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Chapter 6. Closing Process and Financial Statements. LO1. Learning Objective 1 Prepare a work sheet and explain its usefulness. Enter unadjusted trial balance. LO1. Use of a Work Sheet. Enter adjustments. LO1. Use of a Work Sheet. Prepare adjusted trial balance. LO1.
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Chapter 6 ClosingProcess andFinancial Statements
LO1 Learning Objective 1Prepare a work sheet and explain its usefulness. Enter unadjusted trial balance
LO1 Use of a Work Sheet Enter adjustments
LO1 Use of a Work Sheet Prepare adjusted trial balance
LO1 Use of a Work Sheet Sort adjusted trial balance amounts to financial statements
LO1 { { Use of a Work Sheet Total statement columns, compute income or loss and balance columns Column totals differ by the amount of net income.
LO1 Use of a Work Sheet Total statement columns, compute income or loss and balance columns Revenues exceed expenses, resulting in net income of $1,735.
LO1 Use of a Work Sheet Total statement columns, compute income or loss and balance columns Net income is extended to the credit column of these columns.
LO1 Financial Statements Preparedfrom the Work Sheet Prepare the Income Statement. Prepare the Statement of Owner’s Equity. Prepare the Balance Sheet.
LO2 Revenues Assets Owner’s Capital Permanent Accounts Temporary Accounts Liabilities Expenses Withdrawals Income Summary Learning Objective 2Explain why temporary accounts are closed each period. Income is earned over a period of time. At the end of the time period, we start over and calculate income for the next period. The closing process resets all revenue, expense, and withdrawal accounts to a zero balance at the end of the period. This is so we can start the next accounting period fresh.
LO3 Learning Objective 3Describe and prepare closing entries. • Close Revenue accounts to Income Summary. • Close Expense accounts to Income Summary. • Close Income Summary account to Owner’s Capital. • Close Withdrawals to Owner’s Capital.
LO4 Learning Objective 4Explain and prepare a post-closing trial balance. List of permanent accounts and their balances after closing entries have been posted. Total debits and credits must be equal.
LO5 Learning Objective 5Identify steps in the accounting cycle. 1. Analyze transactions 9. Prepare post-closing trial balance 8. Close 2. Journalize 7. Prepare statements 3. Post 4. Prepare unadjusted trial balance 5. Adjust 6. Prepare Adjusted trial balance Steps 1 through 3 occur regularly as a company enters into transactions. Steps 4 through 9 are done at the end of a period.
