The adjustment process
Prepare financial statements
Closing entry2The Accounting Cycle
Start of the Accounting Period
End of the
Period.?? Perform transaction analysis.
Perform transaction analysis.
?? Record journal entries.Record journal entries.
?? Post amounts to general ledger.
Post amounts to general ledger.
?? Prepare a trial balance.
Prepare a trial balance.
?? Record and post adjustingRecord and post adjusting entries.
?? Prepare financial statements.
Prepare financial statements.
?? Record and post closing entries.
Record and post closing entries.End of the Accounting Period3Financial Statement
1.The next step in the accounting cycle
is to prepare the financial statements
Income Statement3.Statement of Retained Earnings
Balance Sheet4.Statement of Cash Flows2.(Chapter 12)Prepared
balancesPrepared from information
provided in balance sheet,
statement of retained
and income statement
45The Closing Process
Why do we need to close
Balance Sheet account balances carry forward from
period to period
Income Statement accounts do not carry forwardWhat do we do in the process
Transfer net income (or loss) to Retained Earnings.
Establish a zero balance in each of the temporary
accounts to start the next accounting period.6Temporary
7Closing Entries? Temporary (or nominal) accounts that
are closed to retained earnings at the
end of the period
-• Revenues.• Revenues.
Permanent (or real) accounts and
are never closed at the end of the