Lesson 5
Completing the Accounting Cycle
Task Team of
FUNDAMETAL ACCOUNTING
School of Business,Sun Yat-sen University
2
Outline
? Describe the preparation of adjusted trial
balance
? Describe and prepare a worksheet and
describe its usefulness.
? Describe the closing process and explain
why temporary accounts are closed each
period.
? Prepare closing entries.
3
Accounting Cycle
1.Analyze
Transactions
2,
Journalize 3,Post
4,Unadjusted
trial balance
5,Adjust
6,Adjusted
trial balance
7,Prepare
finance
statements
8.Close
Start the
next cycle
4
What We Have Done?
?So far we have discussed the following steps
in the accounting cycle:
?Analyzing
?Recording
?Posting
?Unadjusted trial balance
?Adjusting
?Adjusted trial balance
Let’s start
from the
worksheet
5
What are on the Worksheet?
? A worksheet includes following
columns:
?Unadjusted trial balance.
?Adjusting entries
?Adjusted trial balance.
?income statement
?Balance sheet
? Worksheet can be used to simplify the
preparation of financial statements.
6
A Blank Worksheet
7
Steps in preparation of the worksheet
A c c ou n t
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
C a s h 171000
S h or t - t e r m i n ve s t m e n t 100000
A c c ou n t s R e c e i vab l e 36000
I n t e r e s t r e c e i vab l e
P r e p ai d E xp e n s e 20000
I n ve n t or y 20000
P l an t an d E q u i p m e m t 250000
A c c u m u l at e d D e p r e c i at i on
A c c ou n t s P aya b l e 50000
W age s p aya b l e
U n e ar n e d R e ve n u e 50000
P ai d C ap i t al 500000
S al e s R e ve n u e 36000
I n t e r e s t R e ve n u e
C os t of S al e s 30000
O p e r at i n g e xp e n s e s 9000
t ot al 636000 636000
S m i t h I n c,
W or k S h e e t
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t an d
S t at e m e n t of O w n e r ' s
E q u i t y
U n ad j u s t e d T r i al
B al an c e
A d j u s t m e n t s
A d j u s t e d T r i al
B al an c e
I n c om e S t at e m e n t
Step 1:
Enter the
accounts and
unadjusted
trial balance
8
Steps in preparation of the worksheet
A c c ou n t
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
C a s h 171000
S h or t - t e r m i n ve s t m e n t 100000
A c c ou n t s R e c e i vab l e 36000
I n t e r e s t r e c e i vab l e
2 9 1 6, 6 7
P r e p ai d E xp e n s e 20000
10000
I n ve n t or y 20000
P l an t an d E q u i p m e m t 250000
A c c u m u l at e d D e p r e c i at i on
2600
A c c ou n t s P aya b l e 50000
W age s p aya b l e
35000
U n e ar n e d R e ve n u e 50000
2 5 0 0 0, 0 0
P ai d C ap i t al 500000
S al e s R e ve n u e 36000
25000
I n t e r e s t R e ve n u e
2 9 1 6, 6 7
C os t of S al e s 30000
O p e r at i n g e xp e n s e s 9000
4 7 6 0 0, 0 0
t ot al 636000 636000
7 5 5 1 6, 6 7 7 5 5 1 6, 6 7
S m i t h I n c,
W or k S h e e t
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t an d
S t at e m e n t of O w n e r ' s
E q u i t y
U n ad j u s t e d T r i al
B al an c e
A d j u s t m e n t s
A d j u s t e d T r i al
B al an c e
I n c om e S t at e m e n t
Step2:
Entry the
adjusting
entries’
9
Steps in preparation of the worksheet
A c c ou n t
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
C a s h 171000 171000
S h or t - t e r m i n ve s t m e n t 100000 100000
A c c ou n t s R e c e i vab l e 36000 36000
I n t e r e s t r e c e i vab l e 2 9 1 6, 6 7 2916.67
P r e p ai d E xp e n s e 20000 10000 10000
I n ve n t or y 20000 20000
P l an t an d E q u i p m e m t 250000 250000
A c c u m u l at e d D e p r e c i at i on
2600
2600
A c c ou n t s P aya b l e 50000 50000
W age s p aya b l e
35000
35000
U n e ar n e d R e ve n u e 50000
2 5 0 0 0, 0 0
25000.00
P ai d C ap i t al 500000 500000
S al e s R e ve n u e 36000
25000
61000
I n t e r e s t R e ve n u e
2 9 1 6, 6 7
2916.67
C os t of S al e s 30000 30000
O p e r at i n g e xp e n s e s 9000
4 7 6 0 0, 0 0
56600.00
t ot al 636000 636000
7 5 5 1 6, 6 7 7 5 5 1 6, 6 7 676516.67 676516.67
S m i t h I n c,
W or k S h e e t
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t an d
S t at e m e n t of O w n e r ' s
U n ad j u s t e d T r i al
B al an c e
A d j u s t m e n t s
A d j u s t e d T r i al
B al an c e
I n c om e S t at e m e n t
Step3:
Entry the
adjusted
trial balance
10
Steps in preparation of the worksheet
A c c ou n t
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
C a s h 171000 171000
S h or t - t e r m i n ve s t m e n t 100000 100000
A c c ou n t s R e c e i vab l e 36000 36000
I n t e r e s t r e c e i vab l e
2 9 1 6, 6 7
2916.67
P r e p ai d E xp e n s e 20000
10000
10000
I n ve n t or y 20000 20000
P l an t an d E q u i p m e m t 250000 250000
A c c u m u l at e d D e p r e c i at i on
2600
2600
A c c ou n t s P aya b l e 50000 50000
W age s p aya b l e
35000
35000
U n e ar n e d R e ve n u e 50000
2 5 0 0 0, 0 0
25000.00
P ai d C ap i t al 500000 500000
S al e s R e ve n u e 36000
25000
61000
6 1,0 0 0
I n t e r e s t R e ve n u e
2 9 1 6, 6 7
2916.67
2,9 1 7
C os t of S al e s 30000 30000
3 0,0 0 0
O p e r at i n g e xp e n s e s 9000
4 7 6 0 0, 0 0
56600.00
5 6,6 0 0
t ot al 636000 636000
7 5 5 1 6, 6 7 7 5 5 1 6, 6 7 676516.67 676516.67 8 6,6 0 0 6 3,9 1 7
N e t I n c o m e
( 2 2,6 8 3 )
S m i t h I n c,
W or k S h e e t
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t an d
S t at e m e n t of O w n e r ' s
U n ad j u s t e d T r i al
B al an c e
A d j u s t m e n t s
A d j u s t e d T r i al
B al an c e
I n c om e S t at e m e n t
Step4:
Entry Adjusted
Amounts to
Income Statement
Columns
11
Steps in preparation of the worksheet
A c c ou n t
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
C a s h 171000 171000 171000
S h or t - t e r m i n ve s t m e n t 100000 100000 100000
A c c ou n t s R e c e i vab l e 36000 36000 36000
I n t e r e s t r e c e i vab l e
2 9 1 6, 6 7
2916.67 2916.67
P r e p ai d E xp e n s e 20000
10000
10000 10000
I n ve n t or y 20000 20000 20000
P l an t an d E q u i p m e m t 250000 250000 250000
A c c u m u l at e d D e p r e c i at i on
2600
2600 -2600
A c c ou n t s P aya b l e 50000 50000 50000
W age s p aya b l e
35000
35000 35000
U n e ar n e d R e ve n u e 50000
2 5 0 0 0, 0 0
25000.00 25000
P ai d C ap i t al 500000 500000 500000
R e t ai n e d E ar n i n gs (22683)
S al e s R e ve n u e 36000
25000
61000
6 1,0 0 0
I n t e r e s t R e ve n u e
2 9 1 6, 6 7
2916.67
2,9 1 7
C os t of S al e s 30000 30000
3 0,0 0 0
O p e r at i n g e xp e n s e s 9000
4 7 6 0 0, 0 0
56600.00
5 6,6 0 0
t ot al 636000 636000
7 5 5 1 6, 6 7 7 5 5 1 6, 6 7 676516.67 676516.67 8 6,6 0 0 6 3,9 1 7
N e t I n c o m e
( 2 2,6 8 3 )
6 3,9 1 7 6 3,9 1 7 5 8 7,3 1 7 5 8 7,3 1 7
W or k S h e e t
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t
U n ad j u s t e d T r i al
B al an c e
A d j u s t m e n t s A d j u s t e d T r i al B al an c e I n c om e S t at e m e n t
Step5:
Entry Adjusted
Amounts to
Balance sheet
Columns
12
Preparing the Financial Statements
?Financial Statements can be prepared easily
using the completed worksheet.
?The nature and the preparation of Financial
Statement will be discussed in lesson 9
13
Closing Process
? The closing process occurs at the end of an
accounting period after financial
statements are prepared.
? Reasons for closing entries:
?Resets revenue and expense account balances
to zero at the end of the period.
?Updates the retained earnings account to
reflect net income and distributions.
14
Temporary and Permanent Accounts
?Temporary accounts are also called nominal
accounts,They are opened at the beginning
of a period,used to record events for that
period and closed at the end of the period,
They accumulate data related to one
accounting period only.
15
Temporary Accounts
Income
Summary
Rev
en
ues
Exp
en
se
s
The closing process
applies only to
temporary accounts.
16
Permanent Accounts
Permanent
Accounts
Assets
Liabilities Owner’s Capital
The closing process does
not apply to permanent
accounts.
17
Steps in the Closing Process
? Set an Income Summary account.
? Close Revenue accounts to Income
Summary.
? Close Expense accounts to Income
Summary.
? Close Income Summary account to
Retained Earnings
18
Close Revenue Accounts to Income
Summary
I nc om e S um m a r y
6 3,9 1 7
6 3,9 1 7
…
6 1,0 0 0 6 1,0 0 0
S a l e s R e v e nue
2,9 1 7 2,9 1 7
-
I nt e r e s t R e v e nu e
The entries,
Dr,Sales Revenue 61000
Interest Revenue 2917
Cr,Income Summary 63917
19
Close Expense Accounts to Income
Summary
…
3 0,0 0 0 3 0,0 0 0
-
C os t of S a l e s
I nc om e S um m a r y
8 6,6 0 0 6 3,9 1 7
( 2 2,6 8 3 )
The entries:
Dr,Income 86600
Cr,Cost of Sales 30000
Operating Expense 56600
…
5 6,6 0 0 5 6,6 0 0
-
O pe r a t i ng E x pe ns e
20
Close Income Summary to Retained
Earnings
R e t a i ne d E a r ni ng s
…
( 2 2,6 8 3 )
I nc om e S um m a r y
8 6,6 0 0 6 3,9 1 7
( 2 2,6 8 3 )
( 2 2,6 8 3 ) - The Entries:
Dr,Income Summary 22683
Cr,Retained Earnings 22683
21
The Closing Entries
?Close revenue accounts to Income
Summary.
The entries are,
Dr,All Revenue
Cr,Income Summary
22
The Closing Entries
?Close expense accounts to Income
Summary.
The entries are:
Dr,Income Summary
Cr,All Expenses
23
The Closing Entries
?Close Income Summary account to
Retained Earnings.
?If there is a profit,the entries are:
Dr,Income Summary
Cr,Retained Earnings
?If there is a loss,the entries are:
Dr,Retained Earnings
Cr,Income Summary
24
Post-Closing Trial Balance
?Post-Closing Trial Balance is a list of
balances for all accounts that not closed,
?The purpose of a post-closing trial balance
is to verifies that:
?Total debits = total credits for permanent
accounts.
?All temporary accounts have zero balances
25
Post-Closing Trial Balance
A c c ou n t
Dr Cr
C a s h
171000
S h or t - t e r m i n ve s t m e n t 100000
A c c ou n t s R e c e i vab l e 36000
I n t e r e s t r e c e i vab l e 2916.67
P r e p ai d E xp e n s e 10000
I n ve n t or y 20000
P l an t an d E q u i p m e m t 250000
A c c u m u l at e d D e p r e c i at i on 2600
A c c ou n t s P aya b l e 50000
W age s p aya b l e 35000
U n e ar n e d R e ve n u e 25000
P ai d C ap i t al 500000
R e t ai n e d E ar n i n gs (22683)
S al e s R e ve n u e
I n t e r e s t R e ve n u e
C os t of S al e s
O p e r at i n g e xp e n s e s
t ot al
5 8 9,9 1 7 5 8 9,9 1 7
S m i t h I n c,
P os t - C l os i n g T r i al B al an c e
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t
The End of Lesson 5
Completing the Accounting Cycle
Task Team of
FUNDAMETAL ACCOUNTING
School of Business,Sun Yat-sen University
2
Outline
? Describe the preparation of adjusted trial
balance
? Describe and prepare a worksheet and
describe its usefulness.
? Describe the closing process and explain
why temporary accounts are closed each
period.
? Prepare closing entries.
3
Accounting Cycle
1.Analyze
Transactions
2,
Journalize 3,Post
4,Unadjusted
trial balance
5,Adjust
6,Adjusted
trial balance
7,Prepare
finance
statements
8.Close
Start the
next cycle
4
What We Have Done?
?So far we have discussed the following steps
in the accounting cycle:
?Analyzing
?Recording
?Posting
?Unadjusted trial balance
?Adjusting
?Adjusted trial balance
Let’s start
from the
worksheet
5
What are on the Worksheet?
? A worksheet includes following
columns:
?Unadjusted trial balance.
?Adjusting entries
?Adjusted trial balance.
?income statement
?Balance sheet
? Worksheet can be used to simplify the
preparation of financial statements.
6
A Blank Worksheet
7
Steps in preparation of the worksheet
A c c ou n t
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
C a s h 171000
S h or t - t e r m i n ve s t m e n t 100000
A c c ou n t s R e c e i vab l e 36000
I n t e r e s t r e c e i vab l e
P r e p ai d E xp e n s e 20000
I n ve n t or y 20000
P l an t an d E q u i p m e m t 250000
A c c u m u l at e d D e p r e c i at i on
A c c ou n t s P aya b l e 50000
W age s p aya b l e
U n e ar n e d R e ve n u e 50000
P ai d C ap i t al 500000
S al e s R e ve n u e 36000
I n t e r e s t R e ve n u e
C os t of S al e s 30000
O p e r at i n g e xp e n s e s 9000
t ot al 636000 636000
S m i t h I n c,
W or k S h e e t
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t an d
S t at e m e n t of O w n e r ' s
E q u i t y
U n ad j u s t e d T r i al
B al an c e
A d j u s t m e n t s
A d j u s t e d T r i al
B al an c e
I n c om e S t at e m e n t
Step 1:
Enter the
accounts and
unadjusted
trial balance
8
Steps in preparation of the worksheet
A c c ou n t
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
C a s h 171000
S h or t - t e r m i n ve s t m e n t 100000
A c c ou n t s R e c e i vab l e 36000
I n t e r e s t r e c e i vab l e
2 9 1 6, 6 7
P r e p ai d E xp e n s e 20000
10000
I n ve n t or y 20000
P l an t an d E q u i p m e m t 250000
A c c u m u l at e d D e p r e c i at i on
2600
A c c ou n t s P aya b l e 50000
W age s p aya b l e
35000
U n e ar n e d R e ve n u e 50000
2 5 0 0 0, 0 0
P ai d C ap i t al 500000
S al e s R e ve n u e 36000
25000
I n t e r e s t R e ve n u e
2 9 1 6, 6 7
C os t of S al e s 30000
O p e r at i n g e xp e n s e s 9000
4 7 6 0 0, 0 0
t ot al 636000 636000
7 5 5 1 6, 6 7 7 5 5 1 6, 6 7
S m i t h I n c,
W or k S h e e t
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t an d
S t at e m e n t of O w n e r ' s
E q u i t y
U n ad j u s t e d T r i al
B al an c e
A d j u s t m e n t s
A d j u s t e d T r i al
B al an c e
I n c om e S t at e m e n t
Step2:
Entry the
adjusting
entries’
9
Steps in preparation of the worksheet
A c c ou n t
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
C a s h 171000 171000
S h or t - t e r m i n ve s t m e n t 100000 100000
A c c ou n t s R e c e i vab l e 36000 36000
I n t e r e s t r e c e i vab l e 2 9 1 6, 6 7 2916.67
P r e p ai d E xp e n s e 20000 10000 10000
I n ve n t or y 20000 20000
P l an t an d E q u i p m e m t 250000 250000
A c c u m u l at e d D e p r e c i at i on
2600
2600
A c c ou n t s P aya b l e 50000 50000
W age s p aya b l e
35000
35000
U n e ar n e d R e ve n u e 50000
2 5 0 0 0, 0 0
25000.00
P ai d C ap i t al 500000 500000
S al e s R e ve n u e 36000
25000
61000
I n t e r e s t R e ve n u e
2 9 1 6, 6 7
2916.67
C os t of S al e s 30000 30000
O p e r at i n g e xp e n s e s 9000
4 7 6 0 0, 0 0
56600.00
t ot al 636000 636000
7 5 5 1 6, 6 7 7 5 5 1 6, 6 7 676516.67 676516.67
S m i t h I n c,
W or k S h e e t
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t an d
S t at e m e n t of O w n e r ' s
U n ad j u s t e d T r i al
B al an c e
A d j u s t m e n t s
A d j u s t e d T r i al
B al an c e
I n c om e S t at e m e n t
Step3:
Entry the
adjusted
trial balance
10
Steps in preparation of the worksheet
A c c ou n t
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
C a s h 171000 171000
S h or t - t e r m i n ve s t m e n t 100000 100000
A c c ou n t s R e c e i vab l e 36000 36000
I n t e r e s t r e c e i vab l e
2 9 1 6, 6 7
2916.67
P r e p ai d E xp e n s e 20000
10000
10000
I n ve n t or y 20000 20000
P l an t an d E q u i p m e m t 250000 250000
A c c u m u l at e d D e p r e c i at i on
2600
2600
A c c ou n t s P aya b l e 50000 50000
W age s p aya b l e
35000
35000
U n e ar n e d R e ve n u e 50000
2 5 0 0 0, 0 0
25000.00
P ai d C ap i t al 500000 500000
S al e s R e ve n u e 36000
25000
61000
6 1,0 0 0
I n t e r e s t R e ve n u e
2 9 1 6, 6 7
2916.67
2,9 1 7
C os t of S al e s 30000 30000
3 0,0 0 0
O p e r at i n g e xp e n s e s 9000
4 7 6 0 0, 0 0
56600.00
5 6,6 0 0
t ot al 636000 636000
7 5 5 1 6, 6 7 7 5 5 1 6, 6 7 676516.67 676516.67 8 6,6 0 0 6 3,9 1 7
N e t I n c o m e
( 2 2,6 8 3 )
S m i t h I n c,
W or k S h e e t
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t an d
S t at e m e n t of O w n e r ' s
U n ad j u s t e d T r i al
B al an c e
A d j u s t m e n t s
A d j u s t e d T r i al
B al an c e
I n c om e S t at e m e n t
Step4:
Entry Adjusted
Amounts to
Income Statement
Columns
11
Steps in preparation of the worksheet
A c c ou n t
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
C a s h 171000 171000 171000
S h or t - t e r m i n ve s t m e n t 100000 100000 100000
A c c ou n t s R e c e i vab l e 36000 36000 36000
I n t e r e s t r e c e i vab l e
2 9 1 6, 6 7
2916.67 2916.67
P r e p ai d E xp e n s e 20000
10000
10000 10000
I n ve n t or y 20000 20000 20000
P l an t an d E q u i p m e m t 250000 250000 250000
A c c u m u l at e d D e p r e c i at i on
2600
2600 -2600
A c c ou n t s P aya b l e 50000 50000 50000
W age s p aya b l e
35000
35000 35000
U n e ar n e d R e ve n u e 50000
2 5 0 0 0, 0 0
25000.00 25000
P ai d C ap i t al 500000 500000 500000
R e t ai n e d E ar n i n gs (22683)
S al e s R e ve n u e 36000
25000
61000
6 1,0 0 0
I n t e r e s t R e ve n u e
2 9 1 6, 6 7
2916.67
2,9 1 7
C os t of S al e s 30000 30000
3 0,0 0 0
O p e r at i n g e xp e n s e s 9000
4 7 6 0 0, 0 0
56600.00
5 6,6 0 0
t ot al 636000 636000
7 5 5 1 6, 6 7 7 5 5 1 6, 6 7 676516.67 676516.67 8 6,6 0 0 6 3,9 1 7
N e t I n c o m e
( 2 2,6 8 3 )
6 3,9 1 7 6 3,9 1 7 5 8 7,3 1 7 5 8 7,3 1 7
W or k S h e e t
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t
U n ad j u s t e d T r i al
B al an c e
A d j u s t m e n t s A d j u s t e d T r i al B al an c e I n c om e S t at e m e n t
Step5:
Entry Adjusted
Amounts to
Balance sheet
Columns
12
Preparing the Financial Statements
?Financial Statements can be prepared easily
using the completed worksheet.
?The nature and the preparation of Financial
Statement will be discussed in lesson 9
13
Closing Process
? The closing process occurs at the end of an
accounting period after financial
statements are prepared.
? Reasons for closing entries:
?Resets revenue and expense account balances
to zero at the end of the period.
?Updates the retained earnings account to
reflect net income and distributions.
14
Temporary and Permanent Accounts
?Temporary accounts are also called nominal
accounts,They are opened at the beginning
of a period,used to record events for that
period and closed at the end of the period,
They accumulate data related to one
accounting period only.
15
Temporary Accounts
Income
Summary
Rev
en
ues
Exp
en
se
s
The closing process
applies only to
temporary accounts.
16
Permanent Accounts
Permanent
Accounts
Assets
Liabilities Owner’s Capital
The closing process does
not apply to permanent
accounts.
17
Steps in the Closing Process
? Set an Income Summary account.
? Close Revenue accounts to Income
Summary.
? Close Expense accounts to Income
Summary.
? Close Income Summary account to
Retained Earnings
18
Close Revenue Accounts to Income
Summary
I nc om e S um m a r y
6 3,9 1 7
6 3,9 1 7
…
6 1,0 0 0 6 1,0 0 0
S a l e s R e v e nue
2,9 1 7 2,9 1 7
-
I nt e r e s t R e v e nu e
The entries,
Dr,Sales Revenue 61000
Interest Revenue 2917
Cr,Income Summary 63917
19
Close Expense Accounts to Income
Summary
…
3 0,0 0 0 3 0,0 0 0
-
C os t of S a l e s
I nc om e S um m a r y
8 6,6 0 0 6 3,9 1 7
( 2 2,6 8 3 )
The entries:
Dr,Income 86600
Cr,Cost of Sales 30000
Operating Expense 56600
…
5 6,6 0 0 5 6,6 0 0
-
O pe r a t i ng E x pe ns e
20
Close Income Summary to Retained
Earnings
R e t a i ne d E a r ni ng s
…
( 2 2,6 8 3 )
I nc om e S um m a r y
8 6,6 0 0 6 3,9 1 7
( 2 2,6 8 3 )
( 2 2,6 8 3 ) - The Entries:
Dr,Income Summary 22683
Cr,Retained Earnings 22683
21
The Closing Entries
?Close revenue accounts to Income
Summary.
The entries are,
Dr,All Revenue
Cr,Income Summary
22
The Closing Entries
?Close expense accounts to Income
Summary.
The entries are:
Dr,Income Summary
Cr,All Expenses
23
The Closing Entries
?Close Income Summary account to
Retained Earnings.
?If there is a profit,the entries are:
Dr,Income Summary
Cr,Retained Earnings
?If there is a loss,the entries are:
Dr,Retained Earnings
Cr,Income Summary
24
Post-Closing Trial Balance
?Post-Closing Trial Balance is a list of
balances for all accounts that not closed,
?The purpose of a post-closing trial balance
is to verifies that:
?Total debits = total credits for permanent
accounts.
?All temporary accounts have zero balances
25
Post-Closing Trial Balance
A c c ou n t
Dr Cr
C a s h
171000
S h or t - t e r m i n ve s t m e n t 100000
A c c ou n t s R e c e i vab l e 36000
I n t e r e s t r e c e i vab l e 2916.67
P r e p ai d E xp e n s e 10000
I n ve n t or y 20000
P l an t an d E q u i p m e m t 250000
A c c u m u l at e d D e p r e c i at i on 2600
A c c ou n t s P aya b l e 50000
W age s p aya b l e 35000
U n e ar n e d R e ve n u e 25000
P ai d C ap i t al 500000
R e t ai n e d E ar n i n gs (22683)
S al e s R e ve n u e
I n t e r e s t R e ve n u e
C os t of S al e s
O p e r at i n g e xp e n s e s
t ot al
5 8 9,9 1 7 5 8 9,9 1 7
S m i t h I n c,
P os t - C l os i n g T r i al B al an c e
F or Y e ar e n d e d D e c,31 200 4
B al an c e S h e e t
The End of Lesson 5
