Adjusting and Closing Entries

Chapter 10Accounting Ch.10...Have students be t-accounts. Give students

index cards that tell them what accounts they are and what t-accounts they are.

Journal entries made to update general ledger accounts at the end of the fiscal period.

Recorded on next journal page following the page on which you recorded the last daily transactions for the month.

Entries are recorded in General Debit and General Credit columns.

Adjusting Entries

Entries used to prepare temporary accounts for a new fiscal period.

Permanent Accounts: accounts used to accumulate information from one fiscal period to the next.◦ Also called real accounts◦ Assets, liabilities, capital◦ The ending balances for one fiscal period are the

beginning account balances for the next fiscal period.

Closing Entries

Temporary Accounts: accounts used to accumulate information until it is transferred to the owner’s capital account.

◦ Revenue, expenses, drawing, income summary

◦ Shows changes in the owner’s capital for a single

fiscal period

◦ Ending balances will be zero

Closing Entries

Used to summarize the closing entries for revenue and expenses

DOES NOT have a normal balance

Balance is determine by net income or net loss◦ If Revenue>Expenses: Net Income: Credit Balance◦ If Revenue<Expenses: Net Loss: Debit Balance

Temporary account

Income Summary

REID

Revenue

Expenses

Income Summary

Drawing

Closing Entries

Revenue◦ Debit Sales◦ Credit Income Summary

Expenses◦ Debit Income Summary◦ Credit Expenses

REID

Income Summary (assume net income)◦ Debit Income Summary◦ Credit Capital

Drawing◦ Debit Capital◦ Credit Drawing

REID