LESSON 8-1
 Recording Adjusting Entries
 Adjustments were analyzed and planned on the work sheet
 These adjustments must be journalized, so they can be posted
to the general ledger accounts
 Adjusting entries – journal entries recorded to update
general ledger accounts at the end of a fiscal period
 Go to the next page in a journal to record adjusting
entries
 Remember, account balances will not change until they are
posted.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
2
ADJUSTING ENTRY FOR SUPPLIES
1
3
2
page 202
1. Write the heading.
2. Write the date.
3. Write the title of
the account
debited. Record
the debit amount.
4. Write the title of
the account
credited. Record
the credit amount.
4
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-1
3
ADJUSTING ENTRY FOR PREPAID
INSURANCE
page 204
1. Write the date.
2. Write the title of
the account
debited. Record
the debit amount.
3. Write the title of
the account
credited. Record
the credit amount.
1
2
3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-1
LESSON 8-2 - Recording Closing
Entries
 Permanent accounts
 Accounts used to accumulate information from one accounting
period to the next
 Also referred to as “real” accounts
 Asset, liability, and the owner’s capital account
 Ending balances for one fiscal period become the beginning
balances of the next fiscal period
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-2 - Recording Closing
Entries
 Temporary accounts
 Accounts used to accumulate information until it is transferred to the
owner’s capital account
 Also referred to as “nominal” accounts
 Revenue, expense, owner’s drawing, and income summary accounts
 Show changes in the owner’s capital for a SINGLE fiscal period
 Balances of temporary accounts are summarized and transferred to the
owner’s capital account at the end of the fiscal period
 Begin a new fiscal period with zero balances
 Closing entries
 Journal entries used to prepare temporary accounts for a new fiscal period
 Temporary accounts must be reduced back to zero (Concept: matching
expenses with revenue)
 Income Summary – temporary account used to summarize closing entries
for the revenue and expense accounts (no normal balance side – depends
on net income)
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
6
NEED FOR THE INCOME SUMMARY
ACCOUNT
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 207
LESSON 8-2
7
CLOSING ENTRY FOR AN INCOME STATEMENT
ACCOUNT WITH A CREDIT BALANCE
page 208
(Debit to close)
1
2
3
4
1. Write the heading.
2. Write the date.
3. Write the title of the account debited.
Record the debit amount.
4. Write the title of the account credited. Record the credit amount.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-2
8
CLOSING ENTRY FOR INCOME STATEMENT
ACCOUNTS WITH DEBIT BALANCES
1.
2.
3.
4.
page 209
Date
Income Summary
Credit
Debit amount
(Credit to close)
1
2
4
3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-2
CLOSING ENTRY TO RECORD NET INCOME
OR LOSS AND CLOSE THE INCOME
SUMMARY ACCOUNT
9
page 210
1. Date
2. Debit
3. Credit
(Capital: credit to
record net income)
(Income Summary:
debit to close)
1
2
3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-2
10
CLOSING ENTRY FOR THE OWNER’S
DRAWING ACCOUNT
page 211
1. Date
2. Debit
3. Credit
(Credit to close)
1
2
3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-2
11
TERMS REVIEW
page 212
 permanent accounts
 temporary accounts
 closing entries
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-2
LESSON 8-3
Preparing a Post-Closing
Trial Balance
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
GENERAL LEDGER ACCOUNTS AFTER
ADJUSTING AND CLOSING ENTRIES ARE
POSTED
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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page 213
LESSON 8-3
14
POST-CLOSING TRIAL BALANCE
 Post-closing trial balance
 Trial balance prepared AFTER the closing entries are posted
to verify that debits equal credits in the general ledger
 “post” means after
 Only general ledger accounts with balances are included on
a post-closing trial balance
 Permanent accounts have balances and DO appear on the
post-closing TB; temporary accounts do NOT have balances
nor do they appear on the post-closing TB
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-2
15
POST-CLOSING TRIAL BALANCE
4
1
3
2
6
5
7
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 216
1. Heading
2. Account titles
3. Account
balances
4. Single rule
5. Compare
totals
6. Totals
7. Record totals
8. Double rule
8
LESSON 8-3
16
Accounting cycle
 The series of accounting activities included in
recording financial information for a fiscal period
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-3
17
ACCOUNTING CYCLE FOR A SERVICE
BUSINESS
1
2
8
3
7
4
6
5
page 217
1.
2.
3.
4.
5.
Analyzes transactions
Journalize
Post
Prepare work sheet
Prepare financial
statements
6. Journalize adjusting
and closing entries
7. Post adjusting and
closing entries
8. Prepare post-closing
trial balance
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-3
18
TERMS REVIEW
page 219
 post-closing trial balance
 accounting cycle
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-3