Chapter 17Chapter 17

Recording Adjusting and Recording Adjusting and Closing Entries for a Closing Entries for a

PartnershipPartnership

Adjusting EntriesAdjusting Entries

We adjust accounts that we do not We adjust accounts that we do not change over a period of time. change over a period of time.

We bring those accounts up to date We bring those accounts up to date or “Adjust” them so that they are or “Adjust” them so that they are correct at the end of the year.correct at the end of the year.

Account Title Trial Balance Adjustments

  Debit Credit Debit Credit

Merchandise Inventory 270480     (a)15840

Supplies - Office 6480     (b)4730

Supplies - Store 6944     (c)3910

Prepaid Insurance 5800     (d)3170

         

Income Summary     (a)15840  

         

Insurance Expense     (d)3170  

         

Supplies Expense - Office     (b)4730  

Supplies Expense - Store     (c)3910  

Worksheet

General Journal Page 1

Date Account Title Doc No Post Ref Debit Credit

Adjusting Entries        

Dec 31 Income Summary     15840  

    Merchandise Inventory       15840

  31 Supplies Expense - Office     4730  

    Supplies - Office       4730

  31 Supplies Expense - Store     3910  

    Supplies - Store       3910

  31 Insurance Expense     3170  

    Prepaid Insurance       3170

Lets do the On Your Own on Lets do the On Your Own on Page 433Page 433

Date Account Title Doc. No Post Ref Debit CreditGeneral Journal

Dec 31

ADJUSTING ENT

INCOME SUMMARY

MERCH. INV 14400

14400SUPP EXPENSE - OFF 2130

2130SUPPLIES - OFFICE

SUPP EXPENSE - STORE

SUPPLIES - STORE

2210

2210

INSURANCE EXP

PREPAID INS

2890

2890

Closing EntriesClosing Entries

We have done this once before.We have done this once before. Here are the steps that we useHere are the steps that we use

Close all of the accounts in the Credit Close all of the accounts in the Credit column of the income statement column of the income statement column.column.

Please look at page 400 in Please look at page 400 in text booktext book

General Journal Page 2

Date Account Title Doc No Post Ref Debit Credit

    Closing Entries        

Dec 31 Sales     423120  

    Income Summary       423120

Close all credit balance accounts in the income statement column.

Do not forget to Post Reference all of this

Closing EntriesClosing Entries

We have done this once before.We have done this once before. Here are the steps that we useHere are the steps that we use

Close all of the accounts in the Credit Close all of the accounts in the Credit column of the income statement column of the income statement column.column.

Close all of the accounts in the Debit Close all of the accounts in the Debit column of the income statement column of the income statement column.column.

General Journal Page 2

Date Account Title Doc No Post Ref Debit Credit

    Closing Entries        

Dec 31 Sales     423120  

    Income Summary       423120

Dec 31 Income Summary     337664  

    Purchases       189960

    Advertising Expense       6600

    Credit Card Expense       3385

    Insurance Expense       3170

    Miscellaneous Expense       2584.15

    Payroll Taxes Expense       9105

    Rent Expense       21000

    Salary Expense       89400

    Supplies Expense - Office       4730

    Supplies Expense - Store       3910

    Utilities Expense       3820

Close all of the accounts in the Debit column of the income statement column.Close all of the accounts in the Debit column of the income statement column.

Closing EntriesClosing Entries

We have done this once before.We have done this once before. Here are the steps that we useHere are the steps that we use

Close all of the accounts in the Credit Close all of the accounts in the Credit column of the income statement column.column of the income statement column.

Close all of the accounts in the Debit Close all of the accounts in the Debit column of the income statement column.column of the income statement column.

Close the income summary into the Close the income summary into the capital accountscapital accounts

Omni Imports

Distribution of Net Income Statement

Karl Kohen  

50% of Net Income $ 34,807.93

Michelle Wu  

50 % of Net Income $ 34,807.93

Net Income $ 69,615.86

We need to take a look at our Distribution of net income and it should match what the balanceOf our income summary account is……From this point on we can not use the worksheet to get our information

General Journal Page 2

Date Account Title Doc No Post Ref Debit Credit

    Closing Entries        

Dec 31 Sales     423120  

    Income Summary       423120

Dec 31 Income Summary     337664  

    Purchases       189960

    Advertising Expense       6600

    Credit Card Expense       3385

    Insurance Expense       3170

    Miscellaneous Expense       2584.15

    Payroll Taxes Expense       9105

    Rent Expense       21000

    Salary Expense       89400

    Supplies Expense - Office       4730

    Supplies Expense - Store       3910

    Utilities Expense       3820

Dec 31 Income Summary     69615.85  

    Karl Kohen,Captial       34807.93

    Michelle Wu, Captial       34807.93

Closing EntriesClosing Entries

We have done this once before.We have done this once before. Here are the steps that we useHere are the steps that we use

Close all of the accounts in the Credit Close all of the accounts in the Credit column of the income statement column.column of the income statement column.

Close all of the accounts in the Debit Close all of the accounts in the Debit column of the income statement column.column of the income statement column.

Close the income summary into the capital Close the income summary into the capital accountsaccounts

Close the drawing accounts into the capital Close the drawing accounts into the capital accountsaccounts

We go back to the worksheet on page 400 and look at the drawing accounts. We need to Make those accounts zero.

General Journal Page 2

Date Account Title Doc No Post Ref Debit Credit

    Closing Entries        

Dec 31 Sales     423120  

    Income Summary       423120

Dec 31 Income Summary     337664  

    Purchases       189960

    Advertising Expense       6600

    Credit Card Expense       3385

    Insurance Expense       3170

    Miscellaneous Expense       2584.15

    Payroll Taxes Expense       9105

    Rent Expense       21000

    Salary Expense       89400

    Supplies Expense - Office       4730

    Supplies Expense - Store       3910

    Utilities Expense       3820

Dec 31 Income Summary     69615.85  

    Karl Kohen, Captial       34807.93

    Michelle Wu, Capital       34807.93

Dec 31 Karl Kohen, Capital     29100  

    Karl Kohen, Drawing       29100

  31 Michelle Wu, Capital     28800  

    Michelle Wu, Drawing       28800

Post-closing trial balancePost-closing trial balance

Now that we have closed all of the Now that we have closed all of the temporary accounts. temporary accounts.

We need to make sure that the rest We need to make sure that the rest of our permanent accounts are still of our permanent accounts are still in balance.in balance.

Encore Music

Post-Closing Trial Balance

August 31, 20xx

Account Title Debit Credit

Cash 29080.28  

Petty Cash 300  

Accounts Receivable 11198.4  

Merchandise Inventory 254640  

Supplies - Office 1750  

Supplies - Store 3034  

Prepaid Insurance 2630

Accounts Payable   12542.38

Employee Income Tax Payable   542

Social Security Tax Payable   985.4

Medicare Tax Payable   227.42

Sales Tax Payable   2112.05

Unemployment Tax Payable- Fed   8.4

Unemployment Tax Payable - State   56.7

Health Insurance Premiums payable   1008

U.S. Savings Bonds Payable   61

United Way Donations Payable   72

Karl Koehn, Capital   142457.93

Michelle Wu, Capital   142560.4

Totals 302632.68 302632.68

17-1,2,3,4,517-1,2,3,4,5