5 - 1 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by...
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5 - 1 4 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater The Accounting Cycle The Accounting Cycle Completed: Completed: Adjusting, Closing, and Adjusting, Closing, and Post-Closing Trial Balance Post-Closing Trial Balance Chapter 5 Chapter 5
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Transcript of 5 - 1 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by...
5 - 1© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
The Accounting Cycle The Accounting Cycle Completed:Completed:
Adjusting, Closing, andAdjusting, Closing, andPost-Closing Trial BalancePost-Closing Trial Balance
Chapter 5Chapter 5
5 - 2© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
The Accounting CycleThe Accounting Cycle
BusinessBusinesstransactionstransactionsBusinessBusiness
transactionstransactions
11
Book ofBook oforiginal entryoriginal entry
Book ofBook oforiginal entryoriginal entry
22 Journal Journal
Book ofBook offinal entryfinal entryBook ofBook of
final entryfinal entry
33 Ledger Ledger
Trial balanceTrial balanceTrial balanceTrial balance
44
WorksheetWorksheetWorksheetWorksheet
55
5 - 3© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
The Accounting CycleThe Accounting Cycle
TrialTrialbalancebalance
TrialTrialbalancebalance AdjustmentsAdjustmentsAdjustmentsAdjustments
AdjustedAdjustedtrialtrial
balancebalance
AdjustedAdjustedtrialtrial
balancebalance
IncomeIncomestatementstatementIncomeIncome
statementstatementBalanceBalance
sheetsheetBalanceBalance
sheetsheet
BalanceBalancesheetsheet
BalanceBalancesheetsheet
Statement ofStatement ofowner’s equityowner’s equityStatement ofStatement of
owner’s equityowner’s equity
66Financial StatementsFinancial Statements
IncomeIncomestatementstatementIncomeIncome
statementstatement
5 - 4© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
The Accounting CycleThe Accounting Cycle
AdjustingAdjustingentriesentries
AdjustingAdjustingentriesentries
77
ClosingClosingentriesentriesClosingClosingentriesentries
88
Post-closingPost-closingtrial balancetrial balancePost-closingPost-closingtrial balancetrial balance
99
5 - 5© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
End of the Period ActivitiesEnd of the Period Activities
Adjusting entries must be enteredAdjusting entries must be enteredin the journal and posted.in the journal and posted.
Adjusting entries must be enteredAdjusting entries must be enteredin the journal and posted.in the journal and posted.
Closing entries must be journalizedClosing entries must be journalizedat the end of the accounting periodat the end of the accounting periodso that income can be measuredso that income can be measured
for the new period.for the new period.
Closing entries must be journalizedClosing entries must be journalizedat the end of the accounting periodat the end of the accounting periodso that income can be measuredso that income can be measured
for the new period.for the new period.
Temporary accounts are closed.Temporary accounts are closed.Temporary accounts are closed.Temporary accounts are closed.
5 - 6© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
End of the Period ActivitiesEnd of the Period Activities
Prepare adjustmentsPrepare adjustmentsPrepare adjustmentsPrepare adjustments
Complete worksheetComplete worksheetComplete worksheetComplete worksheet
Prepare reportsPrepare reportsPrepare reportsPrepare reports
Close the accounting periodClose the accounting periodClose the accounting periodClose the accounting period
5 - 7© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 1Learning Objective 1
Journalizing and postingJournalizing and posting
adjusting entries.adjusting entries.
5 - 8© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-1 (Journalizing Learning Unit 5-1 (Journalizing and Posting Adjusting Entries)and Posting Adjusting Entries)
Examine each account.Examine each account.Examine each account.Examine each account.
Determine the appropriateDetermine the appropriateending account balances.ending account balances.
Determine the appropriateDetermine the appropriateending account balances.ending account balances.
Determine the requiredDetermine the requiredincrease or decrease.increase or decrease.
Determine the requiredDetermine the requiredincrease or decrease.increase or decrease.
Make an adjusting entry.Make an adjusting entry.Make an adjusting entry.Make an adjusting entry.
5 - 9© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-1 (Journalizing Learning Unit 5-1 (Journalizing and Posting Adjusting Entries)and Posting Adjusting Entries)
Assets must be adjusted to showAssets must be adjusted to showamounts used or allocated to periodsamounts used or allocated to periods
and recorded as expenses.and recorded as expenses.
Assets must be adjusted to showAssets must be adjusted to showamounts used or allocated to periodsamounts used or allocated to periods
and recorded as expenses.and recorded as expenses.
Supplies usedSupplies usedSupplies usedSupplies used
Prepaid rent expired over timePrepaid rent expired over timePrepaid rent expired over timePrepaid rent expired over time
Equipment depreciatedEquipment depreciatedEquipment depreciatedEquipment depreciated
5 - 10© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-1 (Journalizing Learning Unit 5-1 (Journalizing and Posting Adjusting Entries)and Posting Adjusting Entries)
The worksheet is complete.The worksheet is complete.The worksheet is complete.The worksheet is complete.
The books are not up to date.The books are not up to date.The books are not up to date.The books are not up to date.
Adjusting entries are taken fromAdjusting entries are taken fromthe worksheet and journalized.the worksheet and journalized.
Adjusting entries are taken fromAdjusting entries are taken fromthe worksheet and journalized.the worksheet and journalized.
The journal entries must be posted.The journal entries must be posted.The journal entries must be posted.The journal entries must be posted.
5 - 11© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-1 (Journalizing Learning Unit 5-1 (Journalizing and Posting Adjusting Entries)and Posting Adjusting Entries)
a. $500 of office supplies were used.a. $500 of office supplies were used.a. $500 of office supplies were used.a. $500 of office supplies were used.
(a) Office Supplies Expense(a) Office Supplies Expense 500500Office SuppliesOffice Supplies 500500
(a) Office Supplies Expense(a) Office Supplies Expense 500500Office SuppliesOffice Supplies 500500
b. $400 of prepaid rent expired.b. $400 of prepaid rent expired.b. $400 of prepaid rent expired.b. $400 of prepaid rent expired.
(b)(b) Rent Expense Rent Expense 400400Prepaid RentPrepaid Rent 400400
(b)(b) Rent Expense Rent Expense 400400Prepaid RentPrepaid Rent 400400
5 - 12© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-1 (Journalizing Learning Unit 5-1 (Journalizing and Posting Adjusting Entries)and Posting Adjusting Entries)
c.c. Depreciation of word processingDepreciation of word processingequipment was recorded.equipment was recorded.
c.c. Depreciation of word processingDepreciation of word processingequipment was recorded.equipment was recorded.
(c)(c) Depreciation Expense Depreciation Expense 80 80Accumulated depreciationAccumulated depreciation 80 80
(c)(c) Depreciation Expense Depreciation Expense 80 80Accumulated depreciationAccumulated depreciation 80 80
5 - 13© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 2Learning Objective 2
Journalizing and postingJournalizing and posting
closing entries.closing entries.
5 - 14© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-2 (Journalizing Learning Unit 5-2 (Journalizing and Posting Closing Entries)and Posting Closing Entries)
Closing is a mechanical step which setsClosing is a mechanical step which setstemporary accounts to zero so that theytemporary accounts to zero so that they
are ready for a new measurement period.are ready for a new measurement period.
Closing is a mechanical step which setsClosing is a mechanical step which setstemporary accounts to zero so that theytemporary accounts to zero so that they
are ready for a new measurement period.are ready for a new measurement period.
5 - 15© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-2 (Journalizing Learning Unit 5-2 (Journalizing and Posting Closing Entries)and Posting Closing Entries)
AssetsAssetsAssetsAssets
LiabilitiesLiabilitiesLiabilitiesLiabilities
CapitalCapitalCapitalCapital
Balance sheet accountsBalance sheet accountsBalance sheet accountsBalance sheet accounts
5 - 16© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-2 (Journalizing Learning Unit 5-2 (Journalizing and Posting Closing Entries)and Posting Closing Entries)
Permanent accounts arePermanent accounts arealso called also called realreal accounts. accounts.Permanent accounts arePermanent accounts arealso called also called realreal accounts. accounts.
Balances are carried forward.Balances are carried forward.Balances are carried forward.Balances are carried forward.
5 - 17© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-2 (Journalizing Learning Unit 5-2 (Journalizing and Posting Closing Entries)and Posting Closing Entries)
RevenueRevenueRevenueRevenue
ExpensesExpensesExpensesExpenses
WithdrawalsWithdrawalsWithdrawalsWithdrawals
5 - 18© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-2 (Journalizing Learning Unit 5-2 (Journalizing and Posting Closing Entries)and Posting Closing Entries)
New data are accumulated each period.New data are accumulated each period.New data are accumulated each period.New data are accumulated each period.
Temporary accounts are alsoTemporary accounts are alsocalled called nominalnominal accounts. accounts.
Temporary accounts are alsoTemporary accounts are alsocalled called nominalnominal accounts. accounts.
Balances are set to zero.Balances are set to zero.Balances are set to zero.Balances are set to zero.
5 - 19© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-2 (Journalizing Learning Unit 5-2 (Journalizing and Posting Closing Entries)and Posting Closing Entries)
There are four steps to perform.There are four steps to perform.There are four steps to perform.There are four steps to perform.
1. Debit revenue accounts and credit1. Debit revenue accounts and creditthe Income Summary account.the Income Summary account.
1. Debit revenue accounts and credit1. Debit revenue accounts and creditthe Income Summary account.the Income Summary account.
2. Debit the Income Summary account2. Debit the Income Summary accountand credit expense accounts.and credit expense accounts.
2. Debit the Income Summary account2. Debit the Income Summary accountand credit expense accounts.and credit expense accounts.
5 - 20© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-2 (Journalizing Learning Unit 5-2 (Journalizing and Posting Closing Entries)and Posting Closing Entries)
3. Debit or credit the Income Summary account3. Debit or credit the Income Summary accountand debit or credit the Capital account.and debit or credit the Capital account.
3. Debit or credit the Income Summary account3. Debit or credit the Income Summary accountand debit or credit the Capital account.and debit or credit the Capital account.
4. Debit the Capital account and4. Debit the Capital account andcredit the Withdrawals account.credit the Withdrawals account.
4. Debit the Capital account and4. Debit the Capital account andcredit the Withdrawals account.credit the Withdrawals account.
5 - 21© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-2 (Journalizing Learning Unit 5-2 (Journalizing and Posting Closing Entries)and Posting Closing Entries)
Four Steps in Journalizing Closing Entries:Four Steps in Journalizing Closing Entries:
Step 1:Step 1:RevenueRevenueStep 1:Step 1:
RevenueRevenueStep 2:Step 2:
ExpensesExpensesStep 2:Step 2:
ExpensesExpenses
Step 4:Step 4:WithdrawalsWithdrawals
Step 4:Step 4:WithdrawalsWithdrawals
Step 3:Step 3:Income SummaryIncome Summary
Net Income or LossNet Income or Loss
Step 3:Step 3:Income SummaryIncome Summary
Net Income or LossNet Income or Loss
CapitalCapitalCapitalCapital
5 - 22© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
The Closing ProcessThe Closing Process
May 31May 31Word Processing FeesWord Processing Fees 8,0008,000
Income SummaryIncome Summary 8,0008,000
May 31May 31Word Processing FeesWord Processing Fees 8,0008,000
Income SummaryIncome Summary 8,0008,000
May 31May 31Income SummaryIncome Summary 3,1003,100
Various ExpensesVarious Expenses 3,1003,100
May 31May 31Income SummaryIncome Summary 3,1003,100
Various ExpensesVarious Expenses 3,1003,100
5 - 23© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
The Closing ProcessThe Closing Process
May 31May 31Income SummaryIncome Summary 4,9004,900
B. Clark, CapitalB. Clark, Capital 4,9004,900
May 31May 31Income SummaryIncome Summary 4,9004,900
B. Clark, CapitalB. Clark, Capital 4,9004,900
May 31May 31B. Clark, CapitalB. Clark, Capital 625 625
B. Clark, WithdrawalsB. Clark, Withdrawals 625 625
May 31May 31B. Clark, CapitalB. Clark, Capital 625 625
B. Clark, WithdrawalsB. Clark, Withdrawals 625 625
5 - 24© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-2 (Journalizing Learning Unit 5-2 (Journalizing and Posting Closing Entries)and Posting Closing Entries)
8,0008,000 8,0008,0003,1003,100
3,1003,100
ExpensesExpenses
Income SummaryIncome SummaryRevenueRevenue
8,0008,000
3,1003,100
B. Clark, CapitalB. Clark, Capital
B. Clark, WithdrawalsB. Clark, Withdrawals
625625
4,9004,900
4,9004,900625625
625625
5 - 25© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 3Learning Objective 3
Prepare a post-closingPrepare a post-closing
trial balance.trial balance.
5 - 26© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-3 (The Post-Learning Unit 5-3 (The Post-Closing Trial Balance)Closing Trial Balance)
The post-closing trial balanceThe post-closing trial balancehelps prove the accuracy of thehelps prove the accuracy of theadjusting and closing process.adjusting and closing process.
The post-closing trial balanceThe post-closing trial balancehelps prove the accuracy of thehelps prove the accuracy of theadjusting and closing process.adjusting and closing process.
It contains the true ending figure for capital.It contains the true ending figure for capital.It contains the true ending figure for capital.It contains the true ending figure for capital.
It contains only permanent accounts.It contains only permanent accounts.It contains only permanent accounts.It contains only permanent accounts.
5 - 27© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 5-3 (The Post- Learning Unit 5-3 (The Post- Closing Trial Balance)Closing Trial Balance)
Clark’s Word Processing ServicesPost-closing Trial Balance
May 31, 200x
CashCashAccounts ReceivableAccounts ReceivableOffice SuppliesOffice SuppliesPrepaid RentPrepaid RentWord Processing EquipmentWord Processing EquipmentAccumulated DepreciationAccumulated DepreciationAccounts PayableAccounts PayableSalaries PayableSalaries PayableBrenda Clark, CapitalBrenda Clark, Capital TotalsTotals
CashCashAccounts ReceivableAccounts ReceivableOffice SuppliesOffice SuppliesPrepaid RentPrepaid RentWord Processing EquipmentWord Processing EquipmentAccumulated DepreciationAccumulated DepreciationAccounts PayableAccounts PayableSalaries PayableSalaries PayableBrenda Clark, CapitalBrenda Clark, Capital TotalsTotals
6,1556,155 5,0005,000 100100 800800 6,0006,000
8080 3,3503,350 35035014,27514,275
18,05518,055 18,05518,055
6,1556,155 5,0005,000 100100 800800 6,0006,000
8080 3,3503,350 35035014,27514,275
18,05518,055 18,05518,055
Dr. Cr.
5 - 28© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
End of Chapter 5End of Chapter 5
