ACC 221 1st Edition Lecture 7Outline of Previous Lecture- Chapters 3 & 4: Additional Facts of New Accounts Owner’s Equity Accountso Common Stock v. Retained Earningso Revenue and expense accounts begin every new accounting period at zeroOutline of Current Lecture - Chapters 5 & 6: Closing Accounts & Purchasing on Account Closing accounts and post-closing trial balanceso Closing entrieso Steps in accounting cycle Purchasing on Accounto New Liabilityo Making a partial payment Paying interesto Paying interest for 2 monthsCurrent 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 cycleo Closing entries: Revenue Accounts:- Dr. Sales Revenue, Cr. Retained Earnings Expense Accounts:- Dr. retained earnings, Cr. Expense Accountso Steps in accounting cycleThese 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 Accounto 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- Asseto Making a partial payment Dr. Accounts Payable, Cr. Cash Paying interesto 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
View Full Document