Académique Documents
Professionnel Documents
Culture Documents
|
Entry:
Debit Allowance for doubtful debts«50
Credit Accounts Receivable «««..50
3. Total P&L A/c and B/S columns & enter the Net profit
or loss as a balancing figure in both pairs of columns.
Total the four columns with the balancing figure
included.
PREPARING _INANCIAL
STATEMENTS
1. After preparing the work sheet, the
adjusting entries must be entered in the
general journal & posted to the ledger
accounts.
2. Next, closing entries should be designed
to transfer the balances in revenue and
expenses accounts to P&L account.
3. Balancing P&L A/c to identify Net profit
or loss for the accounting period.
CLOSING ENTRIES
Journal entries designed to transfer the
balances in revenue and expense
accounts at the end of an accounting
period to a balance sheet equity account.
Temporary accounts are closed now by
transferring their balances to Income
Summary or Profit & Loss account.
Permanent accounts are also closed to
extract their balances to prepare B/S.
Closing Revenue & Expenses
(Temporary Accounts)
1. Transferring Revenue Accounts
Debit All revenue accounts
Credit Profit & Loss A/c or Income Summary
2. Transferring Expenses Accounts
Debit Profit & Loss A/c or Income Summary
Credit All expenses accounts
Closing Revenue & Expenses
(Temporary Accounts)««.
3. Balance of Profit & Loss a/c transferred to
Retained Earnings or Profit & Loss
Appropriation Account.
(i) If net profit:
Debit Profit & Loss Account
Credit Retained Earnings Account
(ii) If net loss:
Reverse entry
Closing Revenue & Expenses
(Temporary Accounts)«««
m. Closing Dividend Account ( Having Debit
Balance)
Debit Retained Earnings Account
Credit Dividend Account
5. Now all temporary accounts relating to
revenue expenses, dividend have zero
balance & ready to be used for next
accounting period.
Accounts after closing
All temporary accounts have now zero
balances & balances of permanent
accounts are carried forward to next
period.
Post-Closing Trial Balance: Accuracy
check for all permanent accounts and
temporary accounts to be reflected in the
balance sheet.
Reversing Entries
A reversing entry is the exact reverse of
the adjusting entry for accruals (Accrued
Expenses & Revenues) to which it relates.
The amounts and the accounts are same,
the debits and credits are just reversed.
Adjusting entries for deferrals viz. prepaid
expenses & unearned revenue are not to
be reversed.