ACC 221 1st Edition Lecture 7 Outline of Previous Lecture Chapters 3 4 Additional Facts of New Accounts Owner s Equity Accounts o Common Stock v Retained Earnings o Revenue and expense accounts begin every new accounting period at zero Outline of Current Lecture Chapters 5 6 Closing Accounts Purchasing on Account Closing accounts and post closing trial balances o Closing entries o Steps in accounting cycle Purchasing on Account o New Liability o Making a partial payment Paying interest o Paying interest for 2 months Current Lecture Chapters 5 6 Closing Accounts Purchasing on Account Closing accounts and post closing trial balances Temporary accounts Revenue and expense accounts that close every month Permanent accounts accounts that are never closed Include Asset Accounts Liability Accounts Common Stock and Retained Earnings Post Closing Trial Balance Shows all of the general ledger account balances after the closing entries have been made Purpose to check that general ledger is in balance and the company is ready to move into a new accounting cycle o Closing entries Revenue Accounts Dr Sales Revenue Cr Retained Earnings Expense Accounts Dr retained earnings Cr Expense Accounts o Steps in accounting cycle These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Make entries into General Journal corresponding to the correct accounts and making sure to check Dr Cr Are correct Post entries into the general ledger utilizing the temporary expense and revenue accounts Determine if any general ledger accounts need to be adjusted If so note changes to general journal and complete general ledger Complete Pre Closing trial balance to check accounts are in balance Complete income statement from ending balances in temporary revenue and expense accounts Move ending balances for temporary revenue and expense accounts into retained earnings to find final balance Complete balance sheet from ending general ledger balances Use asset accounts liability accounts common stock and retained earnings Enter temporary revenue and expense closing entries into general journal post closing entries to general ledger accounts Prepare a post closing trial balance to make sure accounts are balanced After completed company is ready to begin a new accounting cycle Purchasing on Account o New liability paying on account they now have non owner s claim to assets Dr Inventory Cr Accounts Payable Company will pay for inventory at a later date Accounts payable What we owe outside company Liability Accounts receivable What others owe to us Asset o Making a partial payment Dr Accounts Payable Cr Cash Paying interest o Pay interest for 2 months One transaction recorded into last month s journal ledger February s Interest Dr Interest Payable Cr Cash March s Interest Dr Interest Expense Cr Cash Transaction may be written separately or as one longer transaction
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