1. Chapter 9 Adjusting and Closing Entries

2. Terms that you need to know Adjusting EntriesAdjusting Entries –Used to bring accounts up to date at the end of the year. SuppliesSupplies InventoryInventory Value of assets decreaseValue of assets decrease –Recorded directly from the Worksheet

3. Insert worksheet here…….

4. General Journal Page 1 Date Account Title Doc No Post Ref DebitCredit Adjusting Ent. Aug31 Supplies Expense 2564 Supplies 2564 31 Insurance Expense Insurance Expense 100 Prepaid Insurance Prepaid Insurance 100 Account Supplies Expense Account NO530 DateItemPost RefDebitCredit Balance DebitCredit Aug31 G12564 530 AccountSupplies Account NO150 DateItemPost RefDebitCredit Balance DebitCredit Aug 31 G1 2564 150 Account Insurance Expense Account NO510 DateItemPost RefDebitCredit Balance DebitCredit Aug31 G1100 Account Prepaid Insurance Account NO160 DateItemPost RefDebitCredit Balance DebitCredit Aug31 G1 100 510 160

5. Please work on the “On your Own” page 196Please work on the “On your Own” page 196

6. Closing Entries Temporary AccountsTemporary Accounts –All accounts that are closed at the end of each fiscal period –These are accounts that we need to zero out at the end of each fiscal period. –Any Revenue, or Expense Account Permanent AccountsPermanent Accounts –Accounts that are left open for the life of the business –Any Asset, Liability, or the Owner’s Equity Account

7. The income summary Account This is a account that has no balance.This is a account that has no balance. –We use this account to put all of our numbers together. –It is used to help us determine our net income or net loss.

8. 4 step process in doing closing entries Step 1Step 1 –Close all accounts that have a credit balance in the Income statement columns to the Income Summary

10. General JournalPage 1 Date Account TitleDoc NoPost RefDebitCredit Closing Ent Aug31Sales 4411 Income Summary 4411 AccountSales Account NO410 DateItemPost RefDebitCredit Balance DebitCredit Aug31 G1 4411 31 G14411 ------------- 410 Account Income Summary Account NO330 DateItemPost RefDebitCredit Balance DebitCredit Aug 31 G1 4411 330

11. 4 step process in doing closing entries Step 1Step 1 –Close all accounts that have a credit balance in the Income statement columns to the Income Summary Step 2Step 2 –Close all accounts that have a debit balance in the Income statement columns to the Income summary.

12. Advertising Exp Insurance Exp Miscellaneous Rent Exp Supplies Exp Utilities Exp

13. General JournalPage 1 Date Account TitleDoc NoPost RefDebitCredit Closing Ent Aug31Sales 4104411 Income Summary 330 4411 31Income Summary 3303312 Advert. Exp 510 273 Insurance Exp. 520 100 Miscellaneous Exp 530 10 Rent Ex 535 250 Supplies Expense 540 2564 Utilities Expense 550 115 Account Ad Expense Account NO510 DateItemPost RefDebitCredit Balance DebitCredit Aug 31 G1 273 ------------- Account Insuranc e Exp Account NO520 DateItemPost RefDebitCredit Balance DebitCredit Aug 3131 G1100 G1 100----------- Account Supp Exp Account NO540 DateItemPost RefDebitCredit Balance DebitCredit Aug31 G12564 --------- Account Misc. Exp Account NO530 DateItemPost RefDebitCredit Balance DebitCredit Aug31 G110 31 10----- 3312

14. 4 step process in doing closing entries Step 1Step 1 –Close all accounts that have a credit balance in the Income statement columns to the Income Summary Step 2Step 2 –Close all accounts that have a debit balance in the Income statement columns to the Income summary. Step 3Step 3 –Close the income summary to the Capital Account The total in the income summary should equal the net income or loss on the worksheetThe total in the income summary should equal the net income or loss on the worksheet

15. General JournalPage 1 Date Account TitleDoc NoPost RefDebitCredit Closing Ent Aug31Sales 4104411 Income Summary 330 4411 31Income Summary 3303312 Advert. Exp 510 273 Insurance Exp. 520 100 Miscellaneous Exp 530 10 Rent Ex 535 250 Supplies Expense 540 2564 Utilities Expense 550 115

16. Income Summary 4411 1099 This should be The total of the net income On the worksheet Since this has a balance on the Credit side We must debit it and transfer it to the Capital Account 3312

17. Account Income Summary Account NO330 DateItemPost RefDebitCredit Balance DebitCredit Aug31 g1 4411 31 G13312 1099 31 1099 ------------- Account Capital Account NO310 DateItemPost RefDebitCredit Balance DebitCredit Aug 31Bal ------- 31 G1 1099 General JournalPage 1 Date Account TitleDoc NoPost RefDebitCredit Closing Ent Aug31Sales 4104411 Income Summary 330 4411 31Income Summary 3303312 Advert. Exp 510 273 Insurance Exp. 520 100 Miscellaneous Exp 530 10 Rent Ex 535 250 Supplies Expense 540 2564 Utilities Expense 550 115

18. General JournalPage 1 Date Account TitleDoc NoPost RefDebitCredit Closing Ent Aug31Sales 4411 Income Summary 4411 31Income Summary 3312 Advertising Expense 273 Insurance Expense 100 Miscellaneous 10 Rent Expense 50 Supplies Expense 2564 Utilities Expense 115 31Income Summary 1099 Barbara Trevino, Cap 1099

19. 4 step process in doing closing entries Step 1Step 1 –Close all accounts that have a credit balance in the Income statement columns to the Income Summary Step 2Step 2 –Close all accounts that have a debit balance in the Income statement columns to the Income summary. Step 3Step 3 –Close the income summary to the Capital Account The total in the income summary should equal the net income or loss on the worksheetThe total in the income summary should equal the net income or loss on the worksheet Step 4Step 4 –Close the Drawing into the Capital Account

20. Since the drawing has a debit balance it needs to be closed with a credit Balance to be placed into the Capital Account

21. 4 step process in doing closing entries Step 1Step 1 –Close all accounts that have a credit balance in the Income statement columns to the Income Summary Step 2Step 2 –Close all accounts that have a debit balance in the Income statement columns to the Income summary. Step 3Step 3 –Close the income summary to the Capital Account The total in the income summary should equal the net income or loss on the worksheetThe total in the income summary should equal the net income or loss on the worksheet Step 4Step 4 –Close the Drawing into the Capital Account

22. General JournalPage 1 Date Account TitleDoc NoPost RefDebitCredit Closing Ent Aug31Sales 4411 Income Summary 4411 31Income Summary 3312 Advertising Expense 273 Insurance Expense 100 Miscellaneous 10 Rent Expense 50 Supplies Expense 2564 Utilities Expense 115 31Income Summary 1099 Barbara Trevino, Cap 1099 31Barbara Trevino, Cap 600 Barbara Trevino, Drawing 600

23. Section 3 Post-Closing Trial Balance

24. Please work “On your Own” on page 203 it is the continuation of the last “On Your Own”Please work “On your Own” on page 203 it is the continuation of the last “On Your Own”

25. After we have closed all of the temporary accounts, we have to do something with all of the permanent accounts.After we have closed all of the temporary accounts, we have to do something with all of the permanent accounts. We create a financial document that makes sure that all of our assets, liabilities and Owner’s equity are in balance.We create a financial document that makes sure that all of our assets, liabilities and Owner’s equity are in balance. All we have to do is take a look at the balance sheet section of the worksheet and but the numbers on the sheet.All we have to do is take a look at the balance sheet section of the worksheet and but the numbers on the sheet.

27. Encore Music Post-Closing Trial Balance August 31, 20xx Account TitleDebitCredit Cash8272 Petty Cash200 Account Rec. - Kids Time100 Account Rec. - Learn N Play20 Supplies2187 Prepaid Insurance1100 Accounts Pay - Ling Music 1360 Accounts Pay - Sull Off Supp 20 Barbara Trevino, Capital 10499

28. Problems 9-1,2,3,49-1,2,3,4 We will also do the computer problem together next class, so that we know how to do it on the computer (kind of redundant isn’t it?)We will also do the computer problem together next class, so that we know how to do it on the computer (kind of redundant isn’t it?)