Question

PART II: PROBLEM 2 GENERAL LEDGER WITH ADJUSTED BALANCES APPEAR BELOW: FORMB Required: (1-4) Using the accounts in the General Ledger below, prepare 4 closing entries in the General Journal Post the closing entries to the Ledger and then complete 05 (posting not graded) General Journal A CCOUNT Debit Credit ENTRYW 4 5. After CLOSING entries are posted ENDING CAPTIAL = $ indicate il CAPITAL balance is a debitor a credit GENERAL LEDGER ASSETS LIABILITIES OWNER'S EQUITY Service Revenue Z Jon Capital 250.000 200.000 CASH 400,000 Accounts Payable 100.000 Salaries Expense 80.00 Accounts Receivable Unearned Revenue 70.00 Z Jon, Withdrawals 50.000 Prepaid Insurance Rent Expense 10.00 INCOME SUMMARY Insurance Expense

Answer 1

Closing entries are the entries passed for closing the temporary accounts (Revenue and Expenses Accounts) at the end of the accounting period. They are done after the financial statement for the accounting year has been prepared. This is done make the temporary accounts zero so that these temporary accounts begins with zero balance in the next accounting period.

Closing credit/debit entry is passed in all temporary accounts having debit balance/credit balance before passing the closing entry. The credit /debit amount entered is equal the debit/credit balance prior passing the closing entry.

The net amount of closing entries is the Net Income /(Loss) for the period which is ultimately transferred retained earnings/ capital account.

Entry # Debit Credit $2,50,000 $2,50,000 $1,30,000 Account Service Revenue Income Summary (To close the revenue account) Income Summary Salaries Expense Rent Expense Insurance Expense (To close the expense account) Income Summary Z. Jon, Capital (To close the profit /(Loss) Z. Jon, Capital Z. Jon, Withdrawals (To close the withdrawal account) $80,000 $30,000 $20,000 $1,20,000 $1,20,000 4 $50,000 $50,000 5 After CLOSING entries are posted ENDING CAPITAL = $270000 [Credit]

Assets Liabilities Owners' Equity Cash $4,00,000 Accounts Payable $1,00,000 Z. Jon, Capital $2,00,000 $50,000 $1,20,000 $2,70,000 Service Revenue $2,50,000 $2,50,000 Accounts Receivable $10,000 Unearned Revenue $70,000 Z. Jon, Withdrawal $50,000 $50,000 Salaries Expense $80,000 $80,000 Prepaid Insurance $30,000 Rent Expense $30,000 $30,000 Income Summary $80,000 $2,50,000 $30,000 $20,000 $1,20,000 Insurance Expense $20,000 $20,000