century 21 accounting © 2009 south-western, cengage learning closing the accounting cycle
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Closing the Accounting CycleClosing the Accounting Cycle
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Closing the Accounting CycleClosing the Accounting Cycle
Please note that all slides are available on the class website.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-3
THE ACCOUNTING CYCLETHE ACCOUNTING CYCLE page 217
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8. Prepare post-closing trial balance
7. Post adjusting and closing entries
6. Journalize adjusting and closing entries
5. Prepare financial statements
4. Prepare work sheet
3. Post
2. Journalize
1. Analyzes transactions
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Recording Adjusting Entries
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-1
ADJUSTING ENTRY PROCEDURESADJUSTING ENTRY PROCEDURES page 202
4. Write the title of the account credited. Record the credit amount.
3. Write the title of the account debited. Record the debit amount.
2. Write the date.
1. Write the heading.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Recording Closing Entries
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-2
TERMS all on page 206 of your text bookTERMS all on page 206 of your text book
permanent accounts temporary accounts closing entries
page 212
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-2
TERMS all on page 206 of your text bookTERMS all on page 206 of your text book
Permanent Accounts – Accounts used to accumulate information form one fiscal period to the next. Examples of permanent accounts include asset and liability accounts (balance sheet accounts), as well as the owner’s capital account.
Temporary Accounts – Accounts used to accumulate information until it is transferred to the owner’s capital account. Examples of temporary accounts are revenue and expense accounts (income statement accounts), the owner’s drawing account, and the income summary account.
page 212
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-2
TERMS all on page 206 of your text bookTERMS all on page 206 of your text book
Closing Entries – Journal entries used to prepare temporary accounts for a new fiscal period. The temporary account balances must be reduced to ZERO at the end of each fiscal period.
page 212
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-2
NEED FOR THE INCOME SUMMARY NEED FOR THE INCOME SUMMARY ACCOUNTACCOUNT page 207
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-2
(Debit to close)
CLOSING ENTRY FOR AN INCOME STATEMENT CLOSING ENTRY FOR AN INCOME STATEMENT ACCOUNT WITH A CREDIT BALANCEACCOUNT WITH A CREDIT BALANCE page 208
1. Write the heading.
2. Write the date.
3. Write the title of the account debited. Record the debit amount.
4. Write the title of the account credited. Record the credit amount.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-2
(Credit to close)
CLOSING ENTRY FOR INCOME STATEMENT CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCESACCOUNTS WITH DEBIT BALANCES page 209
4. Debit amount3. Credit2. Income Summary1. Date
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-2
(Income Summary:debit to close)
(Capital: credit torecord net income)
CLOSING ENTRY TO RECORD NET INCOME CLOSING ENTRY TO RECORD NET INCOME OR LOSS AND CLOSE THE INCOME OR LOSS AND CLOSE THE INCOME SUMMARY ACCOUNTSUMMARY ACCOUNT page 210
3. Credit
2. Debit
1. Date
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-2
(Credit to close)
CLOSING ENTRY FOR THE OWNER’S CLOSING ENTRY FOR THE OWNER’S DRAWING ACCOUNTDRAWING ACCOUNT page 211
3. Credit
2. Debit
1. Date
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Preparing a Post-Closing Trial Balance
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-3
GENERAL LEDGER ACCOUNTS AFTER GENERAL LEDGER ACCOUNTS AFTER ADJUSTING AND CLOSING ENTRIES ARE POSTEDADJUSTING AND CLOSING ENTRIES ARE POSTEDpage 213
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 8-3
8. Double rule
7. Record totals
6. Totals
5. Compare totals
4. Single rule
3. Account balances
2. Account titles
1. Heading
POST-CLOSING TRIAL BALANCEPOST-CLOSING TRIAL BALANCE page 216