Chapter 4

Chapter 4 - 1 Completing the Accounting Cycle Chapter 4 2...

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Unformatted text preview: 1 Completing the Accounting Cycle Chapter 4 2 Learning Objectives Learn the closing process of the accounting cycle Learn the components of a classified balance sheet 3 Resets revenue, expense and withdrawal account balances to zero at the end of the period. Helps update Owners capital account. Identify accounts for closing. Record and post closing entries. Prepare post-closing trial balance. Closing Process 4 Temporary Accounts Revenues Income Summary Expenses Withdrawals Permanent Accounts Assets Liabilities Owners Capital The closing process applies only to temporary accounts. Temporary and Permanent Accounts 5 Lets see how the closing process works! Recording Closing Entries Close Revenue accounts to Income Summary. Close Expense accounts to Income Summary. Close Income Summary account to Owners Capital. Close Withdrawals to Owners Capital. 6 Using the adjusted trial balance, lets prepare the closing entries for FastForward. 7 Close Revenue accounts to Income Summary. 8 Close Revenue Accounts to Income Summary Dec. 31 Consulting revenue 7,850 Rental revenue 300 Income summary 8,150 Now, lets look at the ledger accounts after posting this closing entry. 9 Close Revenue Accounts to Income Summary Consulting Revenue 7,850 7,850- Rental Revenue 300 300- Income Summary 7,850 300 10 Close Expense accounts to Income Summary. 11 Now, lets look at the ledger accounts after posting this closing entry. Close Expense Accounts to Income Summary Dec. 31 Income summary 4,365 Depreciation expense-Equipment 375 Salaries expense 1,610 Insurance expense 100 Rent expense 1,000 Supplies expense 1,050 Utilities expense 230 12 Income Summary 4,365 7,850 300 3,785 Utilities Expense 230 230- Rent Expense 1,000 1,000- Net Income Close Expense Accounts to Income Summary Close Expense Accounts to Income Summary Supplies Expense 1,050 1,050- Depreciation Expense- Eq....
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Chapter 4 - 1 Completing the Accounting Cycle Chapter 4 2...

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