Closing Entries: The journal entries recorded in the accounts books to close out the temporary accounts during the closing process are called closing entries. Rules of Journal Entry : To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital. To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital. Perpetual Inventory System: It is an inventory system wherein the accounts related to inventory are updated on each purchase and sale activity. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system. 1. To prepare: Closing entries in the books of Company C.

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Chapter 4, Problem 4PSA

To determine

Closing Entries:

The journal entries recorded in the accounts books to close out the temporary accounts during the closing process are called closing entries.

Rules of Journal Entry:

To increase the balance of account one needs to debit assets, expenses, losses and credit all the liabilities, revenues and gains including capital.

To decrease the balance of account credit all assets, expenses, losses and debit all liabilities, revenues and gains including capital.

Perpetual Inventory System:

It is an inventory system wherein the accounts related to inventory are updated on each purchase and sale activity. Quantities of inventory are updated on continuous basis. This can be done by integrating the inventory system to order entry and to the retail sale point of system.

1.

To prepare: Closing entries in the books of Company C.

2.

To determine

To compute: Ratio of sales returns by gross sales.

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Instructions: Using both periodic and perpetual inventory system, you are required to prepare the following: 1. Chart of Accounts 2. Comparative Journal Entries

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