Chapter 5, Problem 5.32E

1.

To determine

Closing entries: These refers to the journal entries that are recorded at the end of an each accounting period. It closes all revenue accounts earned, and all expenses account incurred during the current accounting year to the income summary account.

Periodic Inventory 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.

To Record: The closing entries of Company OL.

2.

To determine

T Accounts: T- accounts are prepared for all the business transactions. First, journal entries are passed and then transferred to the respective ledger accounts where they are recorded, and summarized in either side of the ‘T’ format. It is divided into two parts by a vertical line, that is, the left side and the right side. The left side of the T-account is known as the debit side, and the right side of the T-account is known as the credit side. The account name appears on the top of the T-account.

To Post: The above closing entries to their respective T-accounts of Company OL.

3.

To determine

Net income represents the revenue after the deduction of total expenses from the total revenue. Its mathematical representation is as below:

$\text{Net income = Total Revenues }–\text{ Total Expenses}$

To Calculate: The net income or loss of Company OL.