Question
In: Accounting
Discuss why closing entries are prepared at the end of the accounting period. How are the...
Discuss why closing entries are prepared at the end of the accounting period. How are the accounts affected?
Solutions
Expert Solution
One of the major purposes for closing your books at the end of each accounting period is to allow you to prepare financial statements that give you a picture of your business's financial status. The financial statements prepared for most small businesses are a balance sheet and an income statement.
The closing entries are recorded after the financial statements for the accounting year are prepared. The reason for the closing entries is to ensure that each revenue and expense account will begin the next accounting year with a zero balance.
The closing entries require that a debit be entered into each of the temporary accounts having a credit balance. The debit entered must be exactly the amount of the credit balance prior to the closing entry. The objective is to get the account balance to be zero.
The closing entries also require that a credit be entered into each of the temporary accounts having a debit balance. The credit amount that is entered must be exactly the amount of the debit balance prior to the closing entry.
ekkarill92 answered 1 year agoRelated Solutions
Why are closing entries required at the end of an accounting period?
Why are closing entries required at the end of an accounting period?
Closing entries are made at the end of an accounting period which requires that balance are...
Closing entries are made at the end of an accounting period which
requires that balance are transferred from temporary to permanent
accounts.
Shelly is the office manager of a local medical practice. She
has come to the end of the closing process and needs to prepare for
the next accounting period. Shelly uses the 4-step closing process
to close the temporary accounts.
1, What are the steps that Shelly must follow? Explain each
step in the process.
2, Explain the...
Closing entries take place at the end of an accounting cycle. It is a vital part...
Closing entries take place at the end of an accounting cycle. It
is a vital part of the accounting cycle to prepare to the company's
annual financial statements as well as for the new fiscal year.
-As a manager, what would be your procedure in setting up the
closing process? What kind of policies would you put in place to
avoid making mistake?
Explain why adjusting journal entries are required at the end of the accounting period? (3 marks)...
Explain why adjusting journal entries are required at the end
of the accounting period?
Explain how a firm’s net cash position in the Cashflow
Statement can decrease during a year when the profit has increased.
Give an example.
(2marks)
In accounting for inventories and cost of goods sold, why are
cost flow assumptions such as FIFO and LIFO needed? Why not just
use the specific identification method?
Explain the impact on the Income Statement of using the LIFO
inventory valuation...
Ledger Accounts, Adjusting Entries, Financial Statements, and Closing Entries; End-of-Period Spreadsheet. The unadjusted trial balance of...
Ledger Accounts, Adjusting Entries, Financial Statements, and
Closing Entries; End-of-Period Spreadsheet.
The unadjusted trial balance of Recessive Interiors at January
31, 2018, the end of the year, follows:
Recessive Interiors
Unadjusted Trial Balance
January 31, 2018
Debit Balances
Credit Balances
11
Cash
13,100
13
Supplies
8,000
14
Prepaid Insurance
7,500
16
Equipment
113,000
17
Accumulated Depreciation—Equipment
12,000
18
Trucks
90,000
19
Accumulated Depreciation—Trucks
27,100
21
Accounts Payable
4,500
31
Common Stock
30,000
32
Retained Earnings
96,400
33
Dividends
3,000
41...
Ledger Accounts, Adjusting Entries, Financial Statements, and Closing Entries; End-of-Period Spreadsheet. The unadjusted trial balance of...
Ledger Accounts, Adjusting Entries, Financial Statements, and
Closing Entries; End-of-Period Spreadsheet.
The unadjusted trial balance of Recessive Interiors at January
31, 2018, the end of the year, follows:
Recessive Interiors
Unadjusted Trial Balance
January 31, 2018
Debit Balances
Credit Balances
11
Cash
13,100
13
Supplies
8,000
14
Prepaid Insurance
7,500
16
Equipment
113,000
17
Accumulated Depreciation—Equipment
12,000
18
Trucks
90,000
19
Accumulated Depreciation—Trucks
27,100
21
Accounts Payable
4,500
31
Common Stock
30,000
32
Retained Earnings
96,400
33
Dividends
3,000
41...
Ledger Accounts, Adjusting Entries, Financial Statements, and Closing Entries; End-of-Period Spreadsheet. The unadjusted trial balance of...
Ledger Accounts, Adjusting Entries, Financial Statements, and
Closing Entries; End-of-Period Spreadsheet.
The unadjusted trial balance of Recessive Interiors at January
31, 2018, the end of the year, follows:
Recessive Interiors
Unadjusted Trial Balance
January 31, 2018
Debit Balances
Credit Balances
11
Cash
13,100
13
Supplies
8,000
14
Prepaid Insurance
7,500
16
Equipment
113,000
17
Accumulated Depreciation—Equipment
12,000
18
Trucks
90,000
19
Accumulated Depreciation—Trucks
27,100
21
Accounts Payable
4,500
31
Common Stock
30,000
32
Retained Earnings
96,400
33
Dividends
3,000
41...
Prepare closing entries for Bagley Consulting Company. What is the net income for this accounting period?...
Prepare closing entries for Bagley Consulting Company. What is
the net income for this accounting period? What is the balance of
retained earnings after the closing? BAGLEY CONSULTING COMPANY
Adjusted Trial Balance Account Title Debits Credits Cash $4,550
Accounts receivable 8,500 Prepaid insurance 1,750 Land 230,000
Buildings & Equipment 169,500 Accumulated
depreciation—buildings & Equipment $79,350 Accounts payable
29,900 Salaries and wages payable 1,400 Deferred rent revenue 950
Common stock 250,000 Retained earnings 48,300 Sales revenue 86,500
Interest revenue 4,800 Rent...
Why are closing entries important to the closing process?
Why are closing entries important to the closing
process?
Adjusting entries are prepared yearly. (T/F) Closing entries are prepared monthly. (T/F) It is not really...
Adjusting entries are prepared yearly. (T/F)
Closing entries are prepared monthly. (T/F)
It is not really necessary to do a post closing trial balance
because it's the end of the year. (T/F)
Adjusting entries record transactions. (T/F)
Beginning capital is $10,000. Net loss of $2,000. Withdrew
$1,000. Balance of the owner's capital account on the post closing
trial balance would be $10,000. (T/F)
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