1. Complete All Steps In The Accounting Cycle © Dale R. Geiger 20111

2. Lacy’s Statement of Financial Position Assets: Cash$130 Other Assets 79 Total:$209 Liabilities & Financial Position: Financial Position (-) Why doesn’t the Ledger Account agree with the Statement of Financial Position? © Dale R. Geiger 20112

3. Terminal Learning Objective Task: Complete All Steps In The Accounting Cycle For A Time Period Condition: You are a cost advisor technician with access to all regulations/course handouts, and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors. Standard: with at least 80% accuracy: Describe the purpose of closing transactions Record closing transactions in tabular format © Dale R. Geiger 20113

4. The Accounting Cycle Record Transactions Post to Ledger Prepare Trial Balance Adjust Accounts Adjusted Trial Balance Prepare Statements Close Accounts Post-Closing Trial Balance © Dale R. Geiger 20114

5. Purpose of Closing Transactions Zero out the Revenue and Expense accounts Allows them to start the new period with a clean slate Transfer revenue and expense information to the Financial Position account Ending balance in Financial Position ledger account will agree with Statement of Financial Position © Dale R. Geiger 20115

6. Zeroing the Accounts If I want to know how much rain falls in the next 24 hours, I must empty the rain gauge of all rain collected in the past. © Dale R. Geiger 20116

7. Revenues Financial Position Expenses Transferring to Financial Position © Dale R. Geiger 20117

8. Check on Learning What are the two purposes for closing transactions? © Dale R. Geiger 20118

9. Lacy’s Ledger Cash Financial Position Revenues (+) 200 15 5 50 -------------- 130 (-) 20 10 5 65 40 ---------------- (+) 15 20 50 --------------- 85 (-) Expenses (+) 10 5 60 1 3 --------------- 79 (-) Liabilities (-) 40 ---------------- (+) 40 3 --------------- 3 Other Assets (+) 20 65 20 40 -------------- 79 (-) 5 60 1 --------------- © Dale R. Geiger 20119

10. Lacy’s Ledger Cash Financial Position Revenues (+) 200 15 5 50 -------------- 130 (-) 20 10 5 65 40 ---------------- (-) --------------- 85 (+) 15 20 50 --------------- 85 (+) 200 85 Expenses (+) 10 5 60 1 3 --------------- 79 Liabilities (-) 40 ---------------- (+) 40 3 --------------- 3 Other Assets (+) 20 65 20 40 -------------- 79 (-) 5 60 1 --------------- © Dale R. Geiger 201110

11. Lacy’s Ledger Cash Financial Position Revenues (+) 200 15 5 50 -------------- 130 (-) 20 10 5 65 40 ---------------- (-) --------------- 85 (+) 15 20 50 --------------- 85 (-) 79 --------------- (+) 200 85 -------------- 206 Expenses (+) 10 5 60 1 3 --------------- 79 (-) -------------- 79 Liabilities (-) 40 ---------------- (+) 40 3 --------------- 3 Other Assets (+) 20 65 20 40 -------------- 79 (-) 5 60 1 --------------- © Dale R. Geiger 201111

12. Recording Closing Transactions Transaction Description Cash+ Other Assets =Liab+ Financial Position +Rev–Exp Balance Forward130+79=3+200+85-79 Close Revenues New Balance Close Expenses New Balance © Dale R. Geiger 201112

13. Recording Closing Transactions Transaction Description Cash+ Other Assets =Liab+ Financial Position +Rev–Exp Balance Forward130+79=3+200+85-79 Close Revenues+=++85+-85- New Balance130+79=3+285+0-79 Close Expenses+=+-79+- New Balance130+79=3+206+0-0 © Dale R. Geiger 201113

14. Recording Closing Transactions Transaction Description Cash+ Other Assets =Liab+ Financial Position +Rev–Exp Balance Forward130+79=3+200+85-79 Close Revenues+=++85+-85- New Balance130+79=3+285+0-79 Close Expenses+=+-79+- New Balance130+79=3+206+0-0 209 © Dale R. Geiger 201114

15. Post-Closing Trial Balance The post-closing or after-closing trial balance is a list of all of the accounts and their balances, omitting the accounts with a zero balance. Therefore, there will be no revenues or expenses on the post-closing trial balance, because the balance in each of those accounts is zero after the closing process. © Dale R. Geiger 201115

16. Lacy‘s Post-Closing Trial Balance Account Titledr.cr. Cash$130 Other Assets79 Liabilities $ 3 Financial Position 206 Totals $209 © Dale R. Geiger 201116

17. Check on Learning When the Expense account is closed, what is the effect on the Financial Position account? What accounts should be included on the Post-Closing Trial Balance? © Dale R. Geiger 201117

18. Accounting Cycle Spreadsheet Statement of Activity shows ending balance in Financial Position Lacy’s © Dale R. Geiger 201118

19. Accounting Cycle Spreadsheet Total Assets equal Total Liabilities and Equity Total Assets equal Total Liabilities and Equity Lacy’s © Dale R. Geiger 201119

20. Accounting Cycle Spreadsheet After Closing, the Revenue and Expense accounts have zero balances © Dale R. Geiger 201120

21. Accounting Cycle Spreadsheet After Closing, the Financial Position balance agrees with the Statement of Activities © Dale R. Geiger 201121

22. Accounting Cycle Spreadsheet The Post-closing Trial Balance includes only Assets, Liabilities and Financial Position © Dale R. Geiger 201122

23. Practical Exercise © Dale R. Geiger 201123