1. Chapter 17 – Recording Adjusting and Closing Entries for a Partnership n Objectives –Identify accounting concepts and practices related to adjusting and closing entries for a merchandising business as a partnership. –Recording adjusting entries –Recording closing entries for income statement accounts. –Recording closing entries for net income or loss and partners’ drawing accounts. –Prepare a post-closing trial balance. n Essential Questions: –When adjusting entries are journalized, why is not source document recorded? –What accounts are increased from zero balances after adjusting entries for prepaid insurance and merchandise inventory are journalized and posted? –What adjusting entry is recorded for a merchandising business that is not recorded for a service business? –What is the name of the temporary account that is used to summarize the closing entries for revenue, cost, and expenses? –Where is the information obtained for journalizing closing entries for revenue, cost and expenses? –Where is the information obtained for journalizing closing entries for net income or loss and partner’s drawing accounts? –How is a temporary account closed? –In what order should accounts be listed on a post-closing trial balance? –What is the purpose of preparing a post-closing trial balance? –Which accounts are listed on a post-closing trial balance?

2. JOURNAL ENTRIES AT THE END OF A FISCAL PERIOD Lesson 17-1, page 428 Two types of journal entries change general ledger account balances at the end of the “year” 1)Adjusting Entries bring general ledger account balances up to date (the amount of supplies that we actually have is what is reported – we record these in our ledger accounts so “Supplies” knows how much it really has) 2) Closing Entries prepare temporary accounts for the next fiscal period (expense accounts are empty so next year’s expenses will actually be next year’s expenses – clear the scoreboard)

3. PARTIAL WORK SHEET SHOWING ADJUSTMENTS Lesson 17-1, page 431 Ending Merchandise Inventory = 254,640.00 270,480.00 – 254,640.00 = 15,840.00 A Debit A Credit – B Debit B Credit – C Debit…

4. ADJUSTING ENTRIES RECORDED IN A JOURNAL 3.Account Debited 1. Heading 4.Debit 2.Date 5.Account Credited 6. Credit 5213 6 4 Lesson 17-1, page 430 …On a NEW journal page

5. Work Together 17- 1 (p.433 wb397) & On Your Own 17- 1 (p.433 wb398)

6. WT 446,200.00 – 419,750.00 = 26,450.00 5,440.00 – 3,350.00 = 2,090.00 6,020.00 – 3,990.00 = 2,030.00 3,860.00 – 970.00 = 2,890.00 Trial Balance – Ending = Adjustment

7. OYO

8. TEMPORARY & PERMANENT ACCOUNTS Permanent Accounts: Assets Is your building worth less just because it is the end of the year? Liabilities Do you owe people more or less just because it is the end of the year? Owner’s Capital Accounts Do you gain more of an interest in the company? Temporary Accounts: Revenue Accounts Cost Account(s) Expense Accounts Drawing Accounts Income Summary Used to summarize information about net income Has NO normal balance – does what you need it to Only used during closing – then empty Must be cleared out for the next year Lesson 17-2, page 434

9. GENERAL LEDGER ACCOUNTS AFTER ADJUSTING AND CLOSING ENTRIES ARE POSTED Lesson 9-3, pages 204-205

10. 4 KINDS OF CLOSING ENTRIES 1)Income Statement Accounts with credit balances (Sales) 2)Income Statement Accounts with debit balances (Expenses &Purchases ) 3)Net Income or Net Loss / Close Income Summary 4)Close Drawing Accounts Lesson 17-2, page 434 Numbers come from Work Sheet Distribution of Net Income Statement. SEIDSEID (Directly into Capital)

11. CLOSING ENTRY FOR AN INCOME STATEMENT ACCOUNT WITH A CREDIT BALANCE 1 2 3.Debit to Close 1. Heading 4.Credit. 2.Date 3 4 Lesson 17-2, page 435 1 S

12. CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCES 4 2 3.Credit to Close 1. Date 4.Debit Total. 2.Account Debited 1 3 3 Lesson 17-2, page 436 2 E

13. Work Together 17- 2 (p.438 wb399, 401) & On Your Own 17- 2 (p.438 wb400, 402)

14. WT Work Sheet on wb 401 (OYO Work Sheet on wb 402)

15. OYO

16. 4 KINDS OF CLOSING ENTRIES 1)Income Statement Accounts with credit balances 2)Income Statement Accounts with debit balances 3)Net Income or Net Loss / Close Income Summary 4)Close Drawing Accounts ( D irectly into Capital) Lesson 17-2, page 434 Numbers come from Work Sheet Distribution of Net Income Statement SEIDSEID

17. CLOSING ENTRY TO RECORD NET INCOME OR LOSS AND CLOSE THE INCOME SUMMARY ACCOUNT 1 4 2 3.Debit to Close 1. Date 2.Account Debited 4.Accounts Credited 5.Credits to Record Net Income 3 Lesson 17-3, page 439 5 Give the owners “credit” for their income (OE increases on the credit side) 3 I

18. 5.Credits to Record Net Income. CLOSING ENTRIES FOR THE PARTNERS’ DRAWING ACCOUNTS – DIRECTLY INTO CAPITAL 1 4 2 3.Debit to Close 1. Date 2.Account Debited 4.Account Credited 3 5 Lesson 17-3, page 440 4 D

19. COMPLETED CLOSING ENTRIES FOR A PARTNERSHIP RECORDED IN A JOURNAL Lesson 17-3, page 441 Income Statement accounts with credit balances Income Statement accounts with debit balances Net Income or Net Loss / Close Income Summary Close Drawing Accounts

20. Work Together 17- 3 (p.442 wb399, 401) & On Your Own 17- 3 (p.442 wb400, 402)

21. WT p.399 Income – wb 401(2) Drawing – from work sheet – wb 401(2)

22. OYO

23. POST-CLOSING TRIAL BALANCE – dr. = cr. in GL 1.Write the heading. 5 1 3 4 2 67 9 8 2.List accounts that have balances. 3.Write debit balances. 4.Write credit balances. 5.Write the word Totals. 6.Total Debit column. 7.Total Credit column. 8.Verify equality of totals. 9.Rule double lines. Lesson 17-4, page 445

24. ACCOUNTING CYCLE FOR A MERCHANDISING BUSINESS ORGANIZED AS A PARTNERSHIP 1 1.Source documents checked for accuracy, and transactions are analyzed. 9 9.A post-closing trial balance is prepared. 2 2.Transactions are recorded in a journal. 3 3.Journal entries are posted to ledgers. 4 4.Schedules of accounts payable and accounts receivable are prepared from subsidiary ledgers. 5 5.Work sheet is prepared. 6 6.Financial statements are prepared. 7 7.Adjusting and closing entries are journalized. 8 8.Adjusting and closing entries are posted. Lesson 17-4, page 446

25. View Work Together 17- 4 (p.447 wb403) & Do On Your Own 17- 4 (p.447 wb374)

26. WT **Only list accounts that are carrying balances - #s from p.447 in text

27. OYO