acct 151a chap 6 - cabrillo collegecabrillo.edu/~mbooth/acct151a/price 14th ed/week 7 chap 6 spring...
TRANSCRIPT
Acct 151A
Chap 6Instructor Michael Booth
Cabrillo College
Closing Entries
and the Postclosing
Trial Balance
Closing Entries
1 Journalize and post closing
entries
The Closing Process
The Accounting Cycle
Step 7
Journalize and
post closing
entries
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 3
Post the
data about
transactions
The seventh step in the accounting cycle is to journalize
and post closing entries
Step 7
Journalize and
post closing
entries
Closing entries are journal entries
that transfer the results of
operations (net income or net loss)
to ownerrsquos equity and reduce the
revenue expense and drawing
account balances to zero
ANSWER
QUESTION
What are closing entries
The Income Summary Account
The Income Summary account is a
special ownerrsquos equity account that
is used only in the closing process
to summarize the results of
operations
ANSWER
QUESTION
What is the Income Summary account
Income Summary Account
Classified as a temporary ownerrsquos equity account
Does not have a normal balance
Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period
Journalize and post closing entries
Steps in the Closing Process
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Closing Entries
and the Postclosing
Trial Balance
Closing Entries
1 Journalize and post closing
entries
The Closing Process
The Accounting Cycle
Step 7
Journalize and
post closing
entries
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 3
Post the
data about
transactions
The seventh step in the accounting cycle is to journalize
and post closing entries
Step 7
Journalize and
post closing
entries
Closing entries are journal entries
that transfer the results of
operations (net income or net loss)
to ownerrsquos equity and reduce the
revenue expense and drawing
account balances to zero
ANSWER
QUESTION
What are closing entries
The Income Summary Account
The Income Summary account is a
special ownerrsquos equity account that
is used only in the closing process
to summarize the results of
operations
ANSWER
QUESTION
What is the Income Summary account
Income Summary Account
Classified as a temporary ownerrsquos equity account
Does not have a normal balance
Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period
Journalize and post closing entries
Steps in the Closing Process
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Closing Process
The Accounting Cycle
Step 7
Journalize and
post closing
entries
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 3
Post the
data about
transactions
The seventh step in the accounting cycle is to journalize
and post closing entries
Step 7
Journalize and
post closing
entries
Closing entries are journal entries
that transfer the results of
operations (net income or net loss)
to ownerrsquos equity and reduce the
revenue expense and drawing
account balances to zero
ANSWER
QUESTION
What are closing entries
The Income Summary Account
The Income Summary account is a
special ownerrsquos equity account that
is used only in the closing process
to summarize the results of
operations
ANSWER
QUESTION
What is the Income Summary account
Income Summary Account
Classified as a temporary ownerrsquos equity account
Does not have a normal balance
Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period
Journalize and post closing entries
Steps in the Closing Process
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Accounting Cycle
Step 7
Journalize and
post closing
entries
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 3
Post the
data about
transactions
The seventh step in the accounting cycle is to journalize
and post closing entries
Step 7
Journalize and
post closing
entries
Closing entries are journal entries
that transfer the results of
operations (net income or net loss)
to ownerrsquos equity and reduce the
revenue expense and drawing
account balances to zero
ANSWER
QUESTION
What are closing entries
The Income Summary Account
The Income Summary account is a
special ownerrsquos equity account that
is used only in the closing process
to summarize the results of
operations
ANSWER
QUESTION
What is the Income Summary account
Income Summary Account
Classified as a temporary ownerrsquos equity account
Does not have a normal balance
Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period
Journalize and post closing entries
Steps in the Closing Process
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Closing entries are journal entries
that transfer the results of
operations (net income or net loss)
to ownerrsquos equity and reduce the
revenue expense and drawing
account balances to zero
ANSWER
QUESTION
What are closing entries
The Income Summary Account
The Income Summary account is a
special ownerrsquos equity account that
is used only in the closing process
to summarize the results of
operations
ANSWER
QUESTION
What is the Income Summary account
Income Summary Account
Classified as a temporary ownerrsquos equity account
Does not have a normal balance
Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period
Journalize and post closing entries
Steps in the Closing Process
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Income Summary Account
The Income Summary account is a
special ownerrsquos equity account that
is used only in the closing process
to summarize the results of
operations
ANSWER
QUESTION
What is the Income Summary account
Income Summary Account
Classified as a temporary ownerrsquos equity account
Does not have a normal balance
Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period
Journalize and post closing entries
Steps in the Closing Process
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Income Summary account is a
special ownerrsquos equity account that
is used only in the closing process
to summarize the results of
operations
ANSWER
QUESTION
What is the Income Summary account
Income Summary Account
Classified as a temporary ownerrsquos equity account
Does not have a normal balance
Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period
Journalize and post closing entries
Steps in the Closing Process
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Income Summary Account
Classified as a temporary ownerrsquos equity account
Does not have a normal balance
Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period
Journalize and post closing entries
Steps in the Closing Process
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Journalize and post closing entries
Steps in the Closing Process
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Step 1 Transfer Revenue Account Balances
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Fees Income account is closed to the Income
Summary account
Step 1 Close Revenue
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The revenue account Fees Income is decreased by
$47000 to zero
The $47000 is transferred to the temporary ownerrsquos
equity account Income Summary
Step 1 Close Revenue
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Revenue Account
Record
decreases
Income Summary
No normal balance
Step 1 Close Revenue
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Which account is debited
For what amount
Which account is credited
For what amount
Step 1 Close Revenue
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Fees Income
Closing 47000
Balance 47000
Income Summary
Closing 47000
Step 1 Close Revenue
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The words ldquoClosing Entriesrdquo are written in the
Description column of the general journal
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Fees Income 47000
Income Summary 47000
Step 1 Close Revenue
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Step 2 Transfer Expense
Account Balances
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Income Statement section of the worksheet for
lists five expense accounts
Since expense accounts have debit balances enter a
credit in each account to reduce its balance to zero
This closing entry transfers total expenses to the
Income Summary account
Step 2 Close Expenses
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The five expense account balances are reduced to
zero
Step 2 Close Expenses
The total $13333 of
expenses are transferred
to the temporary ownerrsquos
equity account Income
Summary
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Income Summary Expense Accounts
Record
decreases
Step 2 Close Expenses
No normal balance
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Which accounts are debited
For what amounts
Which accounts are credited
For what amounts
Step 2 Close Expenses
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Income Summary
Step 2 Close Expenses
Salaries Expense
Closing 13333
BAL 47000
Closing 8000
Balance 8000
Utilities Expense Supplies Expense
Balance 650 Balance 500
Closing 500Closing 650
Depr Expense ndash EquipRent Expense
Closing 4000
Balance 4000 Balance 183
Closing 183
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDITREF
2016 Closing Entries
Dec 31 Income Summary 1333300
Salaries Expense 800000
Utilities Expense 65000
Supplies Expense 50000
Rent Expense 400000
Depreciation Exp-Equip 18300
Step 2 Close Expenses
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Income Summary account reflects all entries in the
Income Statement section of the worksheet
Income Summary
Dr
Closing 13333
Cr
Balance 33667
Closing 47000
Net Income
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Step 3 Transfer Net Income
or Net Loss to Ownerrsquos
Equity
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The journal entry to transfer net income to
ownerrsquos
equity is a debit to Income Summary and a credit
to Ownerrsquos Capital
The balance of Income Summary is reduced to
zero the ownerrsquos capital account is increased by
the amount of net income
Step 3 Close Net Income to
Capital
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Income Summary account is reduced to zero
The net income amount $33667 is transferred to the
ownerrsquos capital account Ownerrsquos Capital is
increased by $33667
Step 3 Close Net Income to
Capital
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Which account is debited
For what amount
Which account is credited
For what amount
Step 3 Close Net Income to
Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Income Summary Carolyn Wellrsquos Capital
Closing 33667
Balance 33667Balance 100000
Step 3 Close Net Income to
Capital
Closing 33667
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Income Summary 3366700
Carolyn Wellrsquos Capital 3366700
Step 3 Close Net Income to
Capital
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Step 4 Transfer the Drawing Account Balance to Capital
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
2 Transfer the expense account balances to the
Income Summary account
There are four steps in the closing process
4 Transfer the balance of the drawing account to the ownerrsquos capital account
3 Transfer the balance of the Income Summary
account to the ownerrsquos capital account
1 Transfer the balance of the revenue account to
the Income Summary account
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Net Income
CREDIT
BALANCE SHEETINCOME STMT
DEBIT CREDIT DEBIT
111350
5000
1000
11000
4000
183
3500
100000
5000
47000
8000
650
500
183
4000
47000 10368313333 137350
183
150683
TRIAL BALANCE ADJ TRIAL BALADJUSTMENTS
DEBIT CREDIT CREDIT DEBIT CREDIT
ACCOUNT NAME
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accum DeprmdashEquip
Carolyn Wells Cap
Accounts Payable
Carolyn Wells Draw
Fees Income
Salaries Expense
Utilities Expense
Supplies Expense
Rent Expense
Depr ExpmdashEquip
Totals
DEBIT
111350
3500
100000
5000
47000
8000
650
11000
8000
5000
1500
111350
5000
11000
5000
8000
650
1000
3500
100000
47000
500
183
4000
150500 150500 4683 4683
(c) 183
(a) 500
(b) 4000
(c) 183
(a) 500
(b) 4000 4000
150683
33667 33667
47000 47000 137350137350It has a credit balance
of $47000
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Withdrawals appear in the statement of ownerrsquos
equity as a deduction from capital
The drawing account is closed directly to the capital
account
Step 4 Close Drawing to Capital
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The drawing account balance is reduced to zero
The balance of the drawing account $5000 is transferred to the ownerrsquos capital account
Step 4 Close Drawing to
Capital
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Which account is debited
For what amount
Which accounts is credited
For what amount
Step 4 Close Drawing to
Capital
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Carolyn Wellrsquos Capital Carolyn Wellrsquos Drawing
Closing 5000
Balance 133667
Closing 5000
Balance 5000
Step 4 Close Drawing to
Capital
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
GENERAL JOURNAL PAGE 4
DATE DESCRIPTION POST DEBIT CREDIT
REF
Closing Entries
Dec 31 Carolyn Wellrsquos Capital 500000
Carolyn Wellrsquos Drawing 500000
Step 4 Close Drawing to
Capital
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The new balance of the Carolyn Wellrsquos Capital account
agrees with the amount listed on Ownerrsquos Equity
Statement and the balance sheet
Carolyn Wells CapitalCarolyn Wells Drawing
Closing 5000
CrDr
Balance 5000
Balance 0
Cr
Balance 100000
Net Inc 33667
Balance 128667
Dr
Drawing 5000
Ownerrsquos Capital
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
All journal entries are posted to the general
ledger accounts
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
ldquoClosingrdquo is entered in the Description column of
the ledger accounts
The ending balances of the drawing revenue
and expense accounts are zero
Posting the Closing Entries
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2016 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Fees Income ACCOUNT NO 401
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2016
Dec 31 J2 3600000 3600000
Dec 31 J2 1100000 4700000
Dec 31 Closing Entry J4 4700000 -0-
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
2010 Closing Entries
Dec 31 Fees Income 401 4700000
Income Summary 309 4700000
31 Income Summary 309 1333300
Salaries Expense 511 800000
Utilities Expense 514 65000
Supplies Expense 517 50000
Rent Expense 520 450000
Depr Expense-Equip 523 18300
31 Income Summary 309 3366700
Carolyn Wells Capital 301 3366700
31 Carolyn Wells Capital 301 500000
Carolyn Wells Draw 302 500000
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCOUNTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
ACCOUNT Income Summary ACCOUNT NO 309
POST BALANCE
DATE DESCRIPTION REF DEBIT CREDIT DEBIT CREDIT
2010
Dec 31 Closing J4 4700000 4700000
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Practice
Problem 63B
Page 179
1 Set up general ledger with the balances
2 Journalize the closing entries
3 Post the closing entries
4 What accounts are impacted
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Summary of Closing Entries
GENERAL JOURNAL PAGE 4
POST
DATE DESCRIPTION REF DEBIT CREDIT
Closing Entries
2014
Dec 31
STEPS
1 CLOSE
REVENUE
2 CLOSE
EXPENSE
ACCTS
3 CLOSE
INCOME
SUMMARY
4 CLOSE
DRAWING
ACCOUNT
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Preparing the Postclosing Trial Balance
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Accounting Cycle
The last two steps of
the accounting cycle
bullPost Closing Trial
Balance
bullInterpret Financial
Information
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 7
Journalize and
post closing
entries
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 6
Journalize and
post adjusting
entriesStep 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
The Accounting Cycle
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Prepare a postclosing trial balance
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
A postclosing trial balance is a
statement that is prepared to prove
the equality of total debits and
credits after the closing process is
completed
ANSWER
QUESTION
What is a postclosing trial balance
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Proves that total debits equal total credits
Verifies that revenue expense and drawing
accounts have zero balances
The Postclosing Trial Balance
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Only permanent accounts appear on
the postclosing trial balance
Assets
Liabilities
Ownerrsquos equity
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Wellrsquos Consulting Services
Postclosing Trial Balance
December 31 2016
ACCOUNT NAME DEBIT CREDIT
Cash 11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment 1100000
Accumulated DepreciationndashEquipment 18300
Accounts Payable 350000
Carolyn Wellrsquos Capital __________ 12866700
Totals 13235000 13235000
Postclosing Trial Balance
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Finding and Correcting Errors
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
If the postclosing trial balance does not
balance the accounting records contain
errors
Use the audit trail to trace data through
the accounting records
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Using Accounting
Information
Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Interpreting the Financial Statements
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Interpret financial
statements
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
To interpret means to understand and
explain the meaning and importance of
something
ANSWER
QUESTION
What is meant by ldquointerpretingrdquofinancial statements
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Financial statements provide
answers
What is the cash balance
How much do customers owe the business
How much does the business owe suppliers
What is the profit or loss
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Lets Analyze the financial statements for
Carloyn Wellrsquos Consulting Services at the
end of the accounting period
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
What is the cash balance
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
What is the
cash balance
How much do the customers
owe the business
Wellsrsquo Consulting ServicesPartial Balance SheetDecember 31 2016
Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
How much does the business
owe suppliers
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
How much does the business owe its suppliers
Wellsrsquo Consulting ServicesBalance Sheet
December 31 2016Assets
Cash $11135000
Accounts Receivable 500000
Supplies 100000
Prepaid Rent 400000
Equipment $ 1100000
Less Accumulated Depreciation 18300 1081700
Total Assets $ 13216700
Liabilities and Ownerrsquos Equity
Liabilities
Accounts Payable $ 350000
Ownerrsquos Equity
Carolyn Wells Capital 12866700
Total Liabilities and Ownerrsquos Equity $13216700
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
What is the profit or loss
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Wellsrsquo Consulting Services
Income Statement
Month Ended December 31 2016
Revenue
Fees Income $47000
Expenses
Salaries Expense $8000
Utilities 650
Supplies Expense 500
Rent Expense 4000
Depreciation Expense - Equipment 183
Total Expenses $13333
Net Income for the Month $33667
Prepare financial statements from
the worksheet
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Using Accounting
Information
Section Objectives
1 Prepare a postclosing trial
balance
2 Interpret financial statements
3 Review the steps in the
accounting cycle
McGraw-Hill copy 2007 The McGraw-Hill Companies Inc All rights reserved
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Accounting Cycle
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Accounting Cycle
Step 1
Analyze
transactionsAnalyze the source documents
Sales slips
Purchase invoices
Credit memorandums
Check stubs
Step 1
Analyze
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Record the effects of the
transactions in a journal
Step 2
Journalize the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Transfer data from the journal to the
general ledger accounts
Step 3
Post the
data about
transactions
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Prepare a worksheet with five sections
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Step 4
Prepare
a
worksheet
Step 4
Prepare
a
worksheet
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
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
worksheetPrepare financial statements
Income Statement
Statement of Ownerrsquos Equity
Balance Sheet
Step 5
Prepare
financial
statements
Step 5
Prepare
financial
statements
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
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
The adjusting entries are a permanent
record of the changes in account balances
shown on the worksheet
Step 6
Journalize and
post adjusting
entries
Step 6
Journalize and
post adjusting
entries
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
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 6
Journalize and
post adjusting
entries
Transfer net income or net loss
to ownerrsquos equity
Reduce the balances of the
temporary accounts to zero
Step 7
Journalize and
post closing
entries
Step 7
Journalize and
post closing
entries
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Confirm that the general ledger is in
balance
Confirm that the revenue expense and
drawing accounts have zero balances
Step 8
Prepare a
postclosing
trial balance
Step 8
Prepare a
postclosing
trial balance
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Use financial statements to understand and
communicate the financial information and to
make decisions
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
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 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Step 8
Prepare a
postclosing
trial balance
Step 9
Interpret
the financial
information
Step 9
Interpret
the financial
information Step 8
Prepare a
postclosing
trial balance
Step 5
Prepare
financial
statements
Step 4
Prepare
a
worksheet
Step 3
Post the
data about
transactions
Step 2
Journalize the
data about
transactionsStep 1
Analyze
transactions
Step 6
Journalize and
post adjusting
entriesStep 7
Journalize and
post closing
entries
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Flow of Data Through a Simple Accounting System
Source
documents
Source documents are analyzed
General
journal
General
ledger
Worksheet Financial
statements
Source
Documents
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Transactions are recorded in the general journal
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
journal
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Transactions are posted from the general journal to
the general ledger
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
General
ledger
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Financial information is proved adjusted and
summarized on the worksheet
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Worksheet
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Financial information is reported on financial
statements
Flow of Data Through a Simple Accounting System
Source
documents
General
journal
General
ledger
Worksheet Financial
statements
Financial
statements
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Practice Assessment
Chapter 4 5 amp 6
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
R
E
V
I
E
W
A postclosing trial balance is a statement
to prove the _______ of total debits and
credits
Only the __________ accounts appear on
the postclosing trial balance
Preparing a postclosing trial balance is
the ______ step of the accounting cycle eighth
permanent
equality
Complete the following sentencesSECTION
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
R
E
V
I
E
W
The ninth step of the accounting cycle is
___________ the financial statements
The flow of data through an accounting
system begins with a(n) _______________
The financial statement that reports the
same items as the postclosing trial
balance is the ____________ balance sheet
Complete the following sentences
interpreting
source document
SECTION
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
R
E
V
I
E
W
_____________ transfer the results of
operations to ownerrsquos equity and reduce
the revenue expense and drawing
account balances to zero
The Income Summary account is classified
as a(n) _________ _____________
account
The first step in the closing process is to
transfer _______ account balancesrevenue
temporary
Closing entries
Complete the following sentences
ownerrsquos equity
SECTION
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
R
E
V
I
E
W
The ledger is called the ____________
_____ because it is the last place where
accounting transactions are recorded
_______ is the process of transferring
data from a journal to a ledger
The ____________ is the master reference
file for the accounting system
general ledger
Posting
record of final
Complete the following sentences
entry
SECTION
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
R
E
V
I
E
W
The first three steps of the accounting
cycle are to _______ _________ and ____
transactions
________________ are an important part
of the audit trail
A ______________ is a journal entry made
to correct an erroneous entry
Complete the following sentences
Posting references
analyze
correcting entry
journalize post
SECTION
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
R
E
V
I
E
W
A ______ is a diary of business activities
The journal is sometimes called the
____________________ because it is
where transactions are first entered in the
accounting records
The _____________ is a financial record
for entering all types of business
transactions
general journal
record of original entry
journal
Complete the following sentencesSECTION
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
R
E
V
I
E
W
A journal entry that contains more than
one debit or credit is called a __________
_____
The _________ is a chain of references that
makes it possible to trace information
locate errors and prevent fraud
___________ is the process of recording
transactions in the general journal
Journalizing
audit trail
compound
entry
Complete the following sentencesSECTION
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
R
E
V
I
E
W
The journal entry to close the drawing
account is debit ______ and credit
________
After the closing entries are posted the
Income Summary account has a(n) ____
balance
After the closing entries are posted all
_________ accounts have zero balancestemporary
zero
Capital
Complete the following sentences
Drawing
SECTION
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required
Assignments
See web httpscabrilloblackboardedu
This will be updated weekly as required