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

Which of the following best describes the closing process in financial accounting?

Posting transactions from the journal to the ledger accounts.

Transferring the balances of temporary accounts to retained earnings at the end of the accounting period.

Reconciling the bank statement with the company's cash account.

Recording adjusting entries to update account balances before preparing financial statements.

Previous problemNext problem

Verified step by step guidance

Understand the purpose of the closing process: The closing process in financial accounting is performed at the end of an accounting period to transfer the balances of temporary accounts (such as revenues, expenses, and dividends) to permanent accounts (specifically retained earnings). This ensures that temporary accounts start with a zero balance in the next accounting period.

Identify temporary accounts: Temporary accounts include revenue accounts, expense accounts, and dividend accounts. These accounts are used to track financial activity during a specific period and are closed to retained earnings at the end of the 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.

Post closing entries to the ledger: After preparing the closing entries, post them to the ledger accounts to update the balances. This step ensures that the temporary accounts have a zero balance and retained earnings reflect the net income or loss for the period.

Verify the closing process: After posting the closing entries, prepare a post-closing trial balance to ensure that all temporary accounts have been closed and only permanent accounts remain. This trial balance is used as the starting point for the next accounting period.