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CHAPTER 20 Completing the Accounting

Cycle for a Merchandising
Corporation
BEFORE
What You’ll Learn YOU READ
1. Journalize closing entries for
a merchandising corporation. Predict
1. What does the chapter title tell you?
2. Post closing entries to the
2. What do you already know about this subject from personal experience?
general ledger accounts.
3. What have you learned about this in the earlier chapters?
3. Prepare a post-closing trial 4. What gaps exist in your knowledge of this subject?
balance.
4. Describe the steps in the
accounting cycle.
Exploring the Real World of Business
Why It’s Important
Like a sole proprietorship,
CLOSING THE BOOKS

a corporation “cleans the
slate” to prepare for the next
PETsMART
accounting period. Is your pet like a member of the family? The loyalty that
leads to spoiling a cat with a heated cuddle bed or purchasing
vitamins for a pet iguana is what contributes to making
PETsMART the leader in the retail pet food and supply industry.
A strong product mix, combined with pet services like grooming
and boarding, have made the company a success. PETsMART’s
net income has risen to $68.1 million, more than double the
earnings of its nearest competitor.
At the end of a fiscal period, companies like PETsMART
prepare closing entries to transfer all temporary account
balances to a permanent account. The general ledger is then
ready for a new accounting period.

What Do You Think?
What might happen if temporary accounts were not closed
before the next accounting period begins?

586 Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation

586-611_CH20_868829.indd 586 9/15/05 12:07:33 PM

Working in the Real World
APPLYING YOUR ACCOUNTING KNOWLEDGE
You have almost completed another accounting
cycle—this time for a merchandising company.
After the financial statements have been prepared,
closing entries are made to get the accounting
records ready for the next fiscal period. Closing
entries for a merchandising business are similar
to those you learned about for a service business.
There are just more of them.

Personal Connection
1. In your job are there duties that you perform
at the end of a night or week that “wipe the
slate clean” or “close out” the day’s activities?
2. If you were preparing the closing entries
for your workplace, what accounts do you
imagine would be involved?

Online Connection
Go to glencoeaccounting.glencoe.com and click
on Student Center. Click on Working in the
Real World and select Chapter 20.

glencoeaccounting.glencoe.com 587

586-611_CH20_868829.indd 587 9/15/05 12:07:43 PM

On Your Mark Work For the Year Ended ACCT. Close the temporary accounts with credit balances to (p. 1 8 0 0 00 28 601 Advertising Expense 2 4 5 0 00 29 605 Bankcard Fees Expense 4 1 9 9 27 30 630 Fed.indd 588 9/15/05 12:08:31 PM . In this chapter you will learn to journalize and post the closing entries for a merchandis- ing corporation. TRIAL BALANCE ADJUSTMENTS NO. The journalizing procedures are the same. Main Idea A corporation’s net income (or net loss) is closed to Retained Earnings. Close the temporary accounts with debit balances to Income Summary. 2. ACCOUNT NAME DEBIT CREDIT DEBIT CREDIT 20 310 Income Summary (a) 3 5 3 6 00 21 401 Sales 320 4 5 0 00 22 405 Sales Discounts 7 3 0 00 23 410 Sales Returns and Allowances 2 0 0 0 00 24 501 Purchases 206 7 0 0 00 25 505 Transportation In 4 0 3 6 18 26 510 Purchases Discounts 1 3 4 0 00 27 515 Purchases Returns and Allow. 588) general ledger accounts of a sole proprietorship: ➤ how to journalize a net loss. Corporate Income Tax Exp. (p. 1. SECTION 1 Journalizing Closing Entries In Chapter 10 you journalized and posted the closing entries BEFORE YOU READ for a sole proprietorship service business. 9 8 4 0 00 (d) 1 5 5 00 31 635 Insurance Expense (c) 1 2 5 00 32 650 Maintenance Expense 3 5 1 9 25 33 655 Miscellaneous Expense 3 4 8 28 34 657 Payroll Tax Expense 3 8 2 6 83 35 660 Rent Expense 14 0 0 0 00 36 665 Salaries Expense 29 3 7 4 60 37 670 Supplies Expense (b) 3 7 1 0 00 38 680 Utilities Expense 2 3 6 4 87 39 435 7 9 8 28 435 7 9 8 28 7 5 2 6 00 7 5 2 6 00 Figure 20–1 Closing 40 Net Income Entries Needed for a 41 Corporation 588 Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation 586-611_CH20_868829. Steps for Closing the Ledger How Are Closing Entries for a Corporation Different Read to Learn… from Closing Entries for a Sole Proprietorship? ➤ how to journalize closing entries In Chapter 10 you made four entries to close the temporary for a merchandising corporation. 591) Income Summary.

320. Purchases Returns and Allowances GENERAL JOURNAL PAGE 23 POST. Closing Entries 1 Clos. 20-- ADJUSTED TRIAL BALANCE INCOME STATEMENT BALANCE SHEET DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT 3 5 3 6 00 3 5 3 6 00 20 320 4 5 0 00 320 4 5 0 00 21 7 3 0 00 7 3 0 00 22 2 0 0 0 00 2 0 0 0 00 23 206 7 0 0 00 206 7 0 0 00 24 1 Close temporary accounts with 4 0 3 6 18 4 0 3 6 18 25 balances in the Income Statement 1 3 4 0 00 1 3 4 0 00 26 Credit column to Income Summary.00 accounts for a merchandising business organized as a corporation. 1. Income Summary 4. Let’s look closely at each closing entry.340. The portion of On Your Mark’s work sheet in Figure 20–1 shows the Debit Credit account balances that are closed.00 2 Dec. 2 3 6 4 87 2 3 6 4 87 38 435 9 5 3 28 435 9 5 3 28 290 9 1 5 28 323 5 9 0 00 145 0 3 8 00 112 3 6 3 28 39 32 6 7 4 72 32 6 7 4 72 40 323 5 9 0 00 323 5 9 0 00 145 0 3 8 00 145 0 3 8 00 41 Figure 20–1 Closing Entries Needed for a Corporation (continued) Section 1 Journalizing Closing Entries 589 586-611_CH20_868829.800. Since a corporation does not have a withdrawals account.00 Bal. DEBIT CREDIT   1 20-. and Purchases Returns and Clos. 1. 320.590. Debit Credit After this closing entry has been journalized and posted. Close the withdrawals account to capital.450.00 1. Debit Credit Only the first three closing entries are made to close the temporary Adj.00 Allowances accounts have zero balances.800. 31 Sales 320 4 5 0 00 2 3 Purchases Discounts 1 3 4 0 00 3 4 Purchases Returns and Allow. 1 8 0 0 00 1 8 0 0 00 27 2 4 5 0 00 2 4 5 0 00 28 4 1 9 9 27 4 1 9 9 27 29 9 9 9 5 00 9 9 9 5 00 30 2 Close temporary accounts with 1 2 5 00 1 2 5 00 31 balances in the Income Statement Debit column to Income Summary.00 Bal.450. 3. Debit Credit DATE DESCRIPTION REF. 1. 3 5 1 9 25 3 5 1 9 25 32 3 4 8 28 3 4 8 28 33 3 8 2 6 83 3 8 2 6 83 34 14 0 0 0 00 14 0 0 0 00 35 29 3 7 4 60 29 3 7 4 60 36 3 Close Income Summary to Retained Earnings by the amount of the net 3 7 1 0 00 3 7 1 0 00 37 income or loss. the   Sales.340. 1 8 0 0 00 4 5 Income Summary 323 5 9 0 00 5 Athletic Wear Sheet December 31. Close the accounts with balances in the Credit column of the Income Statement section of the work sheet (revenue and Purchases Discounts contra cost of merchandise accounts) to Income Summary. 1. 3.   Clos.00 Clos.536.indd 589 9/15/05 12:08:38 PM . 323. the fourth closing Sales entry is not needed. Purchases Discounts.00 Bal. Close the balance of Income Summary to capital.

00 Clos.91 After the entry to close Income Summary to Retained Earnings has been journalized and posted.00 Clos.27 Bal. 3. 730.00 Clos.87 Clos. 14.036.590.700.590.995.000.00 Bal.379. Income Summary has a zero balance.19 Clos.826.60 Bal.00 Clos.536. 9. Bal.00 Bankcard Fees Expense Federal Corporate Income Tax Expense Insurance Expense Debit Credit Debit Credit Debit Credit       Bal.28 Bal.00 Clos. 29. 2. 348.674.710. and expense accounts) to Income Summary.72 Bal. 287.60 Clos.00 Clos. Income Summary Sales Discounts Sales Returns and Allowances Debit Credit Debit Credit Debit Credit     Adj.00 Bal.18 Bal.826.00 Bal. $ 323. 14.519. 2. After this closing entry has been journalized and posted.450.674. cost of merchandise. Income Summary now has a credit balance of $32.771.519.00 Bal.995. 323.00 Bal. 3. 3. 3. 287.25 Bal.710.83 Clos.87 cost of merchandise.27 Clos.674.590.00 Bal. Close the accounts with balances in the Debit column of the Debit Credit   Income Statement section of the work sheet (contra revenue.28 Clos.00 closing credit  3. 3. 125. 206.374.25 Clos. The balance of Retained Earnings is increased to $52.199.00 Maintenance Expense Miscellaneous Expense Payroll Tax Expense Debit Credit Debit Credit Debit Credit       Bal.445. 2.28 Purchases Transportation In Advertising Expense Debit Credit Debit Credit Debit Credit       Bal.00 Clos.28 Clos. 206.536. 4.364.72. 3. 4.000. 323.036. Close Income Summary to Retained Earnings. 590 Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation 586-611_CH20_868829.379. 3. 348.364.199.674.indd 590 4/6/06 6:29:23 PM . 2.00 Clos.700.379. 4.83 Rent Expense Salaries Expense Supplies Expense Debit Credit Debit Credit Debit Credit       Bal. 32.00 Clos.445.000.00 Clos. 730.72 credit balance 3. 9.00 adjustment debit  287. 4.28 closing debit $ 32. Income Summary Retained Earnings Debit Credit Debit Credit   Adj.450.000. 2.18 Clos. 2.374. 19. 125.00 Utilities Expense 2. 29. 52.72 Clos. 3. 32.00 Clos.91. the contra revenue. and expense accounts have zero balances.536.

000. 65. 31 Income Summary 287 3 7 9 28 6 7 Sales Discounts 730 00 7 8 Sales Returns and Allow. Suppose that after posting the Income Summary first two entries closing the temporary accounts.indd 591 9/15/05 12:08:57 PM . the Income Summary Debit Credit account is as shown. Income Summary has a debit balance of $5. Closing In your own 1 Closing Entries 1 words. 63.612.00 Clos. explain the concept of closing the 22 Dec. credit it for $5.00 adjustment debit  65. This closing entry is recorded in the general journal as follows: AS YOU READ GENERAL JOURNAL 23 PAGE In Your Own Words POST. 2 000 00 8 9 Purchases 206 700 00 9 10 Transportation In 4 036 18 10 11 Advertising Expense 2 450 00 11 12 Bankcard Fees Expense 4 199 27 12 13 Fed. DEBIT CREDIT 6 Dec. DATE DESCRIPTION REF. 3.00 Clos. DATE DESCRIPTION DEBIT CREDIT REF. Tax Expense 9 995 00 13 14 Insurance Expense 125 00 14 15 Maintenance Expense 3 519 25 15 16 Miscellaneous Expense 348 28 16 17 Payroll Tax Expense 3 826 83 17 18 Rent Expense 14 000 00 18 19 Salaries Expense 29 374 60 19 20 Supplies Expense 3 710 00 20 21 Utilities Expense 2 364 87 21 22 Dec.000.00 closing debit  63.00 $ 3. The net loss amount decreases the earnings the business retains.790.000. 24 24 Section 1 Journalizing Closing Entries 591 586-611_CH20_868829.00 closing credit $ 5.178.790. Inc. Before it is closed.00: Adj. 31 Income Summary 32 6 7 4 72 22 23 Retained Earnings 32 6 7 4 72 23 24 24 Closing Entry to Transfer a Net Loss How Do You Close a Net Loss to Retained Earnings? Sometimes businesses incur net losses.000 and debit Retained Earnings for $5. 31 Retained Earnings 5 0 0 0 00 22 23 Income Summary 5 0 0 0 00 23 ledger.178.00 debit balance To close Income Summary. GENERAL JOURNAL PAGE 23 POST. Corp.612.

*OURNALIZINGA-ERCHANDISING#ORPORATIONS#LOSING%NTRIES describe the step-by-step process for journalizing a merchandising corporation’s closing entries. and the closing credit entry was $300. is the account debited or credited? 3. Add or remove answer boxes as needed. 1. Do the Math The closing debit entry to the Income Summary account was $263. Is the account affected by a closing entry? 2. Corp. Corp.000. Assume that all accounts have normal balances. Accounts Receivable Purchases Bankcard Fees Expense Purchases Discounts Capital Stock Purchases Returns and Allowances Cash in Bank Retained Earnings Equipment Sales Fed. was the inventory adjustment a debit or credit? What was the amount? Problem 20–1 Identifying Accounts Affected by Closing Entries The following account names appear in the chart of accounts of Larkin’s Department Store. is Income Summary debited or credited? 592 Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation 586-611_CH20_868829.000 credit balance after these entries. During closing. Income Tax Expense Sales Discounts Fed. During closing. If the Income Summary account had a $42. Income Tax Payable Sales Returns and Allowances Income Summary Sales Tax Payable Insurance Expense Supplies Merchandise Inventory Supplies Expense Miscellaneous Expense Transportation In Prepaid Insurance Utilities Expense Instructions Use the form in your working papers to answer the following questions about each account.000. SECTION 1 Assessment AFTER YOU READ Reinforce the Main Idea Using a diagram like this one.indd 592 9/15/05 12:09:01 PM .

DEBIT CREDIT DEBIT CREDIT 20-- Dec. prepare a post- Figure 20–2 shows the portion of On Your Mark’s general ledger closing trial balance. and continue DEBIT CREDIT 20-- posting by moving from Dec. G23 320 4 5 0 00 the Posting Reference column of the general journal. here) for each posting ➤ how to post the in the Description column of the general ledger account. Ent G22 3 5 3 6 00 3 5 3 6 00 31 Clos. G23 323 5 9 0 00 320 0 5 4 00 31 Clos. Ent. (p. Ent. 593) POST. SECTION 2 Posting Closing Entries Closing entries recorded in the general journal are posted to the BEFORE general ledger. 597) 31 Clos. (p. 31 S12 10 7 5 0 00 310 7 5 0 00 Remember to enter 31 CR13 9 7 0 0 00 320 4 5 0 00 the account number in 31 Clos. DEBIT CREDIT date. 310 POST. 598) ACCOUNT Income Summary ACCOUNT NO. Ent. closing entries for a merchandising ACCOUNT Retained Earnings ACCOUNT NO. 305 corporation. Ent. 1 Balance ✓ 300 0 0 0 00 the left to the right.indd 593 9/15/05 12:09:05 PM . DEBIT CREDIT closing trial balance 20-. (p. G23 32 6 7 4 72 YOU READ Instant Recall Posting to the General ACCOUNT Sales ACCOUNT NO. REF. G23 287 3 7 9 28 32 6 7 4 72 AS 31 Clos. 31 Adj. 401 Ledger Begin with the BALANCE DATE DESCRIPTION POST. Ent. BALANCE ➤ how to prepare a post- DATE DESCRIPTION DEBIT CREDIT REF. Figure 20–2 Partial General Ledger at the End of the Fiscal Period Section 2 Posting Closing Entries 593 586-611_CH20_868829. affected by the closing process after the closing entries have been posted. YOU READ Closing the General Ledger Main Idea How Do You Close a Merchandising Corporation’s After posting the closing General Ledger? entries. G23 32 6 7 4 72 52 4 4 5 91 ➤ about a review of the accounting cycle for a merchandising business. for a merchandising Dec. 1 Balance ✓ 19 7 7 1 19 corporation. Read to Learn… Write the term Closing Entry (abbreviated Clos. Ent. BALANCE DATE DESCRIPTION REF.

Ent. G23 2 0 0 0 00 ACCOUNT Purchases ACCOUNT NO. 1 Balance ✓ 1 2 0 0 00 31 CP14 1 4 0 00 1 3 4 0 00 31 Clos. BALANCE DATE DESCRIPTION REF. G23 4 0 3 6 18 ACCOUNT Purchases Discounts ACCOUNT NO. 405 POST. DEBIT CREDIT DEBIT CREDIT 20-- Dec. G23 206 7 0 0 00 ACCOUNT Transportation In ACCOUNT NO. 410 POST. 501 POST. 1 Balance ✓ 1 8 5 0 00 4 G20 1 5 0 00 2 0 0 0 00 31 Clos. BALANCE DATE DESCRIPTION REF. Ent. Ent. 1 Balance ✓ 3 7 6 1 18 24 CP14 2 7 5 00 4 0 3 6 18 31 Clos. Ent. Ent. G23 7 3 0 00 ACCOUNT Sales Returns and Allowances ACCOUNT NO. BALANCE DATE DESCRIPTION REF. 505 POST. DEBIT CREDIT DEBIT CREDIT 20-- Dec. DEBIT CREDIT DEBIT CREDIT 20-- Dec. ACCOUNT Sales Discounts ACCOUNT NO. 510 POST. DEBIT CREDIT DEBIT CREDIT 20-- Dec. 1 Balance ✓ 190 0 0 0 00 19 CP14 1 3 0 0 00 191 3 0 0 00 31 P12 15 4 0 0 00 206 7 0 0 00 31 Clos. BALANCE DATE DESCRIPTION REF.indd 594 9/15/05 12:09:16 PM . BALANCE DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT 20-- Dec. G23 1 3 4 0 00 Figure 20–2 Partial General Ledger at the End of the Fiscal Period (continued) 594 Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation 586-611_CH20_868829. 1 Balance ✓ 7 0 0 00 31 CR13 3 0 00 7 3 0 00 31 Clos.

Ent. DEBIT CREDIT DEBIT CREDIT 20-- Dec. ACCOUNT Purchases Returns and Allowances ACCOUNT NO. Ent. 515 POST. BALANCE DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT 20-- Dec. G23 2 4 5 0 00 ACCOUNT Bankcard Fees Expense ACCOUNT NO. G22 1 5 5 00 9 9 9 5 00 31 Clos. G23 4 1 9 9 27 ACCOUNT Federal Corporate Income Tax Expense ACCOUNT NO. G23 1 8 0 0 00 ACCOUNT Advertising Expense ACCOUNT NO. 630 POST. BALANCE DATE DESCRIPTION REF. Ent. DEBIT CREDIT DEBIT CREDIT 20-- Dec. 1 Balance ✓ 9 8 4 0 00 31 Adj. DEBIT CREDIT DEBIT CREDIT 20-- Dec. 1 Balance ✓ 4 1 2 4 27 31 CP14 7 5 00 4 1 9 9 27 31 Clos. G22 1 2 5 00 1 2 5 00 31 Clos. BALANCE DATE DESCRIPTION REF. Ent. 635 POST. BALANCE DATE DESCRIPTION REF. 605 POST. Ent. Ent. G23 1 2 5 00 Figure 20–2 Partial General Ledger at the End of the Fiscal Period (continued) Section 2 Posting Closing Entries 595 586-611_CH20_868829. 1 Balance ✓ 1 6 0 0 00 16 G21 2 0 0 00 1 8 0 0 00 31 Clos. 601 POST. G23 9 9 9 5 00 ACCOUNT Insurance Expense ACCOUNT NO. BALANCE DATE DESCRIPTION REF.indd 595 9/15/05 12:09:23 PM . 31 Adj. 1 Balance ✓ 2 4 5 0 00 31 Clos. Ent. DEBIT CREDIT DEBIT CREDIT 20-- Dec.

DEBIT CREDIT DEBIT CREDIT 20-- Dec. 1 Balance ✓ 3 8 2 6 83 31 Clos. DEBIT CREDIT DEBIT CREDIT 20-- Dec. Ent. 1 Balance ✓ 3 5 1 9 25 31 Clos. BALANCE DATE DESCRIPTION REF. G23 3 8 2 6 83 ACCOUNT Rent Expense ACCOUNT NO. 1 Balance ✓ 12 0 0 0 00 31 CP14 2 0 0 0 00 14 0 0 0 00 31 Clos. G23 14 0 0 0 00 ACCOUNT Salaries Expense ACCOUNT NO. 1 Balance ✓ 25 3 7 4 60 31 CP14 4 0 0 0 00 29 3 7 4 60 31 Clos. DEBIT CREDIT DEBIT CREDIT 20-- Dec. 660 POST.indd 596 9/15/05 12:09:28 PM . ACCOUNT Maintenance Expense ACCOUNT NO. BALANCE DATE DESCRIPTION REF. 665 POST. BALANCE DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT 20-- Dec. G23 3 4 8 28 ACCOUNT Payroll Tax Expense ACCOUNT NO. G23 29 3 7 4 60 Figure 20–2 Partial General Ledger at the End of the Fiscal Period (continued) 596 Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation 586-611_CH20_868829. BALANCE DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT 20-- Dec. Ent. G23 3 5 1 9 25 ACCOUNT Miscellaneous Expense ACCOUNT NO. BALANCE DATE DESCRIPTION REF. 655 POST. 657 POST. Ent. 650 POST. Ent. Ent. 1 Balance ✓ 3 2 8 28 31 CP14 2 0 00 3 4 8 28 31 Clos.

On Your Mark Athletic Wear Post-Closing Trial Balance December 31. 1 Balance ✓ 2 3 6 4 87 31 Clos. DEBIT CREDIT DEBIT CREDIT 20-- Dec. 680 POST. Corp. G22 3 7 1 0 00 3 7 1 0 00 31 Clos. 670 POST. G23 3 7 1 0 00 ACCOUNT Utilities Expense ACCOUNT NO. DEBIT CREDIT DEBIT CREDIT 20-- Dec. Income Tax Payable 155 00 followed. BALANCE DATE DESCRIPTION REF. G23 2 3 6 4 87 Figure 20–2 Partial General Ledger at the End of the Fiscal Period (continued) Preparing a Post-Closing Trial Balance AS YOU READ How Do You Prepare a Post-Closing Trial Balance? Key Point A post-closing trial balance is prepared at the end of the accounting period to prove that the general ledger accounts are in balance after all Post-Closing Trial adjusting and closing entries have been posted. Figure 20–3 shows the post. Unemployment Tax Payable 18 36 State Unemployment Tax Payable 114 73 Sales Tax Payable 2 428 00 Capital Stock 75 0 0 0 00 Retained Earnings 52 4 4 5 91 Totals 145 0 3 8 00 145 0 3 8 00 Figure 20–3 Post-Closing Trial Balance Section 2 Posting Closing Entries 597 586-611_CH20_868829. 31 Adj. 20-- Cash in Bank 15 179 00 Accounts Receivable 10 404 00 Merchandise Inventory 81 385 00 Supplies 1 839 00 Connect to… Prepaid Insurance Delivery Equipment 1 19 375 831 00 00 HISTORY Office Equipment 9 825 00 After the stock market Store Equipment 5 200 00 crash in 1929 and the Accounts Payable 13 8 5 0 00 Great Depression that Fed. Ent. Ent. BALANCE DATE DESCRIPTION REF.indd 597 9/15/05 12:09:34 PM . Fed. Congress Employees’ Fed. Balance The post-closing closing trial balance for On Your Mark. Income Tax Payable 640 00 created the Securities and Employees’ State Income Tax Payable 80 00 Exchange Commission Social Security Tax Payable 248 00 (SEC) in 1934 to protect Medicare Tax Payable 58 00 investors. Ent. trial balance and the balance sheet list the same account balances. ACCOUNT Supplies Expense ACCOUNT NO.

Complete a work sheet.Ê "1. 5. Figure 20–4 illustrates the accounting cycle. The accounting cycle for a service and a manufacturing business follows the same steps. or corporation—the basic steps of the accounting cycle are the same.Post to the general and subsidiary ledgers. Prepare a post-closing trial balance.Journalize each transaction. AS YOU READ Completing the Accounting Cycle Compare and for a Merchandising Business Contrast What Is the Accounting Cycle for a Merchandising Business? Corporation and Sole Proprietorship How You have completed the study of the accounting cycle for a merchandising is closing the general business organized as a corporation. !NALYZEEACH *OURNALIZE TRANSACTION EACHTRANSACTION 0OSTTOTHE #OLLECTANDVERIFY GENERALAND  "1 / SOURCEDOCUMENTS  . which consists of the following steps: ledger for these forms of 1. 8. is it different? 3. 10. 9.Analyze each business transaction. and balance sheet. Journalize and post the closing entries.  SUBSIDIARYLEDGERS . businesses similar? How 2. 6. statement of retained earnings. 4.Prepare the financial statements—income statement. partnership. Publicly held corporations also prepare a statement of cash flows. Journalize and post the adjusting entries. regardless of how a business is organized—sole pro- prietorship. 7. Also.Prepare a trial balance.Collect and verify source documents.

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whether manual or computerized. the computer performs many of the routine procedures such as posting. . however. 598 Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation 586-611_CH20_868829. TRIALBALANCE  - / 0REPAREA WORKSHEET *OURNALIZEAND POSTTHECLOSING *OURNALIZEAND Figure 20–4 POSTTHEADJUSTING 0REPAREFINANCIAL ENTRIES STATEMENTS The Accounting Cycle ENTRIES The accounting system used.indd 598 4/6/06 6:29:33 PM . In a computerized accounting system. does not affect the steps in the accounting cycle.

SECTION 2 Assessment AFTER YOU READ Reinforce the Main Idea Using a diagram like this 0OSTINGA-ERCHANDISING#ORPORATIONS#LOSING%NTRIES one. Please mail the check to: Mr. TX 77361-8411 Problem 20–3 Organizing the Steps in the Accounting Cycle Instructions List the following steps of the accounting cycle in their proper order. and liabilities. 42 prepare the journal entry 29000 White Road Cold Springs. $156.000. If the ending balance of Retained Earnings was $45. FROM: James Perkins. uses a DATE: July 12. Chief Accountant in your working papers. describe the step-by- step process for posting a merchandising corporation’s closing entries.000. $75. 20-- SUBJECT: New Storage Facility Rent cash payments journal to record disbursements. Controller Warehouse Inc.000. Analyzing business transactions Journalizing and posting closing entries Collecting and verifying source documents Posting journal entries to ledgers Completing the work sheet Preparing financial statements Journalizing business transactions Preparing a post-closing trial balance Journalizing and posting adjusting entries Preparing a trial balance Section 2 Posting Closing Entries 599 586-611_CH20_868829. what was the capital stock account’s ending balance? Problem 20–2 Analyzing a Source Document Instructions Review the MEMORANDUM source document and Your Backpack Inc. Use the form provided in your working papers or a separate sheet of paper. TX 77282-4513 to record this transaction TO: Robert Chan. The check is for the new storage facility we are renting. Would you please make a check out to Warehouse Inc. No.indd 599 9/15/05 12:09:50 PM . Add or remove answer boxes as needed. for $750. President Your Backpack Inc. James Skiller. Do the Math Totals on the post-closing trial balance were assets. 7576 County Line Highway Crossplains.

CHAPTER 20 Summary Key Concepts 1. a. GENERAL JOURNAL PAGE XX POST. Write Closing Entry in the Description column of the general ledger account. The information for journalizing closing entries comes from the Income Statement section of the work sheet. DATE DESCRIPTION REF. GENERAL JOURNAL PAGE XX POST. Close all temporary accounts with credit balances to Income Summary. GENERAL JOURNAL PAGE XX POST. After you have recorded closing entries in the general journal. post them to the general ledger. DEBIT CREDIT 6 Date Income Summary xx x x x xx 6 7 Sales Discounts xxx xx 7 8 Sales Returns and Allow. DATE DESCRIPTION REF. Close the balance of Income Summary to the Retained Earnings account. 600 Chapter 20 Summary 586-611_CH20_868829. DEBIT CREDIT 1 Closing Entries 1 22 Date Income Summary x x x x xx 22 23 Retained Earnings x x x x xx 23 24 24 2. Close all temporary accounts with debit balances to Income Summary.indd 600 9/15/05 12:09:56 PM . Refer to Figure 20–2 on pages 593–597 to review a partial general ledger at the end of the accounting period. Closing Entries 1 2 Date Sales xx x x x xx 2 3 Purchases Discounts xx x x x xx 3 4 Purchases Returns and Allow. Only three steps are necessary to close the temporary accounts of a corporate merchandising business. DATE DESCRIPTION REF. xx x x x xx 4 5 Income Summary xx x x x xx 5 6 6 b. DEBIT CREDIT 1 20-. xxx xx 8 9 Purchases xxx xx 9 10 Transportation In xxx xx 10 11 Expense Account xxx xx 11 12 Expense Account xxx xx 12 13 Expense Account xxx xx 13 14 14 c.

Income Tax Payable 155 00 Employees’ Fed. their debits Cash in Bank 15 179 00 equal their credits.Ê "1. The basic accounting cycle is the same whether • the business is a service provider or merchandiser • the business is organized as a sole proprietorship. Corp. 20-- ledger accounts are in balance. The following is an example of Accounts Receivable 10 404 00 Merchandise Inventory 81 385 00 a post-closing trial balance.  SUBSIDIARYLEDGERS . Summary CHAPTER 20 3. that is. Unemployment Tax Payable 18 36 State Unemployment Tax Payable 114 73 Sales Tax Payable 2 428 00 Capital Stock 75 0 0 0 00 Retained Earnings 52 4 4 5 91 Totals 145 0 3 8 00 145 0 3 8 00 4. corporation. Supplies 1 839 00 Prepaid Insurance 1 375 00 Delivery Equipment 19 831 00 Office Equipment 9 825 00 Store Equipment 5 200 00 Accounts Payable 13 8 5 0 00 Fed. !NALYZEEACH *OURNALIZE TRANSACTION EACHTRANSACTION 0OSTTOTHE #OLLECTANDVERIFY GENERALAND  "1 / SOURCEDOCUMENTS  . or partnership • the business uses a manual or computerized accounting system The following illustrates the complete accounting cycle. Income Tax Payable 640 00 Employees’ State Income Tax Payable 80 00 Social Security Tax Payable 248 00 Medicare Tax Payable 58 00 Fed. A post-closing trial balance is prepared at the end On Your Mark Athletic Wear of the accounting period to prove that the general Post-Closing Trial Balance December 31.

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indd 601 9/15/05 12:10:05 PM . . TRIALBALANCE  - / 0REPAREA WORKSHEET *OURNALIZEAND POSTTHECLOSING *OURNALIZEAND 0REPAREFINANCIAL ENTRIES POSTTHEADJUSTING STATEMENTS ENTRIES Chapter 20 Summary 601 586-611_CH20_868829.

indd 602 4/6/06 6:29:42 PM . closing entries temporary accounts permanent accounts 602 Chapter 20 Review and Activities 586-611_CH20_868829. b. Accounting Cycle a. How are temporary accounts with debit balances closed? 2. Post-Closing Trial Balance a. Name the 10 steps in the accounting cycle. Does the Income Summary account appear on the post-closing trial balance? Why or why not? 4. Which account(s) are used to close temporary accounts with debit and credit balances? b. What is entered in the Posting Reference column of the general ledger account? 3. Let’s review the terms as they relate to a merchandising corporation such as PETsMART. What is written in the Description column of the general ledger account as the closing entries are posted? b. CHAPTER 20 Review and Activities AFTER YOU READ Check Your Understanding 1. Journalizing the Closing Entries a. What is the purpose of preparing a post-closing trial balance? b. Posting the Closing Entries a. Which tasks in the accounting cycle are performed automatically in a computerized accounting system? Apply Key Terms The following key terms were introduced in Chapter 10. What differences exist between the closing entries for a sole proprietorship and the closing entries for a merchandising corporation? Use the following terms in your explanation.

select Set Up Users. Post and print all journal entries and reports before you close the fiscal year. Back up all files before closing. You will be prompted if any procedures need to be completed before the system continues the closing process. Back up the company file before closing. From the Company menu. select System. Closing the fiscal year cannot be reversed. • All expense and revenue accounts should have zero balances. 3. a fiscal year? How do I close the 1. 3. a fiscal year? How do I close the 1. QuickBooks Q & A QuickBooks Question Answer What tasks should I 1. fiscal year. fiscal year? 2. For detailed instructions. Income Summary. only if you want to clear income and and Withdrawals accounts. expense accounts at the end of the • Post the closing entries. perform before closing 2. perform before closing 2. expense.indd 603 9/15/05 12:10:26 PM . Chapter 20 Computerized Accounting 603 586-611_CH20_868829. Q&A Peachtree Question Answer What tasks should I 1. Preparing a • After the closing entries have been • A post-closing trial balance can be post-closing trial posted to the ledger. Choose Year-End Wizard. Enter the date on which you want to close your books and enter a password. From the Tasks menu. fiscal year? 2. see your Glencoe Accounting Chapter Study Guides and Working Papers. Click Closing Date. and credits. • If you have selected the closing option. Post and print all journal entries and reports before you close the fiscal year. Computerized Accounting C H A P T E R 2 0 Closing the Fiscal Year Making the Transition from a Manual to a Computerized System Task Manual Methods Computerized Methods Closing a fiscal • Journalize the entries to close the • Closing the fiscal year is performed year revenue. prepare a trial printed to verify that all revenue and balance balance to verify the equality of debits expense accounts have been closed. the software journalizes closing entries.

record the closing entries for the 1. 20 515 Purchases Returns and Allowances 1 5 0 0 00 TIP: Choose the General 21 625 Federal Corporate Income Tax Exp. 24 655 Rent Expense 12 0 0 0 00 25 665 Supplies Expense 4 5 0 00 26 675 Utilities Expense 14 0 0 0 00 27 69 6 8 2 00 99 0 0 0 00 28 Net Income 29 3 1 8 00 29 99 0 0 0 00 99 0 0 0 00 30 Analyze Identify the effect of the closing entries on the Retained Earnings account. 19 510 Purchases Discounts 5 0 0 00 6. Problem 20–4 Instructions In your working papers. 20–4). Rename the company ACCT. 17 501 Purchases 25 0 0 0 00 5. End the session. and set the system date. Print a post-closing trial 16 410 Sales Returns and Allowances 2 4 0 0 00 balance. DEBIT CREDIT 3. for Sunset Surfwear (Prob. Start with general journal page 13. Complete the Analyze 18 505 Transportation In 3 0 0 0 00 activity. Select the problem set year ended December 31. CHAPTER 20 Problems Complete problems using: Manual Glencoe Peachtree Complete QuickBooks Spreadsheet Spreadshee OR OR OR Working Papers Accounting Software Templates Templates Problem 20–4 Journalizing Closing Entries SMART GUIDE The following amounts appeared in the Income Statement section of Sunset Step–by–Step Instructions: Surfwear’s work sheet. ACCOUNT NAME INCOME STATEMENT NO. 5 5 3 2 00 Ledger Trial Balance 22 635 Insurance Expense 3 0 0 00 report whenever you are 23 650 Miscellaneous Expense 6 0 0 0 00 instructed to print a Post- Closing Trial Balance. Choose System from the Tasks menu and 13 310 Income Summary 7 0 0 0 00 then select Year-End 14 401 Sales 90 0 0 0 00 Wizard to close the 15 405 Sales Discounts 1 0 0 0 00 fiscal year. 4. 604 Chapter 20 Problems 586-611_CH20_868829.indd 604 9/15/05 12:10:32 PM . 2.

20–5). 32 119 6 3 0 00 152 5 0 0 00 33 Net Income 32 8 7 0 00 34 152 5 0 0 00 152 5 0 0 00 35 Analyze Describe what would happen if the accountant for Shutterbug Cameras made a mistake and did not close the Transportation In account. Print a post-closing trial 28 645 Miscellaneous Expense 3 0 0 00 balance. 27 620 Federal Corporate Income Tax Exp. Problems CHAPTER 20 Problem 20–5 Journalizing and Posting Closing Entries SMART GUIDE The following account balances appeared in the Income Statement section Step–by–Step Instructions: of the work sheet of Shutterbug Cameras. 29 650 Rent Expense 6 0 0 0 00 4. Print a post-closing trial included in your working papers. balance. 2. Post the closing entries to the general ledger accounts. Journalize the closing entries for the year ended December 31. ACCOUNT NAME 6. Close the fiscal year.QBB file. Complete the Analyze INCOME STATEMENT activity. CONTINUE Chapter 20 Problems 605 586-611_CH20_868829. 5. Rename the company with page 14 of a general journal (in your working papers). End the session. Back up your work. Enter the closing entries. and set the system date. NO.indd 605 4/6/06 6:29:50 PM . All of the accounts have nonzero balances. 3. 31 670 Utilities Expense 3 0 0 0 00 5. 2. Complete the Analyze 30 660 Supplies Expense 1 6 3 0 00 activity. Restore the Problem 26 515 Purchases Returns and Allowances 1 5 0 0 00 20-5. 4. Problem 20–6 Identifying Accounts for Closing Entries A partial list of the accounts used by Cycle Tech Bicycles appears on page 606. 4 7 0 0 00 2. Problem 20–5 1. which are 3. DEBIT CREDIT 20 310 Income Summary 4 0 0 0 00 QuickBooks 21 401 Sales 150 0 0 0 00 PROBLEM GUIDE 22 410 Sales Returns and Allowances 5 0 0 0 00 23 501 Purchases 90 0 0 0 00 Step–by–Step Instructions: 24 505 Transportation In 5 0 0 0 00 Problem 20–5 25 510 Purchases Discounts 1 0 0 0 00 1. Select the problem set Instructions for Shutterbug Cameras 1. ACCT. Start (Prob.

CHAPTER 20 Problems General Ledger 101 Cash in Bank 650 Miscellaneous Expense 125 Merchandise Inventory SMART GUIDE 665 Supplies Expense 215 Sales Tax Payable Step–by–Step Instructions: Problem 20–6 505 Transportation In 305 Retained Earnings 1. Instructions In your working papers. template. Complete the Analyze activity. Prepare an income statement from the work sheet information. Prepare a post-closing trial balance. If it does not. 6. Enter your name and 1. Prepare a trial balance on a ten-column work sheet. list all account numbers and names for accounts that will be credited when closed.965 4. template for Problem Instructions In your working papers: 20–7. December 31 1. Save your work and exit the spreadsheet 6. December 31 900 sheet using the instructions in your Unexpired insurance. 7. 20–6). 606 Chapter 20 Problems 586-611_CH20_868829. 135 Prepaid Insurance 5. Print a Chart of Accounts 515 Purchases Returns and Allowances report. Merchandise inventory. End the session. Supplies inventory. 2. the end of the period. the date in the spaces provided on the 2. 6. December 31 $20. SPREADSHEET SMART GUIDE Problem 20–7 Completing End-of-Period Step–by–Step Instructions: Activities Problem 20–7 The general ledger accounts for River’s Edge Canoe & Kayak as of 1. Rename the company 310 Income Summary and set the system date. 8. Complete the Analyze 4. Begin on general journal page 14. Journalize and post the adjusting entries. Analyze Conclude whether the company made a profit for the year. explain why. 5.000 3. 3. List the accounts that 601 Advertising Expense will be debited and 625 Federal Corporate Income Tax Expense those that will be 657 Rent Expense credited when closed. Print the spreadsheet and proof your work. 4. Journalize and post the closing entries. 405 Sales Discounts 2. appear in the working papers. Next. Total federal corporate income taxes for the year 2. 5. Complete the work sheet. Complete the spread. Determine whether it contains all of the accounts. Prepare a statement of retained earnings. Prepare a balance sheet. 501 Purchases 3.indd 606 9/15/05 12:10:45 PM . Select the problem set for Cycle Tech Bicycles 401 Sales (Prob. Use the following adjustment information. Analyze Examine your list.800 working papers. activity. list all account numbers and names for accounts that will be debited when closed. Select the spreadsheet December 31.

Journal Entry option. Income Tax Pay. Complete the Analyze December 31. Trial Balance. Enter the closing 650 Miscellaneous Expense 1 6 0 0 00 entries. 675 Utilities Expense 4 2 0 0 00 Totals 373 9 2 3 00 373 9 2 3 00 CONTINUE Chapter 20 Problems 607 586-611_CH20_868829. 20-. activity. prepare a post-closing trial balance. QuickBooks 215 Sales Tax Payable 4 1 6 00 301 Capital Stock 40 0 0 0 00 PROBLEM GUIDE 305 Retained Earnings 24 6 0 3 00 Step–by–Step Instructions: 310 Income Summary Problem 20–8 401 Sales 299 1 5 6 00 1. Print a post-closing trial balance. the business manager can locate only the trial (Prob. Print a General Journal report and proof your Buzz Newsstand work. 635 Insurance Expense 6. 5. Select the problem set for Buzz Newsstand statements. Print a Trial 505 Transportation In 8 2 3 6 00 Balance. Before Problem 20–8 leaving. on page 608. Record the adjustments using the General 2. 130 Merchandise Inventory 64 800 00 135 Supplies 3 916 00 TIP: Peachtree automati- 140 Prepaid Insurance 5 400 00 cally updates the general ledger accounts when you 145 Delivery Truck 46 106 00 close the fiscal year. 4. 3. 20–8). Using the information provided. 9. 201 Accounts Payable 4 6 9 0 00 204 Fed. 665 Supplies Expense 8. 501 Purchases 168 6 2 4 00 2. Problems CHAPTER 20 CHALLENGE Problem 20–8 Preparing Adjusting PROBLEM and Closing Entries SMART GUIDE In the middle of the end-of-period activities. 510 Purchases Discounts 2 9 5 0 00 3. Journalize the adjusting and closing entries on page 16 of the general adjustments. 660 Salaries Expense 26 9 0 0 00 7. Before Adjustments 6. Restore the Problem 410 Sales Returns and Allowances 9 5 0 0 00 20-8. 4. Close the fiscal year. the accountant prepared the work sheet and the financial 1.indd 607 4/6/06 6:29:52 PM . Print a post-closing trial 115 Accounts Receivable 6 106 00 balance. Record the 515 Purchases Returns and Allowances 2 1 0 8 00 adjustments. Print a Working Trial Instructions In your working papers: Balance to help you prepare the 1. Complete the Analyze 625 Fed. Print a Journal report. 601 Advertising Expense 4 0 0 0 00 5. Rename the company and set the system date. balance shown here (before adjustments) and the income statement shown 2. Corp.QBB file. journal. Income Tax Expense 12 5 0 0 00 activity. 101 Cash in Bank 12 035 00 8. End the session. the accountant for Buzz Step–by–Step Instructions: Newsstand was called away because of an illness in the family. 7. However. Corp. Back up your work.

176 8 6 0 00 Less: Purch. 20-. and Allow. 236 6 0 2 00 Merch. 31. Merch. Discounts 2 9 5 0 00 Purch. Inv. 60 4 0 0 00 Cost of Merch. Tax Exp. 20-- Revenue: Sales 299 1 5 6 00 Less: Sales Ret. 608 Chapter 20 Problems 586-611_CH20_868829. 14 913 00 Net Income 57 297 00 Analyze Determine the impact of adjusting entries on net income. CHAPTER 20 Problems Buzz Newsstand Income Statement For the Year Ended December 31. 20-. 64 8 0 0 00 Purchases 168 6 2 4 00 Plus: Transportation In 8 2 3 6 00 Cost of Del. Ret. Sold: Merch. 9 5 0 0 00 Net Sales 289 6 5 6 00 Cost of Merch. and Allow. Jan 1. 2 1 0 8 00 5 0 5 8 00 Net Purchases 171 8 0 2 00 Cost of Merch. Dec. Expenses 41 244 00 Operating Income 72 210 00 Less: Fed. Avail. Sold 176 2 0 2 00 Gross Profit on Sales 113 4 5 4 00 Operating Expenses: Advertising Expense 4 000 00 Insurance Expense 1 800 00 Miscellaneous Expense 1 600 00 Salaries Expense 26 900 00 Supplies Expense 2 744 00 Utilities Expense 4 200 00 Total Oper.indd 608 9/15/05 12:10:55 PM . Inv... Inc.

Winning Competitive Events CHAPTER 20 Practice your test-taking skills! The questions on this page are reprinted with permission from national organizations: • Future Business Leaders of America • Business Professionals of America Use a separate sheet of paper to record your answers. account which caused the net loss with a debit. the balance is closed into the a. c. Closing entries for a corporation are made from information in a work sheet’s a. Adjustments columns. e. Retained Earnings Competitive Events and select Chapter 20. c. Retained Earnings account with a debit. journalizing. none of these answers 2. Proving the accuracy of the adjusting and closing entries is best defined as a. none of the above Business Professionals of America MULTIPLE CHOICE 5. preparing a post-closing trial balance. d. d. closing the temporary accounts.glencoe.com Chapter 20 Winning Competitive Events 609 586-611_CH20_868829. Membership Fees Income Need More Help? b. none of these answers 3. Accounts Receivable Go to glencoeaccounting. none of these answers 4. Trial Balance columns. • Practice Questions and Test-Taking Tips • Concept Capsules and Terminology glencoeaccounting.com and c. Retained Earnings account with a credit. b. b. d. The procedure for transferring information from a journal to ledger accounts is called a. c. e. d. Income Statement columns. file maintenance.indd 609 10/13/05 10:37:26 PM . preparing the statements. Which of the following accounts is closed at the end of a fiscal period? a. e. posting. Future Business Leaders of America MULTIPLE CHOICE 1.glencoe. c. Click on Winning d. b. Balance Sheet columns. To close the Income Summary account of a corporation with a net loss. Delivery Equipment click on Student Center. adjusting. b. adjusting the ledger accounts.

Imagine that you work for a large sporting goods store like The Sports Authority. For example. model customer service principles of accuracy. Justify the use of only three closing entries for a corporation although a sole proprietorship uses four. ETHICAL DECISION MAKING 1. Describe the journal entry to record a net loss. a cash refund can only be given if cash was paid. 4. Analyze the closing of the Income Summary and Retained Earnings accounts when the business has net income and when it has a net loss. INSTRUCTIONS 1. In your explanation. Explain how to determine which accounts have and have not been closed. CHAPTER 20 Real-World Applications and Connections Critical Completing the Accounting Cycle Thinking 1. What is the source of information for journalizing the closing entries? 2. 3. Dynamic Sound. but he wants you to give him a full refund. thoroughness.indd 610 9/15/05 12:11:06 PM . How do the alternatives affect the 2. has a net loss. Martin. 5. Explain how to tell which accounts should have zero balances after closing. The accounting manager asked you to review the work of an accounting intern who completed the closing process. You know he purchased the sweatshirt on sale. Who are the affected parties? 5. a mattoefr ETHICS Handling Sales Returns Most retail stores give employees specific instructions on how to process a sales return. Suggest ways to explain to the intern why temporary accounts have zero balances after closing. What are the ethical issues? 4. 4. What would you do? $ )) )) Communicating Explaining Results ACCOUNTING As you are completing the closing entries for the fourth quarter. a trendy department store. 2. CASE Merchandising Business: Department Store STUDY You work in the accounting department for Pearl’s. Select a partner from your class and role-play an explanation of how the Income Summary and Retained Earnings accounts are affected by the loss. and respect. You know that management is not aware that the fourth quarter financial statements are so bleak. 6. Some temporary accounts in the post-closing trial balance still have balances. What are the alternatives? parties? 3. List human-relations skills you might use in your explanation to the intern. Your friend. you realize that your company. How are temporary accounts with credit balances closed? 3. comes in to return a sweatshirt he purchased recently. Create a memory device to help you remember all the closing entries for a corporation. 610 Chapter 20 Real-World Applications and Connections 586-611_CH20_868829.

glencoe.990  0. Calculate the return on stockholders’ equity for the year ending February 1. For example the number 45. List how you could find the stock’s current price. INSTRUCTIONS Use PETsMART’s financial statements in Appendix F to complete the following. Real-World Applications and Connections CHAPTER 20 Skills Beyond Maintaining and Troubleshooting Technologies NUMBERS In the accounting department of KidsWear Inc.1045 or 10. Analyzing Calculating Return on Stockholders’ Equity Financial One measure of a corporation’s profitability is the return on stockholders’ equity. This morning the printer will not print the ledgers or journals. Net Income $20.229 Making It Your Stocks Personal Your future savings may include stock. INSTRUCTIONS Convert these numbers: (1) 121.255.glencoe.08.520.com and click on Student Center. 2..411. INSTRUCTIONS List the steps you need to take to troubleshoot this problem.indd 611 9/15/05 12:11:14 PM . INTERNATIONAL Number Conventions Many countries use decimal points instead of commas to separate thousands and Accounting use a comma instead of a decimal point as a decimal marker. Reports It shows how much the business earned for each dollar invested by stockholders. How do business activities affect net income or net loss? Visit glencoeaccounting . glencoeaccounting. PERSONAL FINANCE ONLINE Go to glencoeaccounting.309.98 (2) 74. Explain why you think this calculation is important to potential buyers of a Closing the Books company’s stock. Click on WebQuest and select Unit 4 to continue your Internet project.com and click on Student Center. 2004.255. Click on Making It Personal and select Chapter 20. For each step indicate whom to call if the problem is not resolved.com Chapter 20 Real-World Applications and Connections 611 586-611_CH20_868829.832 Average stockholders’ equity  (beginning stockholders’ equity  ending stockholders’ equity)  2. PERSONAL FINANCE ACTIVITY Choose a company to investigate as an investment. you process the closing entries.08 becomes 45. Your stock investment becomes an asset for you and part of stockholders’ equity for the company. 1.45% Average Stockholders’ Equity $200.glencoe.