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1、PowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPAMcGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter 04COMPLETING THE ACCOUNTING CYCLE4 - 2BENEFITS OF A WORK
2、 SHEETAids the preparation of financial statements.Reduces possibility of errors.Links accounts and their adjustments.Assists in planning and organizing an audit.Helps in preparing interim financial statements.Shows the effects of proposed transactions.Not a required report.P 14 - 3FastForward Works
3、heet For the Month Ended December 31, 2011P 14 - 4FastForward Worksheet For the Month Ended December 31, 2011P 14 - 5FastForward Worksheet For the Month Ended December 31, 2011P 14 - 6FastForward Worksheet For the Month Ended December 31, 2011P 14 - 7FastForward Worksheet For the Month Ended Decembe
4、r 31, 2011P 14 - 8 PREPARING THE FINANCIAL STATEMENTSP 14 - 9PREPARING THE FINANCIAL STATEMENTSP 14 - 10RECORDING CLOSING ENTRIES1. Resets revenue, expense and withdrawal account balances to zero at the end of the period.2. Helps summarize a periods revenues and expenses in the Income Summary accoun
5、t.Identify accounts for closing.Record and post closing entries. Prepare post-closing trial balance.C 14 - 11Temporary AccountsRevenuesIncome SummaryExpensesWithdrawalsPermanent AccountsAssetsLiabilitiesOwners CapitalTEMPORARY AND PERMANENT ACCOUNTSThe closing process The closing process applies onl
6、y to applies only to temporary accounts.temporary accounts.C 14 - 12Lets see how the closing process works!RECORDING CLOSING ENTRIESClose Credit Balances in Revenue Accounts to Income Summary. Close Debit Balances in Expense accounts to Income Summary. Close Income Summary account to Owners Capital.
7、 Close Withdrawals to Owners Capital.P 24 - 13Using the adjusted trial balance, lets prepare the closing entries for FastForward.P 24 - 14 Close Credit Balances in Revenue Accounts to Income Summary.P 24 - 15 CLOSE CREDIT BALANCES IN REVENUE ACCOUNTS TO INCOME SUMMARYNow, lets look at the ledger acc
8、ounts after posting this closing entry.Dr. Cr. Dec. 31 Consulting revenue 7,850 Rental revenue 300 Income summary 8,150 P 24 - 16P 2 CLOSE CREDIT BALANCES IN REVENUE ACCOUNTS TO INCOME SUMMARY4 - 17 Close Debit Balances in Expense Accounts to Income Summary.P 24 - 18Now, lets look at the ledger acco
9、unts after posting this closing entry. CLOSE DEBIT BALANCES IN EXPENSE ACCOUNTS TO INCOME SUMMARYP 24 - 19Net Income CLOSE DEBIT BALANCES IN EXPENSE ACCOUNTS TO INCOME SUMMARYP 24 - 20 Close Income Summary to Owners Capital.P 24 - 21Now, lets look at the ledger accounts after posting this closing en
10、try. CLOSE INCOME SUMMARY TO OWNERS CAPITALP 24 - 22P 2 CLOSE INCOME SUMMARY TO OWNERS CAPITAL4 - 23 Close Withdrawals Account to Owners Capital.P 24 - 24Now, lets look at the ledger accounts after posting this closing entry. CLOSE WITHDRAWALS ACCOUNT TO OWNERS CAPITALP 24 - 25P 2 CLOSE WITHDRAWALS
11、ACCOUNT TO OWNERS CAPITAL4 - 26 SUMMARY OF THE CLOSING PROCESS1. Close Credit Balances in Revenue Accounts to Income Summary. 2. Close Debit Balances in Expense Accounts to Income Summary. 3. Close Income Summary to Owners Capital. 4. Close Withdrawals Account to Owners Capital.4 - 27Lets look at Fa
12、stForwards post-closing trial balance.POST-CLOSING TRIAL BALANCEList of permanent List of permanent accounts and their accounts and their balances after posting balances after posting closing entries.closing entries.Total debits and Total debits and credits must be equal.credits must be equal.P 34 -
13、 28POST-CLOSING TRIAL BALANCEP 34 - 29ACCOUNTING CYCLEC 24 - 30Current items are those expected to come due (both collected and owed) within the longer of one year or the companys normal operating cycle.CLASSIFIED BALANCE SHEETC 34 - 31Current assets are expected to be sold, collected, or used withi
14、n one year or the companys operating cycle. C 34 - 32Long-term investments are expected to be held for more than one year or the operating cycle.C 34 - 33Plant assets are tangible long-lived assets used to produce or sell products and services.C 34 - 34Intangible assets are long-term resources used
15、to produce or sell products and services and that lack physical form.C 34 - 35Current liabilities are obligations due within the longer of one year or the companys operating cycle.C 34 - 36Long-term liabilities are obligations not due within the longer of one year or the companys operating cycle.C 3
16、4 - 37Equity is the owners claim on the assets. C 34 - 38GLOBAL VIEWThe definition of an asset is similar under U.S. GAAP and IFRS and involves three basic criteria: (1) the company owns or controls the right to use the item, (2) the right arises from a past transaction or event, and (3) the item can be reliably meas
