2. 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.

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

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

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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 Journalize and post adjusting entries
Step Journalize and post adjusting entries
In step 6, we journalize and post the adjusting entries off of the worksheet.

11. 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 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

12. 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 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

13. 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 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

14. 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 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 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

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.

20. 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

21. 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

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