BUSINESS ACCT 212 week 8 final exam.

Question 1.1. (TCO 3) Closing temporary accounts is necessary at the end of the accounting period. (1) Explain the closing process, include each set of entries required (15 points) and (2) provide an example of closing the Dividend account in the form of a journal entry. (10 points). (Points : 25) Closing entries are journal entries used to empty temporary accounts at the end of a reporting period and transfer their balances into permanent accounts. The use of closing entries resets the temporary accounts to begin accumulating new transactions in the next period. Otherwise, the balances in these accounts would be incorrectly included in the totals for the following reporting period. The basic sequence is as follows: 1. Debit all revenues account and credit the income summary account, thereby clearing out the balances in revenue account. 2. Credit all expenses account, and debit the income summary account, thereby clearing out all the balances in expense account. 3. Close the income summary account to the retained earnings account. If there was a profit in the period, then this entry is a debit to that income summary account and a credit to the retained earnings account. If there was a loss in the period, then this entry is a credit to the income summary account and debit to the retained earnings account. The net result of these activities is to move the net profit or loss for the period into the retained earning account, which appears in the stockholder's equity section of the balance sheet. Since the income summary account is only a transitional account, it is also acceptable to close directly to the retained earnings account and bypass the income summary account entirely. Journal entry for closing dividend: Retained Earnings Account Debit To Dividends Account Credit 2. (TCO 2) As required to complete Course Project 1, one must follow the cycle that includes 10 steps to complete the accounting cycle. (1) Explain how information from the journal entries get into the ledger accounts (15 points) and (2) provide an example of information that would be transferred. (10 points) (Points : 25) The journal entries recorded during the first step provide information about which accounts are to be debited and which to be credited and also the size of the debit or credit. The debit and credit values of journal entries are transferred to ledger accounts one by one in such a way that debit amount of a journal entry is transferred to the debit side of the relevant ledger account and the credit amount is transferred to the credit side of the relevant ledger account. After posting all the journal entries, the balance of each account is calculated. The balance of an asset, expense, contra-liability and contra-equity account is calculated by subtracting the sum of its credit side from the sum of its debit side. The balance of a liability, equity and contra-asset account is calculated the opposite way by subtracting the sum of its debit side from the sum of its credit side. 4. (TCO 4) Thomas Manufacturing had 4 units of their product in inventory at $250 per unit to start the m