1. Recording Adjusting and Closing Entries for a Service Business Chapter 8, Section 2

2. Permanent vs. Temporary Accounts Permanent accounts  Accumulate information from one fiscal period to the next.  Assets, Liabilities, and Owner’s Capital Temporary accounts  Accumulate information until transferred to the owner’s capital.  Closed at the end of each fiscal period  Revenue, expenses, and drawing (real) (nominal)

3. Closing Entries Journalize right below Adjusting Entries Heading “Closing Entries” is written to explain why there are no source document numbers. Information is obtained from the worksheet

4. Income Summary Account Used to summarize the closing entries for revenue and expenses. Does not have a normal balance

5. Closing Entry for an Income Statement Account with a Credit Balance (Debit to close) 1 2 3 4 1.Write the heading. 2.Write the date. 3.Write the title of the account debited. Record the debit amount. 4.Write the title of the account credited. Record the credit amount.

6. Closing Entry for Income Statement Accounts with a Debit Balance (Credit to close) 1 24 4.Debit amount 3.Credit 2.Income Summary 1.Date 3

7. Closing Entry to Record Net Income/Loss and Close Income Summary (Income Summary: debit to close) (Capital: credit to record net income) 3.Credit 2.Debit 1.Date 1 2 3

8. Closing Entry for the Owner’s Drawing Account (Credit to close) 3.Credit 2.Debit 1.Date 1 2 3

9. Problems Work Together 8-2  Textbook pg. 212 On Your Own 8-2  Textbook pg. 212 Application 8-2  Textbook pg. 221