Chapter 4, Problem 4.11E

(a)

To determine

Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts.

Accounting rules for journal entries:

• To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
• To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

Closing entries: Closing entries are those journal entries which are passed to transfer the balances of temporary accounts to the permanent accounts. These are passed at the end of the accounting period, to transfer the final balance.

Accounting rules for closing entries are:

• Debit the account: All temporary accounts with credit balances.
• Credit the account: All temporary accounts with debit balances

Income Summary: Income summary is the account prepared at the end of the accounting period to which all the incomes and expenses are transferred. Any difference arising is the net profit / net loss for the period.

To Prepare: The closing entries

(b)

To determine

To Prepare: The income summary account.