Chapters 5 & 6: Closing Accounts & Purchasing on Account

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Chapters 5 & 6: Closing Accounts & Purchasing on Account

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Lecture number:
7
Pages:
2
Type:
Lecture Note
School:
Miami University, Oxford
Course:
Acc 221 - Intro to Financial Accounting
Edition:
1
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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  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 ACC 221 1st Edition



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