ACCOUNTING I

March 13, 2000

Chapter 17 – Day 1

TEXTBOOK:           

            South-Western Century 21, Accounting: Multicolumn Journal

                        7^th edition, International Thomson Publishing Company

                        Ross, Gilbertson, Lehman, Hanson

CLASS STATUS:     

First semester accounting students

            High School

OBJECTIVES:

            At the end of class, students will be able to:

1.      Identify adjustments on the work sheet.

2.      Record adjusting entries in the journal.

3.      Demonstrate adjustments and new balances with T accounts.

4.      Explain the steps needed to journalize adjusting entries.

MATERIALS NEEDED:

BEFORE CLASS:

                Have “Recording Adjusting Entries for a Partnership” written on the board.

Assignments written on board.

Page 425 (On Your Own)  Journalizing adjusting entries.  Record the appropriate adjusting entries on page 15 of a journal provided in the Working Papers.

Page 441 (17-1) Journalizing adjusting entries.  Record the appropriate adjusting entries on page 12 of the journal provided in the Working Papers.

Both assignments will be handed in tomorrow at the beginning of class.

CLASS TIME:

            50 Minutes

1.      Take attendance and make announcements (2 minutes)

Take attendance per seating chart.  Make any necessary announcements about school, community, class, etc…

2.      Adjusting Entries Introduction (2 minutes)

Today we will be talking about recording adjusting entries for a partnership.  First we need to understand that some general ledger account balances are not completely up to date at the end of the fiscal period.  For example: The balance of the Supplies account does not reflect the supplies used up during the period.  Because of this we need to record adjusting entries so that it is known that some of the supplies were used up instead of thinking we still have all of the supplies available.  There are two types of journal entries that change the general ledger account balances at the end of a fiscal period.  One is adjusting entries which bring general ledger account balances up to date and the second is closing entries which prepare temporary accounts for the next fiscal period.  We will talk more indepth about closing entries later in the week.

3.      Terms (1 minute)

Adjusting entries – journal entries recorded to update general ledger accounts at the end of a fiscal period.

4.      How accounts are affected by adjusting entries  (4 minutes)

(Textbook)

Before you can record an adjusting entry, you must locate the adjustment. 

(By raising your hand, someone tell me where we can find the adjusting entries to be recorded.)

Worksheet

(Open your books to page 423)

(Model or demonstrate using overhead while students do it with you.)

On the top of page 423 there is a partial work sheet which shows adjustments.  The adjustment are under the Adjustments column and marked with the small alphabet letters.  Before we begin recording the adjusting entries there are steps we must follow.  Look on the bottom of page 422.  The six steps to recording adjusting entries are there.  Also, if you look at the top of the same page, you can see where the steps are applied.

(Before you start recording Adjusting Entries you will need a new journal page.)

Step 1             Write the heading (Adjusting Entries) in the middle of the

journal’s Account Title column.

(By writing this there is no need to indicate a source

document.)

Step 2             For the first adjusting entry identified by the letter (a) in the

work sheet Adjustments column, write the date in the dates

column.

Step 3             Write the title of the account debited in the Account Title column.

            Step 4             Write the debit adjustment amount in the General Debit

column.

Step 5             Write the title of the account credited in the Account Title column.

Step 6             Write the credit adjustment amount in the General Credit column.

            Repeat Steps 2-6 for each of the additional adjusting entries.

Are there any questions so far?

5.      T accounts showing new ending balances  (7 minutes)

(Textbook)

(Involve students in giving the answers.)

On the bottom of page 423 the first two T accounts show an effect to Income Summary and Merchandise Inventory.  The normal balance for Income Summary is on the debit side.  The work sheet shows an increase adjustment to Income Summary.  Therefore, we increase Income Summary.  Don’t forget to write in Adj. (a).  Now there has also been an affect to Merchandise Inventory.  Merchandise inventory has a normal balance on the debit side also.  Before we move on we must recognize that Merchandise Inventory has a balance.  The balance is on the normal balance side of that account.  We now look at the work sheet to see what the adjustment to Merchandise Inventory is.  It shows a credit.

(After we credit the Merchandise Inventory account for 15,840 what needs to be done?)

Calculate the new balance

Provide the new balance for Merchandise Inventory.  Don’t forget to label that amount with New Balance.

Now let’s take a look at page 424. (Ask students for the amounts.)  We are provided with T accounts that are correctly filled out.  Supplies Expense-Office is debited for 4,730 and Supplies-Office is credited for 4,730 leaving a new balance of 1,750.  Supplies Expense-Store is debited for 3,910 and Supplies-Store is credited for 3,910 leaving a new balance of 3,034.  Insurance Expense is debited for 3,170 and Prepaid Insurance is credited for 3,170 leaving a new balance of 2,630.

6.      Working the problem (20 minutes)

(Blank Transparency)

(Blank Journal Transparency)

(Textbook)

Everyone direct your attention to the middle of page 425.  We are going to work through the Work Together problem. 

First we have to figure out the adjustments through our T accounts.

Go through each account and have the students say how to set up the account and calculate it aloud.

Income Summary                                        Merchandise Inventory

Adj. 26,450                                                    Bal.           446,200                Adj. 26,450

(New Bal.  419,750)

Supplies Expense-Office                          Supplies-Office

Adj. 2,090                                                      Bal.         5,440       Adj. 2,090

(New Bal. 3,350)

Supplies Expense-Store                           Supplies-Store

Adj. 2,030                                                      Bal.          6,020       Adj. 2,030

(New Bal. 3,990)

Insurance Expense                                      Prepaid Insurance

Adj. 2,890                                                      Bal.         3,860     Adj. 2,890

(New Bal. 970)

Are there any questions concerning how we came up with the adjustment figures?

Now we are ready to record our adjusting entries.

You will need to take out your Working Papers and turn to page 15. 

(What do you need to do before recording the adjusting entries?)

Write Adjusting Entries in the Account Title column, write the date in the date column.

Ask the students what transaction is written down first and then continue on until all transaction are recorded.

                                                                        Debit                           Credit

Income Summary                                            26,450

Merchandise Inventory                                                                     26,450

Supplies Expense-Office                          2,090

Supplies-Office                                                                          2,090

Supplies Expense-Store                           2,030

Supplies-Store                                                                           2,030

Insurance Expense                                             2,890

Prepaid Insurance                                                                                2,890

Are there any questions on any part of the lesson today before we begin the assignments?

7.      Assignment (14 minutes)

(Have the assignments written on the board.)

Have students begin the assignment in class so I can help with any questions that come up.

Hand out Chapter 17 packet.  Tell students to use the packet to hellp them with their assignments.

Page 425 (On Your Own)  Journalizing adjusting entries.  Record the appropriate adjusting entries on page 15 of a journal provided in the Working Papers.

Page 441 (17-1) Journalizing adjusting entries.  Record the appropriate adjusting entries on page 12 of the journal provided in the Working Papers.

Both assignments will be handed in tomorrow at the beginning of class.

8.      Evaluation (After class has been dismissed)

-         How much time did I have at the end of class?___________________

-         Where all questions the students had answered?_________________

-         What areas do I need to go over again?________________________

-         Comments: ______________________________________________

ACCOUNTING I

March 14, 2000

Chapter 17 – Day 2

TEXTBOOK:           

            South-Western Century 21, Accounting: Multicolumn Journal

                        7^th edition, International Thomson Publishing Company

                        Ross, Gilbertson, Lehman, Hanson

CLASS STATUS:     

First semester accounting students

            High School

OBJECTIVES:

            At the end of class, students will be able to:

1.      Explain why income summary is used.

2.      Identify where the closing entries are.

3.      List the temporary accounts.

4.      Identify the normal balances for revenue and expenses.

5.      Explain the steps needed to journalize closing entries for income summary accounts with a debit balance.

6.      Explain how to close an account using T accounts.

7.      Explain the steps needed to journalize closing entries for income summary accounts with a credit balance.

MATERIALS NEEDED:

BEFORE CLASS:

                Have “Recording Closing Entries for Income Statement Accounts” written on the board.

Assignments written on board.

Page 430 (On Your Own)  A partial work sheet of Custom Aquarium for the year ended December 31 of the current year is given in the Working Papers.

Page 441 (17-2) Journalizing closing entries for income statement accounts.

Prepare on page 14 of the journal in the Working Papers.

Both assignments will be handed in tomorrow at the beginning of class.

CLASS TIME:

            50 Minutes

1.       Review (8 minutes)

(Before starting the class, tell the students they should have their papers handed in to me. Take attendance per seating chart.  Make any necessary announcements about school, community, class, etc…)

Everyone needs to take out a piece of paper and for five minutes you will write what you learned the last class period. BEGIN.

(Give a one-minute finish up warning.  Then collect the papers.  Have the students pass the papers to the front and then to the right.)

I will then go through them and read off what was learned.

1    Identify adjustments on the work sheet.

2            Record adjusting entries in the journal.

3            Demonstrate adjustments and new balances with T accounts.

2.      Homework from previous class period. (10 minutes)

(Blank Transparency)

(Blank Journal Transparency)

Go over homework by having the students come up to the overhead or board and complete each problem.

3.  Terms (1 minute)

Closing entries – journal entries used to prepare temporary accounts for a new fiscal period.

Income summary account - is used only at the end of the fiscal period to help prepare other accounts for a new fiscal period.

Temporary Account – accounts used to accumulate information until it is transferred to the owner’s capital account.

Permanent accounts – accounts used to accumulate information from one fiscal period to the next.

4.       Recording Closing Entries for Income Statement Accounts Introduction

(4 minutes)

(Blank Transparency)

Today we are going to talk about recording closing entries for income statement accounts. The income summary account is used only at the end of the fiscal period to help prepare other accounts for a new fiscal period.  Amounts needed for the closing entries are obtained from the Income Statement and Balance Sheet and from the distribution of net income statement.  The ending account balances of permanent accounts for one fiscal period are the beginning account balances for the next fiscal period.  (Ask students’ what T-Accounts are.) Temporary accounts include the revenue, cost, expense, and owners’ drawing accounts.  Income Summary is another temporary account used to summarize the closing entries for revenue, cost, and expenses.

The income summary does not have a normal balance side.  The balance of this account is determined by the amounts posted to the account at the end of a fiscal period.  When revenue is greater than total expenses, resulting in a net income, the income summary account has a credit balance.

5.      Closing an income statement account with a credit balance.  (5 minutes)

(Textbook)

(Demonstrate using the overhead while student do the work with you.)

On the top of page 427, there is an example of a closing entry in the journal and T account reference.

Before we make our closing entry in the journal, we need to find out what accounts are affected and by what amount.

First we need to find the revenue accounts on the work sheet.  For Omni Import’s there is only a Sales account which provides us with revenue amount.

Second we need to make T accounts to allow us to know what is happening to the accounts.

As you can see the first T account is Sales.  (Ask students questions about the balances of the different accounts.)  Since sales is a revenue account, its normal balance is on the credit side.  The balance of sales, as indicated on the work sheet is 423,120.  This balance appears on the credit side.  Next, we must write in the amount to close the account.

? What amount do we use to close the account and what side does it go on?  (Debit 423,120)

The other account affected is the Income Summary.  Income Summary is credited so that debits equal credits.

Now we are ready to record closing an income statement account with a credit balance.  On the bottom of page 427 there are four steps for recording the entries.  Also, if you look at the top of the same page you can see where the steps are applied.

(You will use the same journal that you recorded the adjusting entries in.)

            Step 1             Write the heading, Closing Entries, in the middle of the

journal’s Account Title column following the last adjusting entry.

(This heading explains all of the closing entries that follow.  Therefore, indicating a source document is unnecessary.  The first closing entry is recorded on the first two lines below the heading.)

            Step 2             Write the date in the Date column.

            Step 3             Write the account debited in the Account Title column.  Write

the account balance in the General Debit column.

            Step 4             Write the account credited in the Account Title column.

Write the amount in the General Credit column.

6.      Closing an income statement account with a debit balance.  (10 minutes)

(Textbook)

On the top of page 428 there is an example of a partial work sheet that provides amounts for purchases and expenses.  These debit balances must be reduced to zero to prepare the accounts for the next fiscal period.  To reduce the balances to zero, the cost and expense accounts are credited for the amount of their balances. The cost account is purchases.  Income Summary is debited.

Remember Income Summary is not closed as part of this closing entry.

As we have been doing before, we need to set up our T accounts to find out how they are affected.  Look on page 429. 

(Go through each T account and talk about their normal balance side, the amount needed to close the account, and how to figure Income summary.)

Now we are ready to record closing an income statement account with a credit balance.  On the bottom of page 428 there are four steps for recording the entries.  Also, if you look at the top of the same page, you can see where the steps are applied.

(You will use the same journal that you recorded the adjusting entries and income statement account with credit balances in.)

            Step 1             Write the date in the Date column.

            Step 2             Write the title of the account debited in the Account Title

column.

(The debit to Income Summary is not entered in the amount column until all cost and expense balances have been journalized and the total amount calculated.)

            Step 3             Write the account title of each cost and expense account in

the Account Title column.  Write the balance of each cost and expense account in the General Credit column.

Step 4             Add the credit amounts for this entry.  Write the total of the cost and expense accounts in the General Debit column on the same line as the account title Income Summary.

Are there any question about closing the income statement account with a debit or credit balance?

7.      Working the problem (12 minutes)

(Blank Transparency)

(Blank Journal Transparency)

(Fairbanks Auto supply working papers)

(Textbook)

Everyone direct your attention to the middle of page 430.  We are going to work through the Work Together problem.  Get out your Working Papers and open to Fairbanks Auto Supply for the year ended December 31.

First we have to figure out the closing amounts through our T accounts.

Go through each account and have the students say how to set up the account and calculate it aloud.

Close the income statement account with a credit balance.

Sales                                                                 Income Summary

            Debit               Credit                                     Debit                           Credit

            260,000                                                                                            260,000

Close the income statement account with a debit balance.

Purchases                                                    Advertising Expense

Debit                           Credit                         Debit                                       Credit

                                    118,000                                                                    4,060

Credit Card Fee Expense                                Insurance Expense

Debit                           Credit                         Debit                                       Credit

                                    2,670                                                                          3,150

Miscellaneous Expense                                Rent Expense

Debit                           Credit                         Debit                                       Credit

                                    1,720                                                                          18,000

Supplies Expense-Office                          Supplies Expense-Store

Debit                           Credit                         Debit                                       Credit

                                    3,730                                                                          3,900 

Utilities Expense                   

Debit                           Credit

                                        3,670

Are there any questions concerning how we came up with the closing figures?

Now we are ready to record our changes.

You will need to take out your Working Papers and turn to page 12. 

(What is the first thing you do before recording the closing entries?)

Write Closing Entries under the Account Title and write the date in the date column.

(Show closing entry graphic – Coffee Pot)

(Ask the students what transaction is written down first and then continue on until all transaction are recorded.)

Closing Entry                                                Debit                           Credit

(Date) Sales                                                  260,000

Income Summary                                                                                260,000

(Don’t leave a space between different recorded entries.)

(Date) Income Summary                                158,900

Purchases                                                                                          118,000

Advertising Expense                                                                         4,060

Credit Card Fee Expense                                                                 2,670

Insurance Expense                                                                                     3,150

Miscellaneous Expense                                                                      1,720

Rent Expense                                                                                   18,000

Supplies Expense-Office                                                                  3,730

Supplies Expense-Store                                                                   3,900

Utilities Expense                                                                                     3,670

Are there any questions on any part of the lesson today before we begin the assignments?

8.      Assignment

(Have the assignments written on the board.)

Have students begin the assignment in class so I can help with any questions that come up.

Tell students to use the Chapter 17 packet to help them with the assignment.

Page 430 (On Your Own)  A partial work sheet of Custom Aquarium for the year ended December 31 of the current year is given in the Working Papers.

Page 441 (17-2) Journalizing closing entries for income statement accounts.

Prepare on page 14 of the journal in the Working Papers.

Hand back assignment from the previous period.

Both assignments will be handed in tomorrow at the beginning of class.

9.      Evaluation (After class has been dismissed)

-         How much time did I have at the end of class?___________________

-         Where all questions the students had answered?_________________

-         What areas do I need to go over again?________________________

-         Comments: ______________________________________________

ACCOUNTING I

March 15, 2000

Chapter 17 – Day 3

TEXTBOOK:           

            South-Western Century 21, Accounting: Multicolumn Journal

                        7^th edition, International Thomson Publishing Company

                        Ross, Gilbertson, Lehman, Hanson

CLASS STATUS:     

First semester accounting students

            High School

OBJECTIVES:

            At the end of class, students will be able to:

1                    Explain where to find net income to use for closing out Income Summary.

2                    Illustrate how to close income summary and drawing accounts.

3                    Illustrate how to use T accounts to show adjustments made in the account.

4                    Illustrate how to record the adjustments made from closing income summary and the drawing accounts.

MATERIALS NEEDED:

BEFORE CLASS:

                Have “Recording Additional Closing Entries” written on the board.

Assignments written on board.

Page 434 (On Your Own)  Use the journal from On Your Own on page 430.  Page 15 of your journal.

Page 442 (17-3) Journalizing additional closing entries.  Prepare on page 14 of the journal.

Both assignments will be handed in tomorrow at the beginning of class.

CLASS TIME:

            50 Minutes

1.       Review (8 minutes)

(Before starting the class, tell the students they should have their papers handed in to me. Take attendance per seating chart.  Make any necessary announcements about school, community, class, etc…)

Everyone needs to take out a piece of paper and for five minutes you will write what you learned the last class period. BEGIN.

(Give a one-minute finish up warning.  Then collect the papers.  Have the students pass the papers to the front and then to the right.)

I will then go through them and read off what was learned.

1        Explain why income summary is used.

2        Identify where the closing entries are.

3        List the temporary accounts.

4        Identify the normal balances for revenue and expenses.

5        Explain the steps needed to journalize closing entries for income summary accounts with a debit balance.

6        Explain how to close an account using T accounts.

7        Explain the steps needed to journalize closing entries for income summary accounts with a credit balance.

2.      Homework from previous class period. (10 minutes)

(Blank Journal Transparency)

(Custom Aquarium working papers)

Go over homework by having the students come up to the overhead or board and complete each problem.

3.  Terms (1 minute)

Journal – a form for recording transactions in chronological order.

4.      Closing entry to record net income or loss and close the income summary account.

(5 minutes)

(Textbook)

Turn to page 431 and refer to the top of the page.  For the following closing entries we need to get our information from the Distribution of Net Income Statement.  Since we are dealing with a partnership we have to close out two capital accounts.  The balance of the temporary account Income Summary must be reduced to zero to prepare the account for the next fiscal period.

(Explain each T account and how the adjustments are made.)

Income Statement – on the debit side there are already adjustments that have been made.  As you can see, on the debit side there are already entries for Adj. (mdse. inv.), Closing (cost and expenses), and on the credit side closing (revenue) all including amounts.  We now have to close out the Income Summary.  You need to add the partners’ net incomes together and the total amount goes on the debit side of the Income Summary.  We write the entry as Closing (net income) and the total amount.  We then calculate the amounts to provide us with a zero balance.

Next, we have to make an adjustment to the first partners’ account.  As you can see, the account already has a previous balance on the credit side.  The normal balance for a capital account is on the credit side. Therefore, to increase the account you place the amount on the credit side.  The balance to the account is $136,750.  We look to the Distribution of Net Income Statement to get the amount needed for closing net income.  This amount is placed on the credit side.

Repeat the same sequence for the second partners’ account.

5.      Closing the income summary account to record net income or loss. 

(2 minutes)

(Textbook)

Now we are ready to record closing the income summary account to record net income or loss.  On the bottom of page 431 there are five steps for recording the entries.  Also, if you look at the top of the same page you can see where the steps are applied.

(You will use the same journal that you recorded the adjusting entries and closing to the income summary.)

Step 1             Write the date in the Date column.

            Step 2             Write the title of the account debited in the Account Title

column.

Step 3             Write the debit amount in the General Debit column.

                        (This is the amount of net income.)

            Step 4             Write the titles of the two partners’ capital accounts on the

next two lines in the Account Title column.

            Step 5             Write the credit amount in the General Credit column.

6.      Closing entries for the partners’ drawing accounts  (5 minutes)

(Textbook)

On the top of page 432 there is an example of a partial work sheet that provides amounts for the partners’ drawing accounts.  The drawing accounts are not closed through Income Summary.  The drawing account balances are closed directly to the partners’ capital accounts.

Remember the balances of the partners’ capital accounts are the same as reported in the owners’ equity section of the balance sheet.

As we have been doing before, we need to set up our T accounts to find out how they are affected.  Look on page 432. 

(Go through each T account and talk about their normal balance side, the amount needed to change the capital accounts and close the Drawing accounts.)

Now we are ready to record closing the partners’ drawing accounts.  On the bottom of page 432 there are five steps for recording the entries.  Also, if you look at the top of the same page you can see where the steps are applied.

(You will use the same journal that you recorded the adjusting entries, income statement account with credit balances and closing income summary account in.)

            Step 1             Write the date in the Date column.

            Step 2             Write the title of the account debited in the Account Title

column.

Step 3             Write the debit amount in the General Debit column.

Step 4             Write the title of the account credited in the Account Title column.

Step 5             Write the credit amount in the General Credit column.    

Repeat Steps 1 through 5 to close the second partner’s drawing account.         

Are there any question as to how the closing entries are recorded?

6.            Completed closing entries for a partnership recorded in a journal

(1 minutes)

(Textbook)

Look at page 433.  This is an example of a completed journal that we have been working through the last two class periods.  As you can see the heading Closing Entries starts on line 10.  The reason for this is because the adjusting entries are recorded on lines 2 through 9.

7.      Working the problem (15 minutes)

(Blank Transparency)

(Blank Journal Transparency)

(Fairbanks Auto Supply working papers)

(Textbook)

Everyone direct your attention to the middle of page 434.  We are going to work through the Work Together problem.  Get out your Working Papers and open to page 12 of the journal.

First we have to figure out the closing amounts through our T accounts.

Go through each account and have the students say how to set up the account and calculate it aloud.

                                    Income Summary

                                                Debit                                       Credit

                                                                                                260,000

Beth Fairbanks, Capital

Closing

                                                                                                (net income)            43,050

Chris Gilder, Capital

Closing

                                                                                                (net income)            43,050

Beth Fairbanks, Capital                                               Chris Gilder, Capital

Closing                                                                Closing

  Drawing  31,000            Closing                             Drawing  29,900            Closing

(net income) 43,050            (net income) 43,050

                                      (New Bal.     12,050)                                 (New Bal.     13,150)

Beth Fairbanks, Drawing                                Chris Gilder, Drawing

                                    Closing  31,000                                            Closing  29,900

(New Bal. Zero)                                         (New Bal. Zero)

Are there any questions concerning how we came up with the closing figures?

Now we are ready to record our changes.

You will need to take out your Working Papers and turn to page 12. 

(What do you do before you begin recording the entries?)

Write the date in the date column.

(Ask the students what transaction is written down first and then continue on until all transaction are recorded.)

                                                                        Debit                           Credit

Income Summary                                            86,100

Beth Fairbanks, Capital                                                                        43,050

Chris Gilder, Capital                                                                                    43,050

Beth Fairbanks, Capital                                    31,000

Beth Fairbanks, Drawing                                                                      31,000

Chris Gilder, Capital                                                29,900

Chris Gilder, Drawing                                                                      29,900

Are there any questions on any part of the lesson today before we begin the assignments?

9.      Assignment (3 minutes)

(Have the assignments written on the board.)

Have students begin the assignment in class so I can help with any questions that come up.

Tell students to use the Chapter 17 packet to help them with the assignment.

Page 434 (On Your Own)  Use the journal from On Your Own on page 430.  Page 15 of your journal.

Page 442 (17-3) Journalizing additional closing entries.  Prepare on page 14 of the journal.

Hand back assignment from the previous period.

Both assignments will be handed in tomorrow at the beginning of class.

10.  Evaluation (After class has been dismissed)

-         How much time did I have at the end of class?___________________

-         Where all questions the students had answered?_________________

-         What areas do I need to go over again?________________________

-         Comments: ______________________________________________

-         ________________________________________________________

-         ________________________________________________________

-         ________________________________________________________

ACCOUNTING I

March 16, 2000

Chapter 17 – Day 4

TEXTBOOK:           

            South-Western Century 21, Accounting: Multicolumn Journal

                        7^th edition, International Thomson Publishing Company

                        Ross, Gilbertson, Lehman, Hanson

CLASS STATUS:     

First semester accounting students

            High School

OBJECTIVES:

            At the end of class, students will be able to:

1                    Explain the procedure for posting to the general ledger.

2                    Identify and illustrate the completion of a post-closing trial balance.

3                    Describe how the accounting cycle for a merchandising business works.

MATERIALS NEEDED:

BEFORE CLASS:

                Have “Preparing a Post-Closing Trial Balance” written on the board.

Assignments written on board.

Page 439 (On Your Own)  Prepare a post-closing trial balance on the form provided in the Working Papers.

Page 442 (17-5) Journalizing and posting adjusting and closing entries; preparing a post-closing trial balance.

Both assignments will be handed in tomorrow at the beginning of class.

CLASS TIME:

            50 Minutes

1.       Review (8 minutes)

(Before starting the class, tell the students they should have their papers handed in to me. Take attendance per seating chart.  Make any necessary announcements about school, community, class, etc…))

Everyone needs to take out a piece of paper and for five minutes you will write what you learned the last class period. BEGIN.

(Give a one-minute finish up warning.  Then collect the papers.  Have the students pass the papers to the front and then to the right.)

I will then go through them and read off what was learned.

1          Explain where to find net income to use for closing out Income Summary.

2            Illustrate how to close income summary and drawing accounts.

3          Illustrate how to use T accounts to show adjustments made in the account.

4          Illustrate how to record the adjustments made from closing income summary and the drawing accounts.

2.      Homework from previous class period. (10 minutes)

(Blank Transparency)

(Blank Journal Transparency)

(Blank Worksheet)

(Custom Aquarium working papers)

Go over homework by having the students come up to the overhead or board and complete each problem.

3.  Terms (1 minute)

General Ledger – a ledger that contains all accounts needed to prepare financial statements.

Post-closing trial balance – is prepared to prove the equality of debits and credits in the general ledger.

Posting – transferring information from a journal entry to a ledger account.

Net Loss – the difference between total revenue and total expenses when total expenses is greater.

Net Income – the difference between total revenue and total expenses when total revenue is greater.

4.      Completed General Ledger after adjusting and closing entries are posted.

(3 minutes)

(Textbook)

(Blank Posting Transparency)

Look at pages 435 and 436.  These are examples of what the individual accounts look like in the general ledger after they have been posted with the new entries and calculated out for their new balances.  Balance sheet accounts (asset, liability, and capital accounts) have up-to-date balances to begin the new fiscal period.  Income statement accounts (revenue, cost, and expense account) have zero balance to begin the new fiscal period.

(We will not go through the posting since we have done so earlier in the textbook.)

Review posting

1                    Write the date in the Date column of the account.

(The month and year are written only once on a page of a ledger account unless the month or year changes.)

2                    Write the journal page number in the Post. Ref. Column of the account.

3                    Write the credit or debit amount in the Credit or Debit column of the account.

4                    Write the new account balance in the Balance Credit or Debit column.

5                    Draw a straight line through the Debit and Credit column to indicate an ending zero balance.

6                    Return to the journal and write the account number in the Post. Ref. Column of the journal.

5.      Post-Closing Trial Balance  (5 minutes)

(Textbook)

(Blank Journal Transparency)

(Have the students work the problem with me.)

Open textbooks to page 439.

A post-closing trial balance is prepared to prove the equality of debits and credits in the general ledger.  Because the post-closing trial balance debit and credit totals are the same, the equality of debits and credits in the general ledger is proved.

1                    We begin by writing in the heading.

Omni Import

Post-Closing Trial Balance

December 31, 20—

2                    The Debit accounts are found on the Work sheet.  They are the first row of Debit accounts on the worksheet.  Write the Debit accounts in the Post-Closing Trial Balance.

3                    The Credit accounts are found on the Work sheet.  The credit accounts include all the payables plus the two capital accounts.

4                    After writing in all the account titles and amounts write Total in the row after the last entry.  Add up all the debit amounts and write it in the debit column in the Total row.  Add up all the credit amounts and write it in the debit column in the Total row.

5                    The Debits and Credits must equal.  When they do draw one line over the top of the Total row and two lines under the Total row.

Are there any question about how to complete a post-closing trial balance?

6.      Accounting cycle for a merchandising business organized as a partnership  (5 minutes)

(Textbook)

Turn to page 438.  The diagram at the top of the page show each step of the accounting cycle for a merchandising business.

Step 1             Check over the source documents to make sure they are accurate. 

Step 2             After the source documents have been checked you need to journalize the transactions in a journal.

Step 3             Journal entries are posted to the accounts payable ledger, the accounts receivable ledger, and the general ledger.

Step 4             Schedules of accounts payable and accounts receivable are prepared from the subsidiary ledgers.

Step 5             A work sheet, including a trial balance, is prepared from the general ledger.

Step 6             Financial statements are prepared from the work sheet.

7.      Working the problem (10 minutes)

(Blank Journal Transparency)

(Textbook)

Everyone direct your attention to the middle of page 439.  We are going to work through the Work Together problem.  Get out your Working Papers.

We are going to set up a post-closing trial balance.

(Have the students tell me what needs to be written down.)

Visual Art Center

Post-Closing Trial Balance

December 31, 20—

Are there any questions on any part of the lesson today before we begin the assignments?

8.      Assignment (8 minutes)

(Have the assignments written on the board.)

Have students begin the assignment in class so I can help with any questions that come up.

Tell students to use the Chapter 17 packet to help them with the assignment.

Page 439 (On Your Own)  Prepare a post-closing trial balance on the form provided in the Working Papers.

Page 442 (17-5) Journalizing and posting adjusting and closing entries; preparing a post-closing trial balance.

Hand back assignment from the previous period.

Both assignments will be handed in tomorrow at the beginning of class.

9.      Evaluation (After class has been dismissed)

-         How much time did I have at the end of class?___________________

-         Where all questions the students had answered?_________________

-         What areas do I need to go over again?________________________

-         Comments: ______________________________________________

-         ________________________________________________________

-         ________________________________________________________

-         ________________________________________________________

ACCOUNTING I

March 17, 2000

Chapter 17 – Day 5

TEXTBOOK:           

            South-Western Century 21, Accounting: Multicolumn Journal

                        7^th edition, International Thomson Publishing Company

                        Ross, Gilbertson, Lehman, Hanson

CLASS STATUS:     

First semester accounting students

            High School

OBJECTIVES:

            At the end of class, students will be able to:

1                    Record adjusting entries.

2                    Record closing entries for income statement accounts.

3                    Record closing entries for net income or loss and partners’ drawing accounts.

4                    Prepare a post-closing trial balance.

MATERIALS NEEDED:

BEFORE CLASS:

                Have “Chapter 17 Review” and “Test next class period” written on the board.

CLASS TIME:

            50 Minutes

1.       Review (8 minutes)

(Before starting the class, tell the students they should have their papers handed in to me. Take attendance per seating chart.  Make any necessary announcements about school, community, class, etc…)

** This doesn’t have to be done every day.**

Everyone needs to take out a piece of paper and for five minutes you will write what you learned the last class period. BEGIN.

(Give a one-minute finish up warning.  Then collect the papers.  Have the students pass the papers to the front and then to the right.)

I will then go through them and read off what was learned.

1                    Explain the procedure for posting to the general ledger.

2                    Identify and illustrate the completion of a post-closing trial balance.

3                    Describe how the accounting cycle for a merchandising business works.

2.      Homework from previous class period. (10 minutes)

(Blank Journal Transparency)

Go over homework by having the students come up to the overhead or board and complete each problem.

3.      Recording adjusting entries – Review  (5 minutes)

(Blank Journal Transparency)

(Hand Out Study Guides)

Start by asking the students questions from the book.

(Write the answers that the students give on the transparency.)

Questions:

1                   What accounts are increased from zero balances after adjusting entries for prepaid insurance and merchandise inventory are journalized and posted?

2                   When adjusting entries are journalized, why is no source document recorded?

3                   What adjusting entry is recorded for a merchandising business that is not recorded for a service business?

4                   Definition of Adjusting entries

4.      Recording closing entries for income statement accounts – Review

(2 minutes)

(Blank Journal Transparency)

Start by asking the students questions from the book.

(Write the answers that the students give on the transparency.)

Questions:

1                   Where is the information obtained for journalizing closing entries for revenue, cost, and expenses?

2                   What is the name of the temporary account that is used to summarize the closing entries for revenue, cost, and expenses?

3                   Definition of Closing entries

4                   Definition of Income summary account

5                   Definition of Temporary Account

6                   Definition of Permanent accounts

5.      Recording additional closing entries – Review  (2 minutes)

(Blank Journal Transparency)

Start by asking the students questions from the book.

(Write the answers that the students give on the transparency.)

Questions:

1                   Where is the information obtained for journalizing closing entries for net income or loss and partners’ drawing accounts?

2                   How is a temporary account closed?

3                   Definition of Journal

6.      Preparing a Post-closing trial balance – Review  (3 minutes)

(Blank Journal Transparency)

Start by asking the students questions from the book.

(Write the answers that the students give on the transparency.)

Questions:

1                   Which accounts are listed on a post-closing trial balance?

2                   What is the purpose of preparing a post-closing trial balance?

3                   In what order should accounts be listed on a post-closing trial balance?

4                   Definition of General Ledger

5                   Definition of Post-closing trial balance

6                   Definition of Posting

7.      Application Problem  (20 minutes)

(Application Problem Transparencies)

(Blank Journal Transparency)

Have students turn to page 443.  Go through the problem step-by-step with the students.  Have the students give the steps and answers.

1.                  Use page 24 of a journal.  Journalize the adjusting entries using information from the partial work sheet.

2.                  Post the adjusting entries. (See attached sheets.)

3.

4.      Post the closing entries. (See attached sheets)

5.      Prepare a post-closing trial balance.

6.      Evaluation (After class has been dismissed)

-         How much time did I have at the end of class?___________________

-         Where all questions the students had answered?_________________

-         What areas do I need to go over again?________________________

-         Comments: ______________________________________________

ACCOUNTING I

March 18, 2000

Chapter 17 – Day 6

TEXTBOOK:           

            South-Western Century 21, Accounting: Multicolumn Journal

                        7^th edition, International Thomson Publishing Company

                        Ross, Gilbertson, Lehman, Hanson

CLASS STATUS:     

First semester accounting students

            High School

MATERIALS NEEDED:

BEFORE CLASS:

                Have “Chapter 17 Test” written on the board.

CLASS TIME:

            50 Minutes

1.            Information

Take attendance per seating chart.  Make any necessary announcements about school, community, class, etc…

When you are finished with the test bring it to the front table and turn it upside-down.  Make sure your name is on the test.  When done you may do other homework, study, read, or sit quietly.

Hand out test.  Tell the students no talking and if you have a question raise your hand and I will assist them.

Give a five minute and 1 minute warning before the class period is over.

2.      Evaluation (After class has been dismissed)

-         How much time did I have at the end of class?___________________

-         Where all questions the students had answered?_________________

-         What areas do I need to go over again?________________________

-         Comments: ______________________________________________

CHAPTER 17

HELPER GUIDE

17-1

Terms

Adjusting entries – journal entries recorded to update general ledger accounts at the end of a fiscal period.

Adjusting entries recorded in a journal

(Before starting you will need a new journal page for Adjusting Entries.)

Step 1             Write the heading (Adjusting Entries) in the middle of the

journal’s Account Title column.

(By writing this in there is no need to indicate a source

document.)

Step 2             For the first adjusting entry identified by the letter (a) in the

work sheet Adjustments column, write the date in the dates

column.

Step 3             Write the title of the account debited in the Account Title column.

            Step 4             Write the debit adjustment amount in the General Debit

column.

Step 5             Write the title of the account credited in the Account Title column.

Step 6             Write the credit adjustment amount in the General Credit column.

17-2

Terms

Closing entries – journal entries used to prepare temporary accounts for a new fiscal period.

Income summary account – is used only at the end of the fiscal period to help prepare other accounts for a new fiscal period.

Temporary Account – accounts used to accumulate information until it is transferred to the owner’s capital account.

Permanent accounts – accounts used to accumulate information from one fiscal period to the next.

Recording Closing Entries for Income Statement Accounts

Amounts needed for the closing entries are obtained from the Income Statement and Balance Sheet and from the distribution of net income statement.  The ending account balances of permanent accounts for one fiscal period are the beginning account balances for the next fiscal period.  Temporary accounts include the revenue, cost, expense, and owners’ drawing accounts. Income Summary is another temporary account used to summarize the closing entries for revenue, cost, and expenses. The income summary does not have a normal balance side.

Income Summary

                                    Debit                                                   Credit

                                    Total expenses                               Revenue

(If greater then expenses then the credit balance is the net income.)

Closing an income statement account with a credit balance

(You will use the same journal that you recorded the adjusting entries in.  Make sure you skip a row before you begin writing.

            Step 1             Write the heading, Closing Entries, in the middle of the

journal’s Account Title column following the last adjusting entry.

(This heading explains all of the closing entries that follow.  Therefore, indicating a source document is unnecessary.  The first closing entry is recorded on the first two lines below the heading.)

            Step 2             Write the date in the Date column.

            Step 3             Write the account debited in the Account Title column.  Write

the account balance in the General Debit column.

            Step 4             Write the account credited in the Account Title column.

Write the amount in the General Credit column.

Closing income statement accounts with debit balances.

(You will use the same journal that you recorded the adjusting entries and income statement account with credit balances in.  Make sure you skip a row before you begin writing.)

            Step 1             Write the date in the Date column.

            Step 2             Write the title of the account debited in the Account Title

column.

(The debit to Income Summary is not entered in the amount column until all cost and expense balances have been journalized and the total amount calculated.)

            Step 3             Write the account title of each cost and expense account in

the Account Title column.  Write the balance of each cost and expense account in the General Credit column.

Step 4             Add the credit amounts for this entry.  Write the total of the cost and expense accounts in the General Debit column on the same line as the account title Income Summary.

Closing the income summary account to record net income or loss. 

Now we are ready to record closing the income summary account to record net income or loss.  On the bottom of page 431 there are five steps for recording the entries.  Also, if you look at the top of the same page you can see where the steps are applied.

(You will use the same journal that you recorded the adjusting entries and closing to the income summary.  Make sure you skip a row before you begin writing.)

Step 1             Write the date in the Date column.

            Step 2             Write the title of the account debited in the Account Title

column.

Step 3             Write the debit amount in the General Debit column.

                        (This is the amount of net income.)

            Step 4             Write the titles of the two partners’ capital accounts on the

next two lines in the Account Title column.

            Step 5             Write the credit amount in the General Credit column.

17-3

Terms

Journal – a form for recording transactions in chronological order.

Closing the partners’ drawing accounts

(You will use the same journal that you recorded the adjusting entries, income statement account with credit balances and closing income summary account in.  Make sure you skip a row before you begin writing.)

            Step 1             Write the date in the Date column.

            Step 2             Write the title of the account debited in the Account Title

column.

Step 3             Write the debit amount in the General Debit column.

Step 4             Write the title of the account credited in the Account Title column.

Step 5             Write the credit amount in the General Credit column.    

Repeat Steps 1 through 5 to close the second partner’s drawing account.         

Closing the income summary account to record net income or loss

(You will use the same journal that you recorded the adjusting entries and closing to the income summary.)

Step 1             Write the date in the Date column.

            Step 2             Write the title of the account debited in the Account Title

column.

Step 3             Write the debit amount in the General Debit column.

                        (This is the amount of net income.)

            Step 4             Write the titles of the two partners’ capital accounts on the

next two lines in the Account Title column.

            Step 5             Write the credit amount in the General Credit column.

17-4

Terms

General Ledger – a ledger that contains all accounts needed to prepare financial statements.

Post-closing trial balance – is prepared to prove the equality of debits and credits in the general ledger.

Posting – transferring information from a journal entry to a ledger account.

Net Loss – the difference between total revenue and total expenses when total expenses is greater.

Net Income – the difference between total revenue and total expenses when total revenue is greater.

Review posting

1.      Write the date in the Date column of the account.

2.      (The month and year are written only once on a page of a ledger account unless the month or year changes.)

3.      Write the journal page number in the Post. Ref. Column of the account.

4.      Write the credit or debit amount in the Credit or Debit column of the account.

5.      Write the new account balance in the Balance Credit or Debit column.

6.      Draw a straight line through the Debit and Credit column to indicate an ending zero balance.

7.      Return to the journal and write the account number in the Post. Ref. Column of the journal.

Post-Closing Trial Balance

A post-closing trial balance is prepared to prove the equality of debits and credits in the general ledger.  Because the post-closing trial balance debit and credit total are the same, the equality of debits and credits in the general ledger is proved.

1                    We begin by writing in the heading.

Omni Import

Post-Closing Trial Balance

December 31, 20—

2                    The Debit accounts are found on the Work sheet.  They are the first row of Debit accounts on the worksheet.  Write the Debit accounts in the Post-Closing Trial Balance.

3                    The Credit accounts are found on the Work sheet.  The credit accounts include all the payables plus the two capital accounts.

4                    After writing in all the account titles and amount write Total in the row after the last entry.  Add up all the debit amounts and write it in the debit column in the Total row.  Add up all the credit amounts and write it in the debit column in the Total row.

5                    The Debits and Credits should equal.  When they do draw one line over the top of the Total row and two lines under the Total row.

STUDY GUIDE

Terms (definitions)

Posting

Post-closing trial balance

General ledger

Journal

Permanent Accounts

Temporary Accounts

Income Summary Account

Closing Entries

Adjusting Entries

Net Loss

Net Income

Questions

1.      What accounts are increased from zero balances after adjusting entries for prepaid insurance and merchandise inventory are journalized and posted?

2.      When adjusting entries are journalized, why is no source document recorded?

3.      What adjusting entry is recorded for a merchandising business that is not recorded for a service business?

4.      Where is the information obtained for journalizing closing entries for revenue, cost, and expenses?

5.      What is the name of the temporary account that is used to summarize the closing entries for revenue, cost, and expenses?

6.      Where is the information obtained for journalizing closing entries for net income or loss and partners’ drawing accounts?

7.      How is a temporary account closed?

8.      Which accounts are listed on a post-closing trial balance?

9.      What is the purpose of preparing a post-closing trial balance?

10. In what order should accounts be listed on a post-closing trial balance?

Problem

Page 443 in your textbook.                        Do steps 1-5.

CHAPTER 17 TEST ANSWERS

1.        

Adjustments

Debit                                    Credit

Merchandise Inventory                                                                                 (a) 2,000.00

Supplies                                                                                                         (b)    400.00

Prepaid Insurance                                                                                            (c)    300.00

Federal Income Tax Payable                                                                      (d)    720.00

Income Summary                                                        (a) 2,000.00

Insurance Expense                                                         (c)    300.00

Supplies Expense                                                         (b)    400.00

Federal Income Tax Expense                                 (d)   720.00

1a)      The first adjusting entry is a debit to Income Summary and a credit Merchandise Inventory.

The amount of the debit and the credit is $2,000.00.

1b)      When Supplies is credited for $400.00, which account is debited for the

same amount? Supplies Expense

1c)       The expense account used to record the adjustment for expired insurance premium is Insurance Expense.

1d)      The $400.00 debit to Supplies Expense represents the supplies Consumed/used up during the accounting period.

1e)      How much additional federal income taxes are owed at the end of the accounting period? $720.00

1.                  The source of information for the closing entries is the Income Statement section of the work sheet.

2.                  To close temporary accounts having debit balances, Credit each account for the amount of its Balance.

3.                  If, before the last closing entry, Income Summary has a debit balance, that debit balance represents a Net Loss for the fiscal period.

4.                  If Income Summary has total debits of $145,700.00 and total credits of $160,200.00, what is its balance and what does it represent? Net income for the period

6.

7.

a)     Adjusting entries – journal entries recorded to update general ledger accounts at the end of a fiscal period.

b)     Closing entries – Journal entries used to prepare temporary accounts for a new fiscal period

c)      Temporary accounts – accounts used to accumulate information until it is transferred to the owner’s capital account.

d)     Permanent accounts – accounts used to accumulate information from one fiscal period to the next.

NAME____________

CHAPTER 17 TEST

You have 50 minutes to complete the test.  Don’t spend to much time on one question.  If your having trouble figuring out a question move onto the next question and go back after your done completing the test.

1.                  Use the following adjustment to answer the questions that follow.

Adjustments

Debit                                    Credit

Merchandise Inventory                                                                                 (a) 2,000.00

Supplies                                                                                                         (b)    400.00

Prepaid Insurance                                                                                            (c)    300.00

Federal Income Tax Payable                                                                      (d)    720.00

Income Summary                                                        (a) 2,000.00

Insurance Expense                                                         (c)    300.00

Supplies Expense                                                         (b)    400.00

Federal Income Tax Expense                                 (d)   720.00

1a)      The first adjusting entry is a debit to ?? and a credit ??.

The amount of the debit and the credit is ??.

1b)      When Supplies is credited for $400.00, which account is debited for the

same amount?

1c)       The expense account used to record the adjustment for expired insurance premium is ??.

1d)      The $400.00 debit to Supplies Expense represents the supplies ?? during the accounting period.

1e)      How much additional federal income taxes are owed at the end of the accounting period?

2.                  The source of information for the closing entries is the ?? section of the work sheet.

3.                  To close temporary accounts having debit balances, ?? each account for the amount of its ??.

4.                  If, before the last closing entry, Income Summary has a debit balance, that debit balance represents a ?? for the fiscal period.

5.                  If Income Summary has total debits of $145,700.00 and total credits of $160,200.00, what is its balance and what does it represent?

6.                  Preparing a post-closing trial balance with the following information.

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