CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 8-2 Recording Closing Entries  Need for permanent and temporary accounts  Need for closing temporary accounts  Need for the income summary account  Closing entry for income statement account with a credit balance  Closing entry for income statement accounts with debit balances  Closing entry to record net income or loss and close Income Summary  Closing entry for owner’s drawing account

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Competency: Understanding the Accounting Cycle for a Service Business 2 LESSON 8-2 Objectives: 46 Prepare entries to close temporary accounts 47 Journalize adjusting and closing entries for a service business 49 Prepare post-closing trial balance for a service business 51 Describe record-organization and retention- schedule procedure for a service business

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 3 LESSON 8-2 NEED FOR THE INCOME SUMMARY ACCOUNT page 207

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 4 LESSON 8-2 CLOSING ENTRY FOR AN INCOME STATEMENT ACCOUNT WITH A CREDIT BALANCE page Write the heading. 2.Write the date. 3.Write the title of the account debited. Record the debit amount. 4.Write the title of the account credited. Record the credit amount.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 8-2 CLOSING ENTRY FOR INCOME STATEMENT ACCOUNTS WITH DEBIT BALANCES page Debit amount 3.Credit 2.Income Summary 1.Date 3

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 8-2 CLOSING ENTRY TO RECORD NET INCOME OR LOSS AND CLOSE THE INCOME SUMMARY ACCOUNT page Credit 2.Debit 1.Date 1 2 3

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 8-2 CLOSING ENTRY FOR THE OWNER’S DRAWING ACCOUNT page Credit 2.Debit 1.Date 1 2 3

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 8-2 TERMS REVIEW permanent accounts temporary accounts closing entries page 212