Prepare adjusting entry for supplies. LO 2AP Prepare adjusting entry for depreciation. LO 2AP Prepare adjusting entry for prepaid expense. LO 2AP Prepare adjusting entry for unearned revenue.
Closing entries, also called closing journal entries, are entries made at the end of an accounting period to zero out all temporary accounts and transfer their balances to permanent accounts.
In other words, the temporary accounts are closed or reset at the end of the year. This is commonly referred to as closing the books. For example, the revenues account records the amount of revenues earned during an accounting period—not during the life of the company.
For example, a vehicle account is a fixed asset account that is recorded on the balance. The vehicle will provide benefits for the company in future years, so it is considered a permanent account. At the end of the year, all the temporary accounts must be closed or reset, so the beginning of the following year will have a clean balance to start with.
In other words, revenue, expense, and withdrawal accounts always have a zero balance at the start of the year because they are always closed at the end of the previous year. The income summary account is then closed to the retained earnings account.
Both ways have their advantages. Closing all temporary accounts to the income summary account leaves an audit trail for accountants to follow. The total of the income summary account after the all temporary accounts have been close should be equal to the net income for the period.
Closing all temporary accounts to the retained earnings account is faster than using the income summary account method because it saves a step. There is no need to close temporary accounts to another temporary account income summary account in order to then close that again.
Both closing entries are acceptable and both result in the same outcome. There are three general closing entries that must be made. This resets the income accounts to zero and prepares them for the next year.
Remember that all revenue, sales, income, and gain accounts are closed in this entry.
Close all expense and loss accounts All expense accounts are then closed to the income summary account by crediting the expense accounts and debiting income summary. Close all dividend or withdrawal accounts Since dividend and withdrawal accounts are not income statement accounts, they do not typically use the income summary account.
These accounts are closed directly to retained earnings by recording a credit to the dividend account and a debit to retained earnings.9) Quick assets include only cash, short-term investments, and accounts receivable.
10) Notes receivable are assets and are reported in the balance sheet. 11) Liability accounts increase with a debit and decrease with a credit. The following is the adjusted trial balance for Steely Company. Steely Company Adjusted Trial Balance For the Year ended December 31, Cash 6, Accounts Receivable 2, Prepaid Expenses Equipment 13, Accumulated Depreciation 1, Accounts Payable 1, Notes Payable 5, Bob Steely, Capital 12, Bob Steely, Withdrawals Prepare a classified balance sheet in good form as of December 31, E Selected accounts for Nina’s Salon are presented below.
All June 30 postings are from E Emil Skoda Company had the following adjusted trial balance. Emil Skoda Company: Adjusted Trial Balance. Question. On December 31, the adjusted trial balance of Domino Inc.
shows the following selected data: Analysis shows that adjusting entries had been made, and included above, for (1) $9, of services performed but not billed, and (2) $6, of accrued but unpaid interest.
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