Question

Now we are going to focus on: 8. Closing Entries – to clear out the temporary accounts, a balance of zero, in preparation for the next accounting cycle. 9. Preparing the Post Closing Trial Balance – to ensure that all temporary accounts were closed properly and permanent accounts remained in balance.

Watch the following 4 minute, 12 second video "How to Prepare Closing Entries and Prepare a Post Closing Trial Balance Accounting Principles" by Wiley.
After watching the video, submit your initial discussion , include the following:
Describe the closing process. Differentiate between permanent and temporary accounts. Outline the four steps in closing journal entries. Explain the importance of the closing process. Identify what a post-closing trial balance shows. Compare and contrast a post-closing trial balance and an unadjusted and adjusted trial balance.
150words max

Answer 1

The closing process moves balances from temporary to permanent accounts and includes four steps. Temporary accounts are closed to reset for the new period, while permanent ones carry forward.

Step-by-step explanation:

The closing process in accounting involves transferring the balances of temporary accounts to permanent accounts to prepare the ledger for the next accounting cycle.

Temporary accounts, such as revenues, expenses, and dividends, are used to track transactions within a fiscal year and are closed at the end of the period. In contrast, permanent accounts, like assets, liabilities, and equity, carry their end-of-period balances into the next period.

The closing process involves four main steps:

The importance of the closing process is to ensure accuracy and provide a clean slate for the new fiscal period.

The post-closing trial balance verifies that all temporary accounts have been closed and that the ledger is in balance for the next period, displaying only the permanent account balances.

When comparing a post-closing trial balance to an unadjusted and adjusted trial balance, the difference lies in the type of accounts they contain.

Unadjusted and adjusted trial balances include bothtemporary and permanent accounts and are used before closing entries are made. However, the post-closing trial balance contains only permanent accounts because temporary ones have been closed.