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Introduction to Accounting Preparing for a User’s Perspective

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Presentation on theme: "Introduction to Accounting Preparing for a User’s Perspective"— Presentation transcript:

1 Introduction to Accounting Preparing for a User’s Perspective
Closing Entries: Identify temporary accounts Debits and Credits Trainer By Kevin C. Kimball, CPA with support from Free Jan. 2014 Available on the Google Play Store

2 The Full Accounting Cycle
Original Transaction Entries Identify Analyze Record Post Prepare Pre-adjusted TB Adjusting Entries Identify Analyze Record Post Prepare Adjusted TB Financial Statements Closing Entries Identify Analyze Record Post Prepare Post-Closing TB

3 Steps in the Accounting Cycle
1) Identify 2) Analyze Steps in the Accounting Cycle a) What accounts? Round 3 b) Increase or decrease? Closing Entries c) Amount $? d) Debit or credit? 3) Record 5) Prepare Post-Closing Trial Balance Date Account Debit Credit 12/31 Sales Revenue 1,000 Income Summary DR (CR) 150,570 - (5,000) (65,756) Etc. $0 Cash Etc. Accounts Payable Retained Earnings Total Income Summary Sales Revenue 4) Post 1,000 1,000

4 Current asset Current asset Current asset Contra asset Current asset
Noncurrent liability Current asset Equity Current asset Contra asset Current asset Current asset Current asset Noncurrent asset Noncurrent asset Contra asset Contra asset Current liability Current liability Current liability Current liability Current liability

5 Temporary Accounts Permanent Account

6 The Periodicity Concept
Economic transactions and events are to be accounted for in the accounting period and in the financial statements to which they relate. ALL BALANCE SHEET ACCOUNTS carry their ledger account balances forward each year; therefore, ALL BALANCE SHEET ACCOUNTS ARE PERMANENT ACCOUNTS. Beginning Balance Sheet as of 1/1/X1 Ending Balance Sheet As of 12/31/X1 Assets Liabilities Equity Beginning Balance Sheet As of 1/1/X2 Ending Balance Sheet As of 12/31/X2 ALL Income Statement and Dividend Accounts are CLOSED EACH Year into Retained Earnings (i.e. a PERMANENT ACCOUNT); therefore, ALL Income Statement and Dividend Accounts are TEMPORARY ACCOUNTS. Beginning Balance Sheet As of 1/1/X3

7 Into Retained Earnings
Permanent Accounts R Temporary Accounts To be CLOSED Into Retained Earnings Evenues & gains E xpenses & losses & contra revenues I ncome summary D ividends

8 Current asset Current asset Current asset Contra asset Current asset
Noncurrent liability Current asset Equity Current asset Contra asset Current asset Current asset Current asset Noncurrent asset Noncurrent asset Contra asset Contra asset Current liability Current liability Current liability Current liability Current liability

9 Temporary Accounts Permanent Account

10 Introduction to Accounting Preparing for a User’s Perspective
Closing Entries: Identify temporary accounts Debits and Credits Trainer By Kevin C. Kimball, CPA with support from Free Jan. 2014 Available on the Google Play Store

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