Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Completing the
Accounting Cycle
Chapter
4-1
Study
Study Objectives
Objectives
1.
Prepare a worksheet.
2.
3.
4.
5.
6.
Chapter
4-2
Completing
Completing the
the Accounting
Accounting Cycle
Cycle
Using a
Worksheet
Steps in
preparation
Preparing
financial
statements
Preparing
adjusting entries
Chapter
4-3
Closing the
Books
Preparing
closing entries
Posting closing
entries
Preparing a
post-closing trial
balance
Summary of
Accounting
Cycle
Reversing
entriesAn
optional step
Correcting
entriesAn
avoidable step
Classified
Balance Sheet
Current assets
Long-term
investments
Property, plant,
and equipment
Intangible assets
Current liabilities
Long-term
liabilities
Owners equity
Using
Using AA Worksheet
Worksheet
Worksheet
A multiple-column form used in preparing
financial statements.
Not a permanent accounting record.
Five step process.
Use of worksheet is optional.
Chapter
4-4
SO 1 Prepare a worksheet.
Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
Illustration 4-1
Chapter
4-5
SO 1 Prepare a worksheet.
Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
Illustration: The trial balance for Undercover Roofing for
the month ended March 31, 2010, is as follows.
Other data:
1. Supplies on hand total $140.
2. Depreciation for March is
$200.
3. Unearned revenue amounted
to $130 on March 31.
4. Accrued salaries are $350.
Instructions
a. Prepare and complete the
worksheet.
Chapter
4-6
SO 1 Prepare a worksheet.
Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
1. Prepare a Trial Balance on the Worksheet
Account Titles
Cash
Accounts Receivable
Roofing Supplies
Equipment
Accumulated Depreciation
Accounts Payable
Unearned Revenue
I. Spy, Capital
I. Spy, Drawing
Service Revenue
Salaries Expense
Miscellaneous Expense
Totals
Include all
accounts with
balances.
Chapter
4-7
Trial Balance
Dr.
Cr.
2,500
1,800
1,100
6,000
1,200
1,400
300
7,000
600
3,000
700
200
12,900
12,900
Adjustments
Dr.
Cr.
Adjusted
Trial Balance
Dr.
Cr.
Income
Statement
Dr.
Cr.
Balance Sheet
Dr.
Cr.
SO 1 Prepare a worksheet.
Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
2. Enter the Adjustments in the Adjustments Columns
Account Titles
Cash
Accounts Receivable
Roofing Supplies
Equipment
Accumulated Depreciation
Accounts Payable
Unearned Revenue
I. Spy, Capital
I. Spy, Drawing
Service Revenue
Salaries Expense
Miscellaneous Expense
Totals
Supplies Expense
Depreciation Expense
Salaries Payable
Totals
Chapter
4-8
Trial Balance
Adjustments
Dr.
Cr.
Dr.
Cr.
2,500
1,800
1,100
(a) 960
6,000
(b) 200
1,200
1,400
300 (c) 170
7,000
600
(c) 170
3,000
(d) 350
700
200
12,900
12,900
(a) 960
(b) 200
(d) 350
1,680
1,680
Add additional
accounts as
needed.
Adjusted
Trial Balance
Dr.
Cr.
Income
Statement
Dr.
Cr.
Balance Sheet
Dr.
Cr.
Adjustments Key:
(a) Supplies used.
(b) Depreciation expense.
(c) Service revenue earned.
(d) Salaries accrued.
Enter adjustment
amounts, total
adjustments columns,
and check for equality.
SO 1 Prepare a worksheet.
Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
3. Complete the Adjusted Trial Balance Columns
Account Titles
Cash
Accounts Receivable
Roofing Supplies
Equipment
Accumulated Depreciation
Accounts Payable
Unearned Revenue
I. Spy, Capital
I. Spy, Drawing
Service Revenue
Salaries Expense
Miscellaneous Expense
Totals
Supplies Expense
Depreciation Expense
Salaries Payable
Totals
Chapter
4-9
Trial Balance
Adjustments
Dr.
Cr.
Dr.
Cr.
2,500
1,800
1,100
(a) 960
6,000
(b) 200
1,200
1,400
300 (c) 170
7,000
600
(c) 170
3,000
(d) 350
700
200
12,900
12,900
(a) 960
(b) 200
(d) 350
1,680
1,680
Adjusted
Trial Balance
Dr.
Cr.
2,500
1,800
140
6,000
1,400
1,400
130
7,000
600
3,170
1,050
200
Income
Statement
Dr.
Cr.
Balance Sheet
Dr.
Cr.
960
200
13,450
350
13,450
SO 1 Prepare a worksheet.
Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
4. Extend Amounts to Financial Statement Columns
Account Titles
Cash
Accounts Receivable
Roofing Supplies
Equipment
Accumulated Depreciation
Accounts Payable
Unearned Revenue
I. Spy, Capital
I. Spy, Drawing
Service Revenue
Salaries Expense
Miscellaneous Expense
Totals
Supplies Expense
Depreciation Expense
Salaries Payable
Totals
Chapter
4-10
Trial Balance
Adjustments
Dr.
Cr.
Dr.
Cr.
2,500
1,800
1,100
(a) 960
6,000
(b) 200
1,200
1,400
300 (c) 170
7,000
600
(c) 170
3,000
(d) 350
700
200
12,900
12,900
(a) 960
(b) 200
(d) 350
1,680
1,680
Adjusted
Trial Balance
Dr.
Cr.
2,500
1,800
140
6,000
1,400
1,400
130
7,000
600
3,170
1,050
200
960
200
13,450
Income
Statement
Dr.
Cr.
Balance Sheet
Dr.
Cr.
3,170
1,050
200
960
200
350
13,450
2,410
3,170
SO 1 Prepare a worksheet.
Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
4. Extend Amounts to Financial Statement Columns
Account Titles
Cash
Accounts Receivable
Roofing Supplies
Equipment
Accumulated Depreciation
Accounts Payable
Unearned Revenue
I. Spy, Capital
I. Spy, Drawing
Service Revenue
Salaries Expense
Miscellaneous Expense
Totals
Supplies Expense
Depreciation Expense
Salaries Payable
Totals
Chapter
4-11
Trial Balance
Adjustments
Dr.
Cr.
Dr.
Cr.
2,500
1,800
1,100
(a) 960
6,000
(b) 200
1,200
1,400
300 (c) 170
7,000
600
(c) 170
3,000
(d) 350
700
200
12,900
12,900
(a) 960
(b) 200
(d) 350
1,680
1,680
Adjusted
Trial Balance
Dr.
Cr.
2,500
1,800
140
6,000
1,400
1,400
130
7,000
600
3,170
1,050
200
960
200
13,450
Income
Statement
Dr.
Cr.
Balance Sheet
Dr.
Cr.
2,500
1,800
140
6,000
1,400
1,400
130
7,000
600
3,170
1,050
200
960
200
350
13,450
2,410
3,170
11,040
350
10,280
SO 1 Prepare a worksheet.
Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
5. Total Columns, Compute Net Income (Loss)
Account Titles
Cash
Accounts Receivable
Roofing Supplies
Equipment
Accumulated Depreciation
Accounts Payable
Unearned Revenue
I. Spy, Capital
I. Spy, Drawing
Service Revenue
Salaries Expense
Miscellaneous Expense
Totals
Supplies Expense
Depreciation Expense
Salaries Payable
Totals
Net Income
Totals
Trial Balance
Adjustments
Dr.
Cr.
Dr.
Cr.
2,500
1,800
1,100
(a) 960
6,000
(b) 200
1,200
1,400
300 (c) 170
7,000
600
3,000
(c) 170
(d) 350
700
200
12,900
12,900
(a) 960
(b) 200
(d) 350
1,680
1,680
Adjusted
Trial Balance
Dr.
Cr.
2,500
1,800
140
6,000
1,400
1,400
130
7,000
600
3,170
1,050
200
960
200
13,450
Income
Statement
Dr.
Cr.
Balance Sheet
Dr.
Cr.
2,500
1,800
140
6,000
1,400
1,400
130
7,000
600
3,170
1,050
200
960
200
350
13,450
2,410
760
3,170
3,170
11,040
3,170
11,040
350
10,280
760
11,040
SO 1 Prepare a worksheet.
Steps
Steps in
in Preparing
Preparing aa Worksheet
Worksheet
Review Question
Net income is shown on a worksheet in the:
a. income statement debit column only.
b. balance sheet debit column only.
c. income statement credit column and balance
sheet debit column.
d. income statement debit column and balance
sheet credit column.
Chapter
4-13
SO 1 Prepare a worksheet.
Preparing
Preparing Financial
Financial Statements
Statements from
from aa Worksheet
Worksheet
Worksheet
Income statement is prepared from the
income statement columns.
Balance sheet and owners equity statement
are prepared from the balance sheet columns.
Companies journalize and post adjusting entries.
Chapter
4-14
SO 1 Prepare a worksheet.
Preparing
Preparing Financial
Financial Statements
Statements from
from aa Worksheet
Worksheet
b. Prepare an income statement for the month ended
March 31, 2010.
Chapter
4-15
SO 1 Prepare a worksheet.
Preparing
Preparing Financial
Financial Statements
Statements from
from aa Worksheet
Worksheet
b. Prepare an owners equity statement for the month
ended March 31, 2010.
Chapter
4-16
SO 1 Prepare a worksheet.
Preparing
Preparing Financial
Financial Statements
Statements from
from aa Worksheet
Worksheet
b. Prepare a balance sheet as of March 31, 2010.
Undercover
Roofing
Balance Sheet
March 31, 2010
Assets
Current assets
Cash
Accounts receivable
Roofing supplies
Total current assets
Property, plant, and equipment
Equipment
Less: Accumulated depreciation
Total assets
6,000
1,400
$
2,500
1,800
140
4,440
4,600
9,040
1,400
350
130
1,880
7,160
9,040
SO 1 Prepare a worksheet.
Preparing
Preparing Adjusting
Adjusting Entries
Entries from
from aa Worksheet
Worksheet
Adjusting Entries
The adjusting entries are prepared from the
adjustments columns of the worksheet.
Journalizing and posting of adjusting entries
follows the preparation of financial
statements when a worksheet is used.
Chapter
4-18
SO 1 Prepare a worksheet.
Preparing
Preparing Adjusting
Adjusting Entries
Entries from
from aa Worksheet
Worksheet
c. Journalize the adjusting entries from the
Date
Mar. 31
Account Title
Supplies expense
Ref.
Debit
960
Roofing supplies
Depreciation expense
960
200
Accumulated depreciation
Unearned revenue
200
170
Service revenue
Salaries expense
Salaries payable
Chapter
4-19
Credit
170
350
350
SO 1 Prepare a worksheet.
Preparing
Preparing Adjusting
Adjusting Entries
Entries from
from aa Worksheet
Worksheet
Discussion Question
Q4-2. Explain the purpose of the worksheet.
SO 1 Prepare a worksheet.
Closing
Closing the
the Books
Books
At the end of the accounting period, the company
makes the accounts ready for the next period.
Illustration 4-5
Chapter
4-21
Closing
Closing the
the Books
Books
Closing entries formally recognize, in the general
ledger, the transfer of
net income (or net loss) and
owners drawing
to owners capital.
Closing entries are only at the end of the annual
accounting period.
Chapter
4-22
Closing
Closing the
the Books
Books
Note:
Owners Drawing is closed
directly to Capital and not
to Income Summary
because Owners Drawing
is not an expense.
Chapter
4-23
Illustration 4-6
Owners Capital is a
permanent account; all
other accounts are
temporary accounts.
Closing
Closing the
the Books
Books
d. Journalize the closing entries from the financial
statement columns of the worksheet.
Closing
Entries
need
to be
Posted
Chapter
4-24
Service revenue
Income summary
3,170
Income summary
Salaries expense
Supplies expense
Depreciation expense
Miscellaneous expense
2,410
Income summary
I. Spy, Capital
760
I. Spy, Capital
I. Spy, Drawing
600
3,170
1,050
960
200
200
760
600
Preparing
Preparing aa Post-Closing
Post-Closing Trial
Trial Balance
Balance
Purpose is to prove the equality of the permanent
account balances after journalizing and posting of
closing entries.
All temporary accounts
will have zero balances.
Chapter
4-25
Account Titles
Cash
Accounts Receivable
Roofing Supplies
Equipment
Accumulated Depreciation
Accounts Payable
Salaries payable
Unearned Revenue
I. Spy, Capital
Totals
Post-Closing
Trial Balance
Dr.
Cr.
$ 2,500
1,800
140
6,000
$ 1,400
1,400
350
130
7,160
$ 10,440 $ 10,440
Chapter
4-26
Summary
Summary of
of the
the Accounting
Accounting Cycle
Cycle
1. Analyze business transactions
Chapter
4-27
Illustration 4-12
9. Prepare a post-closing
trial balance
2. Journalize the
transactions
7. Prepare financial
statements
Correcting
Correcting EntriesAn
EntriesAn Avoidable
Avoidable Step
Step
Correcting entries
are unnecessary if the records are error-free.
are made whenever an error is discovered.
must be posted before closing entries.
Instead of preparing a correcting entry, it is possible
to reverse the incorrect entry and then prepare the
correct entry.
Chapter
4-28
Correcting
Correcting EntriesAn
EntriesAn Avoidable
Avoidable Step
Step
BE4-9 At Batavia Company, the following errors were
discovered after the transactions had been journalized and
posted. Prepare the correcting entries.
1. A collection on account from a customer was recorded as a
debit to Cash and a credit to Service Revenue for $780.
Incorrect
entry
Cash
Correct
entry
Cash
Correcting
entry
Chapter
4-29
780
Service revenue
780
780
Accounts receivable
Service revenue
Accounts receivable
780
780
780
Correcting
Correcting EntriesAn
EntriesAn Avoidable
Avoidable Step
Step
BE4-9 At Batavia Company, the following errors were
discovered after the transactions had been journalized and
posted. Prepare the correcting entries.
2. The purchase of supplies on account for $1,570 was
recorded as a debit to Store Supplies and a credit to
Accounts Payable for $1,750.
Incorrect
entry
Store Supplies
Correct
entry
Store Supplies
Correcting
entry
Chapter
4-30
1,750
Accounts payable
1,750
1,570
Accounts payable
Accounts payable
Store Supplies
1,570
180
180
Chapter
4-31
The
The Classified
Classified Balance
Balance Sheet
Sheet
Presents a snapshot at a point in time.
To improve understanding, companies group
similar assets and similar liabilities together.
Standard Classifications
Illustration 4-17
Assets
Current assets
Long-term investments
Property, plant, and equipment
Intangible assets
Current liabilities
Long-term liabilities
Owners (Stockholders) equity
Chapter
4-32
The
The Classified
Classified Balance
Balance Sheet
Sheet
Current Assets
Assets that a company expects to convert to
cash or use up within one year or the
operating cycle, whichever is longer.
Operating cycle is the average time it takes
from the purchase of inventory to the
collection of cash from customers.
Chapter
4-33
The
The Classified
Classified Balance
Balance Sheet
Sheet
Current Assets
Illustration 4-19
The
The Classified
Classified Balance
Balance Sheet
Sheet
Review Question
Cash, and other resources that are reasonably
expected to be realized in cash or sold or
consumed in the business within one year or the
operating cycle, are called:
a. Current assets.
b. Intangible assets.
c. Long-term investments.
d. Property, plant, and equipment.
Chapter
4-35
The
The Classified
Classified Balance
Balance Sheet
Sheet
Long-Term Investments
Investments in stocks and bonds of other companies.
Investments in long-term assets such as land or
buildings that a company is not currently using in its
operating activities.
Illustration 4-20
Chapter
4-36
The
The Classified
Classified Balance
Balance Sheet
Sheet
The
The Classified
Classified Balance
Balance Sheet
Sheet
Chapter
4-38
The
The Classified
Classified Balance
Balance Sheet
Sheet
Intangible Assets
Assets that do not have physical substance.
Illustration 4-22
Chapter
4-39
The
The Classified
Classified Balance
Balance Sheet
Sheet
Review Question
Patents and copyrights are
a. Current assets.
b. Intangible assets.
c. Long-term investments.
d. Property, plant, and equipment.
Chapter
4-40
The
The Classified
Classified Balance
Balance Sheet
Sheet
Current Liabilities
Obligations the company is to pay within the
coming year.
Usually list notes payable first, followed by
accounts payable. Other items follow in order
of magnitude.
Liquidity - ability to pay obligations expected
to be due within the next year.
Chapter
4-41
The
The Classified
Classified Balance
Balance Sheet
Sheet
Current Liabilities
Chapter
4-42
Illustration 4-23
The
The Classified
Classified Balance
Balance Sheet
Sheet
Long-Term Liabilities
Obligations a company expects to pay after one year.
Illustration 4-24
Chapter
4-43
The
The Classified
Classified Balance
Balance Sheet
Sheet
Review Question
Which of the following is not a long-term
liability?
a. Bonds payable
b. Current maturities of long-term obligations
c. Long-term notes payable
d. Mortgages payable
Chapter
4-44
The
The Classified
Classified Balance
Balance Sheet
Sheet
Owners Equity
Proprietorship - one capital account.
Partnership - capital account for each partner.
Corporation - Capital Stock and Retained Earnings.
Illustration 4-25
Chapter
4-45
The
The Classified
Classified Balance
Balance Sheet
Sheet
Discussion Question
Q4-18. (a) What is the term used to describe
the owners equity section of a corporation? (b)
Identify the two owners equity accounts in a
corporation and indicate the purpose of each.
Reversing
Reversing Entries
Entries
Reversing Entries
It is often helpful to reverse some of the adjusting entries
before recording the regular transactions of the next
period.
Companies make a reversing entry at the beginning of the
next accounting period.
Each reversing entry is the exact opposite of the
adjusting entry made in the previous period.
The use of reversing entries does not change the
amounts reported in the financial statements.
Chapter
4-47
Reversing
Reversing Entries
Entries
E4-18 LaBamba Company pays salaries of $10,000 every
Monday for the preceding 5-day week (Monday through
Friday). Assume December 31 falls on a Tuesday, so
LaBambas employes have worked 2 days without being paid.
Instructions
a.
Reversing
Reversing Entries
Entries
E4-18 a. Assume the company does not use reversing
entries. Prepare the December 31 adjusting entry and the
entry on Monday, January 6, when LaBamba pays the
payroll.
Chapter
4-49
Reversing
Reversing Entries
Entries
E4-18 b. Assume the company does use reversing
entries. Prepare the December 31 adjusting entry, the
January 1 reversing entry, and the entry on Monday,
January 6, when LaBamba pays the payroll.
Chapter
4-50
Reversing
Reversing Entries
Entries
Chapter
4-51
Illustration 4A-1
Copyright
Copyright
Copyright 2009 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted
in Section 117 of the 1976 United States Copyright Act
without the express written permission of the copyright owner
is unlawful. Request for further information should be
addressed to the Permissions Department, John Wiley & Sons,
Inc. The purchaser may make back-up copies for his/her own
use only and not for distribution or resale. The Publisher
assumes no responsibility for errors, omissions, or damages,
caused by the use of these programs or from the use of the
information contained herein.
Chapter
4-52