Summarize the end-of-period closing process by reinforcing the need to prepare a bank reconciliation and any adjusting entries necessary for the end of the year.
Use QuickBooks to balance the Cash general ledger with the bank statement and populate the account reconciliation report.
Create and record adjusting entries using different figures to measure the knowledge learned from previous chapters.
Verify that the account balances in the profit and loss statement, balance sheet, statement of cash flows, and trial balance match the check figures.
The end-of-the-month and end-of-the-year procedures for a merchandising company are much the same way as for a service business. The company first reconciles the monthly bank statement and then prepares the year-end adjusting entries. Refer to Chapter 4 of this Practice Set for the bank reconciliation procedures as an internal control for cash. It is important that the cash general ledger balance reconciles with the bank statement balance. The year-end adjusting entries are discussed in Chapter 3. The preparation of the financial statements follows after all adjusting entries have been posted which will present the true picture of what transpired in the course of the operations of the business. And Chapter 5 presents the financial statements and closing the accounting year. The only difference in the closing process of a merchandising company and a service business is that there are more temporary accounts in the merchandising company that will have to be closed. The contra to the revenue accounts and contra to the expense accounts are the additional accounts if being used in a merchandising company that do not appear in the service business. Refer to Chapter 5 for reviewing the closing procedures of a service business. To illustrate the closing procedures in a merchandising company, these are the “behind the scene” entries used in QuickBooks Pro: