CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 4-5 End-of-Period Work for a Departmentalized...
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CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 4-5 LESSON 4-5 End-of-Period Work for a Departmentalized Business Modified by D. Burns West Johnston High School
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Transcript of CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 4-5 End-of-Period Work for a Departmentalized...
CENTURY 21 ACCOUNTING © Thomson/South-Western
LESSON 4-5LESSON 4-5
End-of-Period Work for a Departmentalized Business
Modified by D. Burns West Johnston High School
CENTURY 21 ACCOUNTING © Thomson/South-Western
JOURNALIZING ADJUSTING ENTRIES FOR JOURNALIZING ADJUSTING ENTRIES FOR A DEPARTMENTALIZED BUSINESSA DEPARTMENTALIZED BUSINESS
Journal entries recorded to update general ledger accounts at the end of a fiscal period are called adjusting entries.
Account balances are changed only by posting journal entries to the general ledger accounts
Adjusting entry journal entries are found in the adjustments column of the expanded worksheet.
Modified by D. Burns West Johnston High School
page 118
CENTURY 21 ACCOUNTING © Thomson/South-Western Modified by D. Burns West Johnston High School
2. Enter the adjusting entries without additional explanation. Adjusting entries do not have a source document
JOURNALIZING ADJUSTING ENTRIES JOURNALIZING ADJUSTING ENTRIES FOR A DEPARTMENTALIZED BUSINESSFOR A DEPARTMENTALIZED BUSINESS page 118
1. Write Adjusting Entries in the Account Title column. This heading identifies the group of adjusting entries
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CENTURY 21 ACCOUNTING © Thomson/South-Western
JOURNALIZING CLOSING ENTRIES FOR A JOURNALIZING CLOSING ENTRIES FOR A DEPARTMENTALIZED BUSINESSDEPARTMENTALIZED BUSINESS
Journal entries used to prepare temporary accounts for a new fiscal period are called closing entries.
The information to journalize closing entries is obtained from the Departmental Margin Statements and the Income Statement columns of the worksheet.
Modified by D. Burns West Johnston High School
page 119
CENTURY 21 ACCOUNTING © Thomson/South-Western
EXPLANATION OF CLOSING ENTRIESEXPLANATION OF CLOSING ENTRIES
At the end of each fiscal period, businesses record four closing entries:1. Closing entry for income statement accounts with credit
balances (revenue & contra cost accounts)
2. Closing entry for income statement accounts with debit balances (cost, contra revenue, and expense accounts)
3. Closing entry to record net income or net loss in the retained earnings account & to close the income summary account
4. Closing entry for the dividends account
Modified by D. Burns West Johnston High School
page 119
CENTURY 21 ACCOUNTING © Thomson/South-Western Modified by D. Burns West Johnston High School
JOURNALIZING CLOSING ENTRIES FOR JOURNALIZING CLOSING ENTRIES FOR A DEPARTMENTALIZED BUSINESSA DEPARTMENTALIZED BUSINESS page 119
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1. Write Closing Entries in Account Title column.
2. Record entry to close income statement accounts with credit balances.
3. Write (continued on general journal page 15) to show that the closing entries are continued.
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CENTURY 21 ACCOUNTING © Thomson/South-Western Modified by D. Burns West Johnston High School
JOURNALIZING CLOSING ENTRIES FOR JOURNALIZING CLOSING ENTRIES FOR A DEPARTMENTALIZED BUSINESSA DEPARTMENTALIZED BUSINESS page 120
4. Write Closing Entries (continued) in the Account Title column.
5. Record entry to close income statement accounts with debit balances.
6. Record entry to close Income Summary to Retained Earnings.
7. Record entry for Dividends.
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CENTURY 21 ACCOUNTING © Thomson/South-Western
POST CLOSING TRIAL BALANCE FOR A A POST CLOSING TRIAL BALANCE FOR A A DEPARTMENTALIZED BUSINESSDEPARTMENTALIZED BUSINESS
Modified by D. Burns West Johnston High School
page 122
A trial balance prepared after the closing entries are posted is called a post-closing trial balance
A post closing trial balance proves that debits and credits are still equal after the adjusting and closing entries have been posted.
CENTURY 21 ACCOUNTING © Thomson/South-Western Modified by D. Burns West Johnston High School
POST-CLOSING TRIAL BALANCE FOR POST-CLOSING TRIAL BALANCE FOR A DEPARTMENTALIZED BUSINESSA DEPARTMENTALIZED BUSINESS page 122
Post closing trial balance contains only the permanent account balances.
Temporary accounts were closed with the closing entries and have a zero balance.
CENTURY 21 ACCOUNTING © Thomson/South-Western Modified by D. Burns West Johnston High School
2. Record entries in journals.
SUMMARY OF ACCOUNTING CYCLESUMMARY OF ACCOUNTING CYCLE page 123
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3. Post journal entries to the ledgers.
9. Prepare a post-closing trial balance.
8. Journalize and post adjusting and closing entries.
7. Prepare financial statements.
6. Prepare a trial balance on the work sheet.
5. Prepare schedules of accounts receivable and accounts payable from the subsidiary ledgers.
4. Prepare interim departmental statement of gross profit.
1. Verify source documents for accuracy.
The series of accounting activities included in recording financial information for a fiscal period is called an accounting cycle.
CENTURY 21 ACCOUNTING © Thomson/South-Western Modified by D. Burns West Johnston High School
TERMS REVIEWTERMS REVIEW
adjusting entries closing entries post-closing trial balance accounting cycle
page 117
