ACCOUNTING CYCLE FOR A SERVICE BUSINESS 1. Analyzes transactions 1 2. Journalize 2 3. Post 8 4. Prepare work sheet 5. Prepare financial statements 3 6. Journalize adjusting and closing entries 7 4 7. Post adjusting and closing entries 8. Prepare post-closing trial balance 6 5 LESSON 8-3

ADJUSTING ENTRY FOR SUPPLIES LESSON 8-1

ADJUSTING ENTRY FOR PREPAID INSURANCE LESSON 8-1

Closing entries TEMPORARY PERMANENT SALES + EXPENSES INCOME SUMMARY CAPITAL ACCOUNT (OE) TEMPORARY PERMANENT

Closing entries TERMS REVIEW Permanent Accounts also known as Real Accounts - Assets, Liabilities and OE accounts Temporary Accounts – used to accumulate information until it is transferred to OE accounts (e.g. Sales & Expenses) Closing Entries – used to reduce temporary accounts back to 0. WHY?? LESSON 8-2

WORK sHEET

NEED FOR THE INCOME SUMMARY ACCOUNT LESSON 8-2

CLOSING ENTRY FOR AN INCOME STATEMENT ACCOUNT WITH A CREDIT BALANCE (Debit to close) LESSON 8-2

CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCES (Credit to close) LESSON 8-2

CLOSING ENTRY TO RECORD NET INCOME OR LOSS AND CLOSE THE INCOME SUMMARY ACCOUNT page 210 (Income Summary: debit to close) (Capital: credit to record net income) LESSON 8-2

CLOSING ENTRY FOR THE OWNER’S DRAWING ACCOUNT LESSON 8-2 4/17/2017 CLOSING ENTRY FOR THE OWNER’S DRAWING ACCOUNT page 211 (Credit to close) LESSON 8-2 GREEN

Application problem 8-2 Get a textbook. Go to schoolrack.com/dgarfinkel. Click on “Accounting” Scroll down to “Chapter 8” and click on “Activity: Excel Application Problem 8-2” Open the file up and turn to p. 221 in the text