college accounting

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College Accounting First Canadian
Edition Price Haddock Brock Hahn
Reed
McGraw-Hill Ryerson
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CHAPTER 6
CLOSING ENTRIES AND THE POSTCLOSING TRIAL
BALANCE
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OBJECTIVE 1 Journalize and post closing entries.
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CLOSING ENTRIES

• Entries made in the general journal to transfer
  the results of operations to owners equity and
  to prepare the revenue, expense, and drawing
  accounts for use in the next accounting period.

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INCOME SUMMARY ACCOUNT

• A special owners equity account that is used to
  summarize the results of operations and is used
  only in the closing process.

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TEMPORARY ACCOUNTS
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ARROW EMPLOYMENT SERVICES Adjusted Trial
Balance December 31, 20X5
ACCOUNT NAME
DEBIT
CREDIT Cash
16,200.00 Accounts Receivable
2,000.00 Supplies
500.00 Prepaid Rent
17,500.00 Equipment
15,000.00 Accumulated
Amortization Equipment

250.00
Accounts Payable 4,000.00 John Arrow,
Capital 40,000.00
John Arrow, Drawing
1,000.00 Fees Income
14,000.00 Salaries Expense
2,500.00 Utilities Expense
300.00 Supplies
Expense 500.00 Rent
Expense

2,500.00 Amortization Expense Equipment
250.00 Totals
58,250.00 58,250.00
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GENERAL JOURNAL
Page 4 POST. DATE
DESCRIPTION REF. DEBIT CREDIT
20X5 Closing Entries
Dec. 31 Income Summary
6,050.00 Salaries Expense

2,500.00 Utilities Expense

300.00 Supplies Expense
500.00
Rent Expense
2,500.00
Amortization Exp.-Equip.
250.00
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20X5 Closing Entries
Dec. 31 Income Summary
7,950.00
J. Arrow, Capital
7,950.00
Expenses 6,050
Closing 7,950
Net Inc. 7,950
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20X5 Closing Entries
Dec. 31 John Arrow, Capital 1,000.00
J. Arrow, Drawing 1,000.00
Closing 1,000
Balance 1,000
Drawing 1,000
Balance 40,000
Net Inc. 7,950
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STEPS
GENERAL JOURNAL
Page 4 POST. DATE
DESCRIPTION REF. DEBIT
CREDIT 20X5 Closing Entries

1. CLOSE REVENUE
Dec. 31 Fees Income 4001
14,000.00 Income Summary
3099
14,000.00
31 Income Summary
3099 6,050.00
Salaries Expense 5011
2,500.00
Utilities Expense 5014
300.00
Supplies Expense 5017
500.00
Rent Expense 5020
2,500.00
Amort. Expense-Equip. 5023
250.00
2. CLOSE EXPENSES
3. CLOSE INCOME SUMMARY
31 Income Summary
3099 7,950.00 John
Arrow, Capital 3001
7,950.00
4. CLOSE DRAWING
31 John Arrow, Capital
3001 1,000.00
John Arrow, Draw. 3002
1,000.00
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OBJECTIVE 2 Prepare a postclosing trial balance.
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ARROW EMPLOYMENT
SERVICES POSTCLOSING TRIAL BALANCE
DECEMBER 31, 20X5 ACCOUNT NAME
DEBIT CREDIT
Cash 16,200.00 Accounts
Receivable 2,000.00 Supplies

500.00 Prepaid
Rent 17,500.00 Equipment
15,000.00 Accumulated Amortization-Equipment
250.00 Accounts Payable
4,000.00 John Arrow, Capital
46,950.00 Totals 51,200.00
51,200.00
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OBJECTIVE 3 Interpret financial statements.
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ARROW ACCOUNTING SERVICES
Balance Sheet December 31, 20X5
Assets Cash
16,200.00 Accounts Receivable
2,000.00 Supplies
500.00 Prepaid Rent 17,500.00
Equipment 15,000.00 Accumulated
Amortization 250.00
14,750.00 Total Assets
50,950.00 Liabilities and Owners
Equity Liabilities Accounts Payable
4,000.00 Owners Equity John Arrow,
Capital 46,950.00 Total Liabilities
and Owners Equity 50,950.00
QUESTION FREQUENTLY ASKED BY MANAGEMENT
What is the amount owed to suppliers? (Look at
the Accounts Pay. account in the Liabilities
Section of the Balance Sheet.)
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ARROW ACCOUNTING SERVICES
Balance Sheet December 31, 20X5
Assets Cash
16,200.00 Accounts Receivable
2,000.00 Supplies
500.00 Prepaid Rent 17,500.00
Equipment 15,000.00 Accumulated
Depreciation 250.00
14,750.00 Total Assets
50,950.00 Liabilities and Owners
Equity Liabilities Accounts Payable
4,000.00 Owners Equity John Arrow,
Capital 46,950.00 Total Liabilities
and Owners Equity 50,950.00
QUESTION FREQUENTLY ASKED BY MANAGEMENT
How much money do customers owe the
business? (Look at the Accounts Rec. account in
the Assets Section of the Balance Sheet.)
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OBJECTIVE 4 Review the steps in the accounting
cycle.
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Step 2 Journalize the data about transactions
Step 1 Analyze transactions
Step 3 Post the data about transactions
Step 4 Prepare a trial balance
Step 5 Record adjusting entries
Step 10 Interpret the financial information
Step 6 Prepare an adjusted trial balance
Step 7 Prepare financial statements
Step 8 Record closing entries
Step 9 Prepare a postclosing trial balance
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