At the end of a fiscal period, the temporary accounts are closed to prepare the general ledger for the next fiscal period. What accounting concept is applied here?
What is Matching Expenses with Revenue?
100
What is the normal balance of the income summary account?
The income summary account does not have a normal balance side. the balance of the account is determined by the amounts posted to the account at the end of a fiscal period
100
After all closing entries, what are the balances of the temporary accounts?
zero
100
The two types of journal entries needed to change general ledger account balances at the end of the fiscal period are
For a prepaid insurance adjustment-what account is debited and what account is credited?
Debit Insurance Expense, Credit Prepaid Insurance
200
What accounts are credited and debited to close expense accounts?
Credit the Expense account, debit Income Summary
200
What accounts are debited and credited to close the income summary account when there is a net income?
Debit Income Summary, Credit Retained Earnings
300
What is the purpose of the Post Closing Trial Balance?
1. To prove the equality of debits and credits
2. To prepare the general ledger for the next fiscal period
300
What account is Income Summary closed into
Retained Earnings
300
Where are the amounts for closing entries obtained from
Ledger account balances
300
Closing Entry for the purchases account
Debit Income Summary
Credit Purchases
400
Explain how the concept Matching Expenses with Revenue is applied by posting closing entries
The balances of temporary accounts such as expenses and revenue are cleared to a zero balance to prepare the accounts for the start of the next fiscal period.
400
A corporation having a net loss would record a _______to Income Summary to close the account
credit
400
To close the Sales account --what account is credited and what is debited?
Debit Sales, Credit income summary
400
Adjusting Entry for depreciation of store equipment
Explain how the concept Matching Expenses with Revenue is applied by posting adjusting entries
Expenses are brought up to date so that the expense that was incurred during the fiscal period is shown with the revenue that was earned. Without adjusting entries revenue for a month where supplies or insurance were purchased but used over a six month period would show as much lower than it actually was.
500
Explain the Accounting Cycle for a merchandising business organized as a corporation
1. Source documents are checked and analyzed into debit and credit parts
2. Transactions are posted to the general journals
3. Journal entries are posted to the general ledger accounts
4. A work sheet is prepared
5. Financial Statements are prepared
6. Adjusting and closing entries are journalized from the worksheet
7. Adjusting and closing entries are posted to the ledgers
8. A post closing balance is prepared
500
Adjusting entry for allowance for allowance for uncollectible accounts
Debit Uncollectible Accounts Expense
Credit allowance for Uncollectible Accounts