Department of Accounting Education

Mabini Street, Tagum City

Dav ao del Norte
Telefax: (084) 655-9591, Local 116

Big Picture in Focus: ULOb. Prepare the reports for completing the accounting
cycle.

M etalanguage

For you to demonstrate ULOb, you will need operational understanding of the terms
enumerated below.

Closing Entries the process of closing all the nominal account to the capital accounts

Reversing Entries the process of reversing the adjusting entry that increases the assets
and liabilities for smooth accounting period

Post-Closing Trial Balance the final trial balance that presents only real accounts.

Essential Knowledge

To perform the aforesaid big picture (unit learning outcomes), you need to fully understand
the following essential knowledge laid down in the succeeding pages. Please note that you
are not limited to exclusively refer to these resources. Thus, you are expected to utilize other
books, research articles and other resources that are available in the university’s library e.g.
ebrary, search.proquest.com etc., and even online tutorial websites.

1. ADJUSTMENTS ARE JOURNALIZED AND POSTED

a. The prepaid advertising of 180,000.00 represents Eighteen (18) months expenditure

made on November 1, 2019.

The entry would be:

Advertising Expense (180,000/18*5) 50,000.00
Prepaid Advertising 50,000.00
To adjust the prepaid advertising
From November 2019 to March 2020 = 5 months

b. The supplies are counted at the end of March 31, 2020 amounted to 65,000 from
270,000.00.

The entry would be:

Engineering Supplies Used (270,000-65,000) 205,000.00
Engineering Supplies 205,000.00
To adjust the Engineering Supplies

c. Depreciation expense for the year is computed based on straight line method using 20
years of life with salvage value of 50,000.00. The cost of the survey equipment is
2,050,000.00.

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 Department of Accounting Education
Mabini Street, Tagum City
Dav ao del Norte
Telefax: (084) 655-9591, Local 116

The entry would be:

Depreciation Expense – Survey Equip’t. 100,000.00
Accu.Depre. – Survey Equipment 100,000.00
To record depreciation
((2,050,000-50,000)/20)

d. The 40% of the 90,000.00 unearned survey revenue is earned during the period.

The entry would be:

Unearned Survey Revenue (90,000*.40) 36,000.00
Survey Revenue 36,000.00
To adjust the unearned survey revenue

e. The salaries still unpaid is worth 190,000.00

The entry would be:

Salaries Expense 190,000.00
Accrued Salaries Expense 190,000.00
To record the unpaid salaries.

f. Interest on the note of 650,000.00 is 12%.

The entry would be:

Interest Expense (650,000*.12) 78,000.00
Accrued Interest Expense 78,000.00
To record the unpaid interest.

2. CLOSING ENTRIES

This is the process of bringing the nominal or temporary accounts to zero. The temporary
accounts that are closed are the income, expenses and withdrawal.

The steps of closing accounts is the following:

1. Close the income accounts
2. Close the expense accounts
3. Close the income summary account
4. Close the withdrawal account

Close the income account:

2020
1/31 Survey Revenues 6,826,000.00
Income Summary 6,826,000.00
Closing of revenues

Close the expenses account:

2020
1/31 Income Summary 6,413,000.00

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 Department of Accounting Education
Mabini Street, Tagum City
Dav ao del Norte
Telefax: (084) 655-9591, Local 116

Salaries Expense 4,440,000.00

Rent Expense 1,040,000.00
Insurance Expense 320,000.00
Utilities Expense 120,000.00
Miscellaneous Expense 60,000.00
Advertising Expense 50,000.00
Engineering Supplies Used 205,000.00
Depre. Expense – Survey Equipment. 100,000.00
Interest Expense 78,000.00
Closing of expenses

Close the income summary account:

2020
1/31 Income Summary 413,000.00
Bensioroti, Capital 413,000.00
Closing of revenues

Close the income account:

2020
1/31 Bensioroti, Capital 900,000.00
Bensioroti, Withdrawals 900,000.00
Closing of revenues

3. POST-CLOSING TRIAL BALANCE

To ensure that error is not existent during the posting of adjusting and closing entries. This is
the final trial balance and presents only the permanent accounts.

Emiliano Bensioroti Surveying Firm

Trial Balance
March 31, 2020

Account Titles Debit Credit

Cash 295,000.00
Accounts Receivables 1,750,000.00
Prepaid Advertising 130,000.00
Engineering Supplies 65,000.00
Survey Equipment 2,050,000.00
Accum. Depre. - Survey Equipment 750,000.00
Accounts Payable 240,000.00
Unearned Survey Revenues 54,000.00
Accrued Interest Expense 78,000.00
Accrued Salaries Expense 190,000.00
Notes Payable 650,000.00
Bensioroti, Capital 2,328,000.00

TOTALS 4,290,000.00 4,290,000.00

4. REVERSING ENTRIES ARE JOURNALIZED AND POSTED

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 Department of Accounting Education
Mabini Street, Tagum City
Dav ao del Norte
Telefax: (084) 655-9591, Local 116

Reversing the entry from the adjustment is done by some of the companies but this process
is optional as the last step of accounting cycle is the preparation of post-closing trial balance.
This is an entry that is exactly opposite to what is the adjusting entry are made. This is a
bookkeeping technique that simplify the recording of regular transactions for the next
accounting period.

The adjusting entry that are needed to be reversed are the entry that increased an asset or
a liability accounts means that all accruals are reverses and deferral that are initially recorded
in income statement method or the income method and the expense method of journalizing
transactions are reversed.

Illustration:
a. Is not reversed as it does not increase assets nor liabilities. The adjustment decrease
the assets.
b. Is not reversed as it does not increase assets nor liabilities. The adjustment decrease
the asets.
c. Is not reversed as it does not increase assets nor liabilities. The adjustment decrease
the assets.
d. Is not reversed as it does not increase assets nor liabilities. The adjustment decrease
the assets.
e. The reversing entry would be:
Accrued Salaries Expense 190,000.00
Salaries Expense 190,000.00
To reverse the accrued salaries

This adjusting entry are reversed as the adjusting entry increases the liability of the firm.
f. The reversing entry would be:
Accrued Interest Expense 78,000.00
Interest Expense 78,000.00
To reverse the accrued salaries

This adjusting entry are reversed as the adjusting entry increases the liability of the firm.

Self-Help: You can also refer to the sources below to help you
further understand the lesson.

You can also refer to the sources below to help you further understand the
lesson:
Ballada, W. and Ballada, S. (2018). Basic finacial accounting and repoting (21st
ed.). Manila: DomDane Publishers.
Ballada, W .and Ballada, S. (2015). Basic accounting: made easy (2015 ed.).
Manila: DomDane Publishers.
Lopez, R. M. (2016). Basic accounting for non-accountants: simplified
approach.(2016 ed., Vol. 1). Ma-a, Davao City: MS Lopez Printing & Pub.

Note:

The content of this manual is based on the textbook for ACC 111 titled “Basic Financial
Accounting and Reporting” by Ballada, Win, CPA, CBE, MBA and Ballada, Susan, CPA

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 Department of Accounting Education
Mabini Street, Tagum City
Dav ao del Norte
Telefax: (084) 655-9591, Local 116

Let’s Check!
I. Questions:
1. What is closing entry?
________________________________________________________
________________________________________________________
________________________________________________________
2. What is reversing entry?
________________________________________________________
________________________________________________________
________________________________________________________

3. What is adjusted trial balance?

________________________________________________________
________________________________________________________
________________________________________________________

4. What is post-closing trial balance?

________________________________________________________
________________________________________________________
________________________________________________________

II. True or False

1. The balance sheet is known as the statement of financial position
2. The statement of changes in equity discloses the withdrawals during the period.
3. Purchase of equipment is an example of financing activity.
4. The worksheet is prepared after the formal adjusting and closing entry.
5. Balance sheet cannot be prepared correctly until all the accounts have been
adjusted.

III. Multiple choice

1. Closing entries reduce the following type of accounts to a zero balance at the end
of the period.
a. income and expenses c. withdrawals
b. income summary d. all of the above

2. The closing entry for salaries expense, with a balance of P15, 000 is
a. Salaries expense 15, 000 c. Income summary 15,000
Income summary 15,000 Salaries expense 15,000
b. Salaries expense 15,000 d. Salaries payable 15,000
Salaries payable 15,000 Salaries expense 15,000
3. The purpose of the post-closing trial balance is to
a. provide the account balances for the preparation of the balance sheet.
b. ensure that the ledger is in balance for completion of the worksheet.
c. aid the journalizing and posting of the closing entries.
d. ensure that the ledger is in balance for the start of the next period.

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 Department of Accounting Education
Mabini Street, Tagum City
Dav ao del Norte
Telefax: (084) 655-9591, Local 116

4. Which of the following would appear on the post-closing trial balance?

a. building c. owner withdrawals
b. depreciation expense-building d. service revenues

5. If a trial balance were to be prepared on the first day of the new year, and the
account Salaries expense had a credit balance, you would know that
a. the trial balance is a post-closing trial balance.
b. the adjusting entries have been recorded.
c. the trial balance is an adjusted trial balance.
d. a reversing entry has been made.

6. Reversing entries are

a. optional.
b. made to record a change in corporate objectives.
c. required by generally accepted accounting principles.
d. made prior to preparing a post-closing trial balance.

7. Available data pertaining to single step income statement:

Net operating income P180,000
Other income 5,000
Operating expenses 300,000
Additional information: the company has a capital balance at the beginning of the
year of 65,000. What is the balance of the capital at the end of the year?
a. P485,000 b. P475,000 c. P250,000 d. P185,000

8. Total revenue of Pogi Service for the period is P250,000. All are on cash basis
except for the accounts receivable of P50,000 and notes receivable of P20,000.
Pertaining to the above, the capital of Pogi is increased by
a. P250,000 b. P230,000 c. P200,000 d. P180,000

Let’s Analyze!
Problem 1.
For the next 3 questions:
CJ Realty Company had the following balance sheet accounts and balances:

Accounts payable P60,000 Equipment P70,000

Accounts receivable 10,000 CJ, Capital ?
Building ? Land 70,000
Cash 30,000

1. If the balance of CJ, Capital account was P210,000, what would be the balance of the
Building account?
a. P 250,000 c. P 90,000
b. P 40,000 d. P 210,000

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 Department of Accounting Education
Mabini Street, Tagum City
Dav ao del Norte
Telefax: (084) 655-9591, Local 116

2. If the balance of the Building account was P150,000 and the equipment was sold for
P70,000, what would be the total of owner’s equity?
a. P 150,000 c. P 270,000
b. P 160,000 d. P 330,000

3. If the balance of the Building account was P80,000 and P30,000 of Accounts payable
were paid in cash, what would be the total liabilities and owner’s equity?
a. P 140,000 c. P 190,000
b. P 180,000 d. P 230,000

Problem 2.
For the next Five (5) Questions:
The following is the adjusted trial balance of Kalog:

Dr Cr
Cash P 5,000
Accounts receivable 60,000
Rent deposit 3,000
Accounts payable P 20,000
Accrued salaries payable 3,000
Kalog, Capital 25,000
Kalog, Drawing 2,000
Salaries expense 60,000
Supplies expense 1,000
Rent expense 9,000
Professional fee 91,250
Interest income 750
Total 140,000 140,000

4. How many nominal and temporary accounts are in the trial balance?
a. 12 c. 6
b. 8 d. 5

5. How many are real accounts?

a. 12 c. 6
b. 8 d. 5

6. How much should be debited to income summary account as part of closing entries?
a. P92,000 c. P72,000
b. P73,000 d. P70,000

7. How much should be credited to income summary account as part of closing entries?
a. P92,000 c. P72,000
b. P73,000 d. P70,000

8. What is the post-closing balance of Kalog Capital?

a. P45,000 c. P20,000
b. P25,000 d. P 5,000

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 Department of Accounting Education
Mabini Street, Tagum City
Dav ao del Norte
Telefax: (084) 655-9591, Local 116

Problem 3.
DeceVid Company presents an unadjusted trial balance for the year ended December
31, 2020

DeceVid Company
Trial Balance
December 31, 2020

Cash 45,000
Accounts Receivables 156,000
Notes Receivables 360,000
Office Supplies 63,000
Land 300,000
Building 1,590,000
Accumulated Depreciation-Bldg. 254,000
Machinery and Equipment 2,150,000
Accumulated Depreciation-M and E. 612,000
Accounts Payable 213,000
Unearned Consulting Revenues 450,000
Mortgage Payable 1,000,000
Sarotory, Capital 1,855,000
Sarotory, Withdrawals 600,000
Consulting Revenues 2,208,000
Salaries Expenses 875,000
Repairs and Maintenance 116,000
Utilities Expense 200,000
Miscellaneous Expense 137,000
TOTAL 6,592,000 6,592,000

Additional information:
1. Office supplies inventory on hand is 21,000 at the end of the year.
2. One-third of the unearned consulting revenues has been earned at the end of
the year.
3. The depreciation of the building is 5% of the depreciable amount the building
has 90,000 salvage value.
4. The depreciation of the machinery and equipment is 3% of the depreciable
amount without salvage value.
5. The mortgage payable bearing an interest of 12% per annum. The mortgage
payable is made on July 31, 2020.
6. Salaries of 25,000 were accrued at the year end.
7. The notes receivable issued on August 31, 2020 and will be settled on June 1,
2020 and bearing an 18% interest.

Required:
1. Prepare closing Entries
2. Prepare Post-Closing Trial Balance.
3. Refer in the ULOa Let’s Analyze Problem 1, required number 1, prepare reversing
entries.

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 Department of Accounting Education
Mabini Street, Tagum City
Dav ao del Norte
Telefax: (084) 655-9591, Local 116

In a Nutshell

Activity 1. Indeed, the completion of accounting cycle provide an information for the financial
statement to be presented to the users. Based from the discussion and the learning exercises
that you have done, please feel free to write your arguments or lessons learned below. I have
indicated my arguments or lessons learned.

1. ________________________________________________________________
________________________________________________________________
__________________________________________________________

2. ________________________________________________________________
________________________________________________________________
__________________________________________________________

3. ________________________________________________________________
________________________________________________________________
__________________________________________________________

4. _______________________________________________________________
________________________________________________________________
__________________________________________________________

5. ________________________________________________________________
________________________________________________________________
__________________________________________________________

6. ________________________________________________________________
________________________________________________________________
__________________________________________________________

7. ________________________________________________________________
________________________________________________________________
__________________________________________________________

8. ________________________________________________________________
________________________________________________________________
__________________________________________________________

9. ________________________________________________________________
________________________________________________________________
__________________________________________________________

10. ________________________________________________________________
________________________________________________________________
__________________________________________________________

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 Department of Accounting Education
Mabini Street, Tagum City
Dav ao del Norte
Telefax: (084) 655-9591, Local 116

Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.

Keywords index
Closing Entries Reversing Entries
Nominal Accounts Post-Closing Trial Balance

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