Ga CH20

Unit 4
The Accounting Cycle for a

Merchandising Corporation
Chapter 14 Accounting for Sales and Cash Receipts
Chapter 15 Accounting for Purchases and Cash Payments
Chapter 16 Special Journals: Sales and Cash Receipts
Chapter 17 Special Journals: Purchases and Cash Payments
Chapter 18 Adjustments and the Ten-Column Work Sheet
Chapter 19 Financial Statements for a Corporation
Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation
Chapter 21 Accounting for Publicly Held Corporations
Glencoe Accounting Unit 4 Chapter 20 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. 1
Chapter 20
Completing the Accounting Cycle for a
Merchandising Corporation
What You’ll Learn

 Journalize closing entries for a merchandising
corporation.
 Post closing entries to the general ledger accounts.
 Prepare a post-closing trial balance.
 Describe the steps in the accounting cycle.
Chapter 20, Section 1
Journalizing Closing Entries
What Do You Think?

Why is net income/loss closed to Retained Earnings and
not to owner’s equity?
SECTION 20.1 Journalizing Closing Entries
Main Idea
A corporation’s net income (or net loss) is closed to
Retained Earnings.
You Will Learn

 how to journalize closing entries for a
merchandising corporation.
 how to journalize a net loss.
Steps for Closing the Ledger

A corporation does not have a withdrawals account, so there are only three steps
to closing the ledger for a merchandising business organized as a corporation:
 Close accounts with balances in the Income Statement Credit column to
Income Summary.
 Close accounts with balances in the Income Statement Debit column to
Income Summary.
 Close Income Summary to Retained Earnings.
Closing Entry to Transfer a Net Loss

If there is a net loss, credit Income Summary for the
amount and debit Retained Earnings for the amount.
Chapter 20, Section 2
Posting Closing Entries
What Do You Think?

Why is the post-closing trial balance so important?
SECTION 20.2 Posting Closing Entries
Main Idea
After posting the closing entries, prepare a post-closing
trial balance.
You Will Learn

 how to post the closing entries for a
 how to prepare a post-closing trial balance for a
 about a review of the accounting cycle for a
merchandising business.
Closing the General Ledger

When closing the general ledger, write Closing Entry for
each posting in the Description column of the general
ledger account.
Partial general ledger at the end of the fiscal period.
Preparing a Post-Closing Trial Balance

A post-closing trial balance is prepared at the end of the
accounting period to prove the general ledger accounts
are in balance.
Post-closing trial balance.
Completing the Accounting Cycle for a Merchandising

Business
As you have learned, the accounting cycle for a merchandising business
organized as a corporation consists of the following steps:
 Collect and verify source documents.
 Analyze each business transaction.
 Journalize each transaction.
 Post to the general and subsidiary ledgers.
 Prepare a trial balance.
 Complete a work sheet.
Completing the Accounting Cycle for a

Merchandising Business
 Prepare the financial statements–income statement,
statement of retained earnings, balance sheet, and
statement of cash flows.
 Journalize and post the adjusting entries.
 Journalize and post the closing entries.
 Prepare a post-closing trial balance.
CHAPTER 20 Chapter 20 Review
Question 1
To journalize the closing entries, put the following in order:
Close temporary accounts with debit balances. ________

Close temporary accounts with credit balances. ________
Close the Income Summary account to Capital. ________
Answer 1
Close temporary accounts with debit balances: 2
Close temporary accounts with credit balances: 1
Close the Income Summary account to Capital: 3
Question 2
How is a post-closing trial balance different from
other trial balances?
Answer 2
The post-closing trial balance is prepared after closing
entries in which temporary account balances have been
transferred to the capital account. The post-closing trial
balance has only permanent or balance sheet accounts.
Other trial balances include both temporary and
permanent accounts.
Resources
Glencoe Accounting Online Learning Center
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Unit 4

The Accounting Cycle for a

What You’ll Learn

What Do You Think?

You Will Learn

Steps for Closing the Ledger

Closing Entry to Transfer a Net Loss

What Do You Think?

You Will Learn

Closing the General Ledger

Partial general ledger at the end of the fiscal period.

Partial general ledger at the end of the fiscal period.

Partial general ledger at the end of the fiscal period.

Partial general ledger at the end of the fiscal period.

Partial general ledger at the end of the fiscal period.

Partial general ledger at the end of the fiscal period.

Partial general ledger at the end of the fiscal period.

Preparing a Post-Closing Trial Balance

Post-closing trial balance.

Completing the Accounting Cycle for a Merchandising

Completing the Accounting Cycle for a

Close temporary accounts with debit balances. ________

Glencoe Accounting Online Learning Center

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