NAME: GRADE & SECTION:

TEACHER’S NAME: MS. CHASTINE D. AMPARO

Senior High School Department

S.Y. 2021-2022
2nd Semester
Fundamentals of Accountancy, Business, & Management 1
Grade Level: Subject Classification: Quarter/Term: Date: Week: Module Number:

11 SPECIALIZED Final March 21- April 15, 2022 5-8 3

Most Essential Learning
Topic/s Content Standard/s: Performance Standards Learning Objectives
Competencies (MELCs)
The learners demonstrate an understanding of: The learner can… The learners are able to… a. analyze the
a. the accounting cycle of a merchandising a. describe the nature of transactions a. prepare journal entries; procedures in trial
business to include the following: in a merchandising business; balance, adjusting
1. Journalizing of transactions using the b. record transaction of a b. post to the ledger; entries, and worksheet;
general and special journals, namely: sales merchandising business in the
b. apply the procedures
ACCOUNTING journal, purchase journal, cash receipts general and special journals;
c. prepare the trial balance, in trial balance, adjusting
journal and cash payments journal c. post transactions in the general and
CYCLE OF A 2. Posting to the ledger, namely: general and subsidiary ledgers; worksheet, adjusting entries; entries, and worksheet ;
MERCHANDISING subsidiary ledgers d. prepare a trial balance; and and
BUSINESS 3. Preparation of trial balance e. prepare a adjusting entries; d. complete the accounting c. differentiate the types
4. Adjusting entries to include pre payments, f. complete the accounting cycle of a cycle of a merchandising of financial statements
accrual and deferral merchandising business; and business
5. Worksheet preparation, and g. prepare the Statement of Cost of
6. Completing the accounting cycle of a Goods Sold and Gross Profit
merchandising business

Values Integration: • appreciate and emphasize the importance of the Accounting Cycle in transactions and their analysis applied to a Merchandising Business

Google Classroom Code: References:

For more educational resources, you may access the Google Classroom
using the code below: Florendo,2016, Fundamentals of Accountancy, Business, and Management 1,
11 ABM Prudence: 11 ABM Self Reliance: Rex Book Store
ptc6lqi cxac4sd
NAME: GRADE & SECTION:
TEACHER’S NAME: MS. CHASTINE D. AMPARO

Fundamentals of Accountancy, Business, and Management 1

2ND Semester, Final, Module No. 3, Week 5-8, March 21- April 15, 2022

TOPIC/S: Accounting Cycle of a Merchandising Business

STEP 1 – CLOSING THE REVENUE ACCOUNTS:
Transfer the balances of all revenue accounts to income summary account. It is
DISCUSSION done by debiting various revenue accounts and crediting income summary
account. This step closes all revenue accounts.
CLOSING ENTRIES STEP 2 – CLOSING THE EXPENSE ACCOUNTS:
Closing entries may be defined as the journal entries made at the end Transfer the balances of various expense accounts to income summary account.
of an accounting period to transfer the balances of various temporary It is done by debiting income summary account and crediting various expense
ledger accounts to a permanent ledger account. accounts. This step closes all expense accounts.
Temporary accounts (also known as nominal accounts) are those STEP 3 – CLOSING THE INCOME SUMMARY ACCOUNT:
ledger accounts that are used to record transactions for only a single After making closing entries in step 1 and step 2, the income summary account
accounting period and that are closed at the end of the period by shows either a credit or debit balance which is transferred to retained earnings
making appropriate closing entries. In next accounting period, these account to close the income summary account. The income summary account
temporary accounts are opened again and normally start with a zero would have a credit balance if the total of the balances of all revenue accounts
balance. Temporary or nominal accounts include revenue, expense, is greater than the total of the balances of all expense accounts. If, on the other
dividend and income summary accounts. hand, the total of the balances of all revenue accounts is less than the total of
Permanent accounts (also known as real accounts) are those ledger the balances of all expense accounts, the income summary account shows a
accounts the balances of which continue to exist beyond the current debit balance. The journal entry to close the income summary account is made
accounting period (i.e., these accounts are not closed at the end of as follows:
the period). In the next accounting period, these accounts usually (but 1. If income summary account has a credit balance, it means the business
not always) start with a non-zero balance. All balance sheet accounts has earned a profit during the period which causes an increase in
are examples of permanent or real accounts. retained earnings. Therefore, the income summary account is closed by
The permanent account to which the balances of all temporary debiting income summary account and crediting retained earnings
accounts are closed is the retained earnings account in case of a account.
company and owner’s capital account in case of a sole proprietorship. 2. If income summary account has a debit balance, it means the business
has suffered a loss during the period which causes a decrease in
PROCESS OF PREPARING CLOSING ENTRIES retained earnings. In such a situation, the income summary account is
The preparation of closing entries is a simple four step process which closed by debiting retained earnings account and crediting income
is briefly explained below: summary account.
NAME: GRADE & SECTION:
TEACHER’S NAME: MS. CHASTINE D. AMPARO

Fundamentals of Accountancy, Business, and Management 1

2ND Semester, Final, Module No. 3, Week 5-8, March 21- April 15, 2022

STEP 4 – CLOSING THE DIVIDENDS ACCOUNT:

Transfer the balance of dividends account directly to retained earnings account.
Dividends paid to stockholders is not a business expense and is, therefore, not
used while determining net income or net loss. Its balance is not transferred to
the income summary account but is directly transferred to retained earnings
account.
With the completion of step 4, the necessary closing entries are completed and
all temporary accounts (i.e., revenue, expense, dividend and income summary
accounts) are closed to a permanent account (i.e., retained earnings account).
Consider the following example for a better understanding of closing entries.

EXAMPLE
The Business Consulting Company, which closes its accounts at the end of the
year, provides you the following adjusted trial balance at December 31, 2015.

Required: Using above trial balance, prepare closing entries required

at December 31, 2015.
NAME: GRADE & SECTION:
TEACHER’S NAME: MS. CHASTINE D. AMPARO

Fundamentals of Accountancy, Business, and Management 1

2ND Semester, Final, Module No. 3, Week 5-8, March 21- April 15, 2022

SOLUTION *82,500 – 64,500: In our example, income summary account has a credit
balance because the balance of service revenue earned account ($82,500) is
greater than the total of the balances of eight expense accounts ($64,500).

POST-CLOSING TRIAL BALANCE

The post-closing trial balance (also known as after-closing trial balance) is the
last step of accounting cycle and is prepared after making and posting all
necessary closing entries to relevant ledger accounts. Since closing entries close
all temporary ledger accounts, the post-closing trial balance consists of only
permanent ledger accounts (i.e, balance sheet accounts). The purpose of
preparing a post-closing trial balance is to assure that accounts are in balance
and ready for recording transactions in the next accounting period.

Example
Adjusted trial balance and closing entries of Business Consulting Company are
given below:

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NAME: GRADE & SECTION:
TEACHER’S NAME: MS. CHASTINE D. AMPARO

Fundamentals of Accountancy, Business, and Management 1

2ND Semester, Final, Module No. 3, Week 5-8, March 21- April 15, 2022

Page | 5
NAME: GRADE & SECTION:
TEACHER’S NAME: MS. CHASTINE D. AMPARO

Fundamentals of Accountancy, Business, and Management 1

2ND Semester, Final, Module No. 3, Week 5-8, March 21- April 15, 2022

*Balance of retained earnings account has been updated as follows:

*$82,500 – $64,500
Retained earnings as per adjusted trial balance + Net income – Dividends
= $20,000 + $18,000 – $3,000
Required: Using the information from adjusted trial balance and closing entries
= $35,000
given above, prepare post-closing trial balance of Business Consulting
Company.
Notice that the post-closing trial balance prepared above lists only permanent
or balance sheet accounts. The balances of all temporary accounts (i.e.,
Solution
revenue, expense, dividend and income summary accounts) have turned to
zero because of the above-mentioned closing entries. These temporary
accounts have therefore not been listed in post-closing trial balance.

With the preparation of post-closing trial balance, the accounting cycle for an
accounting period comes to its end. In the next accounting period, this cycle
starts again with the first step i.e., preparation of journal entries.

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NAME: GRADE & SECTION:
TEACHER’S NAME: MS. CHASTINE D. AMPARO

Fundamentals of Accountancy, Business, and Management 1

2ND Semester, Final, Module No. 3, Week 5-8, March 21- April 15, 2022

Topic/s: Accounting Cycle of a Merchandising Business

NOTE: This is the only part of the module that you must return to your Adviser.

INSTRUCTIONS: ADJUSTMENTS
Analyze the given 1. Notes Payable of P3,000.00 was erroneously
booked to Accounts Receivable.
transactions. Journalize and 2. Payment to Suppliers (Accounts Payable) of
post them in your Journal and P5,250.00 was booked as P525.00.
Ledger Sheets. You are 3. Consulting Revenue of P2,000.00 was booked
required to use BLACK pen for at P200.00 (cash).
this assessment.
Required:
1. Prepare a 10-column worksheet for
For Online Distance Learners, DONDON MARKETING for the period ending
kindly take a picture of your December 31,2014 include the above-
Journal and Ledger sheets mentioned adjustments.
then attach the photos in the 2. Using a 1/4 sheet of paper, staple a sheet
per column containing your analysis of the
Google Classroom. following process:
a. Unadjusted Trial Balance
For Modular Distance b. Adjustments
Learners, kindly attach this c. Adjusted Trial Balance
sheet above your Journal and d. Income Statement
e. Balance Sheet
Ledger Sheets. Don't forget to 3. In a sheet of paper, construct a narrative
write your names per sheet. essay of your experience in creating the
worksheet and its relevance to your
strand/your future career.

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