to close all temporary accounts. (1) Explain why this process is required (15 points) and (2) provide an example of the closing of an expense account, Salary Expense in the form of a journal entry. (10 points) (Points : 25)
The Temporary Accounts must be closed at the end of each period for example at the end of each year to begin the following year, this ensures the new period begins at Zero.
Another example would be Car Sales, when 4th quarter ends the company is able to asses how much profits they earned during the previous years, and this data is also used to make trend reports and better predict sales.
Since Debits go first, I started with debiting Salary Expense and credit payroll
June 2017 l DR Salary Expense 5700
CR Payroll 5700
2. (TCO 2) If the two columns of a trial balance are equal, does it mean that there are no errors in the accounting records? Explain. (15 points) If the totals of the trial balance columns do not equal, what are some corrective actions that might be taken to find the error? (10 points) (Points : 25)
Well although both columns on the Trial Balance are equal this does NOT mean that it is error free. For example the Debit and credit can be reversed, the credit can be placed before the debit or both Assets and Liability accounts can be swapped.
If the the balance do not balance you can review the differences between the accounts review every single entry of all transactions. I would personally start from scratch.
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