 1:
Revenue
Step 3:
Income Summary
Net Income or Loss`
Step 4:
Withdrawals
Capital
5 - 16
Learning Unit 5-2
(Close Revenue Account) Income
Revenue
Summary
3,450 3,450
(Close Expense
1,455 3,450
Accounts)
1,955
Various Exp
1,205 1,205
Dep. Exp
50
50
Supplies Exp
200 200
(Close Income
Summary)
Capital
Account
1,955
5 - 17
Learning Objective 3
Prepare a post-closing
trial balance.
5 - 18
Learning Unit 5-3
The post-closing trial balance:
Step 8 of the Accounting Cycle
 The post-closing trial balance helps
prove the accuracy of the adjusting and
closing process.
 It contains the true ending figure for capital.
 It contains only permanent accounts.
5 - 19
Adjustments Example
Account Title
Cash
Accounts receivable
Supplies
Equipment
Accum. depreciation
Accounts payable
Capital
Revenue
Various expenses
Supplies expense
Depreciation expense
Totals
Trial Balance
Dr.
Cr.
4,065
850
300
1,200
Adjustments
Dr.
Cr.
a) 1,000
b) 200
c)
1,205
7,620
50
170
5,00
0
a) 1,000
2,45
0 b) 200
c) 50
1,250
1,250
7,62
0
Adjusted
Trial Balance
Dr.
Cr.
4,065
1,850
100
1,200
50
170
5,000
3,450
1,205
200
50
8,670
8,670
5 - 20
Adjustments Example
Account Title
Cash
Accounts receivable
Supplies
Equipment
Accum. depreciation
Accounts payable
Capital
Revenue
Various expenses
Supplies expense
Depreciation expense
Totals
Adjusted
Trial Balance
Dr.
Cr.
4,065
1,850
100
1,200
50
170
5,000
3,450
1,205
200
50
8,670 8,670
Net income
Income
Statement
Dr.
Cr.
Balance
Sheet
Dr.
Cr.
4,06
5
1,85
0
100
50
1,20
170
0
5,000
3,450
1,205
200
50
1,455
1,995
3,450
3,450
3,450 7,215
7,21
5,220
1,995
7,2155 - 21
Post Closing Trial Balance
Cash
$4,065
Accounts Receivable
1,850
Supplies
100
Equipment
1,200
Total
$7,215
Accumulated Depreciation: Equipment
Accounts Payable
Clara J., Capital
Total
50
170
6,995
$7,215
5 - 22
End of Chapter 5
5 - 23