Presentation on theme: "Recording Adjusting and Closing Entries for a Partnership"— Presentation transcript:
1 Recording Adjusting and Closing Entries for a Partnership Chapter 17Recording Adjusting and Closing Entries for a Partnership
2 Record adjusting entries OBJECTIVES:Identify accounting concepts and practices related to adjusting and closing entries for a merchandising business organized as a partnershipRecord adjusting entriesRecord closing entries for income statement accountsRecord closing entries for net income or loss and partners’ drawing accountsPrepare a post-closing trial balance
3 Entries at the end of the Fiscal Period Adjusting - used to bring the general ledger accounts up to date. (correct balances)Closing - prepare temporary accounts for the next fiscal period.Recorded in the General Journal.No source document.MATCHING EXPENSES WITH REVENUECopy the adjusting entries from the worksheet to the general journal and post.
11 Chapter 17-2: Recording Closing Entries for Income Statement Accounts An entry to close income stmt accounts with CR balancesAn entry to close income stmt accounts with DR balancesAn entry to record net income or net loss and close income summary accountEntries to close partners’ drawing accounts
12 Closing Entries: Record in general journal Permanent accounts real accountsAssets, liabilities, capital accountsEnding balances are beginning balances for next fiscal periodTemporary accounts nominal accountsRevenue, cost, expenses, withdrawalsMust have a 0 balance at end of fiscal periodClose all income statement accounts with credit balances to income summary.Examples: Sales, Interest IncomeClose all income statement accounts with debit balances to income summary.Ex) expenses, cost accounts
13 THE INCOME SUMMARY ACCOUNT Lesson 17-1 (GJ)THE INCOME SUMMARY ACCOUNTIncome SummaryDebitTotal expenses(Debit balance is the net loss.)CreditTotal Revenue(Credit balance is the net income.)Income Summary used to summarize info about net income*Used only at end of fiscal period to prepare ledger accounts for new period*Does not have a normal balance side*If Revenue is greater than expenses, it will have a CR balance = net income*Ending balance should match net income/loss
14 CLOSING ENTRY FOR AN INCOME STATEMENT ACCOUNT WITH A CREDIT BALANCE 31241. Heading2. Date3. Debit to Close4. Credit
15 CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCES 1. Date2. Account Debited33. Credit to Close4. Debit Total124
17 TO DO:Work Together, pg 442On your own, pg 442App 17-1, 17-2
18 Chapter 17-3: Recording Additional Closing Entries Net income increases equity must CR to capital accountsShare for each partner is shown on distribution of net income stmtIncome Summary balance must be reduced to 0Net Income CR to capitalNet Loss DR to capitalThe capital accounts must now show ending capital reported on the owners’ equity statement and balance sheet.Close partners’ drawing accounts to partners’ capital accounts.DO NOT use Income Summary to close Drawing accounts
19 Lesson 17-1 (GJ)CLOSING ENTRY TO RECORD NET INCOME OR LOSS AND CLOSE THE INCOME SUMMARY ACCOUNT532141. Date4. Accounts Credited2. Account Debited5. Credits to Record Net Income3. Debit to Close
20 CLOSING ENTRIES FOR THE PARTNERS’ DRAWING ACCOUNTS 1. Date2. Account Debited53. Debit to Close4. Account Credited25. Credits to Close134
21 COMPLETED CLOSING ENTRIES FOR A PARTNERSHIP RECORDED IN A JOURNAL NEXT STEP:POSTING!!!
23 After Adjusting and Closing Entries are Posted All permanent accounts are open and have the correct balance.All temporary accounts are closedMust now create a:Post-Closing Trial Balance:Prepared to prove the equality of the general ledger before starting a new fiscal period.
24 POST-CLOSING TRIAL BALANCE 11. Write the heading.32. List accounts that have balances.23. Write debit balances.4. Write credit balances.45. Write the word Totals.6. Total Debit column.7. Total Credit column.8. Verify equality of totals.9. Rule double lines.67589
25 Lesson 17-1 (GJ)ACCOUNTING CYCLE FOR A MERCHANDISING BUSINESS ORGANIZES AS A PARTNERSHIP.1. Source documents checked for accuracy, and transactions are analyzed.12. Transactions are recorded in a journal.293. Journal entries are posted to ledgers.4. Schedules of accounts payable and accounts receivable are prepared from subsidiary ledgers.3845. Work sheet is prepared.56. Financial statements are prepared.77. Adjusting and closing entries are journalized.8. Adjusting and closing entries are posted.69. A post-closing trial balance is prepared.
26 TO DO:Work Together, pg 447On your own, pg 447App. prob 17-3, 17-4, 17-5, pg 450Summary:Mastery 17-6Ch 17 Quiz