adjusting entries
journal entries recorded to update general ledger accounts at the end of the fiscal period
adjusting entry for supplies
debit-supplies expense
credit-supplies
adjusting entry for prepaid insurance
debit-insurance expense
credit-prepaid insurance
work sheet
an accounting form used to summarize the general ledger information; needed to prepare financial statements
permanent accounts
accounts used to accumulate information from one fiscal period to another
real accounts
another name for permanent accounts
examples of permanent accounts
assets
liabilities
owner's equity
temporary accounts
accounts used to accumulate information until it is transferred to the owner's capital account
nominal accounts
another name for temporary accounts
examples of temporary accounts
revenues
expenses
drawing
income summary
closing entries
journal entries used to prepare temporary accounts for a new fiscal period
zero
the balance remaining of a temporary account after it is closed
income summary
a general ledger account that is used to summarize the closing entries for revenue and expense accounts
normal balance of income summary
it doesn't have one
balance of income summary in periods of a net income
credit
balance of income summary in periods of a net loss
debit
closing entry for an income statement account with a credit balance
debit-sales
credit-income summary
closing entry for an income statement account with a debit balance
debit-income summary
credit-expenses
closing entry to record net income
debit-income summary
credit-capital
closing entry to record net loss
debit-captial
credit-income summary
closing entry for the owner's drawing
debit-capital
credit-drawing
posting-closing trial balance
a financial statement prepared after closing entries are posted; verifies debits = credits
accounting cycle
series of accounting activities included in recording financial information for a fiscal period
1st step of the accounting cycle
analyze transactions
2nd step of the accounting cycle
journalize
3rd step of the accounting cycle
post
4th step of the accounting cycle
prepare a worksheet
5th step of the accounting cycle
prepare financial statements
6th step of the accounting cycle
journalize adjusting and closing entries
7th step of the accounting cycle
post adjusting and closing entries
8th step of the accounting cycle
prepare post-closing trial balance