The full Accounting Cycle (AC) includes a total of ten steps which is discussed and illustrated among three chapters (2, 3 & 4). Step 9 of the AC is to record and post closing journal entries (CJE) (Similar to Step 1 and 2 but combined in 1 step) and is one of the major topic discussed in Chapter 4. For clarity reasons, step 9 will be split into 2 discussions, recording CJE (current discussion) and Posting CJE (next discussion).
The purpose of this discussion is to describe what is the purpose of recording CJE, explore how to close revenues/expenses and dividends, note effect on the Retained Earnings account in the closing process and make observations on what information must be included in CJE when they have been properly prepared.
Initial Post
Content
Post a full paragraph consisting of 3 full sentences describing why the closing process is needed. Closing must be performed on all temporary accounts (which consist of all revenues, all expenses, and Dividend). Use the following suggestions to guide your post:
Describe difference between temporary and permanent accounts. Is Retained Earnings a permanent or temporary account?
Select one closing entry you are going to focus your initial post on. Choose from closing revenues/expenses or Dividends.
For the closing entry you select… describe 1. what account(s) will you debit and credit and 2. how will you determine the amount you debit and credit. Please be as specific as possible as if you were teaching a friend on how to properly prepare the closing journal entry.
How does the closing entry you selected affect the Retained Earnings account? Explain Why?
If you understand the step well, please share what helps you or if you have difficulty understanding the step, please share what you used to overcome your initial difficulties. An example of what may help is to read and study the “Closing Entries” topic in Chapter 4 of the book.
The paragraph should contain at least 75 words.