1. Completing the Accounting Cycle for a Merchandising Corporation
Chapter 20 $
Completing the Accounting Cycle for a Merchandising Corporation $
Making Accounting Relevant
At the end of a fiscal period, businesses must “close the accounting records” or clean the slate in order to begin another period. $ $
At the end of a school year, what types of activities do you perform? Do you clean out your locker? Do you prepare for a summer job?

2. $ $ $ $ Section 1 Journalizing Closing Entries What You’ll Learn
Chapter 20 $
Section 1 Journalizing Closing Entries $
What You’ll Learn
What steps are followed to close the ledger.
What closing entries are required for a merchandising business organized as a corporation.
What closing entry is required when a corporation reports a loss. $ $

3. $ $ $ $ Why It’s Important Chapter 20
Section 1 Journalizing Closing Entries (cont'd.)
Chapter 20 $
Why It’s Important
Closing the ledger “cleans the slate” so that the next accounting cycle can begin. $ $ $

4. $ $ $ $ Steps for Closing the Ledger Chapter 20
Section 1 Journalizing Closing Entries (cont'd.)
Chapter 20 $
Steps for Closing the Ledger
Closing entries transfer the balances of all the temporary accounts to a permanent account. $
1. Close the temporary accounts with credit balances to Income Summary $
2. Close the temporary accounts with debit balances to Income Summary $
3. Close the balance of Income Summary to Retained Earnings

5. $ $ $ $ Close Temporary Accounts with Credit Balances Chapter 20
Section 1 Journalizing Closing Entries (cont'd.)
Chapter 20 $
Close Temporary Accounts with Credit Balances $ $ $

6. $ $ $ $ Close Temporary Accounts with Debit Balances Chapter 20
Section 1 Journalizing Closing Entries (cont'd.)
Chapter 20 $
Close Temporary Accounts with Debit Balances $ $ $

7. $ $ $ $ Close the Balance of Income Summary to Retained Earnings
Section 1 Journalizing Closing Entries (cont'd.)
Chapter 20 $
Close the Balance of Income Summary to Retained Earnings $ $ $
What if there is a net Loss?
Dr. Retained Earnings
Cr. Income Summary

8. $ $ $ $ Check Your Understanding
Section 1 Journalizing Closing Entries (cont'd.)
Chapter 20 $
Check Your Understanding
1. During the closing process, which account balances are credited to the Income Summary account? $ $
2. Which account balances are debited to the Income Summary account? $