Financial Statements Review Chapter Financial Statements Review

Closing Entry for an Income Statement Account with a Credit Balance Lesson 8-1 Closing Entry for an Income Statement Account with a Credit Balance Closing 5,820.00 Closing (revenue) 5,820.00 Bal. 5,820.00 (New Bal. 0.00) Sales Income Summary “S” = Sales 1 Debit (Debit to close) 2 Credit

Closing Entry for Income Statement Accounts with Debit Balances Lesson 8-1 Closing Entry for Income Statement Accounts with Debit Balances (Credit to close) Debit Amount “E” = Expense Income Summary Credit

Lesson 8-1 Closing Entry to Record Net Income or Loss and Close the Income Summary Account 2 Credit (Capital: credit to record net income) “N” = Net Income 1 Debit (Income Summary: debit to close)

Closing Entry for the Owner’s Drawing Account Lesson 8-1 Closing Entry for the Owner’s Drawing Account “D”= Dividends 2 Credit (Credit to close) 1 Debit

General Ledger Accounts after Closing Entries Are Posted Lesson 8-2 General Ledger Accounts after Closing Entries Are Posted Only the permanent accounts (assets, liabilities and the owner’s capital account) still have a balance. All temporary accounts have been closed and are ready for the next fiscal period.

General Ledger Accounts after Closing Entries Are Posted Lesson 8-2 General Ledger Accounts after Closing Entries Are Posted All temporary accounts (sales, income summary, and the expense accounts) have been closed and are ready for the next fiscal period.

Post-Closing Trial Balance Lesson 8-2 Post-Closing Trial Balance List all accounts and their balances. Total the columns to verify that the total debits equal the total credits after you have posted the adjusting and closing entries. Now you are ready for the next month and the cycle starts all over again. 1 Compare Totals

Accounting Cycle for a Service Business Lesson 8-2 Accounting Cycle for a Service Business 1. Analyze transactions 1 2. Journalize 2 8 3. Post 4. Prepare work sheet These are the steps that are followed each month. 5. Journalize and post adjusting entries 3 7 6. Prepare financial statements 6 4 7. Journalize and post closing entries 5 8. Prepare post-closing trial balance

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