Chapter 4: Completing the Accounting Cycle

Reversing an adjustment to account for depreciation:

would be inappropriate

The final step in the Accounting Cycle

Preparing a post-closing trial balance; summarizing the asset, liability, and owners' equity accounts to prove the equality of debits and credits

The sixth step in the Accounting Cycle

Posting adjusting entries; transferring the adjusting entries from journal to the ledger accounts

The third step in the Accounting Cycle

Posting; transferring the debits and credits from journals to ledger accounts

The fourth step in the Accounting Cycle

Prepare a trial balance; summarizing the ledger accounts to prove the equality of debits and credits

The second step in the Accounting Cycle

Journalizing transactions; record transactions in a journal

The first step in the Accounting Cycle

Analyzing transactions; examining source documents such as sales invoices

Time is limited on the last day of an accounting cycle, so accountants often perform this during the first few days of the following accounting cycle:

make adjustment entries and close accounts

The alternative to using reversing entries is:

make compound journal entries to clear accrual accounts

When an accountant uses a worksheet, it is unnecessary to:

prepare a separated adjusted trial balance

Second step of the closing process

Close the Income Summary account to the Owners' Equity account

Third step of the closing process

Close the Owner's Drawing accounts to the Owners' Equity account

First step of the closing process

Close the revenue and expense accounts to the Income Summary account

The fifth step in the Accounting Cycle

Preparing adjusting entries; determining the adjustments and recording them in the general journal

The seventh step in the Accounting Cycle

Preparing an adjusted trial balance; summering ledger accounts to prove equality of debits and credits after the posting of the adjusting entries

The eight step in the Accounting Cycle

Preparing the financial statements; rearranging the adjusted trial bale into an income statement and balance sheet

The ninth step in the Accounting Cycle

Recording and posting closing entries; journalizing and posting entries that close the revenue and expense accounts for the period to the capital account

The hotel accountant enters a credit to the income summary account a debit to owners' equity; if this entry is a closing entry, the hotel:

had expenses in excess of revenues for this accounting period

Is performed mainly to test the accuracy of the closing process:

preparing a post-closing trial balance

The main purpose for using reversing entries in accounts is to:

reverse the effects of adjusting entries