Learning Objective LO 4 Prepare adjusting entries 2014
Learning Objective LO 4 Prepare adjusting entries. © 2014 Cengage Learning. All Rights Reserved.
Lesson 16 -4 Adjusting Entries LO 4 ● A corporation records four closing entries: 1. Uncollectible Accounts Expense Allowance for Uncollectibles 2. Income Summary (Or Merchandise) Merchandise (Or Income Summary) 3. Supplies Expense – Office Supplies – Office 4. Supplies Expense – Store Supplies Store © 2014 Cengage Learning. All Rights Reserved. SLIDE 2
Lesson 16 -4 Adjusting Entries LO 4 5. Insurance Expense Prepaid Insurance 6. Depreciation Expense – Office Accumulated Deprec. - Office 7. Depreciation Expense – Store Accumulated Deprec. – Store 8. Federal Income Tax Expense Federal Income Tax Payable © 2014 Cengage Learning. All Rights Reserved. SLIDE 3
Learning Objective LO 4 Prepare closing entries. © 2014 Cengage Learning. All Rights Reserved.
Lesson 16 -4 Closing Entries 1. A closing entry for income statement accounts with credit balances LO 4 Sales Purchases Discount Purchases Return and Allowance Income Summary 2. A closing entry for income statement accounts with debit balances Income Summary Sales Discount Sales Return and Allowances Purchases All Expenses © 2014 Cengage Learning. All Rights Reserved. SLIDE 5
Lesson 16 -4 Closing Entries LO 4 3. A closing entry to record net income or net loss in the Retained Earnings account and close the Income Summary account. Income Summary (Retained Earnings –Loss) Retained Earning (Income Summary) 4. A closing entry for the Dividends account. Retained Earnings Dividends © 2014 Cengage Learning. All Rights Reserved. SLIDE 6
Lesson 16 -4 The Income Summary Account LO 4 Income Summary Debit Expenses Credit Revenue (greater than expenses) (Credit balance is the net income) © 2014 Cengage Learning. All Rights Reserved. SLIDE 7
Lesson 16 -4 Closing Entry for Accounts with Credit Balances LO 4 Sales Closing 632, 371. 75 Bal. (New Bal. 632, 371. 75 0. 00) Interest Expense Adj. (mdse inv. ) 5, 648. 44 Closing 635, 345. 90 (credit accounts) © 2014 Cengage Learning. All Rights Reserved. SLIDE 8
Lesson 16 -4 Closing Entry for Accounts with Credit Balances Debit to Close 3 LO 4 3 2 Date 1 Heading Credit to 4 Income Summary © 2014 Cengage Learning. All Rights Reserved. SLIDE 9
Lesson 16 -4 Closing Entry for Income Statement Accounts with Debit Balances Credit to Close 3 LO 4 3 2 Date 1 © 2014 Cengage Learning. All Rights Reserved. Income summary 4 Debit to Income Summary SLIDE 10
Lesson 16 -4 Summary of Closing Entry for Income Statement Accounts with Debit Balances LO 4 Purchases Bal. (New Bal. 254, 851. 26 0. 00) Closing 254, 851. 26 Income Summary Adj. (mdse. Inv. ) Closing (debit accounts) 5, 643. 44 Closing (credit accounts) 549, 800. 89 (New Bal. © 2014 Cengage Learning. All Rights Reserved. 635, 345. 90 79, 896. 57) SLIDE 11
Lesson 16 -4 Closing Entry to Record Net Income LO 4 Income Summary Adj. (mdse. inv. ) Closing (debit accounts) Closing (Retained Earnings) 5, 643. 44 549, 800. 89 79, 896. 57 Closing (credit accounts) (New Bal. 635, 345. 90 0. 00) Retained Earnings Closing (credit accounts) Closing (Retained Earnings) (New Bal. Date 65, 218. 84 79, 896. 57 145, 115. 41) Debit Income Summary Credit Retained Earnings © 2014 Cengage Learning. All Rights Reserved. SLIDE 12
Lesson 16 -4 Closing Entry for Dividends LO 4 Retained Earnings Closing (Dividends) 15, 000. 00 Bal. Closing (Income Summary) (New Bal. 65, 218. 84 79, 896. 57 130, 115. 41) Dividends Bal. (New Bal. 15, 000. 00) Closing (Retained Earnings) Date 15, 000. 00 Debit Retained Earnings Credit Dividends © 2014 Cengage Learning. All Rights Reserved. SLIDE 13
Lesson 16 -4 Completed Closing Entries for a Corporation Recorded in a Journal © 2014 Cengage Learning. All Rights Reserved. LO 4 SLIDE 14
Learning Objective LO 5 Prepare a post-closing trial balance. © 2014 Cengage Learning. All Rights Reserved.
Lesson 16 -5 General Ledger After Closing Entries Are Posted © 2014 Cengage Learning. All Rights Reserved. LO 5 SLIDE 16
Lesson 16 -5 Post-Closing Trial Balance LO 5 1 3 Account Balances 2 Accounts with Balances Totals 4 Heading Column Totals 5 © 2014 Cengage Learning. All Rights Reserved. 6 Double Rule SLIDE 17
Lesson 16 -5 Accounting Cycle for a Merchandising Business Organized as a Corporation 1. 1 2 12 3 3 4 11 LO 5 5 9 10 6 8 7 Source documents are checked for accuracy, and transactions are analyzed. 2. Transactions are recorded in journals. 3. Journal entries are posted to the accounts payable ledger, the accounts receivable ledger, and the general ledger. 4. Schedules of accounts payable and accounts receivable are prepared from the subsidiary ledgers. 5. An unadjusted trial balance is prepared from the general ledger. 6. Adjusting entries are journalized. 7. Adjusting entries are posted to the general ledger. 8. An adjusted trial balance is prepared from the general ledger. 9. Financial statements are prepared from the adjusted trial balance. 10. Closing entries are journalized. 11. Closing entries are posted to the general ledger. 12. A post-closing trial balance is prepared from the general ledger. © 2014 Cengage Learning. All Rights Reserved. SLIDE 18
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