Course Code: ACC 102
Module #9
Name: _____________________________________ Class number: _________________
Section: _________ Schedule: _________________ Date: ________________________
Lesson title: Completing the Accounting Cycle – Part 1 Materials:
Lesson Objectives: Module #9
1. Equip with the proper knowledge of journalizing and
Reference:
posting closing entries.
Fundamentals of Financial
2. Prepare a post-closing trial balance and induce any Accounting and Reporting by
errors from it, if any. Win Ballada
Productivity Tip:
Practice to track your time spent in studying and other activities. Tracking your hours is an important
step toward better time management. Start by breaking down a major subject into manageable and
individual tasks.
A. LESSON PREVIEW/REVIEW
1) Introduction (2 mins)
At the end of each year, the balances of temporary accounts are transferred to the capital account.
This phase of the accounting cycle is called the closing procedure. A temporary account is closed
when an entry is made to bring its balance to zero. A summary account – Income Summary is used to
close the income and expense accounts. Closing the books of accounts signals the end of the
accounting period.
B. MAIN LESSON
1) Activity 1: Pre-Printed Content Notes (13 mins)
Closing process involves the following process:
1. Close the income accounts
Income accounts have credit balances before the closing entries are posted. For this reason, an
entry debiting each revenue account in the amount of its balance is needed to close the account.
The credit is made to the income summary account. The entry to close the income accounts for the
Lara Jean Repairs and Maintenance Service is as follows:
March 31 Repair Income 80,000
Income Summary 80,000
This document is the property of PHINMA EDUCATION
Course Code: ACC 102
Module #9
Name: _____________________________________ Class number: _________________
Section: _________ Schedule: _________________ Date: ________________________
2. Close the expense accounts
Expense accounts have debit balances before the closing entries are posted. For this reason, a
compound entry is needed to credit all expense accounts and debit the income summary for the
total. These data can be found in the debit side of the income statement column of the worksheet.
Mar-31 Income Summary 57,850
Salaries Expense 10,000
Rent Expense 5,000
Utilities Expense 12,000
Taxes and licenses 4,000
Interest Expense 1,000
Uncollectible Accounts Expense 350
Repair Supplies Expense 20,000
Depreciation Expense 2,500
Advertising Expense 3,000
3. Close the income summary account
After posting the closing entries involving the income and expense accounts, the balance of the
income summary account will be equal to the profit or loss for the period. A profit is indicated by a
credit balance and a loss by a debit balance. The income summary account, regardless of the nature
of its balance, must be closed to the capital account. For Lara Jean Repairs and Maintenance
Service, the entry is as follows:
March 31 Income Summary 22,150
L. Jean, Capital 22,150
4. Close the withdrawal account
The withdrawal account shows the amount by which it was increased during the period by
withdrawals of cash or other assets of the business by the owner for personal use for this reason,
the debit balance of the withdrawal account must be closed to the capital account as follows:
March 31 L. Jean, Capital 10,000
L. Jean, Withdrawal 10,000
The effect of posting this closing entry is to close the withdrawal account and to transfer the balance to
the capital account.
This document is the property of PHINMA EDUCATION
Course Code: ACC 102
Module #9
Name: _____________________________________ Class number: _________________
Section: _________ Schedule: _________________ Date: ________________________
Statement of Financial Statement of Financial
Closing Entries
Performance Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
Cash in Bank 743,000
Accounts Receivable 35,000
Repair Supplies 70,000
Repair Equipment 150,000
Notes Payable 100,000
Accounts Payable 30,000
3
L. Jean, Capital 850,000 4 10,000 22,150
4
L. Jean, Drawing 10,000 10,000
Repair Income 80,000 1 80,000
2
Salaries Expense 10,000 10,000
2
Rent Expense 5,000 5,000
2
Utilities Expense 12,000 12,000
2
Taxes and Licenses 4,000 4,000
2
Interest Expense 1,000 1,000
Total
Adjustments:
2
Uncollectible Account 350 350
Est. Uncollectible Act. 350
2
Repair Supplies Exp. 20,000 20,000
2
Depreciation Expense 2,500 2,500
Accum. Depreciation 2,500
2
Advertising Expense 3,000 3,000
Accrued Advertising 3,000
1
Income Summary 2 57,850 80,000
3 22,150
Total 57,850 80,000 1,008,000 985,850 170,000 170,000
This document is the property of PHINMA EDUCATION
Course Code: ACC 102
Module #9
Name: _____________________________________ Class number: _________________
Section: _________ Schedule: _________________ Date: ________________________
22,150 22,150
80,000 80,000 1,008,000 1,008,000
2) Activity2: Skill-building Activities (with answer key) (18 mins + 2 mins checking)
Direction: Answer the subsequent questions using the problem below:
The following is the income summary account of Lalala Services on Dec. 31, 2021, after all revenue and
expenses have been closed to the account.
Income Summary
197,000 190,000
1. What do the figures in the account represent?
Answer:
2. What is the profit or loss?
Answer:
3. Close the Income Summary account.
Answer:
3) Activity 3: Check for Understanding (5 mins)
Direction: Choose the letter of the correct answer and write it on the space provided before each item
number.
1. Closing entries reduce the following type of accounts to a zero balance at the end of the period.
a. income and expenses
b. income summary
c. withdrawals
d. all of the above
This document is the property of PHINMA EDUCATION
Course Code: ACC 102
Module #9
Name: _____________________________________ Class number: _________________
Section: _________ Schedule: _________________ Date: ________________________
2. The purpose of the post-closing trial balance is to
a. provide the account balances for the preparation of the balance sheet.
b. ensure that the ledger is in balance for completion of the worksheet.
c. aid the journalizing and posting of the closing entries.
d. ensure that the ledger is in balance for the start of the next period.
3. Which of the following accounts will appear on the post-closing trial balance?
a. building
b. depreciation expense – building
c. owner withdrawals
d. service revenues
A. LESSON WRAP-UP
1) Activity 6: Thinking about Learning (5 mins)
Let’s now shade the number of this module that you have finished.
b) Think about your learning by filling up your “My Learning Tracker” below. Write your learning targets,
your scores, and learning experience for this session and deliberately plan for our next learning
session.
Date Learning Target/Topic Scores Action Plan
What module# did you do? What What contributed to the quality of your performance today?
What’s the date What were your scores
were the learning targets? What What will you do next session to maintain your performance or
today? in the activities?
activities did you do? improve it?
FAQs
This document is the property of PHINMA EDUCATION
Course Code: ACC 102
Module #9
Name: _____________________________________ Class number: _________________
Section: _________ Schedule: _________________ Date: ________________________
1. Do closing entries has an impact in the financial statements?
- Yes. Closing entries follow period-end adjustments in the closing cycle. Missing a closing entry
causes misreporting of the current period's retained earnings, and if not corrected, it creates
errors in the current or next period's financial reports.
This document is the property of PHINMA EDUCATION