Every acct on adj trial bal is used only once in creating first 3 financial stmts.
Point of closing is to bring RE up to date - in doing that, we zero out temp accts.
4 kinds of closing entries:
1) close out Revenue - debit Rev CR Income Summ (normal credit bal) (only exists long enough for closing entries) - companies may be closing hundreds of rev or exp accts
2) close out Expense accts - list every single acct DR Income Summ CR Exp accts
3) DR Income Summ CR Retained Earnings
4) DR Retained earnings - return of equity, has nothing to do with production (“Income” Summ does)
CR Dividends (always has deb bal)
1) DR Revenue 340,000 CR Sales discounts 8000 CR Sales RtA 13000 CR Income Summ (340,000-8,000-13,000)
You can chose to close Sales disc and Sales RtA when closing expenses. However, they aren’t expenses-they are contrarevenue accts. If closing w/exp, distinguish that I closed both expenses and contra-revenue accts. Don’t close them as expenses.
2) DR Income Summ 302,000 CR C/G/S CR Ins Exp CR Rent Exp CR Salaries and Wages
Freight-in & freight-out (shipping exp-seller is paying cost to get merch out of their bldg and to customer-when seller pays freight, it’s an exp) CR Freight-out
3) DR Income Summ 17,000
CR Retained Earnings 17,000
Side-note: Current liab - current maturity of LT-debt, LT-debt bal that isn’t due is all that is shown as LT-debt. Any LT-debt that’s currently due must show up on bal sheet as current liab. (will study in 2303)
Next topic: Reversing entries
Not required...they are done to simplify a company’s processing of transactions. But accountant must know if it’s being done bc balances will look diff (?). Never made for non-cash entries. Most frequently used with accruals but can be done with cash rcpts/disbursements if company isn’t using their …
Supplies: on unadj trial bal, if I only see Supplies Exp then I know something is missing -- adj entry will put