Chapter 4, Problem 2BTN

To determine

Concept Introduction:

Steps in Accounting cycle:

Accounting cycle is the series of steps of accounting process which processes transactions into financial statements. The steps of accounting cycle are as follows:

1. Collecting transactions and events
2. Recording journal entries for transactions and events
3. Posting the journal entries into ledgers
4. Preparing unadjusted trial balance from ledger balances
5. Recording adjusting entries
6. Posting adjusting entries into ledgers and Preparing adjusted trial balance
7. Preparing financial statements; Income statement, balances sheet, statement of owner's equity and Cash flow statements.
8. Preparing Closing entries to close temporary accounts.
9. Preparing post closing trial balance
10. Recording reversing journal entries (Optional)

Closing Entries:

Closing entries is the process of closing temporary accounts at the end of year. Closing entries are prepared after preparing the adjusted trial balance. In the process of closing entries following steps are follows in the form of journal entries:

1. Closing all revenue accounts by debiting the revenue accounts and crediting Income Summary Account.
2. Closing all expenses by debiting the Income Summary accounts and crediting all expenses accounts.
3. Closing the net income by debiting the Income Summary accounts and crediting Capital or Retained earnings account.
4. Closing the withdrawals accounts by debiting the Capital or Retained earrings account and crediting the withdrawal account.

To discuss:

The concept of closing process relating it with the scoreboard of athletic event