Acc. Chap. 4

• A useful tool for preparers in working with accounting info. Not available to external decision makers
• Made at the end of the period
• Step 1- enter unadjusted trial balance
• Step 2-Enter adjustments
• Step 3-Prepare adjsuted trial balance
• Step 4-Sort Adjusted trial balance amounts to financial statements
• Step 5-Total Statement columns, compute income or loss, and balance columns

• An important step at the end of an accounting period after financial statements have been completed
• Prepares accounts for recording transactions and events of the next period
• Must identify accounts for closing
• Must record and post closing entries
• Must prepare a post-closing trial balance
• Will reset revenue, expense, and withdrawals account balances to 0 at the end of each period
• Helps in summarizing a period's revenues and expenses

• accumulate data related to one accounting period
• Include income statements, withdrawals, and income summary accounts
• Closed one the period is over

• Report on activities related to one or more future accounting periods
• They carry their ending balances into the next period and cosist of all balance sheet accounts

To transfer the end-of-period balances in revenue, expense, and withdrawals accounts to the permanent capital account

• A temporary account that contains a credit for the sum of all revenues and a debit for the sum of all expenses
• Balances equals net income or net loss and is transferred to the capital account
• Step 1-Close credit balances in revenue accts to income summary
• Step 2- Close debit balances in expense accounts to income summary
• Step 3-Close income summary to owner's capital
• Step 4-Close withdrawals account to owner's capital

A list of permanent accounts and their balances from the ledger after all closing entries have been journalized and posted.

• Refers to the steps in preparing financial statements
• The steps are repeated each reporting period
• 1. Analyze transaction
• 2. Journalize
• 3. Post
• 4. Prepare unadjusted trial balance
• 5. Adjust
• 6. Prepare adjusted trial balance
• 7. Prepare statements
• 8. Close
• 9. Prepare post-closing trial balance
• 10. Reverse (optional)

Items are broadly grouped into assets, liabilities, and equity

Organizes assets and liabilities into important subgroups that provide more info. to decision makers

The time span from when cash is used to acquire goods and services until cash is received from the sale of goods and services

• Cash and other resources that are expected to be sold, collected, or used within one year or the company' operating cycle, whichever is longer
• Examples- cash, short-term investments, accounts receivable, and short-term notes receivable

Examples are notes recievable, and investements in stocks and bonds

long term resources that benefit business operations, usually lack physical form, and have uncertain benefits

• Obligations due to be paid or settled within one year or the operating cyce, whichever is longer
• Includes accounts payable, notes payable, and uneared revenue

Obligations not due within one year or the operating cycle, whichever is longer