Who Can’t Do Accounting Work
Mountain Top Hardware Instructions and Guidance
Practice set overview
This practice set is a project that reviews and test your comprehension of all the material that you’ve learned in chapters one through six. In this practice set you will be the bookkeeper keeping the books for a company that is both a retailer and a wholesaler. In chapters 1-4 we covered the 10 steps of the accounting cycle. It will be your job to complete all ten of these steps for this company for a period of one month. These steps must be completed in order (you cannot complete step 2 until step 1 is completed and you cannot complete step 3 until step 2 is completed and so on.) The Mountain Top Hardware guidance document will assist you in the process of navigating these ten steps and enlighten you to the percent of your grade you will earn along the way.
The table below shows those ten steps and the percentage of your final grade you can earn on this project as you complete each step. Following the table is an overview of each book in the project and a section that describes in more detail what needs to be done in each of the steps and which books are utilized to complete each of these steps.
Table 1:
| Table 1: Steps in the Accounting Cycle | % of Final Grade |
| Step 1: Analyzing and recording transactions in the journal | 20% |
| Step 2: Posting transactions to the Ledger | 10% |
| Step 3: Prepare an Unadjusted Trial Balance | 10% |
| Step 4: Assemble and Analyze Adjustment Data (provided for you in book 1 page 2) | |
| Step 5: Prepare End of Period Spreadsheet (this step is omitted from this project) | |
| Step 6: Journalize and Post Adjusting Entries (book 1 page 8) | 10% |
| Step 7: Prepare Adjusted Trial Balance | 10% |
| Step 8: Prepare Financial Statements | 20% |
| Step 9: Journalize and Post the Closing Entries (book 1 page 9) | 15% |
| Step 10 Prepare a Post Closing Trial Balance (book 1 page 22) | 5% |
| 100% |
You must complete all 10 steps in order to fulfill the requirements of this project. You will spend a large portion of your efforts completing steps 1 and 2 but that only earns you 30% of your grade. Don’t stop after steps 1 and 2 are complete. The guidance provided below will assist you in the completion of the project.
Preparation and Introduction
First take your four books out of the envelope and write your name in ink in the front of each book, you might want to include your phone number or email in case your books get lost . Please do not dispose of the envelope these four booklets came in . You will be submitting these four books completed in this envelope . Next in the top left corner of the envelope write YOUR NAME, THE CLASS and SECTION (if you are taking the class as a hybrid your section is H01, H02 or EH1 – if you are taking the class on line your section is N01, N02 or AN1 or AN2), and the SEMESTER and YEAR you are taking the class. For example my envelope would look like this and contain the four books completed :
Once you are done with those things you need to put your pen away – no more ink can be used in this project. You will make mistakes and you will need to erase. I will not accept any project with ink beyond the stated items above.
Now let’s get familiar with each of the four books.
Book 1:
Open up book one to page 1 there’s a general discussion about what the Mountain Top Hardware business does. Page 1 also list the five journals you will use to record the 50 transaction (provided in book 3 – more about that later). The first journal listed is the “General Journal”. You should be familiar with this journal from chapters 2-4. This is the place where we have recorded (journalize) transactions. The next journals are special journals introduced in chapter 5. We will utilize these journals to simplify recording transactions. These special journals include a “Sales Journal”, “Purchases Journal”, “Cash Receipts Journal”, and “Cash Payments Journal”. All five of these journals are in book 1. This page also list the ledgers that will be utilized in this project. They include the “General Ledger” (chapter 2 in the text) and subsidiary ledgers for accounts receivable and accounts payable (chapter 5) if you need to review their function. Page 1 goes on to explain the chart of accounts and the numbering scheme for the general ledger. The inside cover of book 2 provides the chart of accounts for Mountain Top Hardware. This list of accounts is comprehensive and you will not be adding any other accounts to the list. The rest of page 1 book 1 and leading on to page 2 provide a brief overview of the steps and process to complete the project. This document is a supplement to book 1 instructions to provide additional detailed information. The second paragraph of book 1 page 2 provides the adjusting entries that need to be completed before financial statements can be executed properly. The remainder of page two summarizes the steps of the accounting cycle to be complete for this project. Table 1 above also provides this summary of steps.
Page 3 of book 1 provides a demonstration of how numbers are recorded on accounting paper. Reviewing the debit or credit column of the journal we see there are boxes with numbers in them. The box to the right side of the dashed line is the pennies (cents) column. Note that if there are no pennies involved in the transaction the box should be left blank or a line drawn in the box. DO NOT put two little zeros in this box. The next box to the left would be the “ones” column, then continuing to the left, the “tens’ column, then the “hundreds” column. The thicker dark line between the next box would act like a comma in the number 13,560.00. The next box would be the “thousands” column and the final box would contain ten thousand and one hundred thousand digits when required. This particular journal entry will be utilized to record form 20 (different customer and numbers) when you get to that point so make a point to use this guidance if needed.
Page 4 of book 1 provides come check figures for you to compare your column totals for special journals prior to posting to the general ledger. “Income Statement” and Balance Sheet” check figures are also provided here.
Page 7 of book 1 is the first of 3 general journal pages. There are 4 transactions (of the 50) that will be recorded on this page. Those transactions (from book 3) are forms 21, 24, 39, and 45. You can make a note at the top of this page that these 4 forms are the only ones that will get recorded here.
Page 8 of book 1 is the second page of your general journal. There is a note at the top that says “Adjusting Entries Only”. Step 6 from table 1 is to journalize and post adjusting entries. The adjustments that need to be made were given on page 2 of book 1. After you have recorded and posted the transactions to the general ledger (book 2) and prepare your “Unadjusted Trial Balance”, you will journalize the adjustments on this page. Adjusting entries were introduced in chapter 3. When recording these 10 adjusting entries please record them in the order provided 1-9a/b from book 1 page 2. Skip a line between each adjusting entry.
Page 9 of book 1 is the third general journal page. There is a note at the top of the page which says “Closing Entries Only”. When you get to step 9 from table 1 you will be preparing your closing entries on this page. The following exhibit from your ebook shows the closing process for a merchandising business. Use this template to help you with your “Closing Process”.
Note that Mountain Top has three revenue accounts (the example above has only 2) and you may have more and/or different expense accounts than those listed here. Your chart of accounts in book 2 will help in this process. All accounts in the right hand column plus the S H Pilot Drawing account will get closed in this process. Also the S H Pilot Capital account will get updated and the ending balance of the account should match the ending capital number from your “Statement of Owner’s Equity” (discussed later).
Page 11 of book 1 is the first of your 4 specialized journals. The “Sales Journal” is where all sales made on account (accounts receivable) are recorded. In the front of book 3 you will find a list of our regular customers (there are 8) that purchase from us on account. You will find these same 8 customers in the accounts receivable subsidiary ledger in the back of book 2 (more about that later). Specialized journals save time journalizing and posting by creating columns for accounts involved in the sales process so that a sale can be recorded on one line instead of four lines and posting can be done at the end as a total rather than each time a sale is made. The recording process will be covered later. For now note that the column labeled “Account Debited” will be regular customer names only in this column.
Pages 12 and 13 of book 1 are the “Purchases Journal” used to record the purchase of merchandise, supplies, and other miscellaneous items from our suppliers on account (accounts payable). Our regular suppliers are listed again in the front of book 3 below our regular customers (we have 6 regular suppliers). Note that the column labeled “Account Credited” will contain the names of our regular suppliers only.
Pages 14 and 15 of book 1 are the “Cash Receipts Journal”. There are several forms that are representations of checks written to Mountain Top Hardware for payments. Each time we receive checks (and the deposit slips for cash) we enter them in the “Cash Receipts Journal”. There are three types of transactions where cash is received. 1) Regular customers paying for invoices we have issued accompanying the merchandise we have sold to them (for these checks enter the customer name in the “Account Credited” column and utilize the “accounts receivable CR” and “Cash DR” columns to record the amount of the check (note that special journals may not need to use every column for each transaction, only the ones need to record each particular transaction. Update the subsidiary ledger for accounts receivable and place a check mark in the posting reference column of the “Cash Receipts Journal’ to indicate this update has occurred. 2) payment received for something other than a regular customer payment. There are two instances in this practice set where checks are received from a party that is not one of our regular customers (one is for rental of equipment – form 3 and one is for some store supplies we returned to Mile High Office Supply – form 25.) In both of these cases utilize the “other accounts CR” column and the “Cash DR” column. Make sure in the column that say “Account Credited” to write the general ledger account that is credited (“Rent Revenue” for the first one and “Store Supplies” for the second one. The posting reference should be the account number of these accounts from the general ledger). 3) once a week at the end of the week be deposit the cash from the retail store sales (form 14 is the first of these). We utilize the “Merch Inv CR/Cost of Merch Sold DR”, “Sales CR” and “Cash DR” columns to record these transactions (see specific form instructions in the back of book 3 for more details).
Page 16 of book 1 is the “Cash Payments Journal”. You are the bookkeeper for Mountain Top Hardware and part of your job will be to pay various parties. Payments are made to 1) regular suppliers for invoices for merchandise we have purchase 2) to purchase other asset 3) to pay bills for things like electric, advertising, etc. 4) re-imbursement of expenses like sales dinners 4) to pay the owner through the drawing account. Each time a payment is made, it is recorded in the “Cash Payments Journal” (additionally you will need to write a check from book 4 – more about that later). For payments to our regular supplies – write their name in the “Account Debited Column and the amount of the check in the “Accounts Payable DR” and “Cash CR” columns. For other payments write the name of the general ledger account utilized in the “Account Debited” column Use the “Other Accounts DR”: and “Cash CR” column to complete the transaction Note: the posting reference is a √ (indicating a subsidiary ledger is updated) for payment of suppliers and the general ledger account number for other payments).
Page 17 of book 1 is for step 3 of table 1 above. Once the transactions are recorded and the totals are posted to the general ledger (see video “What do I do once all the transactions are completed”) you will be ready to complete the unadjusted trial balance. Don’t forget the date at the top. Once this is complete, it is a good time to have your work checked before proceeding to the next step. If you are an online student and cannot make it to campus, you can take a picture of this page and email it to me for validation.
Page 18 of book 1 is for step 7 from table 1 above. Once you have journalized and posted your adjusting entries you will prepare an adjusted trial balance here. Note: You cannot complete this page until you have completed step 6 of the process. Don’t forget the date. These accounts and the balance provide on this page will provide the information needed to complete the financial statements on the following pages. This is also an excellent time to get your numbers checked again before proceeding to the next step (If you are taking the class on line, you can always take a picture of this page or any page with your smart phone and forward the picture to the instructor to check your work).
Financial Statements (Step 8 from table 1)
Page 20 of book 1 is a template for your “Income statement” (don’t forget the date). The following exhibit from your textbook will provide guidance for your Multi-step income statement.
This exhibit will help in understanding which columns numbers belong in as well as guidance for some additional titles that need to be included like “gross profit”, “total selling expenses”, etc. The chart of accounts in book 2 will help you identify the accounts, the order, and the categorization of the accounts that belong on this financial statement.
Page 21 of book 1 is a template for your “Statement of Owner’s Equity”. Don’t forget the date. The following exhibit from your textbook will refresh your memory for your statement.
Pages 22 and 23 provide templates for your “Balance Sheet”. The following exhibit will help guide you to get the numbers in the proper columns and assist with additional headings for categories and totals (sub-totals). Your chart of accounts in book 2 will help get accounts in the correct order and categories.
Note the exhibit shows the “report form” for a balance sheet (all one column). Your template utilizes the “account form” where assets are listed on the left hand page and liabilities and owners equity are listed on the right hand page.
Page 24 of book 1 provides a template for the “Post Closing Trial Balance”. Step 10 from table 1 above. This is your final step to complete the project. This trial balance should only contain accounts from the general ledger that have balances following the closing process (Asset, Liabilities, and S H Pilot Capital).
Book 2
Book 2 contains your “General Ledger” and your “Subsidiary Ledgers” for Accounts Receivable and Accounts Payable. All balances for accounts have been entered as of June 1. If the balance of the account is missing, this means there is no beginning balance for that account. If you add the balances of the “Accounts Receivable Subsidiary Ledger” this number will equal the balance of “Accounts Receivable” in the general ledger. This will be true for the Accounts Payable Subsidiary Ledger and the Accounts Payable General Ledger account. Subsidiary ledgers provide the details behind the corresponding general ledger account. All transaction will eventually make their way to the general ledger through the posting process.
Book 3
Book 3 contains the business forms that represent the 50 transactions you are required to complete for step 1 of the process that will allow you to then execute steps 2-10 of the accounting cycle. This project utilized the business forms method of identifying transactions. Your textbook and CNOW have utilized the narrative form of identifying transactions. You will be required (with help) to analyze a form and determine what needs to be done to record each transaction. Note that in the back of book 3 starting on page 21 there is assistance to help you step by step in completing the first 15 forms and provide you with heads up on other unique forms. Also note there are help videos in Moodle to guide you through specific types of transaction like credit memos and recording payroll. When all else fails you can get help from the instructor or the business department lab in Meyer 102.
Book 4
Book 4 is your checkbook. The beginning balance in your book is missing. You can find out how much money you have in the checking account by checking the “Cash” account in your general ledger (book 2). There are exactly 16 checks. This project requires you write exactly 16 checks – no more no less. You are expected to keep the check stubs updated and accurate as well as filling in and signing the checks. Do not remove the checks from the book. The last page contains a check stub without the check. This is provided to facilitate the final deposit and allow you to record the ending balance in your checkbook. This balance should match the ending balance in your cash account in the general ledger provided you have recorded all transactions, postings, and checks properly and updated balances correctly from stub to stub. It would be a good idea to check in at the end of each page in the checkbook (every four check) to see if your balances are correct and that all checks recorded are in the proper order (a requirement).
Now that we are familiar with the different books and what is contained and required for each – the following will provide some additional details on completing each of the ten steps of the accounting cycle for this project. Some of the material will be a duplication of information provided to this point, however much of it will provide further clarification and details.
After reviewing this additional guidance, you should be ready to start recording transactions. If you are unable to attend the sessions where I do this for you, you should refer to page 21 of book 3 for step by step instructions on how to record transactions.
Additional detailed guidance
Steps 1 and 2: Analyzing / Recording Transactions and Posting to the Ledgers
The process of completing this practice set begins with recording the 50 transactions provided in book 3.
There are five possible types of entries you may have to record. Recording of the transactions is executed using one of four special journals (discussed in detail below) or via the general journal (introduced in chapter 2 of your text and utilized to record all transactions to this point). Following every journal entry the student will be required to post an update to either a subsidiary ledger or the general ledger. Posting to subsidiary ledgers will increase or decrease the amount owed by one of our regular customers to Mountain Top in the accounts receivable subsidiary ledger (book 2 pages 14-16) or increase or decrease the amount Mountain Top owes to a supplier in the Accounts Payable subsidiary ledger (book 2 pages18-19). Increases to accounts receivable originate in the sales journal while decreases to accounts receivable originate in the cash receipts journal. Increases to accounts payable originate in the purchases journal while decreases originate in the cash payments journal. These subsidiary ledgers may also require updates from activity in the general journal.
The general flow of each entry begins with book 3 which, depending on the type of transaction, will prompt a recording in a journal in book 1, which in turn will trigger a ledger (general or subsidiary) update in book 2. Some transactions will also require that a check be written in book 4. The transaction will conclude back in book 3 where you should note in the margin what was done to complete that transaction (for example if the transaction was a sale you would record in the sales journal and update the accounts receivable subsidiary ledger). Directions on the recording of specific forms can be found in the back of book three. Those instructions will supplement this discussion.
Subsidiary Ledgers:
Subsidiary ledgers are impacted by regular customer and regular supplier transactions. The accounts receivable subsidiary ledger normal balance is a debit balance. Sales (in the sales journal) to regular customers increase the customer balance. Cash receipts (checks received in the cash receipts journal) from regular customers reduce the accounts receivable balances for customers. Accounts payable subsidiary ledger normal balance is a credit. Purchases (from the purchases journal) from regular suppliers increase the balance and cash payments (recorded in the cash payments journal) reduce the balance. Updating these subsidiary ledgers results in a checkmark in the posting reference column of the specialized or general journals. The total of accounts receivable subsidiary ledger accounts should equal the accounts receivable general ledger account balance. Likewise the total of accounts payable subsidiary ledger accounts should equal the accounts payable general ledger account balance once all transactions have been posted.
Special Journals
Special journals expedite the journalizing process by providing columns to record transactions that occur regularly. Special journals also expedite the posting process by only posting the column totals to the general ledger at the end of the month rather than following each transaction. Posting references for these post are recorded below the column total. For additional guidance, see chapter 5 or the video help titled “after the transactions are completed”. The following four transaction types utilize these special journals.
Sales Journal (book 1 page 11)
Sales on account to regular customers. These customers are listed on the inside cover of book 3. The transactions are generated as a result of invoices from Mountain Top Hardware that look like this:
These invoices include the information needed to record the transaction in the sales journal. You will need the date of the invoice to record in the date column. You will need the invoice number, the name of the customer the merchandise was sold to (enter this name in the “account debited” column), the discounted amount owed to Mountain Top Hardware (noted in script “net 2% discount $XXXX at the bottom of the invoice. This amount is recorded in the “Accounts Receivable Dr./Sales Cr.” Column. You will also need the cost of merchandise sold noted on the bottom of the invoice (Cost of Merchandise Sold: $YYYY), this amount is recorded in the “cost of merchandise sold dr. / merchandise inventory cr.” column.
Purchases Journal (book 1 pages 12 and 13)
Mountain Top purchases inventory, supplies, and other items from regular suppliers. These suppliers are listed on the inside cover of book 3. The invoices received for the purchases look similar to the invoice from Mountain Top Hardware shown above but have different company logos on them. These invoices have a date received stamped on them. This is the date you will record in the purchases journal as the transaction date. Enter the supplier name in the “account credited” column. The “accounts payable cr.” column is where the total amount owed to the seller is recorded. If a discount is offered it is noted at the bottom of the invoice, otherwise the total amount from the invoice is the amount owed. Some of the purchases are completely inventory. Other purchases include inventory and supplies. One purchase includes inventory, supplies, and a display rack. Total inventory purchased from the invoice is recorded in the “merchandise inventory dr.” column. There is a column that the amount noted as supplies is recorded (supplies dr. column) and there is a section called “other accounts dr.” with a column to record the name of the account from the general ledger to charge the expense. Remember like all journal entries your total debit amount must equal your total credit amount and you must have at least one debit and one credit entry.
Cash Receipts Journal (book 1 pages 14 and 15)
Any time cash (checks are considered cash) is received it is recorded in the cash receipts journal. These receipts are usually in the form of checks. The checks contain information such as who is sending the payment and at the bottom left of the check there is an indication of what is being payed such as an invoice or other items. If the check is from one of our regular customers, enter the customer name in the “account credited” column. If the check is for something other than payment from a regular customer, then the general ledger account name being impacted is entered in this column. Payments from regular customers enter the amount of the check in “accounts receivable CR” column and in the “cash DR” column. For payment other than regular customers enter the amount in the “other accounts CR” column and “cash DR”. column. Posting is either to the subsidiary ledger to update the amount our regular customer owes or to the general ledger when checks received are for other than payment from regular customers. The other columns shown in the cash receipts journal are used for retail sales deposits made at the end of each week. Those transactions are described below.
Deposit slips – there are four sets, one for each week forms 14 and 15 are the first of these. Form 14 and those like it in each subsequent week include cash receipts of weekly sales that need recording in the cash receipts journal. The date is provided on the deposit slip which is already filled out. In the “Account credited” column enter “Cash Sales” and place a checkmark in the posting reference column. The deposit slip includes a handwritten note with the cost of merchandise sold amount to be entered in the column “Merch Inv CR/Cost of Merch. Sold DR”. The total amount of the deposit is entered in both the “Sales CR” and “Cash DR” columns. This form also requires that you record this deposit in your checkbook. Following this deposit slip is a blank deposit slip (form 15) provided to record the checks received each week (these checks are already recorded in the cash receipts journal as described in the paragraph above). This deposit slip is needed to deposit those checks in the bank and update the checkbook with this total deposit amount. There is a help video that describes how to execute these two forms. The forms help in the back of book 3 also provides guidance.
Cash Payments Journal (book 1 page 16)
Several forms in the practice set indicate payments need to be made. Most of them originate in a memo requesting an invoice or bill be paid. Toward the end of the transactions the bill itself is presented as a form and the bookkeeper (you) should know to issue a check to pay the bill and record the transaction in the cash payments journal. The bills indicated what general ledger account(s) should be charged to record the payment. All entries in the cash payments journal also require you to go to book 4 and write a check and update the check stubs with the proper information. Memos will provide the date of the transaction while bills will be stamped received with a date which becomes the transaction date. The column for check No. will include an entry from book 4 that indicated the check number used to satisfy the transaction. The “Account Debited” column will be either the name of one of our regular suppliers being paid, or the name of a general ledger account indicating an asset account or expense account being paid. If a general ledger account is being charged the amount is entered in the “other accounts DR” column. If a regular supplier is being paid the amount is entered in the “Accounts Payable Dr.” column. Regardless of the Debit, the amount of the check is entered in the “Cash CR” column. Help is available via video or forms help in the back of book 3 to assist in specifics of transactions.
Don’t forget that once all the transaction have been recorded, the columns of each special journal will be totaled and the total will be posted to the appropriate general ledger account. See chapter 5 for posting special journals or the video help in moodle.
Step 3: Unadjusted Trial Balance:
The effort you have just completed will have consumed about 75% of the time it will take to complete this project. HOWEVER you have only earned 30% of your final grade. Yes, I know, it doesn’t seem fair but hey life is not always fair. The point is don’t quit here. The remainder of what is left is the payoff for all that work. Once you have posted all your special journal column totals to the general ledger, it is time to start the unadjusted trial balance. This Unadjusted Trial Balance is in book 1 on page 17. Transfer the balances of each general ledger account to the Unadjusted Trial Balance. This is a good time to get your figures checked by your instructor or other support staff. For on line students you can take a picture of the unadjusted trial balance and send it to your instructor to validate your progress.
Step 4: Assemble and Analyze Adjustment Data
The data you will need to complete the adjusting process is found in book 1 page 2. Most of these adjustments should be familiar from chapter 3 of your textbook. The first adjustment listed in new. This adjustment is to inventory and is a result of “shrinkage” (inventory gets lost, stolen, or broken). Your general ledger balance should be more than the amount indicated by the physical count. This adjustment is meant to update the balance of the account to match to physical count number. You accomplish this by debiting cost of merchandise sold and crediting merchandise inventory for an amount that will cause the balance in the merchandise inventory to equal the physical count. Adjustments 2-6 should be very familiar. If you need additional guidance on these see chapter 3 of your textbook. Adjustment 7 is a debit to interest receivable and a credit to interest revenue. Adjustment 8 requires two debits and one credit. Adjustment 9 is new and in book 1 there is ample guidance provided with the adjusting entry. These adjusting amounts need to be journalized in book 1 page 8 and posted to the general ledger (see step 6 below).
Step 5: Prepare End of Period Spreadsheet
This step of the process is omitted move on to step 6.
Step 6: Journalize and Post Adjusting Entries (book 1 page 8)
Utilize the adjusting data provided in book 1 page 2 to assist in this process (step 4 above provides additional guidance). Please journalize the adjustments in the order provided in book 1 page 2. Once they are journalized, post these adjustments to the general ledger. Be sure to note (write adjusting entry) in the item column of the general ledger accounts.
Step 7: Prepare Adjusted Trial Balance
Once the adjustments are journalized and posted, prepare an adjusted trail balance using the updated general ledger account balances. This Adjusted Trial Balance is recorded in book 1 page 18. Use the Adjusted Trial Balance to assist in preparing the financial statements in step 8 below.
Step 8: Prepare Financial Statements
As we discovered in chapter 1 there are four financial statements. In this course we only address the first three: Income Statement, Statement of Owners Equity, and Balance Sheet (the Statement of Cash Flows is left to more advanced courses).
Templates are provided in book 1 pages 20-23 to record these financial statements.
Income Statement: The instructions to this practice set require a multi-step income statement. An example of one can be found in chapter 6 page 304 exhibit 11 in your textbook (also provided earlier in this document). Your chart of accounts (book 2 inside cover) is also valuable in helping organize and record this financial statement correctly. The example in your textbook will help you understand which columns the numbers should be recorded in and additional titles for totals and sub-totals.
Statement of Owners Equity: The statement of owner’s equity is very straight forward. Textbook page 305 Exhibit 13 provides an example if you need a refresher from chapter 1 (also provided earlier in this document).
Balance Sheet: The instructions to this practice set require a classified balance sheet. Your textbook provides an example on page 306 exhibit 14 (also provided earlier in this document). The textbook version is in the “report form” (assets on top, followed by liabilities, and then owner’s equity). The template provided is in the “account form” (assets on the left page, liabilities and owner’s equity on the right page). Additional help can be provided using the chart of accounts (book 2 inside cover).
All of the data (numbers needed) to complete these financial statements can be obtained from your Adjusted Trial Balance. Don’t’ forget to add the dates on proper form.
Step 9: Journalize and Post the Closing Entries (book 1 page 9)
The closing process is explained in chapter 4 of your textbook. Additional help about closing merchandising accounts can be found in chapter 6 on page 307 (also provided earlier in this document). Your chart of accounts can be helpful. All accounts in the right hand column will be closed in the first step of the closing process. Additionally the drawing account will be closed in the second step of the process. The closing process accomplished two things: 1) it resets the balance of temporary accounts to zero in preparation for the next accounting cycle and 2) it updates the balance of the capital account to match the ending capital calculated in the statement of owner’s equity. Remember to journalize AND post to the general ledger. When posting to the general ledger it should be noted in the “item” column that this is a “closing entry”.
Step 10 Prepare a Post Closing Trial Balance (book 1 page 24)
The final step in the accounting cycle is to prepare a post closing trial balance. Only permanent accounts (assets, liabilities, and owners capital) will have balances. Book 1 page 22 provides the template to complete this task. See chapter 4 if you need a refresher on post closing trial balance. Don’t forge the date.
Final words
This process is important to re-enforce the accounting cycle examined in chapters 1-4 and to introduced special journals (chapter 5) and merchandising business (chapter 6). There are no other assignments due during the time you are working on this practice set. It can appear overwhelming but steady progress each day will get you to the finish line on time. Procrastination will result in heart ache and stress.
Your instructor and support staff are available to help with questions and to check progress along the way. If you ask for help, you will get it. If you do not ask, we cannot read your mind and you will struggle. For distance learning students – The face to face kick off session will provide great help and assistance. If you are unable to attend, help is available via email (take pictures of pages and forward), telephone calls also work well, or your can schedule a time to meet face to face. Good luck and please ask if you do not understand something.
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