Closing Entries and the Postclosing Trial Balance Chapter 6 Closing Entries and the Postclosing Trial Balance Section 2: Using Accounting Information Section Objectives 2. Prepare a postclosing trial balance. 3. Interpret financial statements. 4. Review the steps in the accounting cycle. The last objective of chapter 6 has us reviewing the steps in the accounting cycle of a business.

The Accounting Cycle Let’s review the steps in the accounting cycle.

Review the steps in the accounting cycle. Objective 4 Review the steps in the accounting cycle. This is our last objective in this chapter.

Step 1 Analyze transactions Step 1 Analyze transactions The Accounting Cycle Step 1 Analyze transactions Step 1 Analyze transactions Analyze the source documents. Sales slips Purchase invoices Credit memorandums Check stubs We start with step 1, analyzing transactions.

The Accounting Cycle Step 2 Journalize the data about transactions Step 2 Journalize the data about transactions Step 1 Analyze transactions Record the effects of the transactions in a journal. Step 2 –Journalize the financial transactions of the business.

The Accounting Cycle Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 3 Post the data about transactions Step 1 Analyze transactions Transfer data from the journal to the general ledger accounts. In step 3, we post our journal entries into the general ledger.

The Accounting Cycle Prepare a worksheet with five sections. Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 1 Analyze transactions Step 4 Prepare a worksheet Step 4 Prepare a worksheet Prepare a worksheet with five sections. Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet In step 4, we prepare a worksheet to help with the adjustment process and the financial statements.

The Accounting Cycle Prepare financial statements. Income Statement Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 1 Analyze transactions Step 4 Prepare a worksheet Prepare financial statements. Income Statement Statement of Owner’s Equity Balance Sheet Step 5 Prepare financial statements Step 5 Prepare financial statements In step 5, we use the worksheet to prepare our financial statements.

The Accounting Cycle Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 1 Analyze transactions Step 4 Prepare a worksheet The adjusting entries are a permanent record of the changes in account balances shown on the worksheet. Step 5 Prepare financial statements Step 6 Journalize and post adjusting entries Step 6 Journalize and post adjusting entries In step 6, we journalize and post the adjusting entries off of the worksheet.

The Accounting Cycle Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 1 Analyze transactions Step 4 Prepare a worksheet Transfer net income or net loss to owner’s equity. Reduce the balances of the temporary accounts to zero. Step 5 Prepare financial statements Step 6 Journalize and post adjusting entries In step 7, we journalize and post our end of period closing entries. Step 7 Journalize and post closing entries Step 7 Journalize and post closing entries

The Accounting Cycle Confirm that the general ledger is in balance. Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 1 Analyze transactions Step 4 Prepare a worksheet Confirm that the general ledger is in balance. Confirm that the revenue, expense, and drawing accounts have zero balances. Step 5 Prepare financial statements Step 6 Journalize and post adjusting entries In step 8, we prepare a post closing trial balance. Step 7 Journalize and post closing entries Step 8 Prepare a postclosing trial balance Step 8 Prepare a postclosing trial balance

The Accounting Cycle Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 1 Analyze transactions Step 4 Prepare a worksheet Use financial statements to understand and communicate the financial information and to make decisions. Step 5 Prepare financial statements Step 9 Interpret the financial information Step 9 Interpret the financial information Step 6 Journalize and post adjusting entries In step 9, we interpret the information provided in our financial statements. Step 7 Journalize and post closing entries Step 8 Prepare a postclosing trial balance

The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 4 Prepare a worksheet Step 5 Prepare financial statements Step 6 Journalize and post adjusting entries Step 7 Journalize and post closing entries Step 8 Prepare a postclosing trial balance Step 9 Interpret the financial information Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 1 Analyze transactions Step 4 Prepare a worksheet Step 5 Prepare financial statements Step 9 Interpret the financial information Step 6 Journalize and post adjusting entries These nine steps comprise an entire accounting cycle. Step 7 Journalize and post closing entries Step 8 Prepare a postclosing trial balance

Flow of Data Through a Simple Accounting System Source Documents Source documents General journal General ledger Worksheet Financial statements Source documents are analyzed. After studying the accounting cycle of JT’s Consulting Services, you have an understanding of how data flows through a simple accounting system for a small business: First—Source documents are analyzed.

Flow of Data Through a Simple Accounting System Source documents General journal ledger Worksheet Financial statements General journal Transactions are recorded in the general journal. Then, transactions are recorded in the general journal.

Flow of Data Through a Simple Accounting System Source documents General journal ledger Worksheet Financial statements General ledger Transactions are posted from the general journal to the general ledger. Then, transactions are posted from the general journal to the general ledger.

Flow of Data Through a Simple Accounting System Source documents General journal ledger Worksheet Financial statements Worksheet Financial information is proved, adjusted, and summarized on the worksheet. Next, we prepare a worksheet where information will be proved, adjusted, and summarized.

Flow of Data Through a Simple Accounting System Source documents General journal ledger Worksheet Financial statements Financial statements Financial information is reported on financial statements. Finally, we prepare financial statements.

Complete the following sentences: SECTION R E V I W Complete the following sentences: A postclosing trial balance is a statement to prove the _______ of total debits and credits. equality permanent Only the __________ accounts appear on the postclosing trial balance. Let’s see how many of these review questions you can answer. Preparing a postclosing trial balance is the ______ step of the accounting cycle. eighth

Complete the following sentences: R E V I W SECTION Complete the following sentences: The ninth step of the accounting cycle is ___________ the financial statements. interpreting The flow of data through an accounting system begins with a(n) _______________. source document The financial statement that reports the same items as the postclosing trial balance is the ____________. balance sheet

College Accounting, 11th Edition Thank You for using College Accounting, 11th Edition Price • Haddock • Brock