1. Accounting English Lu_Xiufen E-mail: xiufenlu@126.com 13707884146xiufenlu@126.com

2. Lesson one Lesson Ten Closing Procedures Lesson Ten Closing Procedures

3. Accounting English Steps in the accounting cycle Analyze transactions from source documents Record in journalsPost to general ledger accounts Adjust the general ledger accounts Prepare financial statements Close temporary accounts

4. Accounting English Lesson Ten Closing Procedures Words and PhrasesWords and Phrases 1 presentation 2 Exercises 3 Summary 4

5. Accounting English Part 1 Words and Phrases Words to Drill Temporary Close Reversing Eliminate Terms Temporary account Permanent account Real account Nominal account

6. Accounting English Part 1 Words and Phrases Temporary ---- adj lasting for,designed to be used for, a short time only temporary account Revenue and expense accounts are temporary accounts used to accumulate data related to a specific accounting year. These temporary accounts are maintained to facilitate preparation of the income statement.

7. Accounting English Part 1 Words and Phrases Close Close  v.t., v.i. Bring or come to an end Close a discussion. Closing price I want to close my account, settle in by paying or receiving money that is due. At the end of each accounting year, these temporary accounts will be closed. To close Sales and related accounts and transfer net sales to the Income Summary account.

8. Accounting English Part 1 Words and Phrases Reverse  v.t. v.i. Turn (sth) the other way round or up or inside out. Reverse a procedure Reversing entry The method of reversing adjustments made for accruals is an expedient to permit normal recording of subsequent payments or receipts.

9. Accounting English Part 1 Words and Phrases Eliminate  v.t. (from), remove; take or put away, get rid of (because unnecessary or unwanted) In practice, it is desirable to make reversing entries at the beginning of next accounting period to eliminate the accrued amounts of the respective expense and revenue items.

10. Accounting English Terms --Account 1 Temporary account 2 Permanent account

11. Accounting English Terms --Accounting Basis Text Account Temporary Permanent Text Balance sheet accounts. (Assets Liabilities Owners’ equity) Income statement accounts (Revenues Expenses)

12. Accounting English Terms – accounts 1 Real Account 2 Nominal Account

13. Accounting English Terms – Accounts Text Account Real Nominal Text Another name for Temporary account. Another name for Permanent account.

14. Accounting English Part 2 Presentation a. Which groups of accounts are closed at the end of the accounting year? b. Why is the Income Summary account used in the closing procedure? c. How is the Income Summary account used in the closing procedure?

15. Accounting English Part 2 Presentation Income Summary Expense Revenue

16. Accounting English Part 2 Presentation ---Five Types of Closing Entries 1 2 To close Sales and related accounts To close Purchases and related accounts To close operating expense accounts To close the Income Summary account 3 4 5 To close the Drawing account

17. Accounting English Of Single proprietorships and Partnerships Income Summary Debit side Credit side Capital Debit side Credit side

18. Accounting English Part 2 Presentation --- Part 2 Presentation --- Of a corporation Income Summary Debit side Credit side Retained Earnings Debit side Credit side

19. Accounting English Part 2 Presentation ---Reversing Adjustments for Accruals why the reversing adjustments made for accruals is an expedient ?

20. Accounting English It is an expedient to permit normal recording of subsequent payments or receipts.

21. Part 2 Presentation ---Reversing Adjustments for Accruals Accruing Unrecorded Expenses: Dr. Sales Salaries Expense 3 000 Office Salaries Expense 1 000 Cr. Accrued Salaries Payable 4 000 Reversing Adjustments for Accrued Salaries: Dr. Accrued Salaries Payable 4 000 Cr. Sales Salaries Expense 3 000 Office Salaries Expense 1 000

22. Accounting English Part 2 Presentation ---Reversing Adjustments for Accruals Accruing Unrecorded Revenue: Dr. Accrued Revenue 3 000 Cr. Service Fees Earned 3 000 Reversing Adjustments for Accrued Revenue: Dr. Service Fees Earned 3 000 Cr. Accrued Revenue 3 000

23. Accounting English Temporary accounts such as revenues and expenses accounts are closed at the end of the accounting year. Part 3 Exercises a. Which groups of accounts are closed at the end of the accounting year?

24. Accounting English Income Summary account is used to close temporary accounts finally to the retained earning (of a corporation) or capital accounts (of a single proprietorship or a partnership) at the end of each accounting period so that temporary accounts are ready for the accumulation of financial information for the next accounting period. Part 3 Exercises b. Why is the Income Summary account used in the closing procedure?

25. Accounting English The debit balances of temporary accounts will be transferred to the Income Summary account as debit and vice versa. The net credit balance of Income Summary account will be closed to the credit side of Retained Earnings account. Part 3 Exercises c. How is the Income Summary account used in the closing procedure?

26. Accounting English The method of reversing adjustments made for accruals is an expedient to permit normal recording of subsequent payments or receipts. Part 3 Exercises d. Explain why the method of reversing adjustments made for accruals is an expedient ?

27. Accounting English Part 3 Exercises e. Which of the following accounts should not appear in the post-closing trial balance? 1) Cash in bank 2) Allowance for Uncollectible Accounts 3) Depreciation Expense 4) Accumulated Depreciation 5) Patents 6) Interest Expense 7) Accrued Interest Payable 8) Sales 9) Account Receivable

28. Accounting English Part 3 Exercises 3) Depreciation Expense 6) Interest Expense 8) Sales

29. Accounting English Part 4 Summary. Temporary accounts such as revenues and expenses accounts are closed at the end of the accounting year. Income Summary account is used to close temporary accounts finally to the retained earning (of a corporation) or capital accounts (of a single proprietorship or a partnership) at the end of each accounting period so that temporary accounts are ready for the accumulation of financial information for the next accounting period.

30. Accounting English 2007 Annual report of TESCO