1. Recording Adjusting and Closing Entries for a Service Business
Chapter 9
Recording Adjusting and Closing Entries for a Service Business

2. 9.1 Recording Adjusting Entries

3. Concept: Accounting Period Cycle-Preparation of work sheet at the end of each fiscal pd. to summarize general ledger info for financial stmts.
Concept: Adequate Disclosure – info for financial stmts. are found on the work sheet.
Journal entries recorded to update general ledger accounts at the end of a fiscal period are called adjusting entries.

4. Recorded in the Gen. Deb. & Gen. Cred. Columns.
Adj. Entries are put on the journal page right after the daily transactions.
Recorded in the Gen. Deb. & Gen. Cred. Columns.
Record 2 journal entries:
To bring supplies account up to date
To bring prepaid insurance account up to date.

5. 9.2 Recording Closing Entries

6. Accounts used to accumulate information from one fiscal period to the next are called permanent accounts. AKA real accounts.
Assets, Liab, O.E.
Ending balance from one period beginning balance for next.

7. Accounts used to accumulate information until it is transferred to the owner’s capital account are called temporary accounts. AKA nominal accounts
Revenue, expense, owner’s drawing, income summary
Show changes in capital for fiscal pd.
Balances transferred to capital account
New fiscal pd. balance is zero

8. Concept: Matching Revenue with Expenses
Journal entries used to prepare temporary accounts for a new fiscal period are called closing entries.
Concept: Matching Revenue with Expenses
A temporary account titled Income Summary is used to close revenue and expenses
Has no normal balance side
Net income = credit balance in Income Summary
Net loss = debit balance in Income Summary

9. Information comes from Income Stmt and Balance Sheet of Work Sheet
Four Closing Entries
An entry to close income stmt accounts with credit balances
Entry to close income stmt accounts with debit balances
Entry to record net income or net loss and close Income Summary
Entry to close the owner’s drawing
Information comes from Income Stmt and Balance Sheet of Work Sheet

10. 9.3 Preparing a Post-Closing Trial Balance

11. Accounting Cycle Analyze Transactions Journalize Post
Prepare Worksheet
Prepare Financial Statements
Journalize Adjusting and Closing Entries
Post Adjusting and Closing Entries
Prepare Post-Closing Trial Balance

12. After closing entries are posted debits & credits have to be verified as equal.
A trial balance prepared after the closing entries are posted is called a post-closing trial balance.
Only the permanent accounts are included

13. Accounting Cycle Analyze Transactions Journalize Post
Prepare Worksheet
Prepare Financial Statements
Journalize Adjusting and Closing Entries
Post Adjusting and Closing Entries
Prepare Post-Closing Trial Balance