Chapter 10: Closing Entries Flashcards Preview

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Flashcards in Chapter 10: Closing Entries Deck (7)
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1
Q

What has to happen to ledger accounts before financial statements can be prepared? (2)

A
  1. balanced

2. apply year end adjustments

2
Q

What is the fist step in the process of preparing financial statements?

A

open up another ledger account called the income and expense account (profit and loss account)

3
Q

What happens in the profit and loss account?

A

the business summarizes its results for the period by gathering together all ledger account balances relating to income and expenses.

4
Q

What happens with accounts that represent assets and liabilities (not income or expense)?

A

they are carried forward in the books of the business. they become opening balances for the next accounting period.

5
Q

When balances are brought forward what does a liability look like?

A

Credit balance brought forward

6
Q

When balances are brought forward what does an asset look like?

A

Debit balance brought forward

7
Q

What is collated into the capital account? (3)

A
  1. cash introduced by owner
  2. drawings made
  3. profit made