Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Closing Entries

Financial Accounting

3. Accrual Accounting Concepts

Closing Entries

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Multiple Choice

The last step in the accounting cycle is to:

Post transactions to the ledger

Record adjusting entries

Prepare a trial balance

Prepare closing entries to transfer balances to retained earnings

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Verified step by step guidance

Understand the accounting cycle: The accounting cycle is a series of steps that businesses follow to record and report financial transactions. It begins with identifying transactions and ends with closing the books for the period.

Recognize the purpose of closing entries: Closing entries are made at the end of an accounting period to transfer temporary account balances (e.g., revenues, expenses, and dividends) to permanent accounts like retained earnings. This resets the temporary accounts to zero for the next period.

Identify the accounts involved: Closing entries typically involve revenue accounts, expense accounts, and dividend accounts. These balances are transferred to the retained earnings account, which is part of the equity section of the balance sheet.

Prepare the closing entries: For each temporary account, create a journal entry to transfer its balance to retained earnings. For example, debit revenue accounts and credit retained earnings, and credit expense accounts and debit retained earnings.

Verify the process: After closing entries are posted, check that all temporary accounts have a zero balance and that the retained earnings account reflects the net income or loss for the period, adjusted for dividends.