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CHAPTER 20 • PLANNING GUIDE
SECTION RESOURCESSection College & Career Readiness Professional Development
SECTION 20.1 JOURNALIZING CLOSING ENTRIES Reading Strategy, pp. 591, 592, 594
Critical Thinking, p. 594Writing Support, p. 594Math Skill Practice, p. 593
English Language Learners, p. 593Extended Skill Practice, p. 593
A corporation’s net income (or net loss) is closed to Retained Earnings.
SECTION 20.2 POSTING CLOSING ENTRIES Reading Strategy, pp. 596, 597Critical Thinking, pp. 596, 597, 598, 599, 600, 601Differentiated Instruction, pp. 600, 601Writing Support, p. 598Math Skill Practice, p. 600
Extending the Content, p. 597Extended Skill Practice, p. 599Connect to History, p. 600Case Study, p. 61221st Century Skills, p. 612Career Wise, p. 613H.O.T. Audit, p. 613
After posting the closing entries, prepare a post-closing trial balance.
PACING YOUR LESSONS
Chapter Introduction Section 1 Section 2 Chapter Assessment
½ period 2 periods 2 periods ½ period
P
*This pacing guide is based on a traditional 36-week course. See pp. TM38–TM39 for complete pacing guide information.
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STANDARDS AND SKILLS • CHAPTER 20
STANDARDS-BASED LESSON PLANNational Standards for Business Education
StandardsI.C.5 Identify and use information technology productively
IV.D.3 Record equity-related transactions
V.A.11 Describe the relationship between the closing process, the fi nancial statements, and the post-closing trial balance
VI.A.2 Identify and apply appropriate information technology to the accounting system
PROFESSIONALDEVELOPMENT
Targeted professional development is correlated throughout Glencoe Accounting. The McGraw-Hill Professional Development Mini Clip Video Library provides teaching strategies to strengthen academic and learning skills. Log on to glencoe.com.
In this Chapter, you will fi nd these Mini Clips:• Math: Multiple Approaches to Problem Solving, p. 593• ELL: Reading Aloud, p. 599
*Highlighted blocks indicate areas covered in the chapter. Additional skills are also covered throughout the Teacher Edition.
Resources: Allocating Time Allocating Money Allocating Material and Facility Resources
Allocating Human Resources
Information:Acquiring and
Evaluating Information
Organizing and Maintaining Information
Interpreting and Communicating
Information
Using Computers to Process Information
Interpersonal Skills: Participating as a Member of a Team Teaching Others Serving Clients/
Customers Exercising Leadership Negotiating to Arrive at a Decision
Working With Cultural Diversity
Systems: Understanding Systems
Monitoring and Correcting Performance
Improving and Designing Systems
Technology: Selecting Technology Applying Technology to Task
Maintainingand Troubleshooting
Technology
21st Century Skills Correlations
*See pp. TM33–TM35 for detailed NBEA standards and correlations.
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CORRELATIONS TO NATIONAL STANDARDS FOR BUSINESS EDUCATION
See p. TM33 for a detailed correlation chart.Standards: I.B.1, I.C.3, I.C.4, I.C.5, IV.D.3, V.A.11, VI.A.2
FOCUS
Frugal management policies and cutting-edge warehouse and stock-tracking technologies have served to help keep low prices and high profits on track for the 99 Cents Only Stores. Such technologies help facilitate accurate closing entries for the business. Founder David Gold and his team are also master marketers. Besides the iPod nano promotion, they have celebrated the 99th birthday of public figures as another “99” promotion.
Analyze If temporary accounts were not closed before the next accounting period’s transactions, it would be diffi cult to assess each period’s income and expenses. By closing one period before beginning the next, the temporary accounts hold only that period’s transactions and activities.
FOCUS ON THE PHOTO Visual Literacy Possible answer: Answers will vary. Students might mention temporary accounts, such as Sales, Purchases, and expense accounts. Ask: What do you already know about completing the accounting cycle? Possible answer: In a general sense, closing a door separates one room from another. Closing something out means it has concluded. Also, closing entries for a sole proprietorship (in Chapter 10) may be similar to closing entries for a merchandising corporation.
F l li i d i
REAL-WORLD Business Connection
CHAPTER
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BIG IDEAJournalizing and closing
entries “clean the slate” before a new accounting period.
FOCUS ON THE PHOTOSmart shoppers depend on the 99 Cents Only Stores for all kinds of discounted merchandise, including fresh produce and other food items. What accounts might be involved for preparing closing entries for this merchandising business?
99 Cents Only StoresDo you think it is possible to buy a new iPod Nano for 99 cents? It was for the fi rst nine customers at a recent grand opening of a 99 Cents Only Store. Promoting the newest of its more than 275 retail outlets, 99 Cents Only Stores tempted customers with all kinds of bargains for 99 cents or less: name-brand and private-label foods, beverages, health and beauty products, toys, and household goods. How can selling products at such a low price make the company a profi t? This retailer focuses on close-out inventory and distressed products purchased at discount prices.
Connect to the BusinessAt the end of a fi scal period, companies like 99 Cents Only Stores prepare closing entries to transfer all temporary account balances to a permanent account. The general ledger is then ready for a new accounting period.
AnalyzeWhat might happen if temporary accounts were not closed before the next accounting period begins?
COMPLETING THE ACCOUNTING CYCLE FOR A MERCHANDISING CORPORATION
20REAL-WORLD Business Connection
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BIG IDEA
INTRODUCING CHAPTER 20
Both corporations and sole proprietorships must “clean the slate” to prepare for the next accounting period. Ask students to remember the steps in the closing process for sole proprietorships.
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TEACH Previewing the Main IdeasUse these questions and activities at the beginning of the sections to focus on the Main Ideas.
SECTION 20.1 JOURNALIZING CLOSING ENTRIESClosing entries are made for both a sole proprietorship and a corporation. Ask: Which closing entries are different for the two types of businesses? The third and fourth closing entries are different. Point out that corporations do not use withdrawals accounts and Income Summary is closed to the Retained Earnings account for a corporation.
SECTION 20.2 POSTING CLOSING ENTRIESAsk: How might you check for errors in posting closing entries to the general ledger? prepare a trial balance Ask: What accounts are not closed and are listed on the post-closing trial balance? assets, liabilities, and stockholders’ equity
589
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INTRODUCING CHAPTER 20
The interactive student text and working papers can be found on McGraw-Hill Connect.
Online Learning CenterGet activity and game ideas, reproducible forms, and links to additional accounting resources.
Glencoe Technology Solutions
glencoe.com
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Before You ReadBefore You Read
READING GUIDE STANDARDS
Chapter Objectives
Concepts
C1 Journalize closing entries for a merchandising corporation. (p. 591)
Analysis
A1 Post closing entries to the general ledger accounts. (p. 596)
Procedures
P1 Prepare a post-closing trial balance. (p. 600)
P2 Describe the steps in the accounting cycle. (p. 601)
Main IdeaA corporation’s net income or net loss is closed to Retained Earnings. After posting the closing entries, accountants prepare a post-closing trial balance.
The Essential Question Why is it important to “clean the slate” before a new accounting period?
CHAPTER 20
ACADEMIC
English Language ArtsNCTE 1 Read texts to acquire new information. (p. 604)
MathematicsNCTM Problem Solving Build new mathematical knowledge through problem solving. (p. 604)
NCTE National Council of Teachers of EnglishNCTM National Council of Teachers of Mathematics
Common Core
Reading Analyze how and why individuals, events, and ideas develop and interact over the course of a text. (p. 604)
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INTRODUCING CHAPTER 20
FOCUS READING GUIDE
Before You ReadThe Essential Question The essential question encourages students to inquire about the underlying purpose of accounting. Use the essential question as a discussion starter, emphasizing to students that there are no right or wrong answers.
Main IdeaHave students read the Main Idea in Before You Read. Ask: Why is the net income/loss closed to Retained Earnings and not to owner’s equity? Corporations use the Retained Earnings account to show accumulated earnings, whereas sole proprietorships use the owner’s capital account. Ask: Why is the post-closing trial balance so important? It verifi es that debits equal credits.
Chapter Objectives Have students review the objectives to set expectations for what they’ll learn in Chapter 20.
Academic StandardsHelp students see cross-curricular connections whenever possible.
College and Career Readiness standards emphasize skills and concepts students will need beyond high school.
Connect to the Reading Guide Use the following questions to help students connect to the reading.1. What does the chapter title tell you?
Predict2. What do you already know about this
subject from personal experience? Activate Prior Knowledge
3. What have you learned about this in the earlier chapters? Make Connections
4. What gaps exist in your knowledge of this subject? Set a Purpose for Reading
Print• Chapter Study Guides and
Working Papers pp. 585–614 • Fast File Chapter 20 ResourcesDigital Transparencies(TeacherWorks Plus)• Section 1: Transparencies 20-1 to
20-6
• Section 2: Transparencies 20-7 to 20-10
Technology• Presentation Plus! • TeacherWorks Plus• Peachtree Accounting Software
and Applications
• Using QuickBooks® with Glencoe Accounting
Online• McGraw-Hill Connect• Glencoe Accounting Online
Learning Center
CHAPTER 20 RESOURCES MANAGER
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PRETEACHING SECTION VOCABULARY
SECTION VOCABULARY
Academic Vocabulary• journal
• temporary
• retain
SECTION 20.1
JOURNALIZING CLOSING ENTRIESIn Chapter 10 you journalized and posted the closing entries for
a sole proprietorship service business. In this chapter you will learn to journalize and post the closing entries for a merchandising corporation. The journalizing procedures are the same.
Steps for Closing the LedgerHow Are Closing Entries for a Corporation Different from Closing Entries for a Sole Proprietorship?
In Chapter 10 you made four entries to close the temporary general ledger accounts of a sole proprietorship:
1. Close the temporary accounts with credit balances to Income Summary.
2. Close the temporary accounts with debit balances to Income Summary.
3. Close the balance of Income Summary to capital. 4. Close the withdrawals account to capital.
Only the first three closing entries are made to close the temporary accounts for a merchandising business organized as a corporation. Since a corporation does not have a withdrawals account, the fourth closing entry is not needed.
The portion of The Starting Line’s work sheet in Figure 20–1 on pages 592 and 593 shows the account balances that are closed. Let’s look closely at each closing entry.
1. Close the accounts with balances in the Credit column of the Income Statement section of the work sheet (revenue and contra cost of mer chan dise accounts) to Income Summary. After this closing entry has been journalized and posted, the Sales, Purchases Discounts, and Purchases Returns and Allowances accounts have zero balances.
glencoe.com
• Show Me tutorials • Let Me Try interactive
activities.
Sales
Credit�
Bal. 320,450.00
Debit�
Clos. 320,450.00
Income Summary
Credit
Clos. 323,590.00
Debit
Adj. 3,536.00
Purchases Discounts
Credit�
Bal. 1,340.00
Debit�
Clos. 1,340.00
Purchases Returns and Allowances
Credit�
Bal. 1,800.00
Debit�
Clos. 1,800.00
GENERAL JOURNAL PAGE
1
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DEBIT CREDITDESCRIPTIONDATE POST.REF.
23
20--Dec.
Closing EntriesSalesPurchases DiscountsPurchases Returns and Allow.
Income Summary
31 320 450 001 340 001 800 00
323 590 00
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R1
R2
SECTION 20.1
FOCUSBell Ringer • Comparing and Contrasting:
Have students recall the closing entries they prepared in Chapter 10 for a sole proprietorship service business. Ask: How might the closing entries for a merchandising corporation differ from those for a sole proprietorship? The process is the same; some of the accounts closed will be different because they are unique to a merchandising business.
• Digital Transparency 20-1 focuses students’ attention on the topics covered in Section 20.1.
Bell Ringer
R1 Reading StrategyActivating Prior Knowledge Ask: What have you already learned about journalizing? Journalizing is entering transactions in a book of original entry. OL
R2 Reading StrategyActivating Prior Knowledge Refer students to the general journal (Digital Transparency 20-3). Ask: What are the balances in the Sales and Purchases accounts after closing entries have been journalized and posted? zero OL
Academic Vocabulary1. What does journal mean in the following: He wrote in his travel journal every day. log/diary2. What does temporary mean in the following: The detour was a temporary route to get to the town.
short-term3. What does retain mean in the following: The group wants to retain the design of the historical landmark.
maintain/preserve
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Closing the General Ledger Demonstrate how accounts are closed into the general ledger. Pass out to students note cards containing the balances of general ledger accounts affected by the closing process. Place a bucket representing the general ledger in the front of the class. Have each student drop his or her card into the bucket and call out the account name and balance. After all cards have been “closed,” explain that the next step is to prepare the post-closing trial balance.
Linda StevensEisenhower Senior High School, Houston, TexasTE RTE
ACHER
TEACHERTEACHER
TOTOAACCHH
2. Close the accounts with balances in the Debit column of the Income Statement section of the work sheet (contra revenue, cost of merchan dise, and expense accounts) to Income Summary. After this closing entry has been journalized and posted, the contra revenue, cost of merchandise, and expense accounts have zero balances.
Income Summary now has a credit balance of $32,674.72.
$ 323,590.00 closing credit � 3,536.00 adjustment debit
� 287,379.28 closing debit $ 32,674.72 credit balance
3. Close Income Summary to Retained Earnings.
Retained Earnings
Credit�
Bal. 19,771.19Clos. 32,674.72Bal. 52,445.91
Debit�
Income Summary
Credit
Clos. 323,590.00
Debit
Adj. 3,536.00Clos. 287,379.28Clos. 32,674.72
After the entry to close Income Summary to Retained Earnings has been journalized and posted, Income Summary has a zero balance. The balance of Retained Earnings is increased to $52,445.91.
TRIAL BALANCE
DEBIT CREDIT
ADJUSTMENTS
DEBIT CREDITACCOUNT NAME
ACCT.NO.
20
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28
29
30
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310401405410501505510515601605630635650655657660665670680
Income SummarySalesSales DiscountsSales Returns and AllowancesPurchasesTransportation InPurchases DiscountsPurchases Returns and Allow.Advertising ExpenseBankcard Fees ExpenseFed. Corporate Income Tax Exp.Insurance ExpenseMaintenance ExpenseMiscellaneous ExpensePayroll Tax ExpenseRent ExpenseSalaries ExpenseSupplies ExpenseUtilities Expense
Net Income
The Starting LineWork
For the Year Ended
730 002 000 00
206 700 004 036 18
2 450 004 199 279 840 00
3 519 25348 28
3 826 8314 000 0029 374 60
2 364 87435 798 28
320 450 00
1 340 001 800 00
435 798 28
3 536 00
155 00125 00
3 710 00
7 526 00 7 526 00
(a)
(b)
(c)
(d)
Figure 20–1 Closing Entries Needed for a Corporation
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C3
C1
C2
SECTION 20.1
TEACHC1 Critical ThinkingApplying Prior Knowledge Point out that the second entry closes accounts with debit balances. Ask: What three account classifi cations have debit balances on the income statement? contra revenue, cost of merchandise, and expenses AL
C2 Critical ThinkingApplying Prior Knowledge Ask: Which accounts are classifi ed as contra revenue? sales discounts and sales returns and allowances OL
C3 Critical ThinkingMaking Inferences Have students examine Figure 20-1 (Digital Transparency 20-2). Point out that the fi gure presents only temporary accounts. Ask: Based on this fi gure, how many accounts will be affected by closing entries? 19 OL
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Sales Discounts
Debit
Bal. 730.00
Credit
Clos. 730.00
Sales Returns and Allowances
Debit
Bal. 2,000.00
Credit
Clos. 2,000.00
Transportation In
Debit
Bal. 4,036.18
Credit
Clos. 4,036.18
Purchases
Debit
Bal. 206,700.00
Credit
Clos. 206,700.00
Advertising Expense
Debit
Bal. 2,450.00
Credit
Clos. 2,450.00
Federal Corporate Income Tax Expense
Debit
Bal. 9,995.00
Credit
Clos. 9,995.00
Bankcard Fees Expense
Debit
Bal. 4,199.27
Credit
Clos. 4,199.27
Insurance Expense
Debit
Bal. 125.00
Credit
Clos. 125.00
Miscellaneous Expense
Debit
Bal. 348.28
Credit
Clos. 348.28
Maintenance Expense
Debit
Bal. 3,519.25
Credit
Clos. 3,519.25
Payroll Tax Expense
Debit
Bal. 3,826.83
Credit
Clos. 3,826.83
Salaries Expense
Debit
Bal. 29,374.60
Credit
Clos. 29,374.60
Rent Expense
Debit
Bal. 14,000.00
Credit
Clos. 14,000.00
Utilities Expense
Debit
Bal. 2,364.87
Credit
Clos. 2,364.87
Supplies Expense
Debit
Bal. 3,710.00
Credit
Clos. 3,710.00
Income Summary
Debit
Adj. 3,536.00Clos. 287,379.28
Credit
Clos. 323,590.00
ADJUSTED TRIAL BALANCE
DEBIT CREDIT
INCOME STATEMENT
DEBIT CREDIT
BALANCE SHEET
DEBIT CREDIT
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Sports GearSheetDecember 31, 20--
3 53600
730002 00000
206 700004 03618
2 450004 199279 9950012500
3 5192534828
3 8268314 0000029 374603 710002 36487
435 95328
320 45000
1 340001 80000
435 95328
3 53600
730002 00000
206 700004 03618
2 450004 199279 9950012500
3 5192534828
3 8268314 0000029 374603 710002 36487
290 9152832 67472323 59000
320 45000
1 340001 80000
323 59000
323 59000
145 03800
145 03800
112 3632832 67472145 03800
1 Close temporary accounts withbalances in the Income StatementCredit column to Income Summary.
2 Close temporary accounts withbalances in the Income StatementDebit column to Income Summary.
3 Close Income Summary to RetainedEarnings by the amount of the netincome or loss.
Figure 20–1 Closing Entries Needed for a Corporation (continued)
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PROFESSIONALDEVELOPMENT
Math: Multiple Approaches to Problem Solving A teacher and students discuss various options for problem solving and then apply one, working backwards, to a problem situation.
M
SECTION 20.1
TEACHEnglish Language LearnersUnderstanding the vocabulary is critical to success in this course. Students whose primary language is not English might need extra support in order to keep up with the new vocabulary. Always demonstrate new processes and procedures. Provide visuals whenever possible. Keep these posted so that students can access them when necessary.
M Math Skill PracticeCalculating Closing Entries Refer students to the work sheet in Figure 20-1 (Digital Transparency 20-2). Tell them to suppose the Income Statement Credit column contained the following entries for Sales, Purchases Discounts and Purchases Returns and Allowances: $120,562, $483, and $679. Ask: To close these temporary accounts, will Income Summary be debited or credited? credited Ask: For what amount? $121,724 OL
Journalizing Closing Entries Use Demonstration Problem 20-1 in Chapter 20 Fast File for step-by-step practice journalizing closing entries. The problem also appears on TeacherWorks Plus.
EXTENDED SKILL PRACTICE
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Reading Check Explain In your own words, explain the process of closing the ledger.
Closing Entry to Transfer a Net LossHow Do You Close a Net Loss to Retained Earnings?
Sometimes businesses incur net losses. Suppose that after posting the first two entries closing the temporary accounts, the Income Summaryaccount is as shown. Before it is closed, Income Summary has a debit balance of $5,000.00:
$ 3,612.00 adjustment debit � 65,178.00 closing debit � 63,790.00 closing credit
$ 5,000.00 debit balance
To close Income Summary, credit it for $5,000 and debit Retained Earnings for $5,000. The net loss amount decreases the earnings the business retains. This closing entry is recorded in the general journal as follows:
GENERAL JOURNAL PAGE
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DEBIT CREDITDESCRIPTIONDATE POST.REF.
23
Dec.
Dec.
287 3 7 9 28
32 6 7 4 72
7 3 0 002 0 0 0 00
206 7 0 0 004 0 3 6 182 4 5 0 004 1 9 9 279 9 9 5 00
1 2 5 003 5 1 9 25
3 4 8 283 8 2 6 83
14 0 0 0 0029 3 7 4 60
3 7 1 0 002 3 6 4 87
Income SummarySales DiscountsSales Returns and Allow.PurchasesTransportation InAdvertising ExpenseBankcard Fees ExpenseFed. Corp. Inc. Tax ExpenseInsurance ExpenseMaintenance ExpenseMiscellaneous ExpensePayroll Tax ExpenseRent ExpenseSalaries ExpenseSupplies ExpenseUtilities Expense
Income SummaryRetained Earnings
31
3132 6 7 4 72
Income Summary
Credit
Clos. 63,790.00
Debit
Adj. 3,612.00Clos. 65,178.00
GENERAL JOURNAL PAGE
22
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24
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1 1
DEBIT CREDITDESCRIPTIONDATEPOST. REF.
Dec. 5 0 0 0 005 0 0 0 00
Retained EarningsIncome Summary
Closing Entries
31
23
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W
R
C
SECTION 20.1
TEACHW Writing SupportWriting Clearly Ask: Write a sentence explaining your thoughts as to why the company incurred a net loss. Answers will vary but may include expenses exceeded revenue or revenue was down for the period. OL
R Reading StrategyActivating Prior Knowledge Ask: Why does a loss from operations require a debit to a corporation’s Retained Earnings? When total expenses (debits) exceed total revenues (credits), the resulting loss shows up as debit to Retained Earnings (which has a normal credit balance). OL
C Critical ThinkingApplying Procedures Refer students to the general journal at the bottom of the page (Digital Transparency 20-6). Tell them to assume that after posting the fi rst two closing entries, Income Summary has a debit balance of $16,247. Ask: What is the journal entry to close Income Summary to Retained Earnings? Dr. Retained Earnings $16,247; Cr. Income Summary $16,247 Ask: Did the corporation earn a profi t or incur a loss? loss OL
Reading CheckAnswers will vary. When the ledger is closed, all temporary accounts end up with a zero balance so a new period can start. Closing separates the operating results of one accounting period from the next.
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SECTION 20.1
ASSESSSECTION 20.1 ASSESSMENT RESOURCES Use these resources to assess mastery of section content.• Chapter Study Guides and Working
Papers (Problem 20-1)• Presentation Plus!
glencoe.com
Online Learning Center: Click on Student Center. Click on Self-Assessment Quizzes and select Chapter 20.
SECTION 20.1 ASSESSMENT
Reinforce the Main IdeaTop box: Close temporary accounts with
credit balances to Income Summary.Second box: Close temporary accounts
with debit balances to Income Summary.
Third box: Close Income Summary balance to Retained Earnings.
Math for Accountingcredit $5,000
PROBLEM 20–1See solution in the Teacher Annotated Edition of Chapter Study Guides and Working Papers.
CLOSESynthesizing Write on the board: Total Revenues: $187,322, Total Expenses: $155,689. Ask: Make summary entries to close revenue, expenses, and Income Summary accounts. Debit revenues, credit Income Summary $187,322; credit expenses, debit Income Summary $155,689; debit Income Summary, credit Retained Earnings $31,633
Journalizing a Merchandising Corporation’s Closing Entries
After You Read
PROBLEM 20–1 Identifying Accounts Affected by Closing Entries
The following account names appear in the chart of accounts of Larkin’s Department Store.
Accounts Receivable Purchases Bankcard Fees Expense Purchases Discounts Capital Stock Purchases Returns and Allowances Cash in Bank Retained Earnings Equipment Sales Fed. Corp. Income Tax Expense Sales Discounts Fed. Corp. Income Tax Payable Sales Returns and AllowancesIncome Summary Sales Tax Payable Insurance Expense Supplies Merchandise Inventory Supplies Expense Miscellaneous Expense Transportation InPrepaid Insurance Utilities Expense
INSTRUCTIONS Use the form in your working papers to answer the following questions about each account. Assume that all accounts have normal balances.1. Is the account affected by a closing entry?2. During closing, is the account debited or credited?3. During closing, is Income Summary debited or credited?
Math for AccountingThe closing debit entry to the Income Summary account was $263,000, and the closing credit entry was $300,000. If the Income Summary account had a $42,000 credit balance after these entries, was the inventory adjustment a debit or credit? What was the amount?
Reinforce the Main IdeaUsing a diagram like this one, describe the step-by-step process for journalizing a merchandising corporation’s closing entries. Add or remove answer boxes as needed.
SECTION 20.1 • ASSESSMENT
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QUIZ 1. Are temporary accounts with debit balances debited or credited to Income Summary? debited
2. Are temporary accounts with credit balances debited or credited to Income Summary? credited
3. What is the balance of Income Summary after closing? zero4. What is the closing entry for a net loss? debit Retained Earnings, credit Income Summary5. To which account is Income Summary closed? Retained Earnings
SEC TION 20.1
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PRETEACHING SECTION VOCABULARY
SECTION VOCABULARY
Academic Vocabulary• process
• adjusting
• consists
• analyze
SECTION 20.2
POSTING CLOSING ENTRIESClosing entries recorded in the general journal are posted to the general
ledger.
Closing the General LedgerHow Do You Close a Merchandising Corporation’sGeneral Ledger?
Figure 20–2 shows the portion of The Starting Line’s general ledger affected by the closing process after the closing entries have been posted. Write the term Closing Entry (abbreviated Clos. Ent. here) for each posting in the Description column of the general ledger account.
Figure 20–2 Partial General Ledger at the End of the Fiscal Period
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 19 7 7 1 19
52 4 4 5 9132 6 7 4 72BalanceClos. Ent.
131
✓
G23
Retained Earnings 305
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 3 5 3 6 00
320 0 5 4 0032 6 7 4 72
3 5 3 6 00
287 3 7 9 2832 6 7 4 72
323 5 9 0 00Adj. EntClos. Ent.Clos. Ent.Clos. Ent.
31313131
G22G23G23G23
Income Summary 310
Fi 20 2 P i l G l L d h E d f h Fi l P i d
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 300 0 0 0 00
310 7 5 0 00320 4 5 0 00
320 4 5 0 00
10 7 5 0 009 7 0 0 00
Balance
Clos. Ent.
1313131
✓
S12CR13G23
Sales 401
glencoe.com
• Show Me tutorials • Let Me Try interactive
activities.
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RC
SECTION 20.2
FOCUSBell Ringer • Classifying: Use this activity to
reinforce learning of the closing process. Make a handout listing each of the temporary account names in scrambled order at the top of the page. In the lower half of the page, draw four columns and add these labels: Normal Debit Balance, Normal Credit Balance, Closed with a Debit, Closed with a Credit. Have students write the account names in the appropriate columns. For example, Sales goes in the Normal Credit Balance and the Closed with a Debit columns.
• Digital Transparency 20-7 focuses students’ attention on the topics covered in Section 20.2.
Bell Ringer
C Critical ThinkingMaking Inferences Review Figure 20-2 (Digital Transparency 20-8a) with students. Ask: Why is Retained Earnings the only account with an ending balance? It is a permanent account. Ask: Why is Retained Earnings the fi rst account in the partial ledger? Equity accounts come before revenues and expenses in the ledger. OL
R Reading StrategyActivating Prior Knowledge Ask: Do adjusting entries come before or after closing entries? before Ask: Why? All accounts must be up to date before determining net income or loss. OL
Academic Vocabulary Have students rewrite the following sentences using an Academic Vocabulary word instead of the underlined word or phrase.1. Following the Accounting Cycle is an organized procedure. process2. The department accountants will be modifying their books. adjusting3. The kit is made up of all the supplies and tools you need to build your model. consists4. The inspectors examine the fi ndings of the reports. analyze
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SECTION 20.2
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 7 0 0 00
7 3 0 003 0 007 3 0 00
Balance
Clos. Ent.
13131
✓
CR13G23
Sales Discounts 405
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 1 8 5 0 00
2 0 0 0 001 5 0 002 0 0 0 00
Balance
Clos. Ent.
14
31
✓
G20G23
Sales Returns and Allowances 410
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 190 0 0 0 00
191 3 0 0 00206 7 0 0 00
1 3 0 0 0015 4 0 0 00
206 7 0 0 00
Balance
Clos. Ent.
1193131
✓
CP14P12G23
Purchases 501
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 3 7 6 1 18
4 0 3 6 182 7 5 004 0 3 6 18
Balance
Clos. Ent.
12431
✓
CP14G23
Transportation In 505
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 1 2 0 0 00
1 3 4 0 001 3 4 0 00
1 4 0 00Balance
Clos. Ent.
13131
✓
CP14G23
Purchases Discounts 510
Figure 20–2 Partial General Ledger at the End of the Fiscal Period (continued)
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C1R
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TEACHR Reading Strategy
Reading Accounting Forms Refer to the Account No. section of each ledger card in the Figure 20-2 continuation (Digital Transparency 20-8b). Ask: What can you tell about the account classifi cations? Accounts with a 400 classifi cation are revenue accounts and accounts with a 500 classifi cation are cost of merchandise accounts. AL
C1 Critical ThinkingApplying Prior Knowledge Review the general ledger account for Purchases in the Figure 20-2 continuation. Ask: What does the CP14 in the Post. Ref. column indicate? Purchase was posted from page 14 in the cash payments journal. BL
C2 Critical ThinkingDifferentiating Ask: What information is recorded in the Transportation In account? the cost of getting merchandise to be resold from the supplier/seller to the merchandising company that will resell it Ask: Why is the Delivery Expense account not used? Delivery Expense is used to record the merchandising company’s cost to deliver goods to the consumers who purchased those goods, not the cost of transporting the goods from the supplier to the merchandising company. OL
Keeping Up with New Developments It is a challenge for many people to keep up with new technology and how it changes in both our personal and professional lives. Have students keep portfolios where they can place newspaper clippings, notes, articles, and advertisements of the newest products and trends in the computer industry. As students gather information, have them identify how the new products and developments impact accounting-related jobs. Ask students to refl ect on how people working with technology can keep up with the new developments.
EXTENDING THE CONTENT
Chapter 20 597
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CHAPTER 20 ENRICHMENT RESOURCES
Fast File Chapter 20 Resources• Concept Assessment• Chapter Quiz• Chapter Test
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• Connect to Careers• Extend—A Matter of Ethics• Personal Finance Online• Self-Assessment Section Quizzes• Self-Assessment Chapter Quiz
Figure 20–2 Partial General Ledger at the End of the Fiscal Period (continued)
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 1 6 0 0 00
1 8 0 0 001 8 0 0 00
2 0 0 00Balance
Clos. Ent.
11631
✓
G21G23
Purchases Returns and Allowances 515
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 2 4 5 0 00
2 4 5 0 00BalanceClos. Ent.
131
✓
G23
Advertising Expense 601
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 4 1 2 4 27
4 1 9 9 277 5 004 1 9 9 27
Balance
Clos. Ent.
13131
✓
CP14G23
Bankcard Fees Expense 605
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 9 8 4 0 00
9 9 9 5 001 5 5 009 9 9 5 00
BalanceAdj. Ent.Clos. Ent.
13131
✓
G22G23
Federal Corporate Income Tax Expense 630
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 1 2 5 001 2 5 00
1 2 5 00Adj. Ent.Clos. Ent.
3131
G22G23
Insurance Expense 635
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C1
C2
W
SECTION 20.2
TEACHW Writing SupportWriting Clearly Have students examine the Purchases Returns and Allowances general ledger account in the Figure 20-2 continuation (Digital Transparency 20-8b). Have students write a sentence explaining the credit to Purchases Returns and Allowances for $200 on December 16th. A purchase must have been returned or an allowance granted for damaged merchandise. OL
C1 Critical ThinkingApplying Prior Knowledge Have students examine the Bankcard Fees Expense general ledger account in the Figure 20-2 continuation (Digital Transparency 20-8c). Ask: What source document is used to record Bankcard Fees Expense? the bank statement OL
C2 Critical ThinkingApplying Prior Knowledge Have students examine the Insurance Expense general ledger account in the Figure 20-2 continuation. Ask: What does the adjusting entry to Insurance Expense represent? the expired or used up portion of prepaid insurance OL
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SECTION 20.2
Figure 20–2 Partial General Ledger at the End of the Fiscal Period (continued)
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 3 5 1 9 25
3 5 1 9 25BalanceClos. Ent.
131
✓
G23
Maintenance Expense 650
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 3 2 8 28
3 4 8 282 0 003 4 8 28
Balance
Clos. Ent.
13131
✓
CP14G23
Miscellaneous Expense 655
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 3 8 2 6 83
3 8 2 6 83BalanceClos. Ent.
131
✓
G23
Payroll Tax Expense 657
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 12 0 0 0 00
14 0 0 0 002 0 0 0 0014 0 0 0 00
Balance
Clos. Ent.
13131
✓
CP14G23
Rent Expense 660
DEBIT CREDIT
BALANCEDEBIT CREDITDESCRIPTIONDATE POST.
REF.
ACCOUNT NO.ACCOUNT
20--Dec. 25 3 7 4 60
29 3 7 4 604 0 0 0 0029 3 7 4 60
Balance
Clos. Ent.
13131
✓
CP14G23
Salaries Expense 665
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C2
C1
C3
PROFESSIONALDEVELOPMENT
ELL: Reading Aloud A teacher reads aloud modeling fl uency, pronunciation, expression, and comprehension strategies.
TEACHC1 Critical ThinkingApplying Prior Knowledge Have students examine the balance columns in the ledger cards in the Figure 20-2 continuation (Digital Transparency 20-8d). Ask: What does the line in the balance column signify? The balance is zero. BL
C2 Critical ThinkingMaking Inferences Ask: In the Figure 20-2 continuation, if the closing entry was not made to Miscellaneous Expense, would the expense be over- or understated in the next accounting period? overstated OL
C3 Critical ThinkingApplying GAAP Ask: What GAAP principle is being followed when closing entries are made? matching principle AL
Posting Closing Entries Use Demonstration Problem 20-3 in Chapter 20 Fast File for step-by-step practice posting closing entries. The problem also appears on the TeacherWorks Plus.
EXTENDED SKILL PRACTICE
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Students with Visual Impairments One of the ways students with visual impairments cope with classroom printed material is by listening to taped classroom lectures. Keeping that in mind, think carefully about
what you say in class. When writing on the chalkboard or while presenting information on a digital transparency, be clear and specifi c. “This (pointing) account increases and this (pointing) account is credited” will not mean anything to
students listening to an audio tape of the presentation. “The Income Summary account increases, and the Retained Earnings account is credited” provides a clear explanation.
Differentiated Instruction
Reading Check Recall Where do you post closing entries that have been recorded in the general journal?
Preparing a Post-Closing Trial BalanceHow Do You Prepare a Post-Closing Trial Balance?
A post-closing trial balance is prepared at the end of the accounting period to prove that the general ledger accounts are in balance after all adjusting and closing entries have been posted. Figure 20–3 shows the post- closing trial balance for The Starting Line.
Figure 20–2 Partial General Ledger at the End of the Fiscal Period (continued)
ACCOUNT NO.ACCOUNT Supplies Expense 670
DESCRIPTIONDATEPOST.REF.
3 7 1 0 00Adj. Ent.Clos. Ent.
3131
G22G23
20--Dec.
DEBIT CREDIT
BALANCEDEBIT CREDIT
DEBIT CREDIT
BALANCEDEBIT CREDIT
3 7 1 0 003 7 1 0 00
ACCOUNT Utilities Expense ACCOUNT NO. 680
DESCRIPTIONDATEPOST.REF.
20--Dec. Balance
Clos. Ent.1
31 G23
DEBIT CREDIT
BALANCEDEBIT CREDIT
2 3 6 4 872 3 6 4 87
The Starting Line Sports GearPost-Closing Trial Balance
December 31, 20--
13 8 5 0 001 5 5 006 4 0 00
8 0 002 4 8 00
5 8 001 8 36
1 1 4 732 4 2 8 00
75 0 0 0 0052 4 4 5 91
145 0 3 8 00
15 1 7 9 0010 4 0 4 0081 3 8 5 00
1 8 3 9 001 3 7 5 00
19 8 3 1 009 8 2 5 005 2 0 0 00
145 0 3 8 00
Cash in BankAccounts ReceivableMerchandise InventorySuppliesPrepaid InsuranceDelivery EquipmentOffice EquipmentStore EquipmentAccounts PayableFed. Corp. Income Tax PayableEmployees’ Fed. Income Tax PayableEmployees’ State Income Tax PayableSocial Security Tax PayableMedicare Tax PayableFed. Unemployment Tax PayableState Unemployment Tax PayableSales Tax PayableCapital StockRetained Earnings
TotalsFigure 20–3 Post-Closing Trial Balance
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C2
M
SECTION 20.2
TEACHC1 Critical ThinkingConnecting to Financial Literacy Ask: How is reconciling a personal checking account similar to preparing a post-closing trial balance? You regularly check accuracy and verify account balances in both. OL
M Math Skill PracticeCalculating Balances Refer students to Figure 20-3 (Digital Transparency 20-9). Ask: If net income for the period was $13,298.00, what was the beginning balance of Retained Earnings? $39,147.91 ($52,445.91 � $13,298.00) BL
C2 Critical ThinkingDifferentiating Ask: On which fi nancial statement do all of the accounts listed on the post-closing trial balance appear? balance sheet OL
Connect to HistoryCCoonnnneecctt ttoo HHiissttoorryyrr
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SECTION 20.2Completing the Accounting Cyclefor a Merchandising BusinessWhat Is the Accounting Cycle for aMerchandising Business?
You have completed the study of the accounting cycle for a merchandising business organized as a corporation, which consists of the following steps:
1. Collect and verify source documents. 2. Analyze each business transaction. 3. Journalize each transaction. 4. Post to the general and subsidiary ledgers. 5. Prepare a trial balance. 6. Complete a work sheet. 7. Prepare the financial statements—income statement, statement of
retained earnings, and balance sheet. Publicly held corporations also prepare a statement of cash flows.
8. Journalize and post the adjusting entries. 9. Journalize and post the closing entries. 10. Prepare a post-closing trial balance.
The accounting cycle for a service and a manufacturing business follows the same steps. Also, regardless of how a business is organized—sole proprietorship, partnership, or corporation—the basic steps of the accounting cycle are the same. Figure 20–4 illustrates the accounting cycle.
3344
55
667799 88
11
1010
22ACCOUNT
DEBIT
CREDIT
Collect and verify source documents
Journalizeeach transaction Post to the
general and subsidiary ledgers
Prepare a trial balance
Prepare a work sheet
Prepare financialstatements
Journalize and post the closing entries
Prepare apost-closingtrial balance
INVOICE
RECEIPT
MEMORANDUM
LEDGER
GENERALJOURNAL
TRIALBALANCE
WORK SHEETINCOME
STATEMENTSTATEMENT OF
RETAINED EARNINGS
BALANCESHEET
POST-CLOSINGTRIAL BALANCE
GENERALJOURNAL
LEDGER
Journalize and post the adjusting entries
GENERALJOURNAL
LEDGER
Analyze each transaction
ACCOUNT
DEBIT CREDIT
The accounting system used, whether manual or computerized, does not affect the steps in the accounting cycle. In a computerized accounting system, however, the computer performs many of the routine procedures such as posting.
Figure 20–4 The Accounting Cycle
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C1
C2
D
TEACHC1 Critical ThinkingApplying Prior Knowledge Refer students to Figure 20-4 (Digital Transparency 20-10), Step 5. Ask: What is the purpose of preparing a trial balance prior to completing the work sheet? to prove the equality of debits and credits in the general ledger OL
D Diff erentiated Instruction
Visual-Spatial Learning Show students a check register for a personal checking account. Ask: Discuss and compare the system used in the register with the accounting cycle for a merchandising business in Figure 20-4. Discussion may include: every entry is supported by a source document, cash is a permanent account, expenses decrease cash, deposits increase cash. OL
C2 Critical ThinkingApplying Prior Knowledge Ask: When does a business perform steps 1–5 of the accounting cycle? usually on a daily basis throughout the accounting period Ask: When does it perform steps 6–10? at the end of the accounting period OL
Chapter 20 601
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ASSESSSECTION 20.2 ASSESSMENT RESOURCES Use these resources to assess mastery of section content.• Chapter Study Guides and Working
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Online Learning Center: Click on Student Center. Click on Self-Assessment Quizzes and select Chapter 20.
SECTION 20.2 ASSESSMENT
Reinforce the Main IdeaTop box: Post closing entries to the general ledger. Second box: Write Closing Entry in the Description column for each account. Third box: Prepare a post-closing trial balance.
Math for Accounting$36,000 ($156,000 � $75,000 � $45,000)
PROBLEM 20–2July 12: Dr. Rent Exp. $750; Cr. Cash in Bank $750
PROBLEM 20–3 1. Collecting and verifying source
documents 2. Analyzing business transactions 3. Journalizing business transactions 4. Posting journal entries to ledgers 5. Preparing a trial balance 6. Completing the work sheet 7. Preparing fi nancial statements 8. Journalizing and posting adjusting
entries 9. Journalizing and posting clos. ent.10. Preparing a post-closing trial bal.
CLOSESynthesizing Write on the board: post-closing trial balance. Ask: Why and when is it used? to prove the general ledger is in balance after all adjusting and closing entries; last step in the accounting cycle
Posting a Merchandising Corporation’s Closing Entriesg g p g
After You Read
PROBLEM 20–2 Analyzing a Source Document INSTRUCTIONS Review the source document and prepare the journal entry to record this transaction in your working papers. Your Backpack Inc. uses a cash payments journal to record disbursements.
PROBLEM 20–3 Organizing the Steps in the Accounting Cycle
INSTRUCTIONS List the following steps of the accounting cycle in their proper order. Use the form provided in your working papers or a separate sheet of paper.Analyzing business transactionsCollecting and verifying source documentsCompleting the work sheetJournalizing business transactionsJournalizing and posting adjusting entriesJournalizing and posting closing entriesPosting journal entries to ledgersPreparing financial statementsPreparing a post-closing trial balancePreparing a trial balance
Math for AccountingTotals on the post-closing trial balance were assets, $156,000, and liabilities, $75,000. If the ending balance of Retained Earnings was $45,000, what was the capital stock account’s ending balance?
Reinforce the Main IdeaUsing a diagram like this one, describe the step-by-step process for posting a merchandising corporation’s closing entries. Add or remove answer boxes as needed.
SECTION 20.2 • ASSESSMENT
y g
TO:FROM:DATE:SUBJECT:
MEMORANDUM
Would you please make a check out to Warehouse Inc. for $750. The check is for the new storage facility we are renting. Please mail the check to:
Mr. James Skiller, ControllerWarehouse Inc.7576 County Line HighwayCrossplains, TX 77361-8411
Robert Chan, Chief AccountantJames Perkins, PresidentJuly 12, 20--New Storage Facility Rent
Your Backpack Inc.Your Backpack Inc.29000 White Road
Cold Springs, TX 77282-4513
No. 42
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SECTION 20.2
QUIZ 1. What accounts appear on the post-closing trial balance? permanent accounts
2. Which is completed fi rst: fi nancial statements or work sheet? work sheet
3. Is the trial balance prepared before or after the work sheet? before
4. What accounts are closed each accounting period? temporary accounts
5. After closing entries, does Income Summary have a debit or credit balance? Neither, Income Summary is closed to Retained Earnings and therefore has no balance at all.
SEC TION 20.2
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Three steps to close the temporary accountsof a merchandising business:
1. Close all temporary accounts with credit balances to Income Summary.
2. Close all temporary accounts with debit balances to Income Summary.
3. Close the balance of Income Summary to the Retained Earnings account.
CHAPTER 20 • VISUAL SUMMARY
glencoe.com Download the vocabulary review, i-Summary, and i-Quiz for Chapter 20.mm D
Conc
epts
Ana
lysi
sPr
oced
ures
The basic accounting cycle is the same whether
A post-closing trial balance is prepared at the end of the accounting period.
• the business is a service provider or merchandiser.• the business is organized as a sole proprietorship, corporation, or
partnership.• the business uses a manual or computerized accounting system.
g g
The Starting Line Sports GearPost-Closing Trial Balance
December 31, 20--
13 8 5 0 001 5 5 006 4 0 00
8 0 002 4 8 00
5 8 001 8 36
1 1 4 732 4 2 8 00
75 0 0 0 0052 4 4 5 91
145 0 3 8 00
15 1 7 9 0010 4 0 4 0081 3 8 5 00
1 8 3 9 001 3 7 5 00
19 8 3 1 009 8 2 5 005 2 0 0 00
145 0 3 8 00
Cash in BankAccounts ReceivableMerchandise InventorySuppliesPrepaid InsuranceDelivery EquipmentOffice EquipmentStore EquipmentAccounts PayableFed. Corp. Income Tax PayableEmployees’ Fed. Income Tax PayableEmployees’ State Income Tax PayableSocial Security Tax PayableMedicare Tax PayableFed. Unemployment Tax PayableState Unemployment Tax PayableSales Tax PayableCapital StockRetained Earnings
Totals
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CHAPTER 20
Visual SummaryAfter students have looked at the Visual Summary, challenge them to create their own diagrams of the Procedures section. Tell them that these diagrams could be used to help them remember how to prepare the Post-Closing Trial Balance. Choose several to discuss and share with the class.
English Language LearnersStudents whose primary language is not English might benefit from extra review or tutoring at this point. You might encourage them to write down the situations in which the basic accounting cycle is always the same on index cards to use as reference. Pair ELLs with students who are fluent in English to review the Procedures part of the Summary. Provide more examples for the pairs to work through together.
Student Edition• Reading Check, p. 594• Section Assessments 1, 2: pp. 595, 602• Review and Activities, p. 604• Standardized Test Practice, p. 605 • Chapter 20 Problems, pp. 607–611• Real-World Applications and Connections,
pp. 612–613
Teacher Edition• Section Quizzes 1, 2: pp. 595, 602
Fast File Chapter 20 Resources (on TeacherWorks Plus)• Concept Assessment• Quick Quiz• Chapter Quiz
• Chapter Test • Performance Task Assessment List• Rubric
ExamView Assessment SuiteConnect Assignment Builder
CHAPTER 20 ASSESSMENT RESOURCES Use these resources to review, assess, or reteach the chapter.
Chapter 20 603
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CHAPTER 20 • REVIEW AND ACTIVITIES
1. Why is it important to “clean the slate” before a new accounting period? Like sole proprietorships that you studied in Chapter 10, corporations need to “close the books” at the end of each accounting period. How do businesses get ready for a new accounting period?
Answering the Essential Question
Vocabulary Check 2. Content Vocabulary The following terms were introduced in Chapter 10 when we learned about
closing the accounting cycle for a sole proprietorship business. How do they relate to a merchandising corporation? What differences exist between the closing entries for a sole proprietorship and the closing entries for a merchandising corporation? Use the following terms in your written explanation:
• closing entries (p. 253) • permanent accounts (p. 108) • temporary accounts (p. 116)
3. Academic Vocabulary As you know, academic vocabulary words can be used in subject areas other than accounting. For each academic vocabulary word below, write its meaning in relation to accounting. Then write a meaning for each as it would apply to another subject. Be sure to include the name of that subject.
• journalize (p. 591)• temporary (p. 591)
• retain (p. 594)• process (p. 596)
• adjust (p. 600)• consist (p. 601)
• analyze (p. 601)
Concept Check 4. Analyze Explain how the closing entries for corporations and sole proprietorships are similar and how
they are different. 5. What account(s) are used to close temporary accounts with debit and credit balances? 6. How are temporary accounts with debit balances closed? 7. What is written in the Description column of the general ledger account as the closing entries are posted? 8. What is the purpose of preparing a post-closing trial balance? 9. Analyze Does the Income Summary account appear on the post-closing trial balance? Why or why not? 10. Name the 10 steps in the accounting cycle.
After You Read
Math 11. Rudy’s watch store just celebrated one
year in business. Rudy wants to know the stock-turnover rate for six months to check his progress. Over 12 months, his sale totaled $156,000. His average inventory on hand totaled $68,000. What was the rate?
NCTM Problem Solving Build new mathematical knowledge through problem solving.
English Language Arts 12. Research Supply and Demand Economics
using the Internet or your school library, and explain how this system works to regulate the flow of goods and services within an economy. Create a poster presentation that illustrates the basic concepts of supply and demand within an economy. Be sure to cite the sources for your information.
NCTE 1 Read texts to acquire new information.
604 Chapter 20 Review and Activities
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CHAPTER 20
Review and Activities
After You ReadAnswering the Essential Question
1. The intent of this essential question is to help students use inquiry to arrive at an understanding of the basic role of accounting. Once they see the benefi t of accounting processes on a personal level with their own money, they can generalize and broaden that understanding to businesses.
Vocabulary Check 2. Content Vocabulary See the
glossary for defi nitions of these terms. Have students share and discuss their defi nitions.
3. Academic Vocabulary Answers will vary. Possible meanings for Accounting: journal—a ledger, temporary—short-term, retain—keep, process—procedure, adjust—correct, consist—include, analyze—evaluate. Other meanings for English or Social Studies: journal—magazine or diary, temporary—impermanent, retain—keep, process—method, adjust—modify, consist—made up of, analyze—consider.
Concept Check4. Similar: The process of closing
for both is the same, to prepare the fi nancial records for the next accounting period by bringing temporary account balances to zero. The posting from the Income Summary accounting both results in either an increase or a decrease that must be transferred. Different: Posting for a corporation transfers the increase or decrease to Retained Earnings, but for a proprietorship, the transfer is to the Owner’s Capital account. Also, withdrawals by a sole proprietor are closed to the Capital account.
5. Income Summary6. Each account with a balance in
the Debit column of the Income Statement section of the work sheet (contra revenue, cost of merchandise and expense accounts) is credited to bring its balance to zero. The sum of all these amounts is debited to Income Summary.
7. Closing Entry8. A post-closing trial balance is prepared to
prove that the general ledger accounts are in balance after all adjusting and closing entries have been posted.
9. It does not, because it is a temporary account. Only permanent accounts appear on the post-closing trial balance.
10. 1) Collect/verify source documents. 2) Analyze transactions. 3) Journalize transactions. 4) Post journal entries to general ledger and subsidiary ledgers. 5) Prepare trial balance. 6) Complete work sheet. 7) Prepare fi nancial statements. 8) Journalize/post adjusting entries. 9) Journalize/post closing entries. 10) Prepare post-closing trial balance.
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Math11. 6-month stock-turnover rate � 1.2 ($156,000
� 68,000 � 2.3 for 12 months; 2.3 � 2 � 1.2 for 6 months)
English Language Arts12. Student posters should illustrate that
competition among sellers lowers cost and prices and encourages producers to produce
more of what consumers are willing and able to buy. Competition among buyers increases price and allocates goods and services to those who are willing and able to pay the most for them.
CHAPTER 20 • STANDARDIZED TEST PRACTICE
Multiple Choice1. The procedure for transferring information from a journal to ledger accounts is called
a. journalizing.b. adjusting.c. file maintenance.d. posting.e. none of these answers
2. Proving the accuracy of the adjusting and closing entries is best defined asa. preparing a post-closing trial balance.b. preparing the statements.c. closing the temporary accounts.d. adjusting the ledger accounts.e. none of these answers
3. To close the Income Summary account of a corporation with a net loss, the balance is closed into thea. Retained Earnings account with a debit.b. Retained Earnings account with a credit.c. account which caused the net loss with a debit.d. none of these answers
4. Which of the following accounts is closed at the end of a fiscal period?a. Membership Fees Incomeb. Accounts Receivablec. Delivery Equipmentd. Retained Earnings
True or False5. The Income Summary account appears on the post-closing trial balance.
6. Retained Earnings is credited when the business earns a profit.
Short Answer7. Where can you find the information needed to prepare closing entries?
Extended Response8. Explain the closing entries for a business organized as a corporation.
Chapter 20 Standardized Test Practice 605
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Standardized Test Practice
Multiple Choice1. d2. a3. a4. a
True or False5. F6. T
Short Answer7. The Income Statement section of the
work sheet.
Extended Response8. a) Close balances of revenue and
contra cost of merchandise accounts into Income Summary. b) Close balances of contra revenue, cost of merchandise, and expense accounts into Income Summary. c) Close balance of Income Summary into Retained Earnings.
CHAPTER 20
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CHAPTER 20 • COMPUTERIZED ACCOUNTING
Closing a Fiscal Year and Preparing a Post-Closing Trial BalanceMaking the Transition from a Manual to a Computerized System
MANUAL METHODSMANUAL METHODS COMPUTERIZED METHODS
• Journalize the entries to close the revenue, expense, Income Summary, and Withdrawals accounts.
• Closing the fiscal year is per formed only if you want to clear income and expense accounts at the end of the fiscal year.
• Post the closing entries. • If you have selected the closing option, the software journalizes closing entries.
• After the closing entries have been posted to the ledger, prepare a trial balance to verify the equality of debits and credits.
• A post-closing trial balance can be printed to verify that all revenue and expense accounts have been closed.
• All expense and revenue accounts should have zero balances.
QuickBooks®
Q What tasks should I perform before closing a fi scal year?
A • Post and print all journal entries and reports before you close the fiscal year.
• Back up the company file before closing.
Q How do I close the fi scal year?
A • From the Company menu, select Set Up Users.
• Click Closing Date.• Enter the date on which you want to close
your books and enter a password.
Q What tasks should I perform before closing a fi scal year?
A • Post and print all journal entries and reports before you close the fiscal year.
• Back up all files before closing. Closing the fiscal year cannot be reversed.
Q How do I close the fi scal year?
A • From the Tasks menu, select System.• Choose Year-End Wizard.• You will be prompted if any procedures
need to be completed before the system continues the closing process.
For detailed instructions, see your Glencoe Accounting Chapter Study Guides and Working Papers.
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Computerized Accounting
Peachtree detects any unposted entries and reminds you to print reports. Peachtree reminds you to back up your files before closing. When you close the fiscal period, the software will create closing entries and post them. All income and expense account balances will be transferred to the Retained Earnings account.
QuickBooks®
QuickBooks does not require that you close your books. QuickBooks allows password protection to protect your data for the year. It is recommended that you print all necessary Financial and Journal reports prior to protecting your data. On the first day of the new fiscal year, QuickBooks increases or decreases your Retained Earnings account depending on whether you had a profit or a loss for the period.
CHAPTER 20
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PROBLEMS CAN BE SOLVED USING:
Manual Methods• McGraw-Hill Connect• Manual Glencoe
Working Papers
Computerized Methods• Peachtree®• QuickBooks®• Spreadsheet
CHAPTER 20 • PROBLEMS
Identify the effect of the closing entries on the Retained Earnings account.
Analyze
PROBLEM 20–4 Journalizing Closing EntriesThe following amounts appeared in the Income Statement section of Sunset Surfwear’s work sheet.
INSTRUCTIONS In your working papers, re cord the closing entries for the year ended December 31. Start with general journal page 13.
PROBLEMS CAN BE SOLVED USING:
Manual Methods• Manual Glencoe
Working Papers
Computerized Methods• Spreadsheet• Templates
SPREADSHEETSMART GUIDE
INCOME STATEMENT
DEBIT CREDITACCOUNT NAMEACCT.
NO.
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
310401405410501505510515625635650655665675
Income SummarySalesSales DiscountsSales Returns and AllowancesPurchasesTransportation InPurchases DiscountsPurchases Returns and AllowancesFederal Corporate Income Tax Exp.Insurance ExpenseMiscellaneous ExpenseRent ExpenseSupplies ExpenseUtilities Expense
Net Income
1 000 002 400 00
25 000 003 000 00
5 532 00300 00
6 000 0012 000 00
450 0014 000 0069 682 0029 318 0099 000 00
7 000 0090 000 00
500 001 500 00
99 000 00
99 000 00
SPREADSHEETSMART GUIDE
Step–by–Step Instructions:Problem 20–4
1. Select the problem set for Sunset Surfwear (Prob. 20–4).
2. Rename the company and set the system date.
3. Choose System from the Tasks menu and then select Year-End Wizard to close the fiscal year.
4. Print a post-closing trial balance.
5. Complete the Analyze activity.
6. End the session.
TIP: Choose the General Ledger Trial Balance report whenever you are instructed to print a Post-Closing Trial Balance.
SMART GUIDE
Chapter 20 Problems 607
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CHAPTER 20
PROBLEM 20–4Journalizing Closing EntriesDec. 31: Dr. Sales $90,000, Purchases
Discounts $500, Purchases Returns and Allowances $1,500; Cr. Income Summary $92,000
Dec. 31: Dr. Income Summary $69,682; Cr. Sales Discounts $1,000, Sales Returns and Allowances $2,400, Purchases $25,000, Transportation In $3,000, Federal Corporate Income Tax Exp. $5,532, Insurance Expense $300, Miscellaneous Exp. $6,000, Rent Exp. $12,000, Supplies Exp. $450, Utilities Exp. $14,000
Dec. 31: Dr. Income Summary $29,318; Cr. Retained Earnings $29,318
The third closing entry increased Retained Earnings by $29,318.
Analyze
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PROBLEM 20–5 Journalizing and Posting Closing Entries
The following account balances appeared in the Income Statement section of the work sheet of Shutterbug Cameras.
INSTRUCTIONS 1. Journalize the closing entries for the year ended December 31. Start
with page 14 of a general journal (in your working papers). 2. Post the closing entries to the general ledger accounts, which are
included in your working papers.
PROBLEM 20–6 Identifying Accounts for Closing Entries
A partial list of the accounts used by Cycle Tech Bicycles appears on page 609. All of the accounts have nonzero balances.
Describe what would happen if the accountant for Shutterbug Cameras made a mistake and did not close the Transportation In account.
Analyze
CHAPTER 20 • PROBLEMS
T
Step–by–Step Instructions:Problem 20–5
1. Select the problem set for Shutterbug Cameras (Prob. 20–5).
2. Rename the company and set the system date.
3. Close the fiscal year.4. Print a post-closing trial
balance.5. Complete the Analyze
activity.6. End the session.
SMART GUIDE
INCOME STATEMENT
DEBIT CREDITACCOUNT NAMEACCT.
NO.
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
4 000 00
5 000 0090 000 00
5 000 00
4 700 00300 00
6 000 001 630 003 000 00
119 630 0032 870 00
152 500 00
150 000 00
1 000 001 500 00
152 500 00
152 500 00
310401410501505510515620645650660670
Income SummarySalesSales Returns and AllowancesPurchasesTransportation InPurchases DiscountsPurchases Returns and AllowancesFederal Corporate Income Tax Exp.Miscellaneous ExpenseRent ExpenseSupplies ExpenseUtilities Expense
Net Income
QuickBooks®
Step–by–Step Instructions:Problem 20–5
1. Restore the Problem20–5.QBB file.
2. Enter the closing entries.3. Print a post-closing trial
balance.4. Complete the Analyze
activity.5. Back up your work.
PROBLEM GUIDE
CONTINUE
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CHAPTER 20
PROBLEM 20–5Journalizing and Posting Closing EntriesClosing entries:Dec. 31: Dr. Sales $150,000, Purchases
Disc. $1,000, Purchases Returns and Allowances $1,500; Cr. Income Summary $152,500
Dec. 31: Dr. Income Summary $115,630; Cr. Sales Returns and Allowances $5,000, Purchases $90,000, Trans. In $5,000, Fed. Corp. Inc. Tax Exp. $4,700, Misc. Exp. $300, Rent Exp. $6,000, Supplies Exp. $1,630, Utilities Exp. $3,000,
Dec. 31: Dr. Inc. Summary $32,870; Cr. Retained Earnings $32,870
If the error was not caught and corrected, the balance of the Transportation In account would be carried forward to the new fiscal year. Retained Earnings for the year just ended would be overstated.
PROBLEM 20–6Identifying Accounts for Closing EntriesAccounts debited:401 Sales515 Purchases Ret. and Allow.310 Income Summary (for credits and
profi ts)305 Retained Earnings (for losses)
Accounts credited:650 Miscellaneous Expense665 Supplies Expense505 Transportation In405 Sales Discounts501 Purchases601 Advertising Expense625 Fed. Corp. Income Tax Exp.657 Rent Expense310 Income Summary (for debits and
losses)305 Retained Earnings (for profi ts)
Analyze
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General Ledger 101 Cash in Bank 650 Miscellaneous Expense 125 Merchandise Inventory 665 Supplies Expense 215 Sales Tax Payable 505 Transportation In 305 Retained Earnings 401 Sales 405 Sales Discounts 310 Income Summary 501 Purchases 515 Purchases Returns and Allowances 601 Advertising Expense 625 Federal Corporate Income Tax Expense 657 Rent Expense 135 Prepaid Insurance
INSTRUCTIONS In your working papers, list all account numbers and names for accounts that will be debited when closed. Next, list all account numbers and names for accounts that will be credited when closed.
Step–by–Step Instructions: Problem 20–6
1. Select the problem set for Cycle Tech Bicycles (Prob. 20–6).
2. Rename the company and set the system date.
3. Print a Chart of Accounts report.
4. List the accounts that will be debited and those that will be credited when closed.
5. Complete the Analyze activity.
6. End the session.
SMART GUIDE
Conclude whether the company made a profit for the year.Analyze
Examine your list. Determine whether it contains all of the accounts. If it does not, explain why.
Analyze
PROBLEM 20–7 Completing End-of-Period Activities
The general ledger accounts for River’s Edge Canoe & Kayak as ofDecember 31, the end of the period, appear in the working papers.
INSTRUCTIONS In your working papers: 1. Prepare a trial balance on a ten-column work sheet. 2. Complete the work sheet. Use the following adjustment information. Merchandise inventory, December 31 $20,000 Supplies inventory, December 31 900 Unexpired insurance, December 31 1,800 Total federal corporate income taxes for the year 2,965 3. Prepare an income statement from the work sheet information. 4. Prepare a statement of retained earnings. 5. Prepare a balance sheet. 6. Journalize and post the adjusting entries. Begin on general journal
page 14. 7. Journalize and post the closing entries. 8. Prepare a post-closing trial balance.
Step–by–Step Instructions:Problem 20–7
1. Select the spreadsheet template for Problem 20–7.
2. Enter your name and the date in the spaces provided on the template.
3. Complete the spread sheet using the instructions in your working papers.
4. Print the spreadsheet and proof your work.
5. Complete the Analyze activity.
6. Save your work and exit the spreadsheet
SPREADSHEETSMART GUIDE
Chapter 20 Problems 609
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CHAPTER 20
PROBLEM 20–6Identifying Accounts for Closing Entries (cont’d)
No, because some of the accounts are not affected by closing entries.
PROBLEM 20–7Completing End-of-Period ActivitiesTrial balance totals $261,826.57Adj. trial balance totals $261,851.57Net Income $41,285Ending Retained Earnings $66,685Total Assets $120,236.57
Adjusting entries:Dec. 31: Dr. Income Summary $5,000; Cr.
Merchandise Inv. $5,000Dec. 31: Dr. Supplies Exp. $3,200; Cr.
Supplies $3,200Dec. 31: Dr. Insur. Exp. $1,200; Cr. Prepaid
Insur. $1,200Dec. 31: Dr. Fed. Corp. Inc. Tax Exp. $25;
Cr. Fed. Corp. Inc. Tax Pay. $25
Closing entries:Dec. 31: Dr. Sales $175,000, Purchases
Disc. $2,300, Purchases Ret. and Allow. $5,600; Cr. Income Summary $182,900
Dec. 31: Dr. Income Summary $136,615; Cr. Sales Disc. $3,775, Sales Ret. and Allow. $2,500, Purchases $75,300, Trans. In $5,000, Bankcard Fees Exp. $3,515, Fed. Corp. Inc. Tax Exp. $2,965, Insur. Exp. $1,200, Misc. Exp. $5,960, Rent Exp. $9,000, Salaries Exp. $22,200, Supplies Exp. $3,200, Utilities Exp. $2,000
Dec. 31: Dr. Inc. Summary $41,285; Cr. Retained Earnings $41,285
Post- Closing Trial Balance totals $120,236.57
Analyze
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CHAPTER 20 • PROBLEMS
Step–by–Step Instructions: Problem 20–8
1. Select the problem set for Buzz Newsstand (Prob. 20–8).
2. Rename the company and set the system date.
3. Print a Working Trial Balance to help you prepare the adjustments.
4. Record the adjustments using the General Journal Entry option.
5. Print a General Journal report and proof your work.
6. Complete the Analyze activity.
7. Close the fiscal year.8. Print a post-closing trial
balance.9. End the session.
TIP: Peachtree automati cally updates the general ledger accounts when you close the fiscal year.
SMART GUIDE
CHALLENGEPROBLEM
PROBLEM 20–8 Preparing Adjusting and Closing Entries
In the middle of the end-of-period activities, the accountant for Buzz Newsstand was called away because of an illness in the family. Before leaving, the accountant prepared the work sheet and the financial statements. However, the business manager can locate only the trial balance shown here (before adjustments) and the income statement.
INSTRUCTIONS In your working papers: 1. Journalize the adjusting and closing entries on page 16 of the general
journal. 2. Using the information provided, prepare a post-closing trial balance.
CONTINUE
Buzz NewsstandTrial Balance, Before Adjustments
December 31, 20--
4 6 9 0 00
4 1 6 0040 0 0 0 0024 6 0 3 00
299 1 5 6 00
2 9 5 0 002 1 0 8 00
373 9 2 3 00
12 0 3 5 006 1 0 6 00
64 8 0 0 003 9 1 6 005 4 0 0 00
46 1 0 6 00
9 5 0 0 00168 6 2 4 00
8 2 3 6 00
4 0 0 0 0012 5 0 0 00
1 6 0 0 0026 9 0 0 00
4 2 0 0 00373 9 2 3 00
Cash in BankAccounts ReceivableMerchandise InventorySuppliesPrepaid InsuranceDelivery TruckAccounts PayableFed. Corp. Income Tax Pay.Sales Tax PayableCapital StockRetained EarningsIncome SummarySalesSales Returns and AllowancesPurchasesTransportation InPurchases DiscountsPurchases Returns and AllowancesAdvertising ExpenseFed. Corp. Income Tax ExpenseInsurance ExpenseMiscellaneous ExpenseSalaries ExpenseSupplies ExpenseUtilities Expense
Totals
101115130135140145201204215301305310401410501505510515601625635650660665675
QuickBooks®
Step–by–Step Instructions:Problem 20–8
1. Restore the Problem 20-8.QBB file.
2. Print a Trial Balance.3. Record the adjustments.4. Print a Journal report.5. Complete the Analyze
activity.6. Enter the closing entries.7. Print a post-closing trial
balance.8. Back up your work.
PROBLEM GUIDE
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CHAPTER 20
PROBLEM 20–7Completing End-of-Period Activities (cont’d)Ending debit balances:Cash in Bank $22,236.57Accounts Receivable $7,400.00Merchandise Inventory $20,000.00Supplies $900.00Prepaid Insurance $1,800.00Delivery Truck $67,900.00
Ending credit balances:Accounts Payable $13,000.00Federal Corp. Income Tax Payable $25.00Sales Tax Payable $526.57Capital Stock $40,000.00Retained Earnings $66,685.00
Yes, it had a $41,285 profit.
PROBLEM 20–8Preparing Adjusting and Closing EntriesAdjusting entries:Dec. 31: Dr. Income Summary $4,400; Cr.
Merchandise Inventory $4,400Dec. 31: Dr. Insurance Exp. $1,800; Cr.
Prepaid Insurance $1,800Dec. 31: Dr. Supplies Exp. $2,744; Cr.
Supplies $2,744Dec. 31: Dr. Federal Corporate Income Tax
Exp. $2,413; Cr. Federal Corporate Income Tax Pay. $2,413
Closing Entries:Dec. 31: Dr. Sales $299,156, Purchases
Discounts $2,950, Purchases Returns and Allowances $2,108; Cr. Income Summary $304,214
Dec. 31: Dr. Income Summary $242,517; Cr. Sales Returns and Allowances $9,500, Purchases $168,624, Transportation In $8,236, Advertising Exp. $4,000, Federal Corporate Income Tax Exp. $14,913, Insurance Exp. $1,800, Miscellaneous Exp. $1,600, Salaries Exp. $26,900, Supplies Exp. $2,744, Utilities Exp. $4,200
Dec. 31: Dr. Income Summary $57,297; Cr. Retained Earnings $57,297
Post-Closing Trial Balance totals $129,419
Analyze
CHALLENGEPROBLEM
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Buzz NewsstandIncome Statement
For the Year Ended December 31, 20--
176 8 6 0 00
5 0 5 8 00
168 6 2 4 008 2 3 6 00
2 9 5 0 002 1 0 8 00
Revenue: Sales Less: Sales Ret. and Allow. Net SalesCost of Merch. Sold:
Merch. Inv., Jan 1, 20--PurchasesPlus: Transportation InCost of Del. Merch.Less: Purch. Discounts
Purch. Ret. and Allow.Net PurchasesCost of Merch. Avail.Merch. Inv., Dec. 31, 20--
Cost of Merch. SoldGross Profit on SalesOperating Expenses:
Advertising ExpenseInsurance ExpenseMiscellaneous ExpenseSalaries ExpenseSupplies ExpenseUtilities Expense
Total Oper. ExpensesOperating Income
Less: Fed. Inc. Tax Exp.Net Income
299 1 5 6 009 5 0 0 00
64 8 0 0 00
171 8 0 2 00236 6 0 2 0060 4 0 0 00
4 0 0 0 001 8 0 0 001 6 0 0 00
26 9 0 0 002 7 4 4 004 2 0 0 00
289 6 5 6 00
176 2 0 2 00113 4 5 4 00
41 2 4 4 0072 2 1 0 0014 9 1 3 0057 2 9 7 00
Determine the impact of these adjusting entries on net income.
Analyze
Chapter 20 Problems 611
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CHAPTER 20
PROBLEM 20–8Preparing Adjusting and Closing Entries (cont’d)
The adjusting entries increased expenses and cost of merchandise by $11,357 ($4,400 � $1,800 � $2,744 � $2,413), reducing net income by that amount.
Analyze
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CHAPTER 20
— Pearl’s Department Store —
H.O.T.
— PPePeararll’l’ss DeDepa trtment Store —
CASE STUDY
WITHHIGHER ORDER THINKINGREAL-WORLD Applications & Connections
Direct DepositFor many employees, the days of getting a paycheck and taking it to the bank are long gone. Many employers use direct deposit by which they place a worker’s pay directly into his or her bank account. To set up direct deposit, the worker usually has to provide his or her bank account number and the bank’s routing number to the employer. The worker may supply the employer with a voided check or deposit slip. With this, the payroll clerk is able to deposit money into the worker’s account.
DISCUSS AND WRITE
a. Discuss with a partner why you think businesses are willing to offer direct deposit to employees.
b. List three benefits direct deposit offers to workers. Would you like to have direct deposit? Why or why not?
Merchandising Business: Department StoreYou work in the accounting department for Pearl’s, a trendy department store. The accounting manager asked you to review the work of an accounting intern who completed the closing process. Some temporary accounts in the post-closing trial balance still have balances.
INSTRUCTIONS
a. Explain how to tell which accounts should have zero balances after closing.
b. Explain how to determine which accounts have and have not been closed.
c. Suggest ways to explain to the intern why temporary accounts have zero balances after closing.
d. List human-relations skills you might use in your explanation to the intern.
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Merchandising Business: Department Store1. Only temporary accounts should have
zero balances after closing.
2. Temporary (income statement) accounts are closed; permanent (balance sheet) accounts are not.
3. The accounts must begin each period with zero balances to separate data by fi scal period.
4. Answers may vary. A manager might praise work well done and explain areas that need improvement. Clear oral and written communications should be used to reinforce and document expected improvements.
Direct Deposita. Most answers will indicate reduced
paperwork and clerical costs and, as a result, lower cost. Having no printed checks means that a check cannot be lost or stolen. If any errors occur in electronic payroll, they can be corrected immediately without waiting for the employee to return an incorrect check.
b. Answers may include convenience, never misplacing a check, immediate availability of funds, and less effort for the individual.
CASE STUDY
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CHAPTER 20
H.O.T. Audit
General Ledger AccountantThe general ledger is the primary source of information from which companies generate their financial reports. The general ledger accountant is responsible for making sure that all information in the ledger, including all business transactions, is accurate and up to date, and properly accounted for. General ledger accountants may themselves be responsible for recording the day-to-day bookkeeping activities of an organization, or may work in a supervisory role, directing other accountants or clerks and reviewing their work. A general accountant may also be referred to as a corporate accountant or a management accountant.
RESEARCH AND SHARE
a. Use the Internet to locate three sources of information on general ledger accounting.
b. What level of education is required to be a general ledger accountant? What are the roles and responsibilities of a general ledger accountant?
Closing EntriesMr. Raheev Sing’s accountant made the following closing entry:
INSTRUCTIONS Review the closing entry. On a separate sheet of paper, prepare the closing entries that the accountant should have made.
GENERAL JOURNAL
00 017 0000 08 0002 03 0003 02 0005 03 00
Date20--
XX
Income Summary Purchases Discounts Purchases Ret. and Allow. Sales Discounts Sales Returns and Allow.
1
2
3
4
5
6
1
2
3
4
5
6
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General Ledger
a. Possible sources: Wikipedia, Bureau of Labor Statistics, eHow.com
b. General ledger accountants typically hold at least a bachelor’s degree in accounting or business. Many hold master’s degrees in accounting; many are CPAs. Duties include reviewing accounts, closing the accounting schedule, payroll, calculating depreciation, amortization, and depletion, determining cost of goods sold, and preparing reports for management review, and this position often requires supervision of clerks.
H.O.T. Audit Closing Entries Dec. 31: Dr. Purchases Disc. $8,000, Purchases Returns & Allowances $3,200; Cr. Sales Disc. $2,300, Sales Returns & Allowances $3,500, Income Summary $5,400
Have students research credit ratings and credit scores. Ask what steps they can take to start building and maintaining a strong credit rating. One way to establish a credit rating would be to obtain a credit card and make payments on time.
FINANCIALLITERACY
Chapter 20 613
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