Chapter 6: Closing entries and the postclosing trial balance. After reading this chapter, you should be able to: Journalize and post closing entries, prepare a postclosing trial balance, interpret financial statements, review the steps in the accounting cycle, define the accounting terms new to this chapter. | 1- McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Closing Entries and the Postclosing Trial Balance Section 1: Closing Entries Chapter 6 Section Objectives Journalize and post closing entries. The Accounting Cycle Step 7 Journalize and post closing entries Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 4 Prepare a worksheet Step 5 Prepare financial statements Step 6 Journalize and post adjusting entries Step 8 Prepare a postclosing trial balance Step 9 Interpret the financial information Step 3 Post the data about transactions The seventh step in the accounting cycle is to journalize and post closing entries Step 7 Journalize and post closing entries Income Summary Account Classified as a temporary owner’s equity account. Does not have a normal balance. Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period. 2. Transfer the | 1- McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Closing Entries and the Postclosing Trial Balance Section 1: Closing Entries Chapter 6 Section Objectives Journalize and post closing entries. The Accounting Cycle Step 7 Journalize and post closing entries Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 4 Prepare a worksheet Step 5 Prepare financial statements Step 6 Journalize and post adjusting entries Step 8 Prepare a postclosing trial balance Step 9 Interpret the financial information Step 3 Post the data about transactions The seventh step in the accounting cycle is to journalize and post closing entries Step 7 Journalize and post closing entries Income Summary Account Classified as a temporary owner’s equity account. Does not have a normal balance. Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period. 2. Transfer the expense account balances to the Income Summary account. 4. Transfer the balance of the drawing account to the owner’s capital account. 3. Transfer the balance of the Income Summary account to the owner’s capital account. 1. Transfer the balance of revenue account balances to the Income Summary account. Objective 1 Journalize and post closing entries There are four steps in the closing process: The Income Statement section of the worksheet for Wells’ Consulting Services lists five expense accounts. Since expense accounts have debit balances, enter a credit in each account to reduce its balance to zero. This closing entry transfers total expenses to the Income Summary account. Step 2: Close Expenses The journal entry to transfer net income to owner’s equity is a debit to Income Summary, and a credit to Carolyn Wells, Capital. The balance of Income Summary is reduced to zero; the owner’s capital account is increased by the amount of net income. Step 3: Close Net Income to .
