Chapter 6
The Accounting Cycle: Statements and Closing Entries
146
Direct Method
LIABILITIES
LIABILITIES
OWNER’S CAPITAL
OWNER’S CAPITAL
=
=
+
+
ASSETS
ASSETS
OWNER’S DRAWINGS
OWNER’S DRAWINGS
INCOME SUMMARY
REVENUES
REVENUES
EXPENSES
EXPENSES
Income Summary Method
________________
Figure 6.18
Remember, all journal entries must be posted to the general ledger. Assuming MP Consulting uses
the income summary method to close its books, Figure 6.19 shows how the ledger accounts would
look at the end of the period. All journal entries from the two previous chapters and the closing
entries from this chapter are reflected here. Notice that adjustments and closing entries include a
description to make them stand out in the ledger.
GENERAL LEDGER
Account: Cash
GL. No. 101
Date
Description
PR DR CR Balance
2016
Jan 1 Opening Balance
3,000 DR
Jan 2
J1
1,500
4,500 DR
Jan 3
J1
800 3,700 DR
Jan 4
J1
1,200 2,500 DR
Jan 5
J1
5,000
7,500 DR
Jan 7
J1
2,300 5,200 DR
Jan 16
J1
500 4,700 DR
Jan 19
J1
1,100
5,800 DR
Jan 30
J1
2,000 3,800 DR
Account: Accounts Receivable
GL. No. 105
Date
Description
PR DR CR Balance
2016
Jan 1 Opening Balance
1,200 DR
Jan 10
J1
1,800
3,000 DR
Jan 31 Adjustment
J2
1,000
4,000 DR
