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Monday, November 8

Monday, November 8. Bell ringer: See link on web site Today: Stopwatch Activity Objective #3—did you read today’s assignment?? . Stop Watch Activity. 2 volunteers needed How long does it take for one of your classmates to pass out. . . . Tootsie Rolls . . . Starbursts . . . . STOPWATCH.

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Monday, November 8

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  1. Monday, November 8 • Bell ringer: See link on web site • Today: • Stopwatch Activity • Objective #3—did you read today’s assignment??

  2. Stop Watch Activity • 2 volunteers needed • How long does it take for one of your classmates to pass out. . . . • Tootsie Rolls. . . • Starbursts. . . STOPWATCH

  3. What is the point? • Besides a little sugar start. . . • What is the point? • In business, we want to know certain financial pieces of information for the year. • For example: • How much net income was earned during the year

  4. Therefore. . . • We record revenue and expenses for the year. . . • Income statement • But before we can begin recording revenues and expenses for the next year, we must “reset” each of the revenue and expense accounts to zero….just as we start the clock to determine the time it takes to pass out the candy

  5. Also. . . • The Drawing account is reset to a zero balance. • The process of getting these account balances to zero balances is accomplished through • Closing entries

  6. Objective 3 Close the revenue, expense, and withdrawal accounts

  7. Closing the Accounts • Prepares accounts for recording transactions during next period • Updates owner’s capital account

  8. Closing the Accounts • Temporary Accounts • EXAMPLES: • Service Revenue • Utilities Expense • Permanent Accounts • EXAMPLES: • Cash • Accounts Receivable/Payable • Capital

  9. Four Closing Entries Close all income statement accounts to Income Summary Entry 1: Close revenue accounts to Income Summary Entry 2: Close expense accounts to Income Summary

  10. Income Summary Revenues – Expenses = Net Income Four Closing Entries Revenue Expense 500 500 200 200 Bal 0 Bal 0 200 500 Bal 300

  11. Four Closing Entries Entry 3: Close Income Summary to Capital Entry 4: Close Withdrawals to Capital

  12. Four Closing Entries Income Summary Withdrawals 200 500 100 100 300 Bal 300 Bal 0 Bal 0 Capital 1,000 Beginning balance 100 300 1,200 Ending balance

  13. Fees Earned Wages Expense Bal. 16,840 Bal. 4,525 Rent Expense Bal. 1,600 Depreciation Expense Bal. 50 Utilities Expense Note: The balances shown are adjusted balances before closing. The following sequence demonstrates the closing process. Pat King, Capital Bal. 985 Bal. 15,000 Supplies Expense Bal. 2,040 Insurance Expense Bal. 100 Pat King, Drawing Miscellaneous Expense Bal. 4,000 Bal. 455 The Closing Process Income Summary Rent Revenue Bal. 120

  14. Fees Earned Wages Expense Bal. 16,840 Bal. 4,525 Rent Expense Bal. 1,600 Depreciation Expense Bal. 50 Utilities Expense Bal. 985 Supplies Expense Bal. 2,040 Insurance Expense Bal. 100 Miscellaneous Expense Bal. 455 The Closing Process 16,840 Income Summary 16,960 Rent Revenue Total Revenues Bal. 120 120 Close Revenues Pat King, Capital Bal. 15,000 Pat King, Drawing Bal. 4,000

  15. Fees Earned Bal. 16,840 4,525 1,600 50 985 2,040 Insurance Expense Bal. 100 100 Miscellaneous Expense Bal. 455 455 The Closing Process Wages Expense 16,840 Income Summary Bal. 4,525 Rent Expense 9,755 16,960 Rent Revenue Total Expenses Total Revenues Bal. 1,600 Bal. 120 120 Depreciation Expense Bal. 50 Utilities Expense Close Revenues Pat King, Capital Bal. 985 Bal. 15,000 Close Expenses Supplies Expense Bal. 2,040 Pat King, Drawing Bal. 4,000

  16. Fees Earned Bal. 16,840 4,525 1,600 50 985 2,040 Insurance Expense Bal. 100 100 Miscellaneous Expense Bal. 455 455 The Closing Process Wages Expense 16,840 Income Summary Bal. 4,525 Rent Expense 9,755 16,960 Rent Income Bal. 1,600 7,205 Bal. 120 120 Depreciation Expense Closed Bal. 50 Utilities Expense Close Revenues Pat King, Capital Bal. 985 Bal. 15,000 Close Expenses Supplies Expense 7,205 Bal. 2,040 Close Income Summary Net Income Pat King, Drawing Bal. 4,000

  17. Fees Earned Bal. 16,840 4,525 1,600 50 985 2,040 Insurance Expense Bal. 100 100 Miscellaneous Expense Bal. 455 455 The Closing Process Wages Expense 16,840 Income Summary Bal. 4,525 Rent Expense 9,755 16,960 Rent Income Bal. 1,600 7,205 Bal. 120 120 Depreciation Expense Closed Bal. 50 Utilities Expense Close Revenues Pat King, Capital Bal. 985 Bal. 15,000 4,000 Close Expenses Supplies Expense 7,205 Drawing Bal. 2,040 Close Income Summary Net Income Close Drawing Pat King, Drawing 4,000 Bal. 4,000 Closed

  18. The Closing Process Fees Earned Wages Expense Income Summary Rent Expense Rent Income Depreciation Expense Utilities Expense Pat King, Capital Drawing Bal. 15,000 4,000 Supplies Expense 7,205 Net Income Bal. 18,205 Insurance Expense All temporary accounts now have zero balances and are ready for the next accounting period. Pat King, Drawing Miscellaneous Expense

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