© 2014 Cengage Learning. All Rights Reserved. Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO6 Record closing entries for a merchandising business organized as a corporation. LO7 Record reversing entries for a merchandising business organized as a corporation.

© 2014 Cengage Learning. All Rights Reserved. Closing Entry for Accounts with Credit Balances SLIDE 2 LO6 2 2 Enter the total of the debit entries as a credit to Income Summary. 1 1 Debit the balance of every income statement account with a credit balance. Lesson 22-4

© 2014 Cengage Learning. All Rights Reserved. Closing Entry for Accounts with Debit Balances SLIDE 3 LO6 1 1 Enter Income Summary. 2 2 Enter the total of the credit entries as a debit to Income Summary. 3 3 Credit the balance of every income statement account with a debit balance. Lesson 22-4

© 2014 Cengage Learning. All Rights Reserved. Closing Entry to Record Net Income SLIDE 4 LO6 2 2 Credit Retained Earnings 1 1 Debit Income Summary Lesson 22-4

© 2014 Cengage Learning. All Rights Reserved. Closing Entry for Dividends SLIDE 5 LO6 2 2 Credit Dividends 1 1 Debit Retained Earnings Lesson 22-4

© 2014 Cengage Learning. All Rights Reserved. Reversing Entries SLIDE 6 LO7 3 3 Reverse the entry that created a balance in Federal Income Tax Payable. 2 2 Reverse the entry that created a balance in Interest Payable. 1 1 Reverse the entry that created a balance in Interest Receivable. Lesson 22-4

© 2014 Cengage Learning. All Rights Reserved Source documents are checked for accuracy, and transactions are analyzed into debit and credit parts Transactions, from information on source documents, are recorded in journals Journal entries are posted to the accounts payable, accounts receivable, and general ledgers Schedules of accounts payable and accounts receivable are prepared from the subsidiary ledgers An unadjusted trial balance is prepared from the general ledger Adjusting entries are journalized Adjusting entries are posted to the general ledger An adjusted trial balance is prepared from the general ledger Financial statements are prepared from the adjusted trial balance Closing entries are journalized. Accounting Cycle for a Merchandising Business Organized as a Corporation SLIDE 7 LO Closing entries are posted to the general ledger A post-closing trial balance is prepared from the general ledger Reversing entries are journalized and posted to the general ledger. Lesson 22-4

© 2014 Cengage Learning. All Rights Reserved. Lesson 22-4 Audit Your Understanding 1.What is used to prove the equality of debits and credits in the general ledger after closing entries are posted? SLIDE 8 ANSWER A post-closing trial balance Lesson 22-4

© 2014 Cengage Learning. All Rights Reserved. Lesson 22-4 Audit Your Understanding 2.What are the four closing entries for a corporation? SLIDE 9 ANSWER 1.Closing entry for income statement accounts with credit balances (revenue and cost accounts) 2.Closing entry for income statement accounts with debit balances (cost, contra revenue, and expense accounts) 3.Closing entry to record net income or net loss in the Retained Earnings account and close the Income Summary account 4.Closing entry for the Dividends account Lesson 22-4

© 2014 Cengage Learning. All Rights Reserved. Lesson 22-4 Audit Your Understanding 3.Which accounts are closed to Retained Earnings? SLIDE 10 ANSWER Income Summary and Dividends Lesson 22-4