Chap4 Class Notes 2010

Chap4 Class Notes 2010 - C:\Documents and...

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C:\Documents and Settings\katycck_acy\Desktop\TA assignment\ACCT 2111Victor\Contents\Chap4 Class Notes 2010.DOC Victor Leung ACCT2111, 2010, Chapter 4 1 CHAPTER FOUR The Accounting Cycle Process I. (Obj 02) Closing the Books Preparing Closing entries Closing entries are journal entries made at the end of the accounting period to reduce (reset) the balance in each revenue, expense, and dividends account to zero and to transfer these account balances to the Retained Earnings . Income Summary Account , a temporary account, is used in closing revenue and expense accounts. The journalizing and posting of closing entries is a required step in the accounting cycle. Steps in closing the books of a corporation: (1) Revenue accounts Debit Each revenue account for its credit balance Credit Income Summary Account for total revenues. (2) Expense accounts Debit Income Summary Account for total expenses Credit Each expense account for its debit balance (3a) Net Income Debit Income Summary Account its credit balance Credit Retained Earnings (3b) Net Loss Debit Retained Earnings Credit Income Summary Account its debit balance (3) Dividends account Debit Retained Earnings account for total dividends paid Credit Dividends account for its debit balance (Illustration 4-7, page 153; Illustration 4-8, page 154; Illustration 4-10, page 156; Illustration 4-11, page 157)
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C:\Documents and Settings\katycck_acy\Desktop\TA assignment\ACCT 2111Victor\Contents\Chap4 Class Notes 2010.DOC Victor Leung ACCT2111, 2010, Chapter 4 2 II (Obj 03) Preparing a Post-Closing Trial Balance
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