Podcast
Questions and Answers
What is the purpose of closing entries?
What is the purpose of closing entries?
- To record the beginning balances of all accounts for the new accounting period.
- To transfer temporary account balances to the owner's capital account. (correct)
- To update all balance sheet account balances.
- To prepare the financial statements.
Which of the following accounts is NOT closed at the end of the accounting period?
Which of the following accounts is NOT closed at the end of the accounting period?
- Salaries Expense
- Prepaid Rent (correct)
- Service Revenue
- Advertising Expense
What is the purpose of the Income Summary account?
What is the purpose of the Income Summary account?
- To summarize the beginning balances of all assets and liabilities.
- To track the profitability of a specific product line.
- To record the net income or loss for the period. (correct)
- To calculate the ending balance of the owner's capital account.
Which of the following statements about closing entries is FALSE?
Which of the following statements about closing entries is FALSE?
When closing the revenue accounts, what is the journal entry?
When closing the revenue accounts, what is the journal entry?
What type of accounts are NOT closed at the end of the accounting period?
What type of accounts are NOT closed at the end of the accounting period?
Why are temporary accounts closed at the end of the accounting period?
Why are temporary accounts closed at the end of the accounting period?
What is the purpose of preparing a post-closing trial balance?
What is the purpose of preparing a post-closing trial balance?
When preparing the closing entries for a period, what account is debited if the net income is a credit?
When preparing the closing entries for a period, what account is debited if the net income is a credit?
What is the purpose of preparing a post-closing trial balance after closing entries have been made?
What is the purpose of preparing a post-closing trial balance after closing entries have been made?
What is the purpose of closing the Owner's Drawings account?
What is the purpose of closing the Owner's Drawings account?
Which of the following is not a valid purpose of preparing a post-closing trial balance?
Which of the following is not a valid purpose of preparing a post-closing trial balance?
Which account is debited to close the temporary account for Owner's Drawings?
Which account is debited to close the temporary account for Owner's Drawings?
What is the primary purpose of closing entries?
What is the primary purpose of closing entries?
Flashcards
Closing Entries
Closing Entries
Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts.
Income Summary
Income Summary
An account used during the closing process to summarize the period's revenues and expenses before closing them to capital.
Owner's Capital Account
Owner's Capital Account
An account representing the owner's stake in the business, increases with profits and investments.
Drawings
Drawings
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Post-Closing Trial Balance
Post-Closing Trial Balance
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Permanent Accounts
Permanent Accounts
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Temporary Accounts
Temporary Accounts
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Reversing Entries
Reversing Entries
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Closing Revenue Accounts
Closing Revenue Accounts
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Closing Expense Accounts
Closing Expense Accounts
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Study Notes
Chapter 4: Completion of the Accounting Cycle
- The chapter covers the completion of the accounting cycle
- The chapter was prepared by Debbie Musil at Kwantlen Polytechnic University
- Page 144 of the Principles of Financial Accounting Canadian Edition is referenced
- This course uses Kahoot! for interactive learning
- Students are asked to answer questions on Google Classroom
- Success criteria for the chapter include preparing closing entries and a post-closing trial balance, as well as preparing reversing entries
- The closing process takes place at the end of the accounting period
- Temporary accounts are closed at the end of the accounting period. They track data only for a single period
- Permanent accounts are not closed but rather carried forward to the next period
- Examples of temporary accounts include revenue, expense, and owner's drawings accounts
- Examples of permanent accounts include all balance sheet accounts
- Textbook questions (BE4-1, p179) are assigned
- Closing entries transfer temporary account balances to the owner's capital account
- Closing entries reduce balances in temporary accounts to zero to prepare for the next period
- Revenue and expense accounts are closed to Income Summary, which is a temporary account
- The closing process involves closing revenue and expense accounts, Income Summary, and owner's drawings
Reversing Entries (Appendix 4B)
- Reversing entries are used to reverse adjusting entries at the beginning of the next accounting period
- These entries reverse accrued revenues and expenses
- Reversing entries simplify future transaction recording related to an adjusting entry
- Reversing entries eliminate the need to refer back to prior adjusting entries when recording future transactions
- Students should complete textbook questions E4-3, BE4-15, and BE4-16
- Chapter 1-3 review using Kahoot! is mentioned
Post-Closing Trial Balance
- A post-closing trial balance is prepared after all closing entries are recorded and posted
- It lists all permanent accounts and their balances
- Permanent account balances are carried forward into the following period
- Temporary accounts have zero balances after the closing process, leaving only permanent accounts
- An example trial balance is provided (Pioneer Advertising Agency, October 31, 2014)
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