Chapter 7
Inventory: Merchandising Transactions
189
tools 4u
adjusted trial Balance
december 31, 2016
account titles
dr
Cr
Cash
$25,000
Accounts Receivable
18,000
Inventory
45,000
Prepaid expenses
12,000
equipment
180,000
Accumulated Depreciation
$60,000
Accounts Payable
34,000
unearned Revenue
8,000
Bank Loan
100,000
Sanders, Capital
48,000
Sales Revenue
200,000
Interest Revenue
8,000
Sales Returns & Allowances
4,000
Sales Discounts
2,000
Cost of Goods Sold
100,000
Depreciation expense
5,000
Interest expense
4,000
Rent expense
10,000
Salaries expense
40,000
Supplies expense
7,000
utilities expense
6,000
total
$458,000 $458,000
______________
fIGuRe 7.23
The steps to close the books of a merchandising company are similar to closing a service company.
Step 1 is to close the revenue account, as shown in Figure 7.24.
Journal
Page 1
date
2016
account title and explanation
debit Credit
Jan 31 Sales Revenue
200,000
Interest Revenue
8,000
Income Summary
208,000
Close revenue accounts
______________
fIGuRe 7.24
Step 2 is to close expenses. In this step, we will also close the two contra-revenue accounts (sales
returns and allowances and sales discounts) because they have debit balances like the rest of the
expense accounts.
