Home A corporation’s net income or net loss is closed to Retained Earnings. After posting the closing entries, accountants prepare a post-closing trial balance. Home Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Journalize closing entries for a merchandising corporation. Post closing entries to the general ledger accounts. Prepare a post-closing trial balance. Describe the steps in the accounting cycle. Home Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Steps for Closing the Ledger Section 20.1 Journalizing Closing Entries 1 Steps for Closing the Ledger for a Corporation Close accounts with balances in the Income Statement Credit column to Income Summary. 2 Close accounts with balances in the Income Statement Debit column to Income Summary. 3 Close Income Summary to Retained Earnings. Home Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Steps for Closing the Ledger Section 20.1 Journalizing Closing Entries Closing Entries Needed for a Corporation See page 592 Home Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Steps for Closing the Ledger Section 20.1 Journalizing Closing Entries Closing Entries Needed for a Corporation (continued) Home Glencoe Accounting See page 593 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing Entry to Transfer a Net Loss Section 20.1 Journalizing Closing Entries If there is a net loss, credit Income Summary for the amount and debit Retained Earnings for the amount. See page 594 Home Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing the General Ledger Section 20.2 Posting Closing Entries When closing the general ledger, write Closing Entry for each posting in the Description column of the general ledger account. Home Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing the General Ledger Section 20.2 Posting Closing Entries Partial General Ledger at the End of the Fiscal Period Home Glencoe Accounting See pages 596 – 600 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing the General Ledger Section 20.2 Posting Closing Entries Partial General Ledger at the End of the Fiscal Period (continued) Home Glencoe Accounting See pages 596 – 600 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing the General Ledger Section 20.2 Posting Closing Entries Partial General Ledger at the End of the Fiscal Period (continued) Home Glencoe Accounting See pages 596 – 600 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing the General Ledger Section 20.2 Posting Closing Entries Partial General Ledger at the End of the Fiscal Period (continued) Home Glencoe Accounting See pages 596 – 600 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing the General Ledger Section 20.2 Posting Closing Entries Partial General Ledger at the End of the Fiscal Period (continued) Home Glencoe Accounting See pages 596 – 600 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing the General Ledger Section 20.2 Posting Closing Entries Partial General Ledger at the End of the Fiscal Period (continued) Home Glencoe Accounting See pages 596 – 600 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing the General Ledger Section 20.2 Posting Closing Entries Partial General Ledger at the End of the Fiscal Period (continued) Home Glencoe Accounting See pages 596 – 600 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Preparing a Post-Closing Trial Balance Section 20.2 Posting Closing Entries A post-closing trial balance is prepared at the end of the accounting period to prove the general ledger accounts are in balance. See page 600 Home Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Completing the Accounting Cycle for a Merchandising Business Section 20.2 Posting Closing Entries See page 601 Home Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Question 1 To journalize the closing entries, put the following in order: Close temporary accounts with debit balances. 2 ________ 1 Close temporary accounts with credit balances. ________ 3 Close the Income Summary account to Capital. ________ Home Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Question 2 How is a post-closing trial balance different from other trial balances? The post-closing trial balance is prepared after closing entries in which temporary account balances have been transferred to the capital account. The post-closing trial balance has only permanent or balance sheet accounts. Other trial balances include both temporary and permanent accounts. Home Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. End of Home