Chapter 4 Flashcards
Flow of accounting info
From unadjusted trial balance to financial statements
Unadjusted trial balance
Adjusted trial balance
Income Statement
Retained Earnings statement
Balance sheet
Classified Balance Sheet
Has sub sections for assets and liabilities.
2 Sub Sections of ASSETS
On classified balance sheet
Current Assets (used in 1yr)
&
PPE (property plant & equipment)
2 Sub Sections of Liabilities on a classified Balance Sheet
Current Assets (1yr or less)
&
Long Tern Liabilities
Permanent Accounts
Or
Real Accounts
Balances that carry over year to year.
Do NOT get closed out
Temporary Accounts
Or Nominal Accounts
Closed out at end of year
All accounts on
Income Statement
Retained Earnings Account
Closing Entries
Or
Closing process
Or Closing the Books
Entries that transfer temporary accounts to permanent accounts through journal entries.
Income Summary
Temporary account only used during the closing process.
4 Closing Entries required in closing process.
1) DEBIT each Revenue account and CREDIT income summary for total revenue
2) CREDIT each Expense account and DEBIT income summary for total revenue
3) DEBIT Income Summary for balance and CREDIT Retained Earnings account.
4) DEBIT the retained earnings account for balance and CREDIT Dividends Account.
Post-Closing Trial Balance
To VERIFY the LEDGER is in BALANCE
Also,
Confirm temporary accounts are closed out.
9 Steps of
Accounting Cycle
- Analyze
- Jounalize
- Post to Ledger
- Unadjusted Trial Balance
- Adjustments
- Adjusted Trial Balance
- Financial Statements
- Closing Prosess
- Post Closing Trial Balance
Retained Earning Is??
(Revenues - Expenses)
Purpose of Post-Closing trial balance is?
To verify ledger is balance at the beginning on next period
Last step on posting process
Enter account number in the
post ref. column
The balance of an account is determined by?
Adding all debits, all credits, then subtracting the smaller amount
