Post-Closing Trial Balance (តារាងតុល្យការណ៍សាកល្បងបន្ទាប់ពីបិទបញ្ជីគណនេយ្យ)

Post-Closing Trial Balance (តារាងតុល្យការណ៍សាកល្បងបន្ទាប់ពីបិទបញ្ជីគណនេយ្យ)

A post-closing trial balance is a list of balances of ledger accounts prepared after closing entrieshave been passed and posted to the ledger accounts. Since the closing entries transfer the balances of temporary accounts (i.e. expense,revenue, gain, dividend and withdrawal accounts) to the retained earnings account, the new balances of temporary accounts are zero and therefore they are not listed on a post-closing trial balance. However, all the other accounts having non-negative balances are listed including the retained earnings account.

The preparation of post-closing trial balance is the last step of the accounting cycle and its purpose is to be sure that sum of debits equal the sum of credits before the start of new accounting period. It provides the openings balances for the ledger accounts of the new accounting period.

Example

The following post-closing trial balance was prepared after posting the closing entries of Company A to its general ledger and calculating new account balances:

Company A
Adjusted Trial Balance
January 31, 2010
	Debit	Credit
Cash	$20,430	−
Accounts Receivable	5,900	−
Office Supplies	4,320	−
Prepaid Rent	24,000	−
Equipment	80,000	−
Accumulated Depreciation	−	$1,100
Accounts Payable	−	5,200
Utilities Payable	−	3,964
Unearned Revenue	−	1,000
Interest Payable	−	150
Notes Payable	−	20,000
Common Stock	−	100,000
Retained Earnings	−	3,236
Total	$134,650	$134,650

This is the end of the accounting cycle. In the next accounting period, the accounting cycle will be repeated again starting from the preparation of journal entries i.e. the first step of accounting cycle.

Closing Entries (បិទបញ្ជីគណនេយ្យ)

Closing Entries (បិទបញ្ជីគណនេយ្យ)

Closing entries are journal entries made at the end of an accounting period which transfer the balances of temporary accounts to permanent accounts. Closing entries are based on the account balances in an adjusted trial balance.

Temporary accounts include:

1. Revenue, Income and Gain Accounts
2. Expense and Loss Accounts
3. Dividend, Drawings or Withdrawals Accounts
4. Income Summary Account

The permanent account to which balances are transferred depend upon the type of business. In case of a company, retained earnings account, and in case of a firm or a sole proprietorship, owner's capital account receives the balances of temporary accounts.

Income summary account is a temporary account which facilitates the closing process.

Closing entries are better explained via an example.

Example

The following example shows the closing entries based on the adjusted trial balance of Company A.

Note	Date	Account	Debit	Credit
1	Jan 31	Service Revenue	85,600
		Income Summary		85,600
2	Jan 31	Income Summary	77,364
		Wages Expense		38,200
		Supplies Expense		18,480
		Rent Expense		12,000
		Miscellaneous Expense		3,470
		Electricity Expense		2,470
		Telephone Expense		1,494
		Depreciation Expense		1,100
		Interest Expense		150
3	Jan 31	Income Summary	8,236
		Retained Earnings		8,236
4	Jan 31	Retained Earnings	5,000
		Dividend		5,000

Notes

1. Service revenue account is debited and its balance it credited to income summary account. If a business has other income accounts, for example gain on sale account, then the debit side of the first closing entry will also include the gain on sale account and the income summary account will be credited for the sum of all income accounts.
2. Each expense account is credited and the income summary is debited for the sum of the balances of expense accounts. This will reduce the balance in income summary account.
3. Income summary account is debited and retained earnings account is credited for the an amount equal to the excess of service revenue over total expenses i.e. the net balance in income summary account after posting the first two closing entries. In this case $85,600 − $77,364 = $8,236. Please note that, if the balance in income summary account is negative at this stage, this closing entry will be opposite i.e. debit to retained earnings and credit to income summary.
4. The last closing entry transfers the dividend or withdrawal account balance to the retained earnings account. Since dividend and withdrawal accounts are contra to the retained earnings account, they reduce the balance in the retained earnings.

The last step of an accounting cycle is to prepare post-closing trial balance.

Income Summary Account (គណនីសរុបលទ្ធផល)

Income Summary Account (គណនីសរុបលទ្ធផល)

Income summary account is a ledger account used in the closing stage of the accounting cycle. It holds all income and expense balances and helps in determining net income or net loss for the period. The net balance of the income summary account is transferred to the retained earnings account.

In the closing stage, all revenue accounts are transferred to the income summary account by debiting the individual revenue accounts by their closing balance and crediting the corresponding balance to the income summary account. Similarly, all expense accounts are transferred to the income summary account by crediting the individual accounts by their closing balance and debiting the corresponding balance to the income summary account.

If the credit balance of the income summary account is greater than the debit balance, the excess is a net income but if the debit balance is higher than the credit balance, it represents a net loss.

A net income is transferred to retained earnings by debiting income summary account and crediting retained earnings account while a net loss is transferred by crediting income summary account and debiting retained earnings account.

Example

In the financial year 2014, PC Ltd. had total revenues of $20 million. It used three expense accounts with the following balances:

Cost of goods sold	$8 million
Selling expense	$4 million
Administrative expense	$2 million
Finance cost	$1 million

Post the transactions to the income summary account and close the income summary account.

Solution

Please revise journalizing closing entries here.

Here income summary account has a net credit balance which means that the company has a net income of $5 million.

The income summary account is closed by taking the net balance to retained earnings as follows:

Income Summary Account
Cost of goods sold	8,000,000	Revenues	20,000,000
Selling expense	4,000,000
Administrative expenses	2,000,000
Finance cost	1,000,000
		Balance	5,000,000

Income summary account	$5 million
Retained earnings		$5 million

Accounting Worksheet (សន្លឹកកិច្ចការគណនេយ្យ)

Accounting Worksheet (សន្លឹកកិច្ចការគណនេយ្យ)

An accounting worksheet is large table of data which may be prepared by accountants as an optional intermediate step in an accounting cycle. The main purpose of a worksheet is that it reduces the likelyhood of forgeting an adjustment and it reveals arithmatic errors. A worksheet acts as a tool for an accountant and it is not usually intented to be used by third parties. It is an informal document.

A typical worksheet consists of a column on the left showing main account titles and 10 more columns of debits and credits showing trial balance, adjustments, adjusted trial balance, incomes statement and balancesheet.

Example

The following example shows a worksheet based on the data from various pages of this chapter. Scroll the worksheet to the right to view all columns.

Account Title	Unadjusted Trial Balance		Adjustments		Adjusted Trial Balance		Income Statement		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$20,430				$20,430				$20,430
Accounts Receivable	5,900				5,900				5,900
Office Supplies	22,800			$18,480	4,320				4,320
Prepaid Rent	36,000			12,000	24,000				24,000
Equipment	80,000				80,000				80,000
Accumulated Depreciation				1,100		$1,100				$1,100
Accounts Payable		$5,200				5,200				5,200
Notes Payable		20,000				20,000				20,000
Utilities Payable		3,964				3,964				3,964
Interest Payable				150		150				150
Unearned Revenue		4,000	$3,000			1,000				1,000
Common Stock		100,000				100,000				100,000
Service Revenue		82,600		3,000		85,600		$85,600
Wages Expense	38,200				38,200		$38,200
Supplies Expense			18,480		18,480		18,480
Rent Expense			12,000		12,000		12,000
Depreciation Expense			1,100		1,100		1,100
Miscellaneous Expense	3,470				3,470		3,470
Electricity Expense	2,470				2,470		2,470
Telephone Expense	1,494				1,494		1,494
Dividend	5,000				5,000				5,000
Interest Expense			150		150		150
Totals	$215,764	$215,764	$34,730	$34,730	$217,014	$217,014	$77,364	$85,600	$139,650	$131,414
Net Income							8,236			8,236
							$85,600	$85,600	$139,650	$139,650

Balance Sheet (តារាងតុល្យការណ៍)

Balance Sheet (តារាងតុល្យការណ៍)

A balance sheet also known as the statement of financial position tells about the assets, liabilities and equity of a business at a specific point of time. It is a snapshot of a business.

A balance sheet is an extended form of the accounting equation. An accounting equation is:

Assets = Liabilities + Equity

Assets are the resources controlled by a business, equity is the obligation of the company to its owners and liabilities are the obligations of parties other than owners.

A balance sheet is named so because it lists all resources owned by the company and shows that it is equal to the sum of all liabilities and the equity balance.

A balance sheet has two formats: account form and report form.

An account form balance sheet is just like a T-account listing assets on the debit side and equity and liabilities on the right hand side. A report form balance sheet lists assets followed by liabilities and equity in vertical format.

The following example shows a simple balance sheet based on the post-closing trial balance of Company A.

Company A
Balance Sheet
As on December January 31, 2014
ASSETS			LIABILITIES AND EQUITY
Current Assets:			Liabilities:
Cash	$20,430		Accounts Payable	$5,200
Accounts Receivable	5,900		Utilities Payable	3,964
Office Supplies	4,320		Unearned Revenue	1,000
Prepaid Rent	24,000		Interest Payable	150
Total Current Assets	$54,650		Notes Payable	20,000
Non-Current Assets:			Total Liabilities	$30,314
Equipment	$80,000		Common Stock	100,000
Accumulated Depreciation	−1,100		Retained Earnings	3,236
Net Non-Current Assets	$78,900
Total Assets	$133,550		Total Liabilities and Equity	$133,550