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

Which of the following is the usual final step in the accounting cycle?

Preparing closing entries

Posting adjusting entries to the ledger

Journalizing transactions

Preparing a post-closing trial balance

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Verified step by step guidance

Understand the accounting cycle: The accounting cycle is a series of steps followed to record, classify, and summarize financial transactions. It typically includes identifying transactions, journalizing, posting to the ledger, preparing a trial balance, making adjusting entries, preparing financial statements, and closing the books.

Review the purpose of closing entries: Closing entries are made to transfer balances from temporary accounts (e.g., revenues, expenses, and dividends) to permanent accounts (e.g., retained earnings). This ensures that temporary accounts start with a zero balance in the next accounting period.

Learn about the post-closing trial balance: After closing entries are made, a post-closing trial balance is prepared. This trial balance includes only permanent accounts (assets, liabilities, and equity) and ensures that the ledger is balanced after closing entries.

Understand why preparing a post-closing trial balance is the final step: The post-closing trial balance confirms that all temporary accounts have been closed and the accounting records are ready for the next period. It is the final step because it ensures the accuracy and completeness of the accounting cycle.

Connect the steps logically: Preparing closing entries comes before the post-closing trial balance because the balances of temporary accounts need to be transferred to permanent accounts first. Posting adjusting entries and journalizing transactions occur earlier in the cycle, making the preparation of the post-closing trial balance the usual final step.