completing the accounting cycle for a merchandising corporation
DESCRIPTION
Chapter 20. $. Completing the Accounting Cycle for a Merchandising Corporation. $. Making Accounting Relevant At the end of a fiscal period, businesses must “close the accounting records” or clean the slate in order to begin another period. $. $. - PowerPoint PPT PresentationTRANSCRIPT
Completing the Accounting Cycle for a Merchandising Corporation
Completing the Accounting Cycle for a Merchandising CorporationMaking Accounting RelevantAt the end of a fiscal period, businesses must “close the accounting records” or clean the slate in order to begin another period.
Making Accounting RelevantAt the end of a fiscal period, businesses must “close the accounting records” or clean the slate in order to begin another period.
At the end of a school year, what types of activities do you perform? Do you clean out your locker? Do you prepare for a summer job?
Section 1Journalizing Closing Entries
Section 1Journalizing Closing Entries
What You’ll Learn
What steps are followed to close
the ledger.
What closing entries are required
for a merchandising business
organized as a corporation.
What closing entry is required
when a corporation reports a loss.
What You’ll Learn
What steps are followed to close
the ledger.
What closing entries are required
for a merchandising business
organized as a corporation.
What closing entry is required
when a corporation reports a loss.
Why It’s Important
Closing the ledger “cleans
the slate” so that the next
accounting cycle can begin.
Why It’s Important
Closing the ledger “cleans
the slate” so that the next
accounting cycle can begin.
Section 1 The Ownership of a Corporation (con’t.)Section 1 The Ownership of a Corporation (con’t.)
Steps for Closing the Ledger
…transfer balances of all temporary accounts to a permanent account.
Steps for Closing the Ledger
…transfer balances of all temporary accounts to a permanent account.
1. Close temporary credit accounts to Income Summary
2. Close temporary debit accounts to Income Summary
3. Close Income Summary to Retained Earnings
1. Close temporary credit accounts to Income Summary
2. Close temporary debit accounts to Income Summary
3. Close Income Summary to Retained Earnings
Section 1 The Ownership of a Corporation (con’t.)Section 1 The Ownership of a Corporation (con’t.)
Close Temporary Accounts with Credit BalancesClose Temporary Accounts with Credit Balances
Section 1 The Ownership of a Corporation (con’t.)Section 1 The Ownership of a Corporation (con’t.)
Close Temporary Accounts with Debit BalancesClose Temporary Accounts with Debit Balances
Section 1 The Ownership of a Corporation (con’t.)Section 1 The Ownership of a Corporation (con’t.)
Close the Balance of Income Summary to Retained EarningsClose the Balance of Income Summary to Retained Earnings
Section 1 The Ownership of a Corporation (con’t.)Section 1 The Ownership of a Corporation (con’t.)
Check Your UnderstandingCheck Your Understanding
1. During the closing process, which
account balances are credited to
the Income Summary account?
1. During the closing process, which
account balances are credited to
the Income Summary account?
Section 1 The Ownership of a Corporation (con’t.)Section 1 The Ownership of a Corporation (con’t.)
2. Which account balances are
debited to the Income Summary
account?
2. Which account balances are
debited to the Income Summary
account?
Section 2Posting Closing Entries
Section 2Posting Closing EntriesWhat You’ll Learn
How to post closing entries.
How to prepare a post-closing
trial balance.
The accounting cycle for a
merchandising business.
What You’ll Learn
How to post closing entries.
How to prepare a post-closing
trial balance.
The accounting cycle for a
merchandising business.
Why It’s Important
To prepare the general ledger for
the next period, you need to transfer
the temporary account balances to
the permanent Retained Earnings
account.
Why It’s Important
To prepare the general ledger for
the next period, you need to transfer
the temporary account balances to
the permanent Retained Earnings
account.
Section 2 Posting Closing Entries (con’t.)Section 2 Posting Closing Entries (con’t.)
Closing the General LedgerClosing the General Ledger
After closing entries are recorded in
the general journal, they are posted
to the general ledger.
For each posting the term “Closing
Entry” is written in the Description
column of the general ledger
account.
After closing entries are recorded in
the general journal, they are posted
to the general ledger.
For each posting the term “Closing
Entry” is written in the Description
column of the general ledger
account.
Section 2 Posting Closing Entries (con’t.)Section 2 Posting Closing Entries (con’t.)
Preparing a Post-Closing Trial BalancePreparing a Post-Closing Trial Balance
A post-closing trial balance is
prepared at the end of the accounting
period to prove that the general
ledger accounts are in balance after
all adjusting and closing entries are
posted.
A post-closing trial balance is
prepared at the end of the accounting
period to prove that the general
ledger accounts are in balance after
all adjusting and closing entries are
posted.
Section 2 Posting Closing Entries (con’t.)Section 2 Posting Closing Entries (con’t.)
Check Your UnderstandingCheck Your Understanding
After all closing journal entries
are posted, what is the balance of
the temporary accounts?
After all closing journal entries
are posted, what is the balance of
the temporary accounts?
Section 2 Posting Closing Entries (con’t.)Section 2 Posting Closing Entries (con’t.)