Introduction to Accounting Preparing for a User’s Perspective Closing Entries: Identify temporary accounts Debits and Credits Trainer By Kevin C. Kimball, CPA with support from www.canvas.net Free Jan. 2014 Available on the Google Play Store

The Full Accounting Cycle Original Transaction Entries Identify Analyze Record Post Prepare Pre-adjusted TB Adjusting Entries Identify Analyze Record Post Prepare Adjusted TB Financial Statements Closing Entries Identify Analyze Record Post Prepare Post-Closing TB

Steps in the Accounting Cycle 1) Identify 2) Analyze Steps in the Accounting Cycle a) What accounts? Round 3 b) Increase or decrease? Closing Entries c) Amount $? d) Debit or credit? 3) Record 5) Prepare Post-Closing Trial Balance Date Account Debit Credit 12/31 Sales Revenue 1,000 Income Summary DR (CR) 150,570 - (5,000) (65,756) Etc. $0 Cash Etc. Accounts Payable Retained Earnings Total Income Summary Sales Revenue 4) Post 1,000 1,000

Current asset Current asset Current asset Contra asset Current asset Noncurrent liability Current asset Equity Current asset Contra asset Current asset Current asset Current asset Noncurrent asset Noncurrent asset Contra asset Contra asset Current liability Current liability Current liability Current liability Current liability

Temporary Accounts Permanent Account

The Periodicity Concept Economic transactions and events are to be accounted for in the accounting period and in the financial statements to which they relate. ALL BALANCE SHEET ACCOUNTS carry their ledger account balances forward each year; therefore, ALL BALANCE SHEET ACCOUNTS ARE PERMANENT ACCOUNTS. Beginning Balance Sheet as of 1/1/X1 Ending Balance Sheet As of 12/31/X1 Assets Liabilities Equity Beginning Balance Sheet As of 1/1/X2 Ending Balance Sheet As of 12/31/X2 ALL Income Statement and Dividend Accounts are CLOSED EACH Year into Retained Earnings (i.e. a PERMANENT ACCOUNT); therefore, ALL Income Statement and Dividend Accounts are TEMPORARY ACCOUNTS. Beginning Balance Sheet As of 1/1/X3

Into Retained Earnings Permanent Accounts R Temporary Accounts To be CLOSED Into Retained Earnings Evenues & gains E xpenses & losses & contra revenues I ncome summary D ividends

Current asset Current asset Current asset Contra asset Current asset Noncurrent liability Current asset Equity Current asset Contra asset Current asset Current asset Current asset Noncurrent asset Noncurrent asset Contra asset Contra asset Current liability Current liability Current liability Current liability Current liability

Temporary Accounts Permanent Account

Introduction to Accounting Preparing for a User’s Perspective Closing Entries: Identify temporary accounts Debits and Credits Trainer By Kevin C. Kimball, CPA with support from www.canvas.net Free Jan. 2014 Available on the Google Play Store