Principles Of Accounting(会计学原理)Chapter_04.ppt

Part I All accounts that will be closed are known as temporary accounts. Temporary accounts include revenues, expenses, withdrawals, and the income summary. These accounts should all have a zero balance at the end of the period. Permanent accounts include assets, liabilities and owner’s capital. These accounts are permanent in nature because they are carried forward from one accounting period to the next. Part II Remember, the closing process only applies to temporary accounts, revenues, expenses, withdrawals, and the income summary. * Here are the four steps we always follow in the closing process. First, we close all revenue accounts to the income summary. We move the balance in all revenue accounts from the account to the income summary. This process will cause all revenue accounts to have a zero balance. Remember that revenue accounts normally have a credit balance. Next, we close all expense accounts to the income summary. This will zero out all our expense accounts. Expense accounts normally have a debit balance. Next, the income summary will show revenues and expense, or net income. We must close the income summary, which contains net income, to owner’s capital. This process zeroes out the income summary. The final closing entry will be to move the owner’s withdrawals to the owner’s capital account. This will cause the withdrawal account to have a zero balance. Let’s see how this process works. To prevent confusion when you first try to make closing entries, it is an excellent idea to follow these four steps exactly. * Let’s use the adjusted trial balance for FastForward and prepare the necessary closing entries. We will follow our four-step approach. * Our first step is to close the two revenue accounts. Since they have a credit balance, we will debit the accounts to zero out the balance. Let’s look at the closing entry in the journal. * To close the accounts, we debit consulting revenue for $7,850 and debit rental revenue for $300. The credit to income s