Chapter-10-Closing-Entries.ppt

Click to edit Master title style,Click to edit Master text styles,Second Level,Third Level,10-,*,CLOSING ENTRIES,CHAPTER 10,Learning objectives,1.Be able to close income and expense items to the balance sheet accounts.,2.Be able to conduct post-closing trial balance.,Closing Entries,The final bookkeeping entries made at the,end of an accounting period to transfer income,and expense items to the balance sheet accounts.,Definition,Closing Entries,The closing entries consist of the four steps:,First,the revenue accounts,are closed by transferring their,balances to the income summary account.,Second,the expense accounts,are closed by transferring,their balances to the income summary account.,Third,the income summary,is closed by transferring the,net balance to capital account.,Last,the withdrawals accounts,are closed by transferring,the balance to capital account.,Closing Entries,STEP 1,Closing Entries,Step 1.Closing the credit balances from income statement accounts to the income summary.,March.31,Dr.Haircutting Services Revenue,2,800,Cr.Income Summary,2,800,Closing Entries,The posting is shown as following:,Haircutting Services Revenue Account No.411,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20,XX,March,10,19,31,31,Adjusting,Closing,$,2,8,00,$,900,1,400,500,$,900,2,300,2,800,_,Closing Entries,Income Summary Account No.313,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,XX,March,31,Closing,$,2,8,00,$,2,8,00,Closing Entries,STEP 2,Closing Entries,Step 2.Closing the debit balances from income statement accounts to the income summary.,Jan.31 Income Summary$1403.3,Wages Expense 1,100,Utility Expense 230,Telephone Expense 120,Rent Expense 400,Insurance Expense 50,Closing Entries,Depreciation Expense,Haircutting Equipment 13.3,Depreciation Expense,Store Equipment 40,Haircutting Supplies Expense 100,Office Supplies Expense 50,Closing Entries,The posting is shown as following:,Wages Expense Account No.511,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20,XX,March,25,31,Closing,$,4,00,$,4,00,$,4,00,_,Utility Expense Account No.512,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,29,31,Closing,$230,$230,$230,_,Closing Entries,Telephone Expense Account No.513,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20,XX,March,31,31,Closing,$120,$120,$120,_,Haircutting Supplies Expense Account No.516,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$,1,00,$,1,00,$,1,00,_,Closing Entries,Office Supplies Expense Account No.517,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$,5,0,$,5,0,$,5,0,_,Rent Expense Account No.514,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$,4,00,$,4,00,$,4,00,_,Closing Entries,Insurance Expense Account No.515,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$50,$50,$50,_,Depreciation Expense,Haircutting Equipment Account No.542,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$,1,3,.,3,$,1,3,.,3,$,1,3,.,3,_,Closing Entries,Depreciation Expense,Store Equipment Account No.543,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$,40,$,40,$,40,_,Income Summary Account No.313,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20,XX,March,31,31,Adjusting,Closing,$,1,403.3,$,2,800,$,2,800,1,396.7,STEP 3,Closing Entries,Closing Entries,Step 3.Closing the income summary account to the,capital account.,March.31,Dr.Income Summary,1,396.7,Cr.Stev Taylor,Capital,1,396.7,Closing Entries,Income Summary Account No.313,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,31,Closing,Closing,Closing,$,1,403.3,1,396.7,$,2,8,00,$,2,8,00,1,396.7,_,Stev Taylor,Capital Account No.311,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,3,31,Closing,$,1,0,000,1,396.7,$,1,0,000,11,396.7,Closing Entries,STEP 4,Closing Entries,Step 4.Closing the Withdrawals Account to the,Capital Account.,The Withdrawals account shows the amount that the,owner takes from the business account for personal,living expenditures.,Closing Entries,March.31 Stev Taylor,Capital,480,Stev Taylor,Withdrawals,480,Stev Taylor,Withdrawals Account No.312,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,24,31,Closing,$,4,80,$,4,80,$,4,80,_,Closing Entries,Stev Taylor,Capital Account No.311,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,3,31,31,Closing,Closing,$,4,80,$,1,0,000,1,396.7,$,1,0,000,11,396.7,1,0,916.7,Closing Entries,The accounts after closing entries are posted,Cash Account No.111,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,3,6,7,7,8,9,14,19,24,25,29,$,1,0,000,1,300,1,400,$9,900,$4,800,8,00,1,4,00,600,6,00,4,80,4,00,230,$,1,0,000,5,200,4,4,00,3,0,00,2,4,00,1,8,00,3,1,00,4,5,00,4,0,20,3,6,20,3,3,90,Closing Entries,Accounts Receivable Account No.113,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,10,$,9,00,$,9,00,Haircutting Supplies Account No.115,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,8,31,Adjusting,$,4,00,$,1,00,$,4,00,3,00,Closing Entries,Office Supplies Account No.116,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,8,31,Adjusting,$,2,00,$,50,$,2,00,$,150,Prepaid Rent Account No.117,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,6,31,Adjusting,$4,800,$400,$4,800,4400,Closing Entries,Prepaid Insurance Account No.118,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,8,31,Adjusting,$6,00,$50,$600,550,Haircutting Equipment Account No.144,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,7,Adjusting,$,8,00,$,8,00,Closing Entries,Store Equipment Account No.146,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,7,$,2,4,00,$,2,4,00,Accumulated Depreciation,Haircutting Equipment Account No.145,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,Adjusting,$,1,3,.,3,$,1,3,.,3,Closing Entries,Accumulated Depreciation,Store Equipment Account No.147,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,Adjusting,$,40,$,40,Accounts Payable Account No.212,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,7,8,9,31,$,6,00,$,1,000,600,120,$,1,000,1,6,00,1,000,1,120,Closing Entries,Unearned Haircutting Fees Account No.213,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,14,31,Adjusting,$500,$1,300,$1,300,800,Stev Taylor,Withdrawals Account No.312,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,24,31,Closing,$,4,980,$,4,80,$,4,80,_,Closing Entries,Stev Taylor,Capital Account No.311,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,3,31,31,Closing,Closing,$,4,80,$,1,0,000,1,396.7,$,1,0,000,11,396.7,10,916.7,Income Summary Account No.313,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,31,Closing,Closing,Closing,$,1,403.3,1,396.7,$,2,8,00,$,2,8,00,1,396.7,_,Closing Entries,Haircutting Services Revenue Account No.411,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,10,19,31,31,Adjusting,Closing,$,2,8,00,$,900,1,400,500,$,9,00,2,3,00,2,8,00,_,Wages Expense Account No.511,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,25,31,Closing,$,4,00,$,4,00,$,4,00,_,Closing Entries,Utility Expense Account No.512,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,29,31,Closing,$230,$230,$230,_,Telephone Expense Account No.513,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Closing,$120,$120,$120,_,Closing Entries,Haircutting Supplies Expense Account No.516,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$,1,00,$,1,00,$,1,00,_,Office Supplies Expense Account No.517,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$,5,0,$,5,0,$,5,0,_,Closing Entries,Rent Expense Account No.514,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$400,$400,$400,_,Insurance Expense Account No.515,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$50,$50,$50,_,Closing Entries,Depreciation Expense,Haircutting Equipment Account No.542,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$,1,3,.3,$,1,3,.,3,$,1,3,.,3,_,Depreciation Expense,Store Equipment Account No.543,Date,Item,Post.,Ref.,Debit,Credit,Balance,Debit,Credit,20XX,March,31,31,Adjusting,Closing,$,40,$,40,$,40,_,Closing Entries,Once posted to the ledger,Revenue,Expense,Withdrawals,ZERO,The next accounting period,0,The Post-closing Trial Balance,It can be used to alert you to errors in your books,during the process of posting the adjustments and,closing entries to the ledger accounts.,The,total,debits,must,equal,the,total,credits,.,The trial balance,The trial balance is a worksheet on which you list all your general ledger accounts and their debit or credit balance.,Cash,Accounts Receivable,Haircutting Supplies,Office Supplies,Prepaid Rent,Prepaid Insurance,Haircutting Equipment,Accumulated Depreciation,Haircutting Equipment,Office Equipment,Accumulated Depreciation,Store Equipment,Accounts Payable,Unearned Haircutting Fees,Stev Taylor,Capital,Total,$,3,3,90,9,00,3,00,1,50,4,400,550,8,00,2,4,00,$,12,89,0,1,3,.,3,40,$,1,120,800,10,916.7,$,12,89,0,Stevs Barber Shop,Post-Closing Trial Balance,March 31,20XX,WE ARE SAILING RIGHT ALONG!,