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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.
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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.
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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.
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Steps for Closing
the Ledger
Section 20.1
Journalizing
Closing Entries
Closing Entries
Needed for a
Corporation
See page 592
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Steps for Closing
the Ledger
Section 20.1
Journalizing
Closing Entries
Closing Entries Needed for a
Corporation (continued)
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See page 593
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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
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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.
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Closing the
General Ledger
Section 20.2
Posting Closing Entries
Partial General
Ledger at the
End of the
Fiscal Period
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See pages 596 – 600
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Closing the
General Ledger
Section 20.2
Posting Closing Entries
Partial General
Ledger at the
End of the
Fiscal Period
(continued)
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See pages 596 – 600
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Closing the
General Ledger
Section 20.2
Posting Closing Entries
Partial General
Ledger at the
End of the
Fiscal Period
(continued)
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See pages 596 – 600
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Closing the
General Ledger
Section 20.2
Posting Closing Entries
Partial General
Ledger at the
End of the
Fiscal Period
(continued)
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See pages 596 – 600
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Closing the
General Ledger
Section 20.2
Posting Closing Entries
Partial General
Ledger at the
End of the
Fiscal Period
(continued)
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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)
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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)
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See pages 596 – 600
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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
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Completing the Accounting
Cycle for a Merchandising
Business
Section 20.2
Posting Closing Entries
See page 601
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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. ________
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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.
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