Unit 4 The Accounting Cycle for a Merchandising
- Slides: 28
Unit 4 The Accounting Cycle for a Merchandising Corporation Chapter 14 Accounting for Sales and Cash Receipts Chapter 15 Accounting for Purchases and Cash Payments Chapter 16 Special Journals: Sales and Cash Receipts Chapter 17 Special Journals: Purchases and Cash Payments Chapter 18 Adjustments and the Ten-Column Work Sheet Chapter 19 Financial Statements for a Corporation Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation Chapter 21 Accounting for Publicly Held Corporations Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 0
Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation What You’ll Learn § Journalize closing entries for a merchandising corporation. § Post closing entries to the general ledger accounts. § Prepare a post-closing trial balance. § Describe the steps in the accounting cycle. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 1
Chapter 20, Section 1 Journalizing Closing Entries What Do You Think? Why is net income/loss closed to Retained Earnings and not to owner’s equity? Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 2
SECTION 20. 1 Journalizing Closing Entries Main Idea A corporation’s net income (or net loss) is closed to Retained Earnings. You Will Learn § how to journalize closing entries for a merchandising corporation. § how to journalize a net loss. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 3
SECTION 20. 1 Journalizing Closing Entries Steps for Closing the Ledger A corporation does not have a withdrawals account, so there are only three steps to closing the ledger for a merchandising business organized as a corporation: § Close accounts with balances in the Income Statement Credit column to Income Summary. § Close accounts with balances in the Income Statement Debit column to Income Summary. § Close Income Summary to Retained Earnings. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 4
SECTION 20. 1 Journalizing Closing Entries Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 5
SECTION 20. 1 Journalizing Closing Entries Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 6
SECTION 20. 1 Journalizing Closing Entries Closing Entry to Transfer a Net Loss If there is a net loss, credit Income Summary for the amount and debit Retained Earnings for the amount. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 7
Chapter 20, Section 2 Posting Closing Entries What Do You Think? Why is the post-closing trial balance so important? Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 8
SECTION 20. 2 Posting Closing Entries Main Idea After posting the closing entries, prepare a post-closing trial balance. You Will Learn § how to post the closing entries for a merchandising corporation. § how to prepare a post-closing trial balance for a merchandising corporation. § about a review of the accounting cycle for a merchandising business. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 9
SECTION 20. 2 Posting Closing Entries Closing the General Ledger When closing the general ledger, write Closing Entry for each posting in the Description column of the general ledger account. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 10
SECTION 20. 2 Posting Closing Entries Partial general ledger at the end of the fiscal period. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 11
SECTION 20. 2 Posting Closing Entries Partial general ledger at the end of the fiscal period. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 12
SECTION 20. 2 Posting Closing Entries Partial general ledger at the end of the fiscal period. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 13
SECTION 20. 2 Posting Closing Entries Partial general ledger at the end of the fiscal period. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 14
SECTION 20. 2 Posting Closing Entries Partial general ledger at the end of the fiscal period. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 15
SECTION 20. 2 Posting Closing Entries Partial general ledger at the end of the fiscal period. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 16
SECTION 20. 2 Posting Closing Entries Partial general ledger at the end of the fiscal period. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 17
SECTION 20. 2 Posting Closing Entries Preparing a Post-Closing Trial Balance A post-closing trial balance is prepared at the end of the accounting period to prove the general ledger accounts are in balance. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 18
SECTION 20. 2 Posting Closing Entries Post-closing trial balance. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 19
SECTION 20. 2 Posting Closing Entries Completing the Accounting Cycle for a Merchandising Business As you have learned, the accounting cycle for a merchandising business organized as a corporation consists of the following steps: § Collect and verify source documents. § Analyze each business transaction. § Journalize each transaction. § Post to the general and subsidiary ledgers. § Prepare a trial balance. § Complete a work sheet. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 20
SECTION 20. 2 Posting Closing Entries Completing the Accounting Cycle for a Merchandising Business § Prepare the financial statements–income statement, statement of retained earnings, balance sheet, and statement of cash flows. § Journalize and post the adjusting entries. § Journalize and post the closing entries. § Prepare a post-closing trial balance. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 21
SECTION 20. 2 Posting Closing Entries Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 22
CHAPTER 20 Chapter 20 Review Question 1 To journalize the closing entries, put the following in order: Close temporary accounts with debit balances. ____ Close temporary accounts with credit balances. ____ Close the Income Summary account to Capital. ____ Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 23
CHAPTER 20 Chapter 20 Review Answer 1 Close temporary accounts with debit balances: 2 Close temporary accounts with credit balances: 1 Close the Income Summary account to Capital: 3 Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 24
CHAPTER 20 Chapter 20 Review Question 2 How is a post-closing trial balance different from other trial balances? Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 25
CHAPTER 20 Chapter 20 Review Answer 2 The post-closing trial balance is prepared after closing entries in which temporary account balances have been transferred to the capital account. The post-closing trial balance has only permanent or balance sheet accounts. Other trial balances include both temporary and permanent accounts. Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 26
Resources Glencoe Accounting Online Learning Center English Glossary Spanish Glossary Glencoe Accounting Unit 4 Chapter 20 Copyright © by The Mc. Graw-Hill Companies, Inc. All rights reserved. 27
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