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