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0 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Steps for Closing the Ledger A corporation does.

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Presentation on theme: "0 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Steps for Closing the Ledger A corporation does."— Presentation transcript:

1 0 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Steps for Closing the Ledger A corporation does not have a withdrawals account, so there are only three steps to closing the ledger for a merchandising business organized as a corporation:  Close accounts with balances in the Income Statement Credit column to Income Summary.  Close accounts with balances in the Income Statement Debit column to Income Summary.  Close Income Summary to Retained Earnings. Journalizing Closing Entries SECTION 20.1

2 1 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Journalizing Closing Entries SECTION 20.1

3 2 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Journalizing Closing Entries SECTION 20.1

4 3 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing Entry to Transfer a Net Loss If there is a net loss, credit Income Summary for the amount and debit Retained Earnings for the amount. Journalizing Closing Entries SECTION 20.1

5 4 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Closing the General Ledger When closing the general ledger, write Closing Entry for each posting in the Description column of the general ledger account. Posting Closing Entries SECTION 20.2

6 5 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting Closing Entries SECTION 20.2 Partial general ledger at the end of the fiscal period.

7 6 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting Closing Entries SECTION 20.2 Partial general ledger at the end of the fiscal period.

8 7 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting Closing Entries SECTION 20.2 Partial general ledger at the end of the fiscal period.

9 8 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting Closing Entries SECTION 20.2 Partial general ledger at the end of the fiscal period.

10 9 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting Closing Entries SECTION 20.2 Partial general ledger at the end of the fiscal period.

11 10 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting Closing Entries SECTION 20.2 Partial general ledger at the end of the fiscal period.

12 11 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting Closing Entries SECTION 20.2 Partial general ledger at the end of the fiscal period.

13 12 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Preparing a Post-Closing Trial Balance A post-closing trial balance is prepared at the end of the accounting period to prove the general ledger accounts are in balance. Posting Closing Entries SECTION 20.2

14 13 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting Closing Entries SECTION 20.2 Post-closing trial balance.

15 14 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Completing the Accounting Cycle for a Merchandising Business As you have learned, the accounting cycle for a merchandising business organized as a corporation consists of the following steps:  Collect and verify source documents.  Analyze each business transaction.  Journalize each transaction.  Post to the general and subsidiary ledgers.  Prepare a trial balance.  Complete a work sheet. Posting Closing Entries SECTION 20.2

16 15 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Completing the Accounting Cycle for a Merchandising Business  Prepare the financial statements–income statement, statement of retained earnings, balance sheet, and statement of cash flows.  Journalize and post the adjusting entries.  Journalize and post the closing entries.  Prepare a post-closing trial balance. Posting Closing Entries SECTION 20.2

17 16 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting Closing Entries SECTION 20.2


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