Recording Adjusting and Closing Entries for a Service Business Chapter 8 Recording Adjusting and Closing Entries for a Service Business Accounting February 2014

Warm Up The Walt Disney Company What do you think of when you hear the word DISNEY? How many of you think of the environment when you hear the word Disney?

Warm Up In 1990, the WDC introduced an The Walt Disney Company In 1990, the WDC introduced an Initiative called “Environmentality.” Definition-A fundamental ethic that blends business growth with the conservation of natural resources.

Warm Up The Walt Disney Company Environmentality goes beyond just complying laws. It includes purchasing recycled products, waste minimization , resource conservation, research and development, community involvement and education.

Warm Up The Walt Disney Company It’s a success!!! A 2011 report on the water usage at the Animal Kingdom stated that 145,000,000 gallons of water was saved just by having employees monitor their usage. So here is my question for you!

Warm Up The Walt Disney Company List at least two reasons why you think the WDC would be interested in such environmental measures? If the WDC purchased equipment to help measure water usage, would that equipment be classified as an asset, liability, or owner’s equity on the balance sheet? Why?

Warm Up The Walt Disney Company List at least two reasons why you think the WDC would be interested in such environmental measures? WDC could generally be concerned about the environment and believe that business has a responsibility to do what it can to conserve natural resources.

Warm Up The Walt Disney Company List at least two reasons why you think the WDC would be interested in such environmental measures? Could be that good use of natural resources can result in cost savings for the company. A company also might think that its customers expect the company to protect the environment.

Warm Up The Walt Disney Company If the WDC purchased equipment to help measure water usage, would that equipment be classified as an asset, liability, or owner’s equity on the balance sheet? Why? Equipment to help measure water usage would be classified as an asset because it is something of value owned by the company

Internet Research Activity Go to the homepage for a company or corporation of your choice. Search the site for the most recent annual report. Go to the income statement. Looking at the categories of Revenues on the income statement, List the accounts that may be Included in the company’s entry to close the revenue accounts.

Internet Research Activity Answers should vary here, but all answers should include the Income Summary account along with a variety of appropriate revenue accounts.

Chapter 8 presents journalizing adjusting entries for a service business organized as a proprietorship. Adjusting entries play an important role in the accounting cycle. Journalizing closing entries is also covered in this chapter.

Preview Chapter 8.1 Objectives

Objectives for Chapter 8.1 Define Accounting Terms related to adjusting entries for a service business organized as a proprietorship. Identify accounting concepts and practices related to adjusting entries for a service business organized as a proprietorship. Record adjusting entries for a service business organized as a proprietorship.

REMEMBER… The balance in an account is changed by journalizing a transaction and posting the entry to the account. When we prepared the worksheet, we only planned The adjusting entries. NO account balances have Been changed.

Terminology 8.1 Adjusting Entries- journal entries recorded to update general ledger accounts at the end of a fiscal period. (p. 202)

Let me Explain… You do not have to decide the debit and credit parts of the entry. The analysis was done when the worksheet was completed. All that needs to be done at this point is to record the entry in the journal. T accounts are given so that you can visualize the effect of the entry on accounts.

Let me Explain… There are no documents associated with adjusting entries, therefore the doc No. column is left blank. The entry must be posted to the general Ledger accounts before the account balance changes. Once the entry is posted, the supplies account balance will reflect the amount of supplies on hand at the end of the period.

ADJUSTING ENTRY FOR SUPPLIES page 202 1. Write the heading. 2. Write the date. 3. Write the title of the account debited. Record the debit amount. 1 4. Write the title of the account credited. Record the credit amount. 3 2 4 LESSON 8-1

Adjusting Entry for Prepaid Insurance page 204 1. Write the date. 2. Write the title of the account debited. Record the debit amount. 3. Write the title of the account credited. Record the credit amount. 2 1 3 LESSON 8-1

page 205 TERM REVIEW Adjusting entries- journal entries recorded to update general ledger accounts at the end of a fiscal period. (p. 202) Try Aplia-Work Together & On Your Own Application Problem Character Counts Can I Say this on My Resume? LESSON 8-1

Exit Ticket Why are Adjusting Entries Journalized? Where is the information obtained to journalize adjusting entries? What account are increased from zero balances after adjusting entries for supplies and prepaid insurance are journalized and posted?