Accounting-Ch 8

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