1. Recording Adjusting and Closing Entries for a Partnership
Chapter 17
Recording Adjusting and Closing Entries for a Partnership

2. Record adjusting entries
OBJECTIVES:
Identify accounting concepts and practices related to adjusting and closing entries for a merchandising business organized as a partnership
Record adjusting entries
Record closing entries for income statement accounts
Record closing entries for net income or loss and partners’ drawing accounts
Prepare a post-closing trial balance

3. Entries at the end of the Fiscal Period
Adjusting - used to bring the general ledger accounts up to date. (correct balances)
Closing - prepare temporary accounts for the next fiscal period.
Recorded in the General Journal.
No source document.
MATCHING EXPENSES WITH REVENUE
Copy the adjusting entries from the worksheet to the general journal and post.

4. PARTIAL WORK SHEET SHOWING ADJUSTMENTS

5. ADJUSTING ENTRY FOR MERCHANDISE INVENTORY
AFTER ADJUSTMENT
BEFORE ADJUSTMENT
Income Summary
Adj. (a) 15,840.00
Merchandise Inventory
Bal. 270,480.00
Bal. 270,480.00
Adj. (a) 15,840.00
(New Bal. 254,640.00)

6. ADJUSTING ENTRY FOR OFFICE SUPPLIES INVENTORY
AFTER ADJUSTMENT
BEFORE ADJUSTMENT
Supplies Expense—Office
Adj. (b) 4,730.00
Supplies —Office
Bal. 6,480.00
Bal. 6,480.00
Adj. (b) 4,730.00
(New Bal. 1,750.00)

7. ADJUSTING ENTRY FOR STORE SUPPLIES INVENTORY
AFTER ADJUSTMENT
BEFORE ADJUSTMENT
Supplies Expense—Store
Adj. (c) 3,910.00
Supplies —Store
Bal. 6,944.00
Bal. 6,944.00
Adj. (c) 3,910.00
(New Bal. 3,034.00)

8. ADJUSTING ENTRY FOR PREPAID INSURANCE
AFTER ADJUSTMENT
BEFORE ADJUSTMENT
Insurance Expense
Adj. (d) 3,170.00
Prepaid Insurance
Bal. 5,800.00
Bal. 5,800.00
Adj. (d) 3,170.00
(New Bal. 2,630.00)

9. ADJUSTING ENTRIES RECORDED IN A JOURNAL
Lesson 17-1 (GJ)
ADJUSTING ENTRIES RECORDED IN A JOURNAL 1 2 4 3 5 6
1. Heading
4. Debit
2. Date
5. Account Credited
3. Account Debited
6. Credit

10. TO DO:
Work Together, pg 433
On your own, pg 433

11. Chapter 17-2: Recording Closing Entries for Income Statement Accounts
An entry to close income stmt accounts with CR balances
An entry to close income stmt accounts with DR balances
An entry to record net income or net loss and close income summary account
Entries to close partners’ drawing accounts

12. Closing Entries: Record in general journal
Permanent accounts real accounts
Assets, liabilities, capital accounts
Ending balances are beginning balances for next fiscal period
Temporary accounts nominal accounts
Revenue, cost, expenses, withdrawals
Must have a 0 balance at end of fiscal period
Close all income statement accounts with credit balances to income summary.
Examples: Sales, Interest Income
Close all income statement accounts with debit balances to income summary.
Ex) expenses, cost accounts

13. THE INCOME SUMMARY ACCOUNT
Lesson 17-1 (GJ)
THE INCOME SUMMARY ACCOUNT
Income Summary
Debit
Total expenses
(Debit balance is the net loss.)
Credit
Total Revenue
(Credit balance is the net income.)
Income Summary used to summarize info about net income
*Used only at end of fiscal period to prepare ledger accounts for new period
*Does not have a normal balance side
*If Revenue is greater than expenses, it will have a CR balance = net income
*Ending balance should match net income/loss

14. CLOSING ENTRY FOR AN INCOME STATEMENT ACCOUNT WITH A CREDIT BALANCE3 1 2 4
1. Heading
2. Date
3. Debit to Close
4. Credit

15. CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCES
1. Date
2. Account Debited 3
3. Credit to Close
4. Debit Total 1 2 4

16. Lesson 17-1 (GJ)
SUMMARY OF CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCES
Bal. 189,960.00
Purchases
Bal. 6,600.00
Advertising Expense
Bal. 3,385.00
Credit Card Fee Expense
Bal. 3,170.00
Insurance Expense
Bal. 2,584.15
Miscellaneous Expense
Bal. 9,105.00
Payroll Taxes Expense
Bal. 21,000.00
Rent Expense
Bal. 89,400.00
Salary Expense
Bal. 4,730.00
Supplies Expense—Office
Bal. 3,910.00
Supplies Expense—Store
Bal. 3,820.00
Utilities Expense
Income Summary
Closing (revenue) 423,120.00
Adj. (mdse. inv.) 15,840.00
Closing (costs and expenses) 337,664.15
(New Bal. 69,615.85)
(New Bal. zero)
Closing 189,960.00
(New Bal. zero)
Closing 21,000.00
(New Bal. zero)
Closing 6,600.00
(New Bal. zero)
Closing 89,400.00
(New Bal. zero)
Closing 3,385.00
(New Bal. zero)
Closing 4,730.00
(New Bal. zero)
Closing 3,170.00
(New Bal. zero)
Closing 3,910.00
(New Bal. zero)
Closing 2,584.15
(New Bal. zero)
Closing 3,820.00
(New Bal. zero)
Closing 9,105.00

17. TO DO:
Work Together, pg 442
On your own, pg 442
App 17-1, 17-2

18. Chapter 17-3: Recording Additional Closing Entries
Net income increases equity must CR to capital accounts
Share for each partner is shown on distribution of net income stmt
Income Summary balance must be reduced to 0
Net Income CR to capital
Net Loss DR to capital
The capital accounts must now show ending capital reported on the owners’ equity statement and balance sheet.
Close partners’ drawing accounts to partners’ capital accounts.
DO NOT use Income Summary to close Drawing accounts

19. Lesson 17-1 (GJ)
CLOSING ENTRY TO RECORD NET INCOME OR LOSS AND CLOSE THE INCOME SUMMARY ACCOUNT 5 3 2 1 4
1. Date
4. Accounts Credited
2. Account Debited
5. Credits to Record Net Income
3. Debit to Close

20. CLOSING ENTRIES FOR THE PARTNERS’ DRAWING ACCOUNTS
1. Date
2. Account Debited 5
3. Debit to Close
4. Account Credited 2
5. Credits to Close 1 3 4

21. COMPLETED CLOSING ENTRIES FOR A PARTNERSHIP RECORDED IN A JOURNAL
NEXT STEP:
POSTING!!!

22. TO DO:
Work Together, pg 442
On your own, pg 442

23. After Adjusting and Closing Entries are Posted
All permanent accounts are open and have the correct balance.
All temporary accounts are closed
Must now create a:
Post-Closing Trial Balance:
Prepared to prove the equality of the general ledger before starting a new fiscal period.

24. POST-CLOSING TRIAL BALANCE1
1. Write the heading. 3
2. List accounts that have balances. 2
3. Write debit balances.
4. Write credit balances. 4
5. Write the word Totals.
6. Total Debit column.
7. Total Credit column.
8. Verify equality of totals.
9. Rule double lines. 6 7 5 8 9

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

26. TO DO:
Work Together, pg 447
On your own, pg 447
App. prob 17-3, 17-4, 17-5, pg 450
Summary:
Mastery 17-6
Ch 17 Quiz