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FABM1-Week-5-6-q2

This document outlines the process of completing the accounting cycle, specifically focusing on closing entries and post-closing trial balances. It includes true/false questions to assess understanding of key concepts, as well as detailed steps for closing income and expense accounts, and preparing reversing entries. Additionally, it provides practical applications for students to apply their knowledge in a real-world context.

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6 views5 pages

FABM1-Week-5-6-q2

This document outlines the process of completing the accounting cycle, specifically focusing on closing entries and post-closing trial balances. It includes true/false questions to assess understanding of key concepts, as well as detailed steps for closing income and expense accounts, and preparing reversing entries. Additionally, it provides practical applications for students to apply their knowledge in a real-world context.

Uploaded by

love3sha1012
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 5

Fundamentals of Accountancy, Business and Management 1

LAS
(Week 5-6 Complete the Accounting Cycle
Quarter
2)

What I Need To Know

At the end of this learning activity sheet, you are expected to complete the
accounting cycle.

What I Know

Directions: Write TRUE if the analysis for each transaction is correct and FALSE if it is
not. Write your answers on the activity sheet in the last page.

1. Preparing closing journal entries is the eighth step in accounting cycle.


2. Nominal accounts are also known as temporary accounts.
3. Closing the books is the process of transferring the balances of the temporary accounts
to the owner’s permanent capital account.
4. Income accounts have normal debit balance.
5. Income summary account is a temporary account debited to close revenue or income
account.
6. Income summary account is a temporary account debited to close expense account.
7. Expenses have normal debit balances.
8. Expenses should be credited to be closed.
9. Income summary is close by debiting and crediting to withdrawal account.
10. Reversing entries is an optional step.

1
What is It

Step 8 – Journalize and Post Closing Journal Entries


The income, expense, withdrawal (equity) accounts are called temporary accounts or
nominal accounts. They are called temporary because they accumulate the transactions of
only one accounting period. At the end of this accounting period, the changes in owner’s
equity accumulated in these temporary accounts are transferred into the owner’s capital
account. This process serves two purposes:
(1) to update the balance of the owner’s capital; and
(2) it returns the balance of the temporary accounts to zero, so that they are ready to
measure the income, expenses and drawings of the next accounting period again.
The owner’s capital account and other statement of financial position accounts are
referred to as permanent or real accounts because their balances continue to exist beyond
the current accounting period. Closing the books is the process of transferring the balances
of the temporary accounts to the owner’s permanent capital account.
Steps in Closing Entries
1. Close the income accounts
Since income accounts have normal credit balances, each revenue account will have
to be debited in the amount of its balance to bring their balances to zero. The credit is
made to the income summary account.
2021
May 31 Service Revenue xxx
Income Summary xxx
To close income accounts.
2. Close the expense accounts
Expense accounts have normal debit balances, each of these will have to be
credited to close the account.
May 31 Income Summary xxx
Salaries Expense xxx
Utilities Expense xxx
Insurance Expense xxx
Rent Expense xxx
Art Supplies Expense xxx
Depreciation Expense xxx
Bad Debts Expense xxx
To close expense accounts.

2
3. Close the Income Summary to Capital
May 31 Income Summary xxx
Ong, Capital xxx
To close income summary to capital
4. Close the drawing account
May 31 Ong, Capital xxx
Ong, Drawing xxx
To close drawing account to capital.

Step 9 - Prepare Post-Closing Trial Balance


The post-closing trial balance is prepared from the general ledger accounts
after the closing entries have been posted. This is necessary to ensure that these
entries have been correctly posted. This will also test the equality of the accounts. It
also confirms the equality of the debits and credits. It contains only balance sheet
items such as assets, liabilities, and ending capital because all the income and
expense accounts as well as the drawing account all have zero balances as a result
of the closing entries. The process of posting is the same as you’ve done in step 6.
Step 10 - Journalize and Post Reversing Journal Entries
Reversing entries are made to simplify the accounting process. They are
made on the first day of the next accounting period. Reversing entries are not used
in connection with all adjusting entries.
A reversing is simply a journal entry that is just the opposite of the adjusting
entry made at the end of the preceding accounting period. As the name connotes,
the adjusting journal entry of the previous period is simply reversed at the
beginning of the next period.
Following are the adjusting entries that can be reversed.
1. Prepayments (Expense Method)
2. Unearned Revenues ( Income Method)
3. Accrued Expenses
4. Accrued Income

Example:
Adjusting Entry
2021
May 31 Utilities Expense 5,000
Utilities Payable 5,000
To record unpaid utilities.

Reversing Entry
3
2021
June 1 Utilities Payable 5,000
Utilities Expense 5,000
To reverse the accrual of utilities made last May 31.

What I Have Learned

Direction: Enumerate the ten steps in completing the accounting cycle, then give
brief explanation for each of the steps. Do the activity in the attached activity
sheet.

What I Can Do

Directions: Based from the example above, complete the worksheet for Listen Law Firm.
Presented below is an adjusted trial balance and income statement of Listen Law
Firm as of May 31,2021.

LISTEN LAW FIRM


Income Statement
For the Month Ended May 31, 2021

4
Learning Activity Sheet – FABM 1 (Week 5-6 of Quarter 2)

Name: ____________________________________ Time Started:______Time Ended:______Score:______


Grade 12-_________________________ Teacher: Mrs. Grace N. Aloner

MELCs: Complete the accounting cycle.

Instruction: Write TRUE if the statement is correct or FALSE if the statement is incorrect for
each of the statement provided in “What I Know” (page 1).
1. 6.

2. 7.

3. 8.

4. 9.

5. 10.

What I Have Learned

Enumerate the ten steps in completing the accounting cycle, then give brief
explanation for each of the steps.

Practical Application: Activity (What I Can Do)


Directions: Prepare closing entries for Listen Law Firm, found in “What I Can Do” on page 4.
You can use the back of this activity sheet or use another sheet of paper.

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