1. Completing the Accounting Cycle for a Merchandising Corporation
Chapter 20
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2. Journalizing Closing Entries (20.1)
Journalizing procedures are the same as for a sole proprietorship (ch 10)
Steps for closing the ledger
In chapter 10, you made four entries to close the temporary general ledger accounts of a sole proprietorship
Only the first three closing entries are made to close the temporary accounts for a merchandising business organized as a corporation
Since a corporation does not have a withdrawals account, the fourth closing entry is not needed
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3. Steps (cont.) See Figure 20.1
Close temporary accounts with balance in the Income Statement Credit column to Income Summary
Close temporary accounts with balance in the Income Statement Debit column to Income Summary
Close Income Summary to Retained Earnings by the amount of the net income or loss
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4. Closing entry to transfer a net loss
Suppose after posting the first two entries, Income Summary has a debit balance of $5,000
To close Income Summary, credit it for $5,000 and debit Retained Earnings for $5,000
The net loss amount decreases the earnings the business retains.
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5. Posting closing entries
Closing entries recorded in the general ledger are posted to the general ledger
Closing the general ledger (Figure 20.2)
Write the term Closing Entry for each posting in the Description column of the general ledger account
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6. Preparing a post-closing trial balance
Prepared at the end of the accounting period to prove that the general ledger accounts are in balance after all adjusting & closing entries have been posted
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7. Completing the accounting cycle for a Merchandising Business
Figure 20.4on page 598
Same steps as a service business
Whether the accounting system is manual or computerized, the steps are not affected
However, the computer performs many of the routing procedures such as posting
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