Chapter 4 lecture
Download
1 / 78

Completing the Accounting Cycle - PowerPoint PPT Presentation


  • 285 Views
  • Uploaded on

0 4 Completing the Accounting Cycle 0 After studying this chapter, you should be able to: Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements. Prepare financial statements from adjusted account balances.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Completing the Accounting Cycle' - ostinmannual


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Slide1 l.jpg

0

4

Completing the Accounting Cycle


Slide2 l.jpg

0

After studying this chapter, you should be able to:

  • Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements.

  • Prepare financial statements from adjusted account balances.

  • Prepare closing entries.


Slide3 l.jpg

0

After studying this chapter, you should be able to:

  • Describe the accounting cycle.

  • Illustrate the accounting cycle for one period.

  • Explain what is meant by the fiscal year and the natural business year.

3


Slide4 l.jpg

0

4-1

Objective 1

Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements.


Slide5 l.jpg

0

4-1

5


Slide6 l.jpg

0

4-1

Spreadsheet (Work Sheet)

Trial Balance

Adjustments

Adjusted TB

Accounts Dr Cr Dr Cr Dr Cr

Accounts are listed in the Trial Balance column using the ending balance found in the general ledger.

6


Slide7 l.jpg

0

4-1

Spreadsheet (Work Sheet)

Trial Balance

Adjustments

Adjusted TB

Accounts Dr Cr Dr Cr Dr Cr

Adjustments are entered here. Two possibilities:

1. Deferrals – Existing balances are changed.

2. Accruals – New information is entered.

7


Slide8 l.jpg

0

4-1

Spreadsheet (Work Sheet)

Trial Balance

Adjustments

Adjusted TB

Accounts Dr Cr Dr Cr Dr Cr

Adjustments are combined with the trial balance. Account balances are now adjusted.

8


Slide9 l.jpg

0

4-1

Spreadsheet (Work Sheet)

Adjusted TB

Income State.

Balance Sheet

Accounts Dr Cr Dr Cr Dr Cr

Revenue and expense balances in the Adjusted Trial Balance column are extended to the Income Statement column.

9


Slide10 l.jpg

0

4-1

Spreadsheet (Work Sheet)

Adjusted TB

Income State.

Balance Sheet

Accounts Dr Cr Dr Cr Dr Cr

Asset, liability, owner’s equity, and drawing balances in the Adjusted Trial Balance column are extended to the Balance Sheet column.

10


Slide11 l.jpg

Example Exercise 4-1

0

4-1

The balances for the accounts listed below appear in the Adjusted Trial Balance columns of the end-of-period spreadsheet (work sheet). Indicate whether each balance should be extended to (a) an Income Statement column or (b) a Balance Sheet column.

  • Fees Earned

  • Accounts Payable

  • Rent Revenue

  • Supplies

  • Amber Bablock, Drawing

  • Utilities Expense

  • Accumulated Depreciation—Equipment

  • Unearned Rent

11


Slide12 l.jpg

Follow My Example 4-1

0

4-1

  • Balance Sheet column

  • Income Statement column

  • Balance Sheet column

  • Balance Sheet column

  • Income Statement column

  • Balance Sheet column

  • Income Statement column

  • Balance Sheet column

For Practice: PE 4-1A, PE 4-1B

12


Slide13 l.jpg

0

4-2

Objective 2

Prepare financial statements from adjusted account balances.


Slide14 l.jpg

0

4-2

To balance sheet

14


Slide15 l.jpg

0

4-2

(Concluded)

From statement of owner’ equity

15


Slide16 l.jpg

Example Exercise 4-2

0

4-2

In the Balance Sheet columns of the end-of-period spreadsheet (work sheet) for Dimple Consulting Co. for the current year, the Debit column total is $678,450, and the Credit column total is $599,750 before the amount of net income or net loss has been included. In preparing the income statement from the end-of-period spreadsheet (work sheet), what is the amount of net income or net loss?

16


Slide17 l.jpg

0

4-2

Follow My Example 4-2

A net income of $78,700 ($678,450 – $599,750) would be reported. When the Debit column of the Balance Sheet columns is more than the Credit column, net income is reported. If the Credit column exceeds the Debit column, a net loss is reported.

For Practice: PE 4-2A, PE 4-2B

17


Slide18 l.jpg

Example Exercise 4-3

0

4-2

Zack Gaddis owns and operates Gaddis Employment Services. On January 1, 2007, Zack Gaddis, Capital had a balance of $186,000. During the year, Zack invested an additional $40,000 and withdrew $25,000. For the year ended December 31, 2007, Gaddis Employment Services reported a net income of $18,750. Prepare a statement of owner’s equity for the year ended December 31, 2007.

18


Slide19 l.jpg

0

4-2

Follow My Example 4-3

GADDIS EMPLOYMENT SERVICES

STATEMENT OF OWNER’S EQUITY

For the Year Ended December 31, 2007

Zack Gaddis, capital, January 1, 2007 $186,000

Additional investment during 2007 40,000

Total $226,000

Withdrawals $ 25,000

Less net income 18,750

Decrease in owner’s equity 6,250

Zack Gaddis, capital, December 31, 2007 $219,750

For Practice: PE 4-3A, PE 4-3B

19


Slide20 l.jpg

0

4-2

A classified balance sheet is a balance sheet that was expanded by adding subsections for current assets; property, plant, and equipment; and current liabilities.


Slide21 l.jpg

0

4-2

Cash and other assets that are expected to be converted into cash, sold or used up usually within a year or less, through the normal operations of the business are called current assets.

  • Cash

  • Accounts Receivable

  • Supplies


Slide22 l.jpg

0

4-2

Notes receivable are written promises by the customer to pay the amount of the note and possibly interest at an agreed rate.


Slide23 l.jpg

0

4-2

Property, plant, and equipment(also called fixed assets) include assets that depreciate over a period of time. Land is an exception as it is not subject to depreciation.

  • Equipment

  • Machinery

  • Buildings

  • Land


Slide24 l.jpg

0

4-2

Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called current liabilities.

  • Accounts payable

  • Wages payable

  • Interest payable

  • Unearned fees


Slide25 l.jpg

0

4-2

Liabilities not due for a long time (usually more than one year) are long-term liabilities.

  • Notes payable

  • Mortgage payable

  • Bond payable


Slide26 l.jpg

0

4-2

Owner’s equity is the owner’s right to the assets of the business. Owner’s equity is added to the total liabilities, and the total must be equal to the total assets.


Slide27 l.jpg

Example Exercise 4-4

0

4-2

The following accounts appear in the adjusted trial balance of Hindsight Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability, (d) long-term liability; or (e) owner’s equity section of the December 31, 2007 balance sheet of Hindsight Consulting.

  • Jason Corbin, Capital 5. Cash

  • Notes Receivable (due 6. Unearned Rent

  • in 6 months) months)

  • Notes Payable (due in 7. Accumulated Depr.—

  • 2009) Equipment

  • 4. Land 8. Accounts Payable

27


Slide28 l.jpg

0

4-2

Follow My Example 4-4

  • Owner’s equity 5. Current asset

  • Current asset 6. Current liability

  • Long-term liability 7. Property, plant, and equipment

  • Property, plant, and equip. 8. Current liability

For Practice: PE 4-4A, PE 4-4B

28


Slide29 l.jpg

0

4-3

Objective 3

Prepare closing entries.


Slide30 l.jpg

0

4-3

Accounts that are relatively permanent from year to year are called realaccounts. Accounts that report amounts for only one period are called temporary accounts or nominal accounts.


Slide31 l.jpg

0

4-3

To report amounts for only one period, temporary accounts should have zero balances at the beginning of the period. At the end of the period the revenue and expense account balances are transferred to Income Summary.


Slide32 l.jpg

0

4-3

The balance of Income Summary is then transferred to the owner’s capital account. The balance of the owner’s drawing account is also transferred to the owner’s capital account. The entries that transfer these balances are called closing entries.


Slide33 l.jpg

0

4-3

33


Slide34 l.jpg

Fees Earned

Bal. 16,840

0

4-3

Debit each revenue account for the amount of its balance, and credit Income Summary for the total revenue.

Step 1:

16,840

Income Summary

Step 1

16,960

Rent Revenue

Bal. 120

120

34


Slide35 l.jpg

Bal. 4,525

4,525

1,600

Bal. 1,600

Bal. 50

50

Bal. 985

985

Bal. 2,040

2,040

Insurance Expense

200

Bal. 200

Miscellaneous Expense

455

Bal. 455

4-3

Wages Expense

Income Summary

9,855

16,960

Rent Expense

Depreciation Expense

Utilities Expense

Step 2

Debit Income Summary for the total expenses and credit each expense account for its balance.

Supplies Expense

35


Slide36 l.jpg

Step 3

Debit Income Summaryfor the amount of its balance (in this case, the net income) and credit the capital account.

Chris Clark, Capital

Bal. 25,000

Chris Clark, Drawing

Bal. 4,000

4-3

Income Summary

9,855

16,960

7,105

7,105

36


Slide37 l.jpg

Step 4

Debit the capital account for the balance of the drawing account, and credit drawing for the same amount.

Chris Clark, Capital

Bal. 25,000

7,105

Chris Clark, Drawing

Bal. 4,000

4-3

4,000

4,000

37


Slide38 l.jpg

0

4-3

Step 1

Step 2

Step 3

Step 4

38


Slide39 l.jpg

0

4-3

After the closing entries are posted, all of the temporary accounts have zero balances.


Slide40 l.jpg

Example Exercise 4-4

Example Exercise 4-5

0

4-3

The following accounts appear in the adjusted trial balance of Hindsight Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability, (d) long-term liability; or (e) owner’s equity section of the December 31, 2007, balance sheet of Hindsight Consulting.

After the accounts have been adjusted at July 31, the end of the fiscal year, the following balances are taken from the ledger of Cabriolet Services Co.

Terry Lambert, Capital $615,850

Terry Lambert, Drawing 25,000

Fees Earned 380,450

Wages Expense 250,000

Rent Expense 65,000

Supplies Expense 18,250

Miscellaneous Expense 6,200

Journalize the four entries required to close the accounts.

40


Slide41 l.jpg

Follow My Example 4-5

0

4-3

July 31 Fees Earned 380,450

Income Summary 380,450

31 Income Summary 339,450

Wages Expense 250,000

Rent Expense 65,000

Supplies Expense 18,250

Miscellaneous Expense 6,200

31 Income Summary 41,000

Terry Lambert, Capital 41,000

31 Terry Lambert, Capital 25,000

Terry Lambert, Drawing 25,000

41

For Practice: PE 4-5A, PE 4-5B


Slide42 l.jpg

NetSolutions

Post-Closing Trial Balance

December 31, 2007

Cash 2 065 00

Accounts Receivable 2 720 00

Supplies 760 00

Prepaid Insurance 2 200 00

Land 20 000 00

Office Equipment 1 800 00

Accumulated Depreciation 50 00

Accounts Payable 900 00

Wages Payable 250 00

Unearned Rent 240 00

Chris Clark, Capital 28 105 00

29 545 00 29 545 00

0

4-3

Exhibit 7 Post-Closing Trial Balance

42


Slide43 l.jpg

0

4-4

Objective 4

Describe the accounting cycle.


Slide44 l.jpg

0

4-4

The accounting process that begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period’s transactions is called the accounting cycle. There are ten steps in the accounting cycle.


Slide45 l.jpg

0

4-4

The Accounting Cycle

  • Transactions are analyzed and recorded in the journal.

  • Transactions are posted to the ledger.

  • An unadjusted trial balance is prepared.

  • Adjustment data are assembled and analyzed.

  • An optional end-of-period spreadsheet (work sheet) is prepared.

Continued


Slide46 l.jpg

0

4-4

  • Adjusting entries are journalized and posted to the ledger.

  • An adjusted trial balance is prepared.

  • Financial statements are prepared.

  • Closing entries are journalized and posted to the ledger.

  • A post-closing trial balance is prepared.


Slide47 l.jpg

Example Exercise 4-4

Example Exercise 4-6

0

4-4

The following accounts appear in the adjusted trial balance of Hindsight Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability, (d) long-term liability; or (e) owner’s equity section of the December 31, 2007, balance sheet of Hindsight Consulting.

From the following list of steps in the accounting cycle, identify what two steps are missing.

  • Transactions are analyzed and recorded in the journal.

  • Transactions are posted to the ledger.

  • Adjustment data are assembled and analyzed.

  • An optional end-of-period spreadsheet (work sheet) is prepared.

  • Adjusting entries are journalized and posted to the ledger.

  • Financial statements are prepared.

  • Closing entries are journalized and posted to the ledger.

  • A post-closing trial balance is prepared.

21

47


Slide48 l.jpg

Follow My Example 4-6

0

4-4

The following two steps are missing: (1) the preparation of an unadjusted trial balance and (2) the preparation of the adjusted trial balance. The unadjusted trial balance should be prepared after step (b). The adjusted trial balance should be prepared after step (e).

48

For Practice: PE 4-6A, PE 4-6B


Slide49 l.jpg

0

4-5

Objective 5

Illustrate the accounting cycle for one period.

Refer to the textbook for this extended illustration.


Slide50 l.jpg

0

4-6

Objective 6

Explain what is meant by the fiscal year and the natural business year.


Slide51 l.jpg

0

4-6

The annual accounting period adopted by a business is known as its fiscal year.When a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation, such a fiscal year is also called the natural year.


Slide52 l.jpg

0

4-6

Financial History of a Business

The financial history of a business may be shown by a series of balance sheets and income statements, as displayed below.

52


Slide53 l.jpg

0

Appendix

End-of-Period Spreadsheet (Work Sheet)


Slide54 l.jpg

0

The end-of-period spreadsheet (work sheet) shown in the following slides does not have the usual spreadsheet headings due to space constraints.


Slide55 l.jpg

0

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash 2,065

Accounts Receivable 2,220

Supplies 2,000

Prepaid Insurance 2,400

Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 360

Chris Clark, Capital 25,000

Chris Clark, Drawing 4,000

Fees Earned 16,340

Wages Expense 4,275

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 800

Miscellaneous Expense 455

42,600 42,600

The unadjusted trial balance is checked for equality.

55


Slide56 l.jpg

0

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash 2,065

Accounts Receivable 2,220

Supplies 2,000

Prepaid Insurance 2,400

Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 360

Chris Clark, Capital 25,000

Chris Clark, Drawing 4,000

Fees Earned 16,340

Wages Expense 4,275

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 800

Miscellaneous Expense 455

42,600 42,600

(a) 1,240

Cost of supplies on hand at end of period is $760.

(a) 1,240

56


Slide57 l.jpg

Accounts are added as needed.

0

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash 2,065

Accounts Receivable 2,220

Supplies 2,000 (a) 1,240

Prepaid Insurance 2,400

Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 360

Chris Clark, Capital 25,000

Chris Clark, Drawing 4,000

Fees Earned 16,340

Wages Expense 4,275

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 800 (a) 1,240

Miscellaneous Expense 455

42,600 42,600

(b) 200

The insurance expense for December is $200 ($2,400/12)

Insurance Expense (b) 200

57


Slide58 l.jpg

0

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash 2,065

Accounts Receivable 2,220

Supplies 2,000 (a) 1,240

Prepaid Insurance 2,400 (b) 200 Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 360

Chris Clark, Capital 25,000

Chris Clark, Drawing 4,000

Fees Earned 16,340

Wages Expense 4,275

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 800 (a) 1,240

Miscellaneous Expense 455

42,600 42,600

Rent revenue earned during December was $120.

(c) 120

Insurance Expense (b) 200

58

Rent Revenue (c) 120


Slide59 l.jpg

0

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash 2,065

Accounts Receivable 2,220

Supplies 2,000 (a) 1,240

Prepaid Insurance 2,400 (b) 200 Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 360 (c) 120

Chris Clark, Capital 25,000

Chris Clark, Drawing 4,000

Fees Earned 16,340

Wages Expense 4,275

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 800 (a) 1,240

Miscellaneous Expense 455

42,600 42,600

Wages accrued but not paid at the end of December totaled $250.

(d) 250

Insurance Expense (b) 200

Rent Revenue (c) 120

59

Wages Payable (d) 250


Slide60 l.jpg

0

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash 2,065

Accounts Receivable 2,220

Supplies 2,000 (a) 1,240

Prepaid Insurance 2,400 (b) 200 Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 360 (c) 120

Chris Clark, Capital 25,000

Chris Clark, Drawing 4,000

Fees Earned 16,340

Wages Expense 4,275 (d) 250

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 800 (a) 1,240

Miscellaneous Expense 455

42,600 42,600

(e) 500

Fees accrued at the end of December but not recorded total $500.

(e) 500

Insurance Expense (b) 200

Rent Revenue (c) 120

Wages Payable (d) 250

60


Slide61 l.jpg

0

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash 2,065

Accounts Receivable 2,220 (e) 500

Supplies 2,000 (a) 1,240

Prepaid Insurance 2,400 (b) 200 Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 360 (c) 120

Chris Clark, Capital 25,000

Chris Clark, Drawing 4,000

Fees Earned 16,340 (e) 500

Wages Expense 4,275 (d) 250

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 800 (a) 1,240

Miscellaneous Expense 455

42,600 42,600

Depreciation of office equipment is $50 for December.

Insurance Expense (b) 200

Rent Revenue (c) 120

Wages Payable (d) 250

61

Depreciation Expense (f) 50

Accum. Depreciation (f) 50


Slide62 l.jpg

0

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Cash 2,065

Accounts Receivable 2,220 (e) 500

Supplies 2,000 (a) 1,240

Prepaid Insurance 2,400 (b) 200 Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 360 (c) 120

Chris Clark, Capital 25,000

Chris Clark, Drawing 4,000

Fees Earned 16,340 (e) 500

Wages Expense 4,275 (d) 250

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 800 (a) 1,240

Miscellaneous Expense 455

42,600 42,600

To make more space, let’s remove the heading.

Insurance Expense (b) 200

Rent Revenue (c) 120

Wages Payable (d) 250

Depreciation Expense (f) 50

Accum. Depreciation (f) 50

62


Slide63 l.jpg

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

0

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash 2,065

Accounts Receivable 2,220 (e) 500

Supplies 2,000 (a) 1,240

Prepaid Insurance 2,400 (b) 200 Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 360 (c) 120

Chris Clark, Capital 25,000

Chris Clark, Drawing 4,000

Fees Earned 16,340 (e) 500

Wages Expense 4,275 (d) 250

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 800 (a) 1,240

Miscellaneous Expense 455

42,600 42,600

Insurance Expense (b) 200

Rent Revenue (c) 120

Wages Payable (d) 250

Depreciation Expense (f) 50

Accum. Depreciation (f) 50

2,360 2,360

Summed and ruled

63


Slide64 l.jpg

0

The next step is to add or subtract the adjustments from (to) the amounts found in the Unadjusted Trial Balance columns and enter the results in the Adjusted Trial Balance columns.


Slide65 l.jpg

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

0

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash 2,065

Accounts Receivable 2,220 (e) 500

Supplies 2,000 (a) 1,240

Prepaid Insurance 2,400 (b) 200 Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 360 (c) 120

Chris Clark, Capital 25,000

Chris Clark, Drawing 4,000

Fees Earned 16,340 (e) 500

Wages Expense 4,275 (d) 250

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 800 (a) 1,240

Miscellaneous Expense 455

42,600 42,600

Insurance Expense (b) 200

Rent Revenue (c) 120

Wages Payable (d) 250

Depreciation Expense (f) 50

Accum. Depreciation (f) 50

2,360 2,360

65


Slide66 l.jpg

Unadjusted Adjusted

Trial Balance Adjustments Trial Balance

0

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash 2,065 2,065

Accounts Receivable 2,220 (e) 500 2,720

Supplies 2,000 (a) 1,240760

Prepaid Insurance 2,400 (b) 200 2,200 Land 20,000 20,000

Office Equipment 1,800 1,800

Accounts Payable 900 900

Unearned Rent 360 (c) 120 240

Chris Clark, Capital 25,00025,000

Chris Clark, Drawing 4,000 4,000

Fees Earned 16,340 (e) 500 16,840

Wages Expense 4,275 (d) 250 4,525

Rent Expense 1,600 1,600

Utilities Expense 985 985

Supplies Expense 800 (a) 1,2402,040

Miscellaneous Expense 455 455

42,600 42,600

Insurance Expense (b) 200 200

Rent Revenue (c) 120 120

Wages Payable (d) 250 250

Depreciation Expense (f) 50 50

Accum. Depreciation (f) 50 50

2,360 2,360 43,400 43,400

66


Slide67 l.jpg

0

Because of space constraints, the Unadjusted Trial Balance and the Adjustments columns will not be shown in the following slides.


Slide68 l.jpg

Adjusted

Trial Balance Income Statement Balance Sheet

0

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash 2,065

Accounts Receivable 2,720

Supplies 760

Prepaid Insurance 2,200

Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 240

Chris Clark, Capital 25,000 Chris Clark, Drawing 4,000

Fees Earned 16,840

Wages Expense 4,525

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 2,040

Miscellaneous Expense 455

Insurance Expense 200

Rent Revenue 120

Wages Payable 250

Depreciation Expense 50

Accum. Depreciation 50 43,400 43,400

68


Slide69 l.jpg

0

The next step is to extend amounts in the Adjusted Trial Balance columns to the Income Statement and Balance Sheet columns.


Slide70 l.jpg

Adjusted

Trial Balance Income Statement Balance Sheet

0

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash 2,065

Accounts Receivable 2,720

Supplies 760

Prepaid Insurance 2,200

Land 20,000

Office Equipment 1,800

Accounts Payable 900

Unearned Rent 240

Chris Clark, Capital 25,000 Chris Clark, Drawing 4,000

Fees Earned 16,840

Wages Expense 4,525

Rent Expense 1,600

Utilities Expense 985

Supplies Expense 2,040

Miscellaneous Expense 455

Insurance Expense 200

Rent Revenue 120

Wages Payable 250

Depreciation Expense 50

Accum. Depreciation 50 43,400 43,400

70


Slide71 l.jpg

Adjusted

Trial Balance Income Statement Balance Sheet

0

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash 2,065 2,065

Accounts Receivable 2,720 2,720

Supplies 760 760

Prepaid Insurance 2,200 2,200

Land 20,000 20,000

Office Equipment 1,800 1,800

Accounts Payable 900 900

Unearned Rent 240 240

Chris Clark, Capital 25,00025,000 Chris Clark, Drawing 4,000 4,000

Fees Earned 16,840 16,840

Wages Expense 4,525 4,525

Rent Expense 1,600 1,600

Utilities Expense 985 985

Supplies Expense 2,040 2,040

Miscellaneous Expense 455 455

Insurance Expense 200 200

Rent Revenue 120 120

Wages Payable 250 250

Depreciation Expense 50 50

Accum. Depreciation 50 50 43,400 43,400

71


Slide72 l.jpg

0

The Income Statement and Balance Sheet columns are totaled.


Slide73 l.jpg

Adjusted

Trial Balance Income Statement Balance Sheet

0

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash 2,065 2,065

Accounts Receivable 2,720 2,720

Supplies 760 760

Prepaid Insurance 2,200 2,200

Land 20,000 20,000

Office Equipment 1,800 1,800

Accounts Payable 900 900

Unearned Rent 240 240

Chris Clark, Capital 25,000 25,000 Chris Clark, Drawing 4,000 4,000

Fees Earned 16,840 16,840

Wages Expense 4,525 4,525

Rent Expense 1,600 1,600

Utilities Expense 985 985

Supplies Expense 2,040 2,040

Miscellaneous Expense 455 455

Insurance Expense 200 200

Rent Revenue 120 120

Wages Payable 250 250

Depreciation Expense 50 50

Accum. Depreciation 50 5043,400 43,400

73


Slide74 l.jpg

Adjusted

Trial Balance Income Statement Balance Sheet

0

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash 2,065 2,065

Accounts Receivable 2,720 2,720

Supplies 760 760

Prepaid Insurance 2,200 2,200

Land 20,000 20,000

Office Equipment 1,800 1,800

Accounts Payable 900 900

Unearned Rent 240 240

Chris Clark, Capital 25,000 25,000 Chris Clark, Drawing 4,000 4,000

Fees Earned 16,840 16,840

Wages Expense 4,525 4,525

Rent Expense 1,600 1,600

Utilities Expense 985 985

Supplies Expense 2,040 2,040

Miscellaneous Expense 455 455

Insurance Expense 200 200

Rent Revenue 120 120

Wages Payable 250 250

Depreciation Expense 50 50

Accum. Depreciation 50 5043,400 43,400 9,855 16,960 33,545 26,440

74


Slide75 l.jpg

0

The net income or net loss is determined. Then the Income Statement and Balance Sheet columns are totaled and double-ruled.


Slide76 l.jpg

Adjusted

Trial Balance Income Statement Balance Sheet

0

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash 2,065 2,065

Accounts Receivable 2,720 2,720

Supplies 760 760

Prepaid Insurance 2,200 2,200

Land 20,000 20,000

Office Equipment 1,800 1,800

Accounts Payable 900 900

Unearned Rent 240 240

Chris Clark, Capital 25,000 25,000 Chris Clark, Drawing 4,000 4,000

Fees Earned 16,840 16,840

Wages Expense 4,525 4,525

Rent Expense 1,600 1,600

Utilities Expense 985 985

Supplies Expense 2,040 2,040

Miscellaneous Expense 455 455

Insurance Expense 200 200

Rent Revenue 120 120

Wages Payable 250 250

Depreciation Expense 50 50

Accum. Depreciation 50 5043,400 43,400 9,855 16,960 33,545 26,440

76


Slide77 l.jpg

Adjusted

Trial Balance Income Statement Balance Sheet

77

0

Account Title Debit Credit Debit Credit Debit Credit

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Cash 2,065 2,065

Accounts Receivable 2,720 2,720

Supplies 760 760

Prepaid Insurance 2,200 2,200

Land 20,000 20,000

Office Equipment 1,800 1,800

Accounts Payable 900 900

Unearned Rent 240 240

Chris Clark, Capital 25,000 25,000 Chris Clark, Drawing 4,000 4,000

Fees Earned 16,840 16,840

Wages Expense 4,525 4,525

Rent Expense 1,600 1,600

Utilities Expense 985 985

Supplies Expense 2,040 2,040

Miscellaneous Expense 455 455

Insurance Expense 200 200

Rent Revenue 120 120

Wages Payable 250 250

Depreciation Expense 50 50

Accum. Depreciation 50 5043,400 43,400 9,855 16,960 33,545 26,440

Net income 7,105 7,105

16,960 16,960 33,545 33,545


Slide78 l.jpg

Income Statement Balance Sheet

9,855 16,960 33,545 26,440

7,105 7,105

16,960 16,960 33,545 33,545

Net Income

Net Income

0

The difference between the Income Statement column totals is the net income (or net loss) for the period.

78