Chapter 5, Problem 5.15BE

To determine

Periodic system

It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period

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.

In periodic inventory system, ending and beginning inventory accounts are also closed to Income Summary to adjust the balance of inventory at the end of the accounting period.

Rules for closing entries:

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

To record: Closing entries in the books of T Company.