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Lecture Accounting fundamentas (7e): Chapter 10 - Curran

Chapter 10 - Closing the ledger. After completing this chapter, students will be able to: Record closing entries, post the closing entries to the general ledger accounts, open new ledger accounts, prepare a postclosing trial balance, describe the accounting cycle. | CHAPTER TEN Closing the Ledger 1. Record closing entries. 2. Post the closing entries to the general ledger accounts. 3. Open new ledger accounts. 4. Prepare a postclosing trial balance. 5. Describe the accounting cycle. CLOSING THE LEDGER Objectives: 10- Recording the Closing Entries The procedure used at the end of each accounting period to make the ledger ready for the next period’s transactions is known as closing the ledger. This procedure begins with a series of closing entries, which are journalized and posted. 10- Recording the Closing Entries (continued) Closing entries: Summarize the balances of the revenue and expense accounts so that the net income or net loss can be recorded. 10- Recording the Closing Entries (continued) Closing entries: Transfer to the capital account the net increase or net decrease in owner’s equity resulting from the current period’s operations. 10- Recording the Closing Entries (continued) Closing entries: Reduce the balances of . | CHAPTER TEN Closing the Ledger 1. Record closing entries. 2. Post the closing entries to the general ledger accounts. 3. Open new ledger accounts. 4. Prepare a postclosing trial balance. 5. Describe the accounting cycle. CLOSING THE LEDGER Objectives: 10- Recording the Closing Entries The procedure used at the end of each accounting period to make the ledger ready for the next period’s transactions is known as closing the ledger. This procedure begins with a series of closing entries, which are journalized and posted. 10- Recording the Closing Entries (continued) Closing entries: Summarize the balances of the revenue and expense accounts so that the net income or net loss can be recorded. 10- Recording the Closing Entries (continued) Closing entries: Transfer to the capital account the net increase or net decrease in owner’s equity resulting from the current period’s operations. 10- Recording the Closing Entries (continued) Closing entries: Reduce the balances of the revenue, expense, and drawing accounts to zero so that these accounts can be used to record information for the next period. 10- Recording the Closing Entries (continued) 10- Recording the Closing Entries (continued) 10- Opening New Ledger Accounts Some accountants prefer to file the previous period’s ledger and set up new ledger sheets for the current period, transferring the prior balances to the new ledger sheets. 10- Preparing the Postclosing Trial Balance Before any transactions are recorded for the new period, another trial balance, called a postclosing trial balance, is prepared to check the equality of the debits and credits in the ledger. 10- Preparing the Postclosing Trial Balance (Continued) The only accounts listed on the postclosing trial balance are the ones that are still open -- assets, liabilities, and owner’s equity accounts. These accounts are often called permanent accounts. 10- The Accounting Cycle Accounting work follows a pattern that .