Chapter 4, Problem 4PSB

To determine

Closing Entries:

The accounting entries which are made at the end of an accounting period for transfer of balances of temporary accounts to permanent accounts. These entries are generally made in manual accounting system.

Rules of Journal Entry:

To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital. To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital.

Perpetual Inventory System:

The inventory system in which the inventory accounts are updated on each purchase or sale in inventory. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

1.

To prepare: Closing entries in the books of Company C.

2.

To determine

To compute: Ratio of sales returns by gross sales.