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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

The closing process is necessary in order to:

Record adjusting entries for accrued expenses

Prepare the balance sheet for the next accounting period

Transfer the balances of temporary accounts to retained earnings

Calculate depreciation expense for the period

Previous problemNext problem

Verified step by step guidance

Understand the purpose of the closing process: The closing process is performed at the end of an accounting period to reset temporary accounts (such as revenues, expenses, and dividends) to zero and transfer their balances to permanent accounts, specifically retained earnings.

Identify temporary accounts: Temporary accounts include revenue accounts, expense accounts, and dividend accounts. These accounts are used to track activity during a specific accounting period and must be closed to start fresh for the next period.

Prepare closing entries: Closing entries are journal entries made to transfer the balances of temporary accounts to retained earnings. For example, revenue accounts are debited, and retained earnings are credited; expense accounts are credited, and retained earnings are debited.

Verify the impact on retained earnings: The net effect of closing entries (revenues minus expenses and dividends) will adjust the retained earnings balance, reflecting the company's performance for the period.

Ensure the balance sheet is ready for the next period: After the closing process, only permanent accounts (assets, liabilities, and equity) remain on the balance sheet, making it ready for the next accounting period.