Accounting 1: Program #14 – “Intro to Closing Journal Entries”

Alright right here we are once more lets jump right
in reason I obtained a lot I want to experience today the intro said the title claimed introduction
to closing journal entries we actually have a few last minute points in regards to phase
three changing journal entrances but we we'' ll try to get involved in phase 4 a little today which is shutting journal access so allow ' s go on as well as have a look at the research had you do. Oh well go on and also do them in the order I offered them to you I wanted you to check out web page one oh nine and do quick research study 3 eleven alright and also that got on profit margin wasn'' t it? Did you review that it was quite very easy? This is one more among those ratios at the end of the phase that they desired you to do desired you to analyze this is another method to determine an organization so allow'' s do that fast research 3 eleven and also that is discovered on page one nineteen quite quick and easy little example.Yang Firm reported web earnings of 3 7 9 2 five and web sales of three hundred as well as ninety thousand bucks for the internet duration or for the current year. Compute the Business ' s revenue margin and'analyze the internet result. The rivals gain an average earnings margin of fifteen percent. So taking an appearance at the Elmo the profit margins is computed by taking the three 7 nine two 5 earnings divided by sales, web sales of
three hundred as well as ninety thousand that offers us 9 factor seven -percent right? One method to interpret is to say that for every dollar that is record as income 9 factor 7 cents is earned as earnings ok as well as it ' s a lot less than the competitors correct? Now you constantly desire to recognize these ratios are these points you wish to be high or you wish to be low all various other things being equivalent revenue margin is constantly something you ' d intend to be high right? This is a very quick example, but I at least intend to present you to this ratio revenue margin it ' s rather
3 point 3 whoops I existed workout 3 factor

kind of behind then we need to get you to tutoring or obtain you'to the office hrs or.
Alright allow ' s take a look actual quick workout there aim three prepare adjusting. Ok a devaluation on the business ' s equipment of two thousand and also a eleven is. Alright allow ' s take an appearance at that that ' s our.
in December two thousand as well as a eleven before readjusting for the cost of any type of expired insurance coverage.
an analysis of the insurance coverage showed that thousand forty remains.So how much. insurance was consumed individuals
? Fifty nine sixty was made use of up so we lower our pre paid insurance coverage.

by attributing
it and we debit our insurance cost alright. Alright C the workplace supplies. had a three hundred debit balance December on two thousand ten and twenty 6 eighty. of office supplies
were purchased during the year. The December thirty one two thousand. And also eleven physical matter revealed three hundred and also fifty 4 of supplies available? What they did below is they did a little t account for workplace materials they place in. just how much was the beginning balance they place in how much was acquired what the ending. equilibrium and we have to state how much was consumed bear in mind when we did those? Well how much. was consumed? Twenty six twenty 6? Ok twenty 6 twenty 6 so we lowered our office. products and also we debit our materials cost is that right? Inquiries? Ok D one half. of the work pertaining to ten thousand bucks of cash obtained in innovative executed this.
duration so we can move that fifty percent 10 thousand or five thousand out of unearned revenue and. into earnings or cost income as they claim correct? Alright E the pre-paid insurance account had.
a fifty 6 hundred debit balance of December thirty one 2 thousand as well as eleven prior to.
adjusting for the price of run out insurance coverage an evaluation of the protection that 6 hundred.
bucks had expired now this set is worded in a different way isn ' t it? They are not telling.
us the ending equilibrium and also require us to back right into the quantity that was consumed and the amount. that was utilized up or expired is the quantity that obtains expensed in this case forty six. hundred bucks so we debit insurance coverage expenditure as well as we credit report pre-paid insurance right?
You. believe we well have any of these on the examination? Certainly we will certainly right so if you wear ' t recognize.
just how to do these how well do you assume you will do on the test? Not real well? Alright F wage cost of four thousand dollars has actually been sustained yet not paid since December.
thirty one two thousand as well as eleven so the AJE there is we debit wage ' s expense as well as we. credit rating wage ' s payable alright? Any type of questions on exercise three-three ok, no doubt on.
workout 3 alright awesome.Ok we obtained another that I gave you as research which I think.'is exercise there 6 ok is that right? Alright let ' s take an appearance this is among those. wage accrual one isn ' t it? Pablo
monitoring has 5 pert time

employees each of them. earn an hundred bucks each day. They are usually paid on Fridays for job completed. on Monday with Friday of the very same work of the very same week allows sort of fill this out. as we accompany I desire to make sure we understand. What is the everyday pay roll? As well as it claims there ' s. five staff members each of whom earn a hundred bucks per day so what is the everyday pay-roll? 5 hundred bucks ok. They were paid completely on Friday December twenty 8th two thousand. and eleven ok so let ' s go on Friday is December twenty eighth appropriate? So this will. Be December twenty eighth, twenty 9, thirty December has thirty one days? This is. January one, 2, three, 4, five, six, 7 and so forth right? They were paid. now for'that week of job is what its informing us fix? The next week the staff members. worked just four days since New Year ' s Day was an overdue holiday.Ok so now right
. here they did not function that day di they? That stayed house and viewed university football right
. as well as recuperated from their New Year ' s Eve celebration so they didn ' t work that day.
Just one and exactly how much is our daily payroll? 5 hundred dollars you with me did you obtain. And also they also want us to do
remember keep in mind at the calendar schedule ' ll get paid Friday.
credited right here okay so now what day will they make money them especially what? The 4th is that proper? So this is not an AJE yet this an journal entrance just how much. cash is going out on the January 4th?
Two thousand due to the fact that this day was an overdue vacation. They ' re'obtaining paid for one two three 4 times the everyday payroll five hundred. Incomes payable that ' s not a AJE.
will I offer a schedule? No I possibly wont however you can write one down actual fast the just. factor I do it right here if I do it fast it will be all messy but you can jot one down. I ' ll give you a tip
there are seven days a week ok Sunday, Monday, Tuesday, Wednesday,.
I claimed what do you mean
and as well as said January, February, March April, May he didn ' t know. Yeah no he simply didn ' t recognize.
He states I never ever truly memorized it and also I said you know what it ' s time to memorize ok.
or at some point you ' re mosting likely to miss your better half ' s wedding anniversary or something like that so alright I. thinks that ' s all the homework is that proper? No so alright inquiries? Any kind of inquiries? Yeah” I. appear to always compose salaries instead of salaries” I won ' t take of however attempt to once again the distinction. between is that salaries is kind'of an annual point versus wages its per hour but you know. I ' m not going to take off
for that but attempt'to do it. “And I composed solution income instead. of charge earnings” that ' s great'or might just place income ok so there ' s a little shake. room on some of those accounts? Any kind of various other inquiries? I ' m mosting likely to give you some a lot more.
phase 3 AJE research when I give you your homework today however we ' re going to relocate.
on chapter 4 ok. Alright oh wait I lied we have to speak about something else in phase. 3 we have a little left in chapter 3 I always neglect to do this part so. Take a. look at the chapter 3 power factors ok we discovered what a trial balance is? Now I didn ' t inform you this but actually what we were mentor is in phase 2 that is. what we call an unadjusted test balance due to the fact that we hadn ' t made the modifications yet right? Now this sort of a little worksheet and this is probably
mosting likely to be difficult to review for you. individuals at home you could desire to look at the PowerPoint '
s you printed off of what we have. here is let me see if I can get my guideline going here.In this column right below'we have. we have what we call the unadjusted test equilibrium it just claims test balance yet it. probably just state unadjusted test balance'which is just that the unadjusted trial. equilibrium currently what we do is the method that we can sort of see what ' s occurring with these.
When we make our AJEs they are in these center columns, adjustments. Ok its in these center. columns and for example I ' m not really great at creating with a

computer mouse I ask forgiveness that ' s. meant
to be AJE ok sorry regarding that however like right below we credited pre-paid insurance coverage.
for one hundred and down here we debited insurance coverage expenditure for one hundred you see that to make sure that ' s. where they published for that a person entrance for pre-paid insurance coverage that we made ok.And in entry B. they debited products expense for one oh five oh and also they credited supplies for one oh 5.
oh I won ' t go via every one however you can see what they ' ve done right? And after that what'.
Now we wear ' t do as numerous of these as we utilized to. Why do you believe because we don ' t treatment concerning. The readjusted that ' s why we are doing these AJEs deal with?
or an obligation account to its appropriate quantity as well as to either book or expenditure or profits so.
Makes sense? You can read concerning that in your publication I didn ' t desire.
to spend a great deal of time speaking about however once more I desire you to recognize once more we are making. these adjustments for these AJEs to adjust accounts so they ' ll be mirrored correctly. on the monetary statements ok.Alright audio great alright ok any type of inquiries on anything.
else in relation to that? I think I can look back at the computer system once more if you would certainly they.
Prepare the earnings statement and then you prepare the statement of equity as well as then. And I assume that ' s it and also after that well speak regarding earnings.
you some AJE chapter 3 homework simply to keep you on your toes ok excellent. Remember we.
are going to begin chapter four today your next examination is over phases three and also 4.
For you folks at residence it ' s in the curriculum.
you ' re weeding through that point as well as inspecting it and not allowing it accumulate way too much alright. Allow ' s have a look at chapter four and also'this is mosting likely to get on completing the account cycle. completing the account cycle.And the important point we are mosting likely to speak about in this chapter. is closing the journal access currently we simply spent a whole phase discussing changing. journal entries as well as currently we are mosting likely to start discussing shutting journal entrances. Listen. to me folks'those are 2 various things phase three changing journal access chapter. four shutting journal entrances.
Alright below ' s the bargain shutting process what it does is it. resets the accounts equilibriums to no at the end of the period. And were mosting likely to discover. it assists sum up a duration ' s
revenue as well as expenditure accounts as well as

something called the. income summary account ok.Alright you with me? Allow me provide you an instance have a look. at the Elmo allow ' s say you got a baseball video game going on as well as you have the home group versus. the site visitors group ok currently a baseball game has 9 innings is that
correct? Ok so let ' s. claim you recognize were experiencing this video game were maintaining track of runs nobody ratings the. Inning or the second inning or the 3rd inning the 4th inning the residence group scores. obtains two runs the visitors put on ' t get any kind of. Okay fifth inning nobody scores sixth inning. no one scores the seventh inning the residence team ratings one and the site visitors rack up three. Currently it ' s in fact connected 3 to 3 isn ' t it? Alright 8th inning no one ratings home team.
this should be no one correct me it ' s always site visitors as well as house on bottom right? Come one. folks but the exact same thing visitors versus home and after that the ninth inning the visitor ' s team. is up to bat they wear ' t rack up any type of runs home they score a run and also now what ' s the grand. Total three to 4, house team wins? And also we kept track during this game we
maintained. track of the runs and after that after the video game mores than for the home group we put one win correct? And also then
for the following video game do we keep an eye on all these runs and also stuff? No we begin again.
put on ' t we and we are mosting likely to play an entire brand-new ballgame and all that kind of things ok.
And also all that is that of the first game is kind of that mirrored up there? We. sort of cleared out the results of this game into a win loss scenario we have one win. as well as absolutely no losses right? Coming off of that the closing procedure if I checked out earnings'. declaration for sprint it would certainly inform me perhaps the profits and the expenses for the last. Year? Is it going to show me the incomes as well as expenses that, that firm has earned. since they started a hundred years ago or whenever they started no we kind of naturally. understand this but at some point we clean the slate tidy as well as we begin over again'and also we start. At no as well as begin constructing up our expenditures and also incomes? Has any person worked a sales. task where you obtained paid payments on your sales anybody no? well I had a pupil as soon as. that sold made use of autos and also it ' s much like it remains in the television shows as well as the flicks where they. have a white board up there as well as every body ' s name and every time you make a sale they place. your number there so with the month your wishing your number construct up and also your keeping. Track of how everyone ' s doing and its generally very competitive? After that what do you. believe they do throughout the next month with that said white board? They eliminate and also they begin again. again that ' s what the closing procedure is returning to the slides going back to the slides. the closing process resets incomes expenditure and also withdraw accounts to zero at the end of. the period and also it kind of purges the results of that duration into the earnings recap account.
as well as at some point a few other accounts now the initial thing we have to do we have to identify.
Ok this is important take
a look appearance your screen here right here allow get obtain drinkBeverage Alright there are irreversible accounts permanent accounts are not shut they are irreversible.
If you had cash in your bank that ' s a property for your, off the screen for a second Jake.
business correct? As well as let ' s say in December thirty initial two thousand as well as eleven you had.
You still have the money they put on ' t. no out your cash money account however it works that means with responsibilities to? Anna
let Allowed s say claim have a thirteen thousand dollars bucks loan financing December thirty.
have that responsibility or did they zero it out? You still have it we put on ' t close out properties. as well as liabilities do you
comprehend that? Nor do we shut out owner ' s capital we just close. out short-term accounts permanent accounts going back to the slide irreversible accounts.
do not shut those are our possessions, responsibilities, proprietor ' s funding.What do we close we close
our short-lived accounts short-term accounts are our profits accounts are expenditure accounts
our withdrawal accounts and our income recap account and also we sanctuary'' t discovered what that is I ' m going to educate you today. So the accounts we close are profits expenditures withdrawals and also income recap cool? Alright let'' s take look how this functions what we ' re mosting likely to do'and it ' s kind of mosting likely to be finest cited an example but the first thing we are mosting likely to do is close the revenue accounts the following thing we are mosting likely to do is close the cost accounts the 3rd point we are going to do after that is the earnings summary account and also the last point we are going to do is close the withdrawal accounts.Alright what we are

going to do allow
' s see below I want you to keep these 4 action in mind but were going to overcome an instance right here were mosting likely to resolve an example and also I assume it will be best found out that way ok. Let ' s simply take a real and I ' m simply showing you a partial ledger below.
I simply made up some accounts below some income some expense accounts and this is what we are taking a look at. For the period the company has two revenue accounts consulting revenue and also assorted profits and it has a credit score equilibrium of twenty two as well as five thousand and afterwards they have three cost accounts rent out expenditure advertising cost and also income cost account and also those have balance of eight thousand, fifteen hundred and five hundred. Ok what is the very first closing entrance that were going to make? What do we do what'' s the very first one? We close the earnings accounts so the very first thing we are mosting likely to do is shut the revenue accounts. Ok currently revenue accounts are regular debit or regular credit scores equilibrium account? They'' re normal credit so if we wish to shut those or zeroes those out what do we need to do? We have to debit them we have debit consulting earnings for twenty 2 thousand and also assorted income for five thousand as well as now those have zero
Ok what was the following ok any type of concern on the first closing entrance?
Our second closing entry is to shut the expenditure account. Currently do expenditure accounts have a normal
debit or credit history equilibrium account? They have a regular debit balance account so what do we have to
do to shut these out what do I need to do to shut lease cost? I have to
credit it for 8 thousand now it has a no balance. I need to credit score marketing expense
for fifteen hundred dollars now it

has a no balance.I need to credit rating salary expenditure for 5 hundred bucks now it has a no equilibrium. What'' s the journal entrance we make to achieve that? Well were mosting likely to debt rent cost advertising and marketing cost as well as income expenditure for eight thousand fifteen hundred and 5 hundred respectively now remember this is a journal entry this is the credit rating column this is the debit column you see what I'' m doing below? I just attributed those 3 expense accounts allow me pull it down right here so you can see it. I attributed these 3 expenditure accounts currently the debit how a lot does that amount to? Uh 10 thousand doesn'' t it? Ten thousand that ' s a 8 thousand so I believe its ten thousand and also what you think we debit? We debit earnings summary. Ok so have a look at the 2nd closing and the very first entrance entrance the first one we closed the profits accounts after that we closed the cost accounts take an appearance at that ask questions if you put on'' t understand, yet do you see what we ' re doing? You see what we'' re doing these are our closing entries we made this will certainly be the influences after they ' re published it to the journal and also indeed these temporary accounts have no equilibriums when we are all done does that make good sense? Ok what is the 3rd closing access we require to make? You know return as well as look at it what does it state? What does it say? Shut the revenue summary account right back there shut the income summary account to owners' ' funding right?' We ' ve done those very first entries currently we ' ve shut the profits account to earnings recap and we closed the expenditure account to income recap you with me? Alright currently what I want you to do or what I want to do is shut the income recap account to owner'' s. capital currently I still need to speak about that revenue summary a little bit but allow'' s go back right here. allow ' s do a t account for earnings recap, let'' s do a t account for income recap'I don ' t. want it to enter into that so I'' ll sort of keep it separate we credit it for twenty.
We debited for ten thousand you with me? What'' s
the. On the credit scores side.
correct? Currently let me ask you this do we understand if we have a take-home pay situation or do we.
“it seems we have an internet earnings' ' we have a net income. “because are revenues are higher than our expense very great Sarah.
are incomes looking back our revenues completed twenty seven thousand our expenses completed.
ten thousand so we have a net earnings of seventeen thousand wear'' t we? Profits are higher than.
costs currently our 3rd closing entry as this mentioned is to close revenue recap account.
to owners' ' funding correct? You with me? What do we do below? If I wish to shut this. earnings summary account and also I do what do I need to do to it? If I desire
to have this have. a no equilibrium what do I have to do with it? I need to debit it for just how much? Seventeen. thousand currently it has a no balance correct would you agree? Now the third closing access. the 3rd closing entrance would certainly be this is we close earnings summary to funding that we do. that by stating ok we are going to have to debit income summary for seventeen thousand. dollars and also what do we credit score remind of what I just say we shut it to capital.
that is our third closing entry.Ok take an appearance at those 3 currently I can'' t show
them. all on the display does this make any kind of feeling individuals? Closing access is one of those points.
You have to do a t account to recognize the amount that goes in.
thousand in that 3rd closing access this amount just stemmed from a t account. When.
I see these seizing amounts on your examinations I like to see a t account someplace in there.
after you'' ve the very first 2 so you know what totals up to place in the 3rd one make good sense? Inquiries now I know we are not done however are there any type of inquiry on the very first 3 closing.
access? Now come off that momentarily currently we have another closing access we'' ll do in. If we have a web loss or a net earnings scenario and also you stated accurately, a second I asked.
that we have an earnings circumstance is that correct? Take a look at that 3rd entry that.
closing entrance this ought to make good sense do you remember I asked you what are both points.
that enhanced capital what are both points that lowered resources and also all that and after that.
we learned the declaration of equity as well as we saw that earnings boosts funding remember.
that exactly how we done declarations of equity well capital is capital a typical debit or a normal.
credit history equilibrium account? It'' s a typical credit history equilibrium account therefore when we credit it in.
this third closing access what are we doing are we enhancing it or reducing it? You.
tell me? We'' re raising were attributing it'it ' s a credit report equilibrium account it ' s going up. its increasing that ought to make sense due to the fact that you informed me appropriately this is a take-home pay.
circumstance as well as wear'' t we understand from the declaration of equity that internet income increases capital.
Don'' t simply remember these in a feeling I wear'' t understand what he ' s is.
mistakes when I see lines there and I see points like overall no these are not a revenue.
statement these are closing journal access yet we close the earnings we needed to debit.
them since they had credit score equilibrium and we needed to zero them out we close the expenditure.
accounts by crediting them ok and we did this to earnings recap then we found out the.
equilibrium of income recap was and we needed to close it so that'' s our 3rd closing entrance. We had an internet revenue circumstance so it makes feeling that resources is being attributed or enhanced.
ok now some students have asked what is this income recap as well as they'' ve been great trainees.
now they'' re trained well into thinking the following ok we have a new account below I.
would like to know what type of account it is and also I wish to know If it is a debit or credit report.
balance account I need to know what financial declaration it is earnings summary is type of.
a funny little account because it'' s not truly it doesn ' t have a normal
debit or credit balance. account it ' s not located on any kind of economic statement it ' s simply type of a t account'that we utilize. it has a really short life it ' s a t make up the closing procedure then it gets zeroed. Out it ' s a short-lived account? Bear in mind the list of short-lived accounts it'' s among. the short-lived accounts and also it is zeroed out and afterwards were done with it doesn'' t program upon.
any kind of financial declaration it'' s not a typical debit or credit rating equilibrium account it'' s simply. sort of like a t account where we toss points for a while during the closing procedure does.
that make sense? Sort of strange I always sort of relate to a mixing dish you ever before make cookies? You ever make cookies Jessica? Ok what do you have you have a blending dish right you.
got a blending dish put your delicious chocolate chips in there you place your flour in there split.
A couple of eggs placed some vanilla in there placed some brownish sugar? And afterwards you blend it all.
up right blend all of it up in the mixing dish and after that you take it out of the blending dish.
You might do it but it ' s a great deal simpler. It'' s a debit balance account so what do we have to do to. Capital for 9 hundred dollars withdrawals has a typical debit balance account it'' s a. typical debit balance account, thus to close it we have to credit report there is no value.
that that a person is red as well as one is black except I selected up the wrong pen. Currently this should.
make good sense though cause did you simply inform as well as we'' re going to go over a pair of mins.
over ok I'' m not mosting likely to bill you additional, yet this must make feeling because isn'' t withdrawals. that decreases capital from the declaration of equity? As well as consider this fourth entry you.
told me credit scores balance account therefore when it is being debited we'' re lowering it right? Make good sense ok any concerns on those shutting entrances? “” I have a question since the earnings.
summary does it have a regular credit balance account if you have a bottom line would you simply.
do the journal entrance?”” yeah excellent concern Kim what she was asking what about in a net.
loss situation we'' re mosting likely to at some point do one that is an internet loss yet you'' re precisely.
right ok.So what I want you to focus on tonight people is this I want you to comprehend.
those 4 closing entrances does that make feeling? Allow me offer you your research ok.
what I desire you to do and currently bear in mind to use your job papers in the rear of your book.
are you8 people utilizing those? I assume they'' re extremely valuable I indicate not in the rear of the.
publication I believe they sell them individually put on'' t they? Make use of those work paper ' s you can constantly.
go back as well as see what exercise what you'' re expected to be dealing with but it will certainly provide.
you design templates and t accounts and also stuff.Ok for residence job I desire you to do work out 3. 2 currently this this is readjusting journal entrances ok so put on ' t get perplexed this is still phase. three readjusting journal entries. And also for phase four is what I want you to do is. I ' m going to provide you separate … I ' m going to offer you different instructions I desire. you to do exercise four 2, exercise 4 point 2 nevertheless allow ' s take a real quick. view on exercise four 2 it ' s down here.Exercise four two is'down here do you

see. it down right here? workout four 2 I desire you to not do what they ' re asking you to do now. this'is crucial I want you to use this workout four factor two as well as I want you to publish closing. access for that information. Post the four closing entries for this info does. that make good sense? Ignore the guidelines they are offering you put on ' t do that just make use of the. four point two details and post the four closing entries is anyone unclear on that? Ok so your homework is workout three factor 2 adjusting journal entrances and after that exercise. 4 point two with unique guidelines cool down? Alright thanks individual ' s see you

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