CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 8 Objectives 1.Define accounting terms related to adjusting/closing entries for a service business organizes as a proprietorship. 2.Identify accounting concepts and practices related to adjusting and closing entries for a service business organized as a proprietorship. 1 LESSON 8-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 8 Objectives 3.Record adjusting entries for a service business 4.Record closing entries for a service business 5.Prepare a post-closing trial balance for a service business 2 LESSON 8-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 8-1 Recording Adjusting Entries

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Accounting Terms Adjusting Entries—Journal entries recorded to bring general ledger balances up to date at the END of a fiscal period. COPIED DIRECTLY from the worksheet “Adjustments” Columns 3 & 4. TWO Adjusting Entries Supplies Expense and Supplies Insurance Expense and Prepaid Insurance 4 LESSON 8-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 8-1 ADJUSTING ENTRY FOR SUPPLIES 1 2 page Write the title of the account credited. Record the credit amount. 3.Write the title of the account debited. Record the debit amount. 2.Write the date. 1.Write the heading.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 8-1 ADJUSTING ENTRY FOR PREPAID INSURANCE page Write the title of the account credited. Record the credit amount. 2.Write the title of the account debited. Record the debit amount. 1.Write the date.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Posting Posting—Transferring information FROM a journal entry TO a ledger account FIVE Steps of Posting TO the Ledger 1. Write the Date from Source 2. Write the Page Number of the Source 3. Write the Debit OR Credit amount FROM Source 4. Update the Balance of the Ledger Account 5. Write the Acct. Number in the Post Ref of Source 7 LESSON 4-2

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Rules for Balances 1.When the previous balance was a Debit and the new number is ALSO a debit, ADD to get a larger debit 2.When the previous balance was a Credit and the new number is ALSO a credit, ADD to get a larger credit When the same always ADD!!!! LESSON 4-2 8

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Rules for Balances 1.When the previous balance was a Debit and the new number is a Credit, SUBTRACT to get a smaller debit 2.When the previous balance was a Credit and the new number is a debit, SUBTRACT to get a smaller credit When different always SUBTRACT!!!! LESSON 4-2 9

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 8-1 TERM REVIEW adjusting entries page 205

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Audit Your Understanding 1.Why are adjusting entries journalized? 2.Where is the information obtained to journalize adjusting entries? 3.What accounts are increased from zero balances after adjusting entries for supplies and prepaid insurance are journalized and posted? 11 LESSON 8-1