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© 2015 Cengage Learning. All Rights Reserved. Learning Objectives © 2015 Cengage Learning. All Rights Reserved. LO9Complete end-of-period work for a departmentalized.

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Presentation on theme: "© 2015 Cengage Learning. All Rights Reserved. Learning Objectives © 2015 Cengage Learning. All Rights Reserved. LO9Complete end-of-period work for a departmentalized."— Presentation transcript:

1 © 2015 Cengage Learning. All Rights Reserved. Learning Objectives © 2015 Cengage Learning. All Rights Reserved. LO9Complete end-of-period work for a departmentalized merchandising business. 1 LESSON4-4 End-of-Period Work for a Departmentalized Business

2 © 2015 Cengage Learning. All Rights Reserved. Journalizing Closing Entries for a Departmentalized Business ●Journal entries used to prepare temporary accounts for a new fiscal period are called closing entries. SLIDE 2 ●The following slides present the four closing entries: 1. Closing entry for income statement accounts with credit balances (revenue and contra cost accounts). 2. Closing entry for income statement accounts with debit balances (cost, contra revenue, and expense accounts). 3. Closing entry to record net income or net loss in the retained earnings account and to close the income summary account. 4. Closing entry for the dividends account. LO9 Lesson 4-4 © 2015 Cengage Learning. All Rights Reserved.

3 CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH CREDIT BALANCES SLIDE 3 Lesson 4-4 Only temporary accounts are closed. Permanent account balances are needed to continue conducting business in the next accounting cycle. LO9 © 2015 Cengage Learning. All Rights Reserved.

4 CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCES SLIDE 4 Lesson 4-4 LO9 © 2015 Cengage Learning. All Rights Reserved.

5 CLOSING ENTRY TO RECORD NET INCOME OR NET LOSS SLIDE 5 Lesson 4-4 LO9 © 2015 Cengage Learning. All Rights Reserved.

6 CLOSING ENTRY FOR THE DIVIDENDS ACCOUNT SLIDE 6 Lesson 4-4 LO9 © 2015 Cengage Learning. All Rights Reserved.

7 Post-Closing Trial Balance SLIDE 7 LO9 Lesson 4-4 © 2015 Cengage Learning. All Rights Reserved. A trial balance prepared after the closing entries are posted is called a post- closing trial balance.

8 © 2015 Cengage Learning. All Rights Reserved. Summary of the Accounting Cycle SLIDE 8 Lesson 4-4 LO9 © 2015 Cengage Learning. All Rights Reserved. The series of accounting activities included in recording financial information for a fiscal period is called an accounting cycle. Check Source Documents and Analyze Transactions Record Transactions in Journals Post Journal Entries Prepare Schedules of Accounts Payable and Accounts Receivable Post Adjusting Entries to General Ledger Journalize Adjusting Entries Prepare Unadjusted Trial Balance Prepare Adjusted Trial Balance Prepare Financial Statements from Adjusted Trial Balance Prepare Closing Entries Post Closing Entries Prepare a Post-closing Trial Balance

9 © 2015 Cengage Learning. All Rights Reserved. Lesson 4-4 Audit Your Understanding 1.What is the purpose of adjusting entries? SLIDE 9 ANSWER To update general ledger accounts at the end of a fiscal year. Lesson 4-4 © 2015 Cengage Learning. All Rights Reserved.

10 Lesson 4-4 Audit Your Understanding 2.What accounts are closed by each of the closing entries? SLIDE 10 ANSWER a. Income statement accounts having credit balances. b. Income statement accounts having debit balances. c. The Income Summary account. d. The Dividends account. Lesson 4-4 © 2015 Cengage Learning. All Rights Reserved.

11 Lesson 4-4 Audit Your Understanding 3.What is the purpose of a post-closing trial balance? SLIDE 11 ANSWER To prove the equality of the debits and credits in the general ledger after all closing entries have been posted. Lesson 4-4 © 2015 Cengage Learning. All Rights Reserved.

12 Lesson 4-4 Audit Your Understanding 4.What accounts are presented on a post- closing trial balance? SLIDE 12 ANSWER Asset, liability, and owners’ equity accounts. Lesson 4-4 © 2015 Cengage Learning. All Rights Reserved.


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