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Trial Balance, Adjusting Entries, adjusting balances, and Net Income or Loss.

Trial Balance, Adjusting Entries, adjusting balances, and Net Income or Loss. Case Development-Step 9: Trial Balance. Record the end of period General Ledger account balances in the Trial Balance columns of the worksheet. See General Ledger & Worksheet solutions. Adjusting Entries.

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Trial Balance, Adjusting Entries, adjusting balances, and Net Income or Loss.

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  1. Trial Balance, Adjusting Entries, adjusting balances, and Net Income or Loss.

  2. Case Development-Step 9: Trial Balance • Record the end of period General Ledger account balances in the Trial Balance columns of the worksheet. • See General Ledger & Worksheet solutions

  3. Adjusting Entries • Used to adjust account balances at the end of the fiscal period. • For purposes of the Mini-case this is one month • Brainstorm examples of situations that require accounts to be adjusted through an adjustment entry. • First entered into the Journal. • Identify these by inserting “Adjusting Entries” as a section title before the journalizing the adjusting entries. • After entering the adjusting entries in the Journal, they must be posted to the General Ledger and placed into the “Adjustments” column of the worksheet.

  4. Case Development-Step 10: Adjusting Entries • The sample case has one adjusting entry. • In the Multicolumn Journal write “Adjusting Entries” as a heading in the Item Column. • The rows that follow are used to record any necessary adjusting entries. • An inventory of supplies reveals $150 of supplies used during the month. • Debit Supplies Expense ($150) & credit Supplies ($150)

  5. Case Development-Step 10: Adjusting Entries (continued) • Post the two adjusting entries to the General Ledger. • Remember to put the Ledger account numbers in the PR (post reference) column. • After posting - record the adjusting entries in the Adjustment columns of the eight-column worksheet.

  6. Case Development-Step 11: Adjusted Balances • Use the adjusting entry values to update the account balances for each adjusted account. • Place the adjusted account balances, as well as all others, in the Balance Sheet or the Income Statement Columns within the worksheet.

  7. Case Development-Step 12: Income or Loss • After the adjusted Trial Balance account totals are extended to the worksheet’s Balance Sheet and Income Statement Columns, it is time to determine whether the business made a profit or suffered a loss during the financial period. • Total the Revenue & Expense worksheet columns.

  8. Case Development-Step 12: Income or Loss (continued) • Subtract total expenses from total revenue (Revenue minus Expenses = Net Income (profit) or Net Loss. • Enter this value into the worksheet below TOTALS to balance the Income Statement and Balance Sheet Columns. • This entry will be either a debit (Net Income) or credit (Net Loss) in the Income Statement columns; and either a debit (Net Loss) or credit (Net Income) in the Balance Sheet columns. • The amount of the Net Income or Net Loss is important for preparing financial statements and closing entries (see next slide show for more about closing entries).

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