Questions that you need to Questions that you need to ask yourself.ask yourself.

• Have you understood everything up to Have you understood everything up to this point?this point?

• Can you tell me what step in the Can you tell me what step in the accounting cycle you are on now?accounting cycle you are on now?

• What does it mean to post? To What does it mean to post? To Journalize?Journalize?

• Why do we do a worksheet?Why do we do a worksheet?• On the balance sheet how do we get On the balance sheet how do we get

the balance for the Capital account?the balance for the Capital account?

• Please get out your textbook open to Please get out your textbook open to page page

• Do you have my handouts for this Do you have my handouts for this class?class?

• Turn your brain on…..Turn your brain on…..

Chapter 9Chapter 9

Adjusting and Closing EntriesAdjusting and Closing Entries

Terms that you need to Terms that you need to knowknow

• Adjusting EntriesAdjusting Entries– Used to bring accounts up to date at the Used to bring accounts up to date at the

end of the year.end of the year.• SuppliesSupplies• InventoryInventory• Value of assets decreaseValue of assets decrease

– Recorded directly from the WorksheetRecorded directly from the Worksheet

Insert worksheet here…….

General JournalGeneral Journal Page 1Page 1

DateDate Account TitleAccount Title Doc NoDoc No Post RefPost Ref DebitDebit CreditCredit

      Adjusting Ent.Adjusting Ent.            

AugAug 3131 Supplies ExpenseSupplies Expense    25642564   

      Supplies Supplies          25642564

   31 31    Insurance ExpenseInsurance Expense         100100   

        Prepaid InsurancePrepaid Insurance          100100

                    

                    

AccountSupplies Expense       Account NO 530

Date Item Post Ref Debit Credit

Balance

Debit Credit

 Aug 31   G1 2564   2564  

               

               

               

               

530

Account Supplies       Account NO 150

Date Item Post Ref Debit Credit

Balance

Debit Credit

Aug  31   G1   2564   2564

                              

               

               

150

AccountInsurance Expense       Account NO 510

Date Item Post Ref Debit Credit

Balance

Debit Credit

 Aug 31   G1 100   100  

               

               

               

               

AccountPrepaid

Insurance       Account NO 160

Date Item Post Ref Debit Credit

Balance

Debit Credit

 Aug 31   G1   100   100

               

               

               

               

510160

• Please work on the “On your Own” Please work on the “On your Own” page 196page 196

Date Account TitleDoc No

Post Ref Debit Credit

           

         

           

           

           

           

           

Adjusting Entries

Feb 28 Supplies Expense

Supplies

520520

520

28 Insurance Expense28

Pre-paid Insurance

300

300

Once you have journalized this information we must post it into the journal andThen post reference it in the Journal

530

150

510

160

“On your own” 9-1

Closing EntriesClosing Entries

• Temporary AccountsTemporary Accounts– All accounts that are closed at the end of each All accounts that are closed at the end of each

fiscal periodfiscal period– These are accounts that we need to zero out at These are accounts that we need to zero out at

the end of each fiscal period.the end of each fiscal period.– Any Revenue, or Expense AccountAny Revenue, or Expense Account

• Permanent AccountsPermanent Accounts– Accounts that are left open for the life of the Accounts that are left open for the life of the

businessbusiness– Any Asset, Liability, or the Owner’s Equity Any Asset, Liability, or the Owner’s Equity

AccountAccount

The income summary The income summary AccountAccount

• This is a account that has no This is a account that has no balance.balance.– We use this account to put all of our We use this account to put all of our

numbers together.numbers together.– It is used to help us determine our net It is used to help us determine our net

income or net loss.income or net loss.

4 step process in doing 4 step process in doing closing entriesclosing entries

• Step 1Step 1– Close all accounts that have a Close all accounts that have a credit credit

balancebalance in the Income statement in the Income statement columns to the Income Summarycolumns to the Income Summary

Please open your textbook to pg 160 where the overlay pages were in the last chapter

Income Summary

Sales

4411

General Journal Page 1

Date Account Title Doc No Post Ref Debit Credit

    Closing Ent        

Aug 31 Sales   4411  

    Income Summary       4411

             

             

Account Sales       Account NO 410

Date Item Post Ref Debit Credit

Balance

Debit Credit

 Aug 31   G1       4411 

  31    G1 4411   ------- ------

               

               

               

410

AccountIncome

Summary       Account NO 330

Date Item Post Ref Debit Credit

Balance

Debit Credit

Aug   31   G1   4411   4411

                              

               

               

330

4 step process in doing 4 step process in doing closing entriesclosing entries

• Step 1Step 1– Close all accounts that have a Close all accounts that have a credit credit

balancebalance in the Income statement in the Income statement columns to the Income Summarycolumns to the Income Summary

• Step 2Step 2– Close all accounts that have a Close all accounts that have a debit debit

balancebalance in the Income statement in the Income statement columns to the Income summary.columns to the Income summary.

Advertising ExpInsurance ExpMiscellaneousRent ExpSupplies ExpUtilities Exp

Income Summary

Sales

44114411 -0-

4411

Miscellaneous Exp

10

Rent Expense

250

Supplies Expense

2564

Utilities Expense

115

Advertising Exp

273Insurance Exp

100

General Journal Page 1

Date Account Title Doc No Post Ref Debit Credit

    Closing Ent        

Aug 31 Sales 410 4411  

    Income Summary   330   4411

  31 Income Summary   330 3312  

    Advert. Exp    510   273

    Insurance Exp.    520   100

    Miscellaneous Exp   530    10

    Rent Ex   535   250

    Supplies Expense   540   2564

    Utilities Expense   550   115

AccountAd

Expense       Account NO 510

Date Item Post Ref Debit Credit

Balance

Debit Credit

Aug   31   G1     273  

          273  ------ -------

               

               

               

AccountInsuranc

e Exp       Account NO 520

Date Item Post Ref Debit Credit

Balance

Debit Credit

 Aug 31 31   G1 100   100  

      G1   100 ----- ------

               

               

               

AccountSupp Exp       Account NO 540

Date Item Post Ref Debit Credit

Balance

Debit Credit

 Aug 31   G1 2564   2564  

          2564 ---- -----

               

               

               

AccountMisc. Exp       Account NO 530

Date Item Post Ref Debit Credit

Balance

Debit Credit

 Aug 31   G1 10   10  

  31       10 ----- -----

               

               

               

3312

4 step process in doing 4 step process in doing closing entriesclosing entries

• Step 1Step 1– Close all accounts that have a Close all accounts that have a credit balancecredit balance in the in the

Income statement columns to the Income statement columns to the Income SummaryIncome Summary

• Step 2Step 2– Close all accounts that have a Close all accounts that have a debit balancedebit balance in the in the

Income statement columns to the Income statement columns to the Income summaryIncome summary..

• Step 3Step 3– Close the Close the income summary to the Capital Accountincome summary to the Capital Account

• The total in the income summary should equal the net The total in the income summary should equal the net income or loss on the worksheetincome or loss on the worksheet

General Journal Page 1

Date Account Title Doc No Post Ref Debit Credit

    Closing Ent        

Aug 31 Sales 410 4411  

    Income Summary   330   4411

  31 Income Summary   330 3312  

    Advert. Exp    510   273

    Insurance Exp.    520   100

    Miscellaneous Exp   530    10

    Rent Ex   535   250

    Supplies Expense   540   2564

    Utilities Expense   550   115

Income Summary

Sales

44114411 -0-

4411

Miscellaneous Exp

10

Rent Expense

250

Supplies Expense

2564

Utilities Expense

115

Advertising Exp

273Insurance Exp

100273-0-

100-0-

10-0-

250-0-

2564-0-

115-0-

3312

1099

Income Summary

4411

1099This should be The total of the net incomeOn the worksheet

Since this has a balance on the Credit sideWe must debit it and transfer it to the

Capital Account

3312

4 step process in doing 4 step process in doing closing entriesclosing entries

• Step 1Step 1– Close all accounts that have a Close all accounts that have a credit balancecredit balance in the in the

Income statement columns to the Income statement columns to the Income SummaryIncome Summary

• Step 2Step 2– Close all accounts that have a Close all accounts that have a debit balancedebit balance in the in the

Income statement columns to the Income statement columns to the Income summaryIncome summary..

• Step 3Step 3– Close the Close the income summary to the Capital Accountincome summary to the Capital Account

• The total in the income summary should equal the net The total in the income summary should equal the net income or loss on the worksheetincome or loss on the worksheet

Income Summary

Sales

44114411 -0-

4411

Miscellaneous Exp

10

Rent Expense

250

Supplies Expense

2564

Utilities Expense

115

Advertising Exp

273Insurance Exp

100273-0-

100-0-

10-0-

250-0-

2564-0-

115-0-

3312

1099

Barbara Trevino, Cap

General Journal Page 1

Date Account Title Doc No Post Ref Debit Credit

    Closing Ent        

Aug 31 Sales   4411  

    Income Summary       4411

  31 Income Summary     3312  

    Advertising Expense       273

    Insurance Expense       100

    Miscellaneous       10

    Rent Expense       50

    Supplies Expense       2564

    Utilities Expense       115

  31 Income Summary     1099  

    Barbara Trevino, Cap       1099

AccountIncome

Summary       Account NO 330

Date Item Post Ref Debit Credit

Balance

Debit Credit

 Aug 31   g1    4411   4411

   31   G1 3312     1099

  31     1099    ------ -------

               

               Account Capital       Account NO 310

Date Item Post Ref Debit Credit

Balance

Debit Credit

Aug  31 Bal      -------

  31   G1   1099   1099

           

               

               

4 step process in doing 4 step process in doing closing entriesclosing entries

• Step 1Step 1– Close all accounts that have a credit balance in Close all accounts that have a credit balance in

the Income statement columns to the Income the Income statement columns to the Income SummarySummary

• Step 2Step 2– Close all accounts that have a debit balance in Close all accounts that have a debit balance in

the Income statement columns to the Income the Income statement columns to the Income summary.summary.

• Step 3Step 3– Close the income summary to the Capital AccountClose the income summary to the Capital Account

• The total in the income summary should equal the net The total in the income summary should equal the net income or loss on the worksheetincome or loss on the worksheet

• Step 4Step 4– Close the Drawing into the Capital AccountClose the Drawing into the Capital Account

Income Summary

Sales

44114411 -0-

4411

Miscellaneous Exp

10

Rent Expense

250

Supplies Expense

2564

Utilities Expense

115

Advertising Exp

273Insurance Exp

100273-0-

100-0-

10-0-

250-0-

2564-0-

115-0-

3312

1099

Barbara Trevino, Cap

1099-0-

1099

Since the drawing has a debit balance it needs to be closed with a credit Balance to be placed into the Capital Account

4 step process in doing 4 step process in doing closing entriesclosing entries

• Step 1Step 1– Close all accounts that have a credit balance in Close all accounts that have a credit balance in

the Income statement columns to the Income the Income statement columns to the Income SummarySummary

• Step 2Step 2– Close all accounts that have a debit balance in Close all accounts that have a debit balance in

the Income statement columns to the Income the Income statement columns to the Income summary.summary.

• Step 3Step 3– Close the income summary to the Capital AccountClose the income summary to the Capital Account

• The total in the income summary should equal the net The total in the income summary should equal the net income or loss on the worksheetincome or loss on the worksheet

• Step 4Step 4– Close the Drawing into the Capital AccountClose the Drawing into the Capital Account

Income Summary

Sales

44114411 -0-

4411

Miscellaneous Exp

10

Rent Expense

250

Supplies Expense

2564

Utilities Expense

115

Advertising Exp

273Insurance Exp

100273-0-

100-0-

10-0-

250-0-

2564-0-

115-0-

3312

1099

Barbara Trevino, Cap

1099-0-

1099

Barbara Trevino, Draw

600

General Journal Page 1

Date Account Title Doc No Post Ref Debit Credit

    Closing Ent        

Aug 31 Sales   4411  

    Income Summary       4411

  31 Income Summary     3312  

    Advertising Expense       273

    Insurance Expense       100

    Miscellaneous       10

    Rent Expense       50

    Supplies Expense       2564

    Utilities Expense       115

  31 Income Summary     1099  

    Barbara Trevino, Cap       1099

  31 Barbara Trevino, Cap     600  

    Barbara Trevino, Drawing       600

• Please work “On your Own” on page Please work “On your Own” on page 203 it is the continuation of the last 203 it is the continuation of the last “On Your Own”“On Your Own”

Date Account TitleDoc No

Post Ref Debit Credit

  Adjusting Entries        

28-Feb Supplies Exp   530 520  

  Supplies Exp   150   520

28-Feb Insurance Exp   510 300  

  Prepaid Insurance   160   300

  Closing entries        

 Feb 28          

           

           

           

           

           

           

           

           

           

           

           

SalesIncome Summary

Income Summary

Keith Altobelli, CapitalIncome Summary

Keith Altobelli, Drawing

Utilities Exp

Supplies Expense

Miscellaneous ExpInsurance Expense

Keith Altobelli, CapitalFeb 28

Feb 28

Feb 28 3196

63476347

300

962

17501750

31513151

1414520

Section 3Section 3

Post-Closing Trial BalancePost-Closing Trial Balance

• After we have closed all of the After we have closed all of the temporary accounts, we have to do temporary accounts, we have to do something with all of the permanent something with all of the permanent accounts.accounts.

• We create a financial document that We create a financial document that makes sure that all of our assets, makes sure that all of our assets, liabilities and Owner’s equity are in liabilities and Owner’s equity are in balance.balance.

• All we have to do is take a look at the All we have to do is take a look at the balance sheet section of the balance sheet section of the worksheet and but the numbers on the worksheet and but the numbers on the sheet. sheet.

Encore Music

Post-Closing Trial Balance

August 31, 20xx

Account Title Debit Credit

Cash 8272  

Petty Cash 200  

Account Rec. - Kids Time 100  

Account Rec. - Learn N Play 20  

Supplies 2187  

Prepaid Insurance 1100  

Accounts Pay - Ling Music   1360

Accounts Pay - Sull Off Supp   20

Barbara Trevino, Capital   10499

Beginning Capital$10,000

Net Income$1099

Drawing$600

ProblemsProblems

• 9-1,2,3,49-1,2,3,4• We will also do the computer We will also do the computer

problem together next class, so that problem together next class, so that we know how to do it on the we know how to do it on the computer (kind of redundant isn’t computer (kind of redundant isn’t it?)it?)