Presentation on theme: "The Accounting Cycle Completed – Adjusting, Closing, and Post-Closing Trial Balance Chapter 5 2."— Presentation transcript:
1 The Accounting Cycle Completed – Adjusting, Closing, and Post-Closing Trial Balance Chapter 52
2 End of the Period Activities Adjusting entries must be entered in the journal and posted.Closing entries must be journalized at the end of the accounting period so that income can be measured for the new period.Temporary accounts are closed.4
3 End of the Period Activities Accounting CycleAnalyze TransactionsRecord, Journalize,and PostPrepareTrial Balance
4 End of the Period Activities Prepare AdjustmentsComplete WorksheetPrepare ReportsClose the AccountingPeriod
5 Journalizing and posting Learning Objective 1Journalizing and postingadjusting entries.5
6 Learning Unit 5-1 Adjusting entries Assets must be adjusted to show amounts used or allocated to periods and recorded as expenses.supplies usedprepaid rent expired over timeequipment depreciated5
7 Journalizing and posting adjusting entries Learning Unit 5-1Journalizing and posting adjusting entriesThe worksheet is complete.The books are not up to date.Adjusting entries are taken from the worksheet and journalized.The journal entries must be posted.
8 Journalizing and posting Learning Objective 2Journalizing and postingclosing entries.5
9 Journalizing and posting closing entries Learning Unit 5-2Journalizing and posting closing entriesClosing is a mechanical step which sets temporary accounts to zero so that they are ready for a new measurement period.7
10 Learning Unit 5-2 What are permanent accounts? assets liabilities capitalbalance sheet accounts8
11 Learning Unit 5-2 Permanent accounts are also called real accounts. Balances are carried forward.8
12 Learning Unit 5-2 What are temporary accounts? revenue expenses withdrawals9
13 Learning Unit 5-2 New data is accumulated each period. Temporary accounts are also called nominal accounts.Balances are set to zero.9
14 Learning Unit 5-2 Closing entries: There are four steps to perform. Debit revenue accounts and credit the Income Summary account.Debit the Income Summary account and credit expense accounts.
15 Learning Unit 5-2Debit or credit the Income Summary account and debit or credit the Capital account.Debit the Capital account and credit the Withdrawals account.
16 Four Steps in Journalizing Closing Entries Learning Unit 5-2Four Steps in Journalizing Closing EntriesStep 2:ExpensesStep 1:RevenueStep 3:Income SummaryNet Income or Loss`Step 4:WithdrawalsCapital
18 Prepare a post-closing Learning Objective 3Prepare a post-closingtrial balance.5
19 Learning Unit 5-3 The post-closing trial balance: Step 8 of the Accounting CycleThe post-closing trial balance helps prove the accuracy of the adjusting and closing process.It contains the true ending figure for capital.It contains only permanent accounts.
20 Adjustments Example Adjusted Trial Balance Adjustments Trial Balance Account Title Dr. Cr Dr Cr. Dr. Cr.CashAccounts receivableSuppliesEquipmentAccum. depreciationAccounts payableCapitalRevenueVarious expensesSupplies expenseDepreciation expenseTotals4,0658503001,2001,2057,6204,0651,8501001,2001,205200508,670a) 1,000b)c)1,250b)c)a) 1,0001,2501705,0002,4507,620501705,0003,4508,670
21 Adjustments Example Adjusted Income Balance Trial Balance Statement SheetAccount Title Dr. Cr Dr Cr. Dr. Cr.CashAccounts receivableSuppliesEquipmentAccum. depreciationAccounts payableCapitalRevenueVarious expensesSupplies expenseDepreciation expenseTotals4,0651,8501001,2001,205200508,6704,0651,8501001,2007,215501705,0003,4508,670501705,0005,2203,4501,205200501,455Net income1, ,9953, , , ,215
22 Post Closing Trial Balance Cash $4,065Accounts Receivable ,850SuppliesEquipment ,200Total $7,215Accumulated Depreciation: EquipmentAccounts PayableClara J., Capital ,995Total $7,215