Respond to the following in a minimum of 175 words:
We will continue our study this week of the accounting cycle for a service based company. Keep in mind the steps in the accounting cycle as we work through each week:
- Analyze business transactions
- Journalize the transactions
- Post journal entries to general ledger accounts
- Prepare a Worksheet
- 4a Prepare a Trial Balance in the Worksheet
- 4b Record Adjusting Entries in the Worksheet
- 4c Prepare Adjusted Trial Balance in the Worksheet
- 4d Complete and Balance the Balance Sheet and Income Statement columns in the Worksheet
5. Prepare the Four Basic Financial Statements (Income Statement, Owners Equity, Balance Sheet and Cash Flow) using data from the Worksheet
6. Record the adjusting entries in the General Journal and post to Ledger Accounts.
7. Record Closing Entries in General Journal and post to Ledger Accounts
8. Prepare Post-closing Trial Balance
9. Review the Financial Statements and Interpret the financial information
Step 7 of the Accounting Cycle is to journalize and post the closing entries.
On the last day of the fiscal year, a co-worker asks you to cut a check for $2,000 as a miscellaneous expense for supplies in order to complete a project for a VIP customer today. You notice the invoice looks a little different from other invoices that are usually processed. You know that by preparing the closing entries tomorrow, the miscellaneous expense will be set to zero for the beginning of the year.
Should you write this check today and record the expense or write the check tomorrow? How would the company be affected if the check is written and the invoice ends up being erroneous?
What are the four closing journal entries? Why are these necessary?