Closing Entries and the Postclosing Trial Balance

Size: px
Start display at page:

Download "Closing Entries and the Postclosing Trial Balance"

Transcription

1 6-1

2 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter Closing Entries and the Postclosing Trial Balance 6 Section 1: Closing Entries Section Objectives 1. Journalize and post closing entries.

3 6-3 The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 4 Prepare a worksheet Step 5 Prepare financial statements Step 9 Interpret the financial information Step 8 Prepare a postclosing trial balance Step 7 Journalize and post closing entries Step 6 Journalize and post adjusting entries The seventh step in the accounting cycle is to journalize and post closing entries.

4 6-4 QUESTION: What is the Income Summary account? ANSWER: The Income Summary account is a special owner s equity account that is used only in the closing process to summarize the results of operations.

5 6-5 Income Summary Account Classified as a temporary owner s equity account. Does not have a normal balance. Has a zero balance after the closing process and remains with a zero balance until after the closing procedure for the next period.

6 Objective 1 Journalize and post closing entries There are four steps in the closing process: 1. Transfer the balance of the revenue account to the Income Summary account. 2. Transfer the expense account balances to the Income Summary account. 3. Transfer the balance of the Income Summary account to the owner s capital account. 4. Transfer the balance of the drawing account to the owner s capital account. 6-6

7 JT s Consulting Services Worksheet Month Ended December 31, 2010 ACCOUNT NAME Cash Accounts Receivable Supplies Prepaid Rent Equipment Accum. Depr. Equip. Accounts Payable Jason Taylor, Cap. Jason Taylor, Draw. Fees Income Salaries Expense Utilities Expense Supplies Expense Rent Expense Depr. Exp. Equip. Totals Net Income TRIAL BALANCE ADJUSTMENTS 6-7 ADJ. TRIAL BAL. DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT 83,500 5,000 3,000 7,000 22,000 4,000 7, ,000 90,000 35,000 (a) 1,000 (b) 3,500 (c) ,500 5,000 (a) 1,000 2,000 (b) 3,500 3,500 22,000 (c) , ,000 4,083 4,083 4,000 7, ,000 3, , ,000 90,000 35, ,583 INCOME STMT. Fees Income has a credit balance of $35,000. DEBIT CREDIT DEBIT 83,500 5,000 2,000 BALANCE SHEET 3,500 22,000 4,000 CREDIT 367 7,000 90,000 35,000 7, ,000 3, ,367 35, ,000 97,367 22,633 22,633 35,000 35, , ,000

8 6-8 Step 1: Close Revenue Fees Income Income Summary Closing 35,000 Balance 35,000 Closing 35,000

9 6-9 GENERAL JOURNAL PAGE 4 DATE DESCRIPTION POST. DEBIT CREDIT REF Closing Entries Step 1: Close Revenue Dec. 31 Fees Income 35,000 Income Summary 35,000 The words Closing Entries are written in the Description column of the general journal.

10 6-10 Step 2: Close Expenses The Income Statement section of the worksheet for JT s Consulting Services lists five expense accounts. Since expense accounts have debit balances, enter a credit in each account to reduce its balance to zero. This closing entry transfers total expenses to the Income Summary account.

11 6-11 Step 2: Close Expenses The five expense account balances are reduced to zero. The total, $12,367 of expenses are transferred to the temporary owner s equity account, Income Summary.

12 Step 2: Close Expenses 6-12 Closing 12,367 Income Summary BAL 35,000 Balance 7,000 Salaries Expense Closing 7,000 Utilities Expense Supplies Expense Balance 500 Balance 1000 Closing 500 Closing 1000 Rent Expense Depr. Expense Equip. Balance 3,500 Balance 367 Closing 3,500 Closing 367

13 6-13 Step 2: Close Expenses GENERAL JOURNAL PAGE 4 DATE DESCRIPTION POST. DEBIT CREDIT REF Closing Entries Dec. 31 Income Summary 12, Salaries Expense 7, Utilities Expense Supplies Expense 1, Rent Expense 3, Depreciation Exp.-Equip

14 6-14 The Income Summary account reflects all entries in the Income Statement section of the worksheet. Income Summary Dr. Closing 12,367 Cr. Closing 35,000 Balance 22,633 Net Income

15 6-15 Step 3: Close Net Income to Capital The journal entry to transfer net income to owner s equity is a debit to Income Summary, and a credit to Jason Taylor, Capital. The balance of Income Summary is reduced to zero; the owner s capital account is increased by the amount of net income. The Income Summary account is reduced to zero. The net income amount, $22,633, is transferred to the owner s capital account. Jason Taylor, Capital is increased by $22,633.

16 6-16 Step 3: Close Net Income to Capital Closing 22,633 Income Summary Balance 22,633 Jason Taylor, Capital Balance 90,000 Closing 22,633

17 6-17 Step 3: Close Net Income to Capital GENERAL JOURNAL PAGE 4 DATE DESCRIPTION POST. DEBIT CREDIT REF. Closing Entries Dec. 31 Income Summary 22, Jason Taylor, Capital 22,633.00

18 6-18 Step 4: Close Drawing to Capital Withdrawals appear in the statement of owner s equity as a deduction from capital. The drawing account is closed directly to the capital account. The drawing account balance is reduced to zero. The balance of the drawing account, $4,000, is transferred to the owner s capital account.

19 6-19 Step 4: Close Drawing to Capital Jason Taylor, Capital Jason Taylor, Drawing Closing 4,000 Balance 112,633 Balance 4,000 Closing 4,000

20 6-20 Step 4: Close Drawing to Capital GENERAL JOURNAL PAGE 4 DATE DESCRIPTION POST. DEBIT CREDIT REF. Closing Entries Dec. 31 Jason Taylor, Capital 4, Jason Taylor, Drawing 4,000.00

21 The new balance of the Jason Taylor, Capital account agrees with the amount listed on the balance sheet. Jason Taylor, Drawing Jason Taylor, Capital Dr. Cr. Dr. Cr. Balance 4,000 Closing 4,000 Balance 90,000 Balance 0 Drawing 4,000 Net Inc. 22,633 Balance 108, Jason Taylor, Capital

22 Summary of Closing Entries GENERAL JOURNAL PAGE 4 STEPS 1. CLOSE REVENUE 2. CLOSE EXPENSE ACCOUNTS 3. CLOSE INCOME SUMMARY 4. CLOSE DRAWING ACCOUNT POST. DATE DESCRIPTION REF. DEBIT CREDIT 2010 Closing Entries Dec. 31 Fees Income , Income Summary , Income Summary , Salaries Expense 511 7, Utilities Expense Supplies Expense 517 1, Rent Expense 520 3, Depr. Expense-Equip Income Summary , Jason Taylor, Capital , Jason Taylor, Capital 301 4, Jason Taylor, Draw ,

23 6-23 Posting the Closing Entries All journal entries are posted to the general ledger accounts. Closing is entered in the Description column of the ledger accounts. The ending balances of the drawing, revenue, and expense accounts are zero.

24 6-24 STEPS 1. CLOSE REVENUE 2. CLOSE EXPENSE ACCOUNTS GENERAL JOURNAL PAGE 4 POST. DATE DESCRIPTION REF. DEBIT CREDIT 2010 Closing Entries Dec. 31 Fees Income , Income Summary , Income Summary , Salaries Expense 511 7, Utilities Expense Supplies Expense 517 1, Rent POST. Expense 520 BALANCE 3, Depr. Expense-Equip Income Summary , Jason Taylor, Capital , ACCOUNT Fees Income ACCOUNT NO. 401 DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT CLOSE Dec. INCOME 31 Dec. SUMMARY 31 J2 J2 26, , , , Dec. 4. CLOSE 31 DRAWING ACCOUNT Closing J4 35, Jason Taylor, Capital 301 4, Jason Taylor, Draw ,000.00

25 6-25 STEPS 1. CLOSE REVENUE 2. CLOSE EXPENSE ACCOUNTS GENERAL JOURNAL PAGE 4 POST. DATE DESCRIPTION REF. DEBIT CREDIT 2010 Closing Entries Dec. 31 Fees Income , Income Summary , Income Summary , Salaries Expense 511 7, Utilities Expense Supplies Expense 517 1, POST. Rent Expense 520 BALANCE 3, Depr. Expense-Equip Income Summary , Jason Taylor, Capital , ACCOUNT Income Summary ACCOUNT NO. 309 DATE DESCRIPTION REF. DEBIT CREDIT DEBIT CREDIT 3. CLOSE 2010 INCOME Dec. 31 Closing J4 35, , SUMMARY 4. CLOSE DRAWING ACCOUNT 31 Jason Taylor, Cap 301 4, Jason Taylor, Draw ,000.00

26 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter Closing Entries and the Postclosing Trial Balance 6 Section 2: Using Accounting Information 2. Prepare a postclosing trial balance. 3. Interpret financial statements. 4. Review the steps in the accounting cycle.

27 6-27 The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 4 Prepare a worksheet Step 5 Prepare financial statements Step 9 Interpret the financial information Step 8 Prepare a postclosing trial balance Step 7 Journalize and post closing entries Step 6 Journalize and post adjusting entries

28 QUESTION: What is the postclosing trial balance ANSWER: A postclosing trial balance is a statement that is prepared to prove the equality of total debits and credits after the closing process is completed. It verifies that revenue, expense, and drawing accounts have zero balances. 6-28

29 6-29 Postclosing Trial Balance JT s Consulting Services Postclosing Trial Balance December 31, 2010 ACCOUNT NAME DEBIT CREDIT Cash 83, Accounts Receivable 5, Supplies 2, Prepaid Rent 3, Equipment 22, Accumulated Depreciation Equipment Accounts Payable 7, Jason Taylor, Capital 108, Totals 116, ,000.00

30 6-30 Finding and Correcting Errors If the postclosing trial balance does not balance, the accounting records contain errors. Use the audit trail to trace data through the accounting records.

31 6-31 Objective 3 Interpret financial statements.

32 6-32 JT s Consulting Services Balance Sheet December 31, 2010 Assets Cash $83, Accounts Receivable 5, Supplies 2, Prepaid Rent 3, Equipment $ 22, Less Accumulated Depreciation , Total Assets $ 115, What is the How much do the customers owe the Liabilities and Owner s Equity Liabilities cash balance? Accounts Payable business? $7, Owner s Equity Jason Taylor, Capital 108, Total Liabilities and Owner s Equity $115,633.00

33 6-33 JT s Consulting Services Balance Sheet December 31, 2010 Assets Cash $83, Accounts Receivable How much does the business 5, Supplies owe its suppliers? 2, Prepaid Rent 3, Equipment $ 22, Less Accumulated Depreciation , Total Assets $ 115, Liabilities and Owner s Equity Liabilities Accounts Payable $7, Owner s Equity Jason Taylor, Capital 108, Total Liabilities and Owner s Equity $115,633.00

34 6-34 JT s Consulting Services Income Statement Month Ended December 31, 2010 Revenue Fees Income 35, Expenses Salaries Expense 7, Utilities Expense Supplies Expense What is the profit? 1, Rent Expense 3, Depr. Expense--Equipment Total Expenses 12, Net Income for the Month 22,633.00

35 6-35 Objective 4 Review the steps in the accounting cycle The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Prepare financial statements. Income Statement Statement of Owner s Equity Balance Sheet Step 4 Prepare a worksheet Step 5 Prepare financial statements

36 6-36 The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 4 Prepare a worksheet Transfer net income or net loss to owner s equity. Reduce the balances of the temporary accounts to zero. Step 7 Journalize and post closing entries Step 5 Prepare financial statements Step 6 Journalize and post adjusting entries

37 6-37 The Accounting Cycle Step 1 Analyze transactions Step 2 Journalize the data about transactions Step 3 Post the data about transactions Step 4 Prepare a worksheet Step 5 Prepare financial statements Step 9 Interpret the financial information Step 8 Prepare a postclosing trial balance Step 7 Journalize and post closing entries Step 6 Journalize and post adjusting entries

38 6-38 Flow of Data Through a Simple Accounting System Source Documents documents General journal General ledger Worksheet Financial statements Source documents are analyzed.

39 6-39 Thank You for using College Accounting, 12th Edition Price Haddock Farina

b. Do not recognize revenue until steel is shipped. c. Do not recognize revenue until next year after the games are played.

b. Do not recognize revenue until steel is shipped. c. Do not recognize revenue until next year after the games are played. CHAPTER FOUR SE4-2 Revenue recognition a. Recognize revenue from car sales for 12,000. Notes receivable $12,000 Sales revenue $12,000 b. Do not recognize revenue until steel is shipped. c. Do not recognize

More information

TRANSACTIONS ANALYSIS EXAMPLE. Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations:

TRANSACTIONS ANALYSIS EXAMPLE. Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations: TRANSACTIONS ANALYSIS EXAMPLE Maxwell Partners Medical Diagnostic Services report the following information for 2011, their first year of operations: 1. Billings to clients for services provided: $350,000

More information

Time Period Assumption

Time Period Assumption ILLUSTRATION 3-1 GUIDELINES TO REPORT REVENUE AND EXPENSES Time Period Assumption Economic life of business can be divided into artificial time periods Revenue Recognition Principle Revenue recognized

More information

Accounting Cycle. Matching Principle

Accounting Cycle. Matching Principle CHAPTER 3 Accounting Cycle Analyze and record the transactions Post the transactions and prepare trial balance Adjust the accounts and prepare trial balance Prepare the financial statements Close the accounts

More information

ACCT1115. Review Package - Midterm SOLUTION Fall 2013

ACCT1115. Review Package - Midterm SOLUTION Fall 2013 ACCT1115 Review Package - Midterm SOLUTION Fall 2013 Part I Multiple Choice 1) How should you record the purchase of an expensive automobile? a) Decrease cash, increase assets b) Decrease cash, increase

More information

CHAPTER 12 ACCRUALS, DEFERRALS, AND THE WORKSHEET

CHAPTER 12 ACCRUALS, DEFERRALS, AND THE WORKSHEET CHAPTER 12 ACCRUALS, DEFERRALS, AND THE WORKSHEET Chapter Opener: Thinking Critically Students may assess that an unexpected decline in sales would mean surplus inventory which would have to be reduced

More information

CHAPTER 4. Adjusting the accounts and preparing financial statements CONTENTS

CHAPTER 4. Adjusting the accounts and preparing financial statements CONTENTS CHAPTER 4 Adjusting the accounts and preparing financial statements CONTENTS Demonstration problem 4.1 Adjusting entries and corrections 4.2 Adjusting centries and effect on financial statements 4.3 Adjusting

More information

appendix C Periodic Inventory Systems for Merchandising Businesses Merchandise Transactions in a Periodic Inventory System

appendix C Periodic Inventory Systems for Merchandising Businesses Merchandise Transactions in a Periodic Inventory System 66124_appC_C1-C14.qxd 11/10/03 7:45 PM Page C-1 appendix C Periodic Inventory Systems for Merchandising Businesses In this text, we emphasize the perpetual inventory system of accounting for purchases

More information

WHY ADJUSTING JOURNAL ENTRIES? CHAPTER FIVE. ADJUSTING ENTRIES Page 145 MATCHING PRINCIPLE WHY ENDING BALANCE NOT CORRECT?

WHY ADJUSTING JOURNAL ENTRIES? CHAPTER FIVE. ADJUSTING ENTRIES Page 145 MATCHING PRINCIPLE WHY ENDING BALANCE NOT CORRECT? CHAPTER FIVE ADJUSTING ENTRIES Page 1 WHY ADJUSTING JOURNAL ENTRIES?! All amounts must be correct before financial statements printed! Test ending balance in each account! Auditing! Test accounting system,

More information

CHAPTER 3 ADJUSTING THE ACCOUNTS

CHAPTER 3 ADJUSTING THE ACCOUNTS CHAPTER 3 ADJUSTING THE ACCOUNTS TIME PERIOD ASSUMPTION The time period (or periodicity) assumption assumes that the economic life of a business can be divided into artificial time periods generally a

More information

Review of the Accounting Process THE BASIC MODEL

Review of the Accounting Process THE BASIC MODEL THE BASIC MODEL The accounting information system is designed to collect and organize data into information that is useful for stakeholders. The Accounting Equation The basic accounting equation is what

More information

Vol. 1, Chapter 3 - Accounting Adjustments

Vol. 1, Chapter 3 - Accounting Adjustments Vol. 1, Chapter 3 - Accounting Adjustments Problem 1 1. ($20,000 2,000) 48 = $375 per month 2. Jan. 31 Depreciation Expense $375 Accumulated Depreciation Van $375 To record depreciation expense for January

More information

ACCOUNTING LIFEPAC 7 ADJUSTING & CLOSING ENTRIES

ACCOUNTING LIFEPAC 7 ADJUSTING & CLOSING ENTRIES Unit 7 ACCOUNTING LIFEPAC 7 ADJUSTING & CLOSING ENTRIES CONTENTS I. ADJUSTING ENTRIES.............................. 3 The Purpose of the Worksheet....................... 3 The Need for Adjustments..........................

More information

7 Accounting for Sales and Accounts Receivable

7 Accounting for Sales and Accounts Receivable 7-1 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 7 Accounting for Sales and Accounts Receivable Section 1: Merchandise Sales Section Objectives 1. Record credit sales in

More information

The Double-Entry System EFFECTS OF TRANSACTIONS ON THE BALANCE SHEET. Initial Paid-in Capital. An Example Entity. Transaction 2.

The Double-Entry System EFFECTS OF TRANSACTIONS ON THE BALANCE SHEET. Initial Paid-in Capital. An Example Entity. Transaction 2. The Double-Entry System EFFECTS OF TRANSACTIONS ON THE BALANCE SHEET 2001 Richard S. Barr Transaction: Any event that affects the entity's financial position and requires recording Every accounting transaction

More information

The Adjusting Process

The Adjusting Process Chapter 03.qxd 5/21/08 7:07 PM Page 99 C H A P T E R 3 AP Photo/Jeff Kravitz Fo r Sa le The Adjusting Process M A R V E L D E N T E R T A I N M E N T, N ot o you subscribe to any magazines? Most of us

More information

Chapter 3. Adjusting the accounts. Appendix 3A: An alternative method of recording deferrals

Chapter 3. Adjusting the accounts. Appendix 3A: An alternative method of recording deferrals 1 Chapter 3 Adjusting the accounts Appendix 3A: An alternative method of recording deferrals 2 Learning objectives 1. Prepare adjusting entries for prepaid expenses originally recorded in an expense account

More information

Module 3: Adjusting the accounts, preparing the statements, and completing the accounting cycle

Module 3: Adjusting the accounts, preparing the statements, and completing the accounting cycle Course Schedule Course Modules Review and Practice Exam Preparation Resources Module 3: Adjusting the accounts, preparing the statements, and completing the accounting cycle Overview In Module 2 you studied

More information

Chapter 5 Accrual Adjustments and Financial Statement Preparation. Revenue recognition Matching expenses to revenues Expenses related to periods

Chapter 5 Accrual Adjustments and Financial Statement Preparation. Revenue recognition Matching expenses to revenues Expenses related to periods Chapter 5 Accrual Adjustments and Financial Statement Preparation Revenue recognition Matching expenses to revenues Expenses related to periods 1 The Measurement of Income major function of accounting

More information

In the event of a tie, the score on the last ten questions will be used as a tie-breaker.

In the event of a tie, the score on the last ten questions will be used as a tie-breaker. NEW YORK STATE ASSOCIATION FUTURE BUSINESS LEADERS OF AMERICA SPRING DISTRICT MEETING ACCOUNTING II 2010 TEST DIRECTIONS 1. Complete the information requested on the answer sheet. PRINT your name on the

More information

> DO IT! Chapter 3 Adjusting the Accounts. Timing Concepts. Adjusting Entries for Deferrals D-12. Solution

> DO IT! Chapter 3 Adjusting the Accounts. Timing Concepts. Adjusting Entries for Deferrals D-12. Solution Chapter 3 Adjusting the Accounts Timing Concepts Review the glossary terms. Study carefully the revenue recognition principle, the expense recognition principle, and the time period assumption. Several

More information

Fundamentals of Financial Accounting

Fundamentals of Financial Accounting Fundamentals of Financial Accounting CHAPTER I Accounting in action. What is accounting? Accounting is the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting

More information

EXERCISES. Does not normally require adjustment. Normally requires adjustment (AE).

EXERCISES. Does not normally require adjustment. Normally requires adjustment (AE). EXERCISES Ex. 3 1 1. Prepaid expense 2. Accrued revenue 3. Unearned revenue 4. Accrued expense 5. Unearned revenue 6. Prepaid expense 7. Accrued expense 8. Accrued expense Ex. 3 2 Account Accounts Receivable...

More information

T Accounts, Debits and Credits, Trial Balance, and Financial Statements

T Accounts, Debits and Credits, Trial Balance, and Financial Statements 2 T Accounts, Debits and Credits, Trial Balance, and Financial Statements DEMONSTRATION PROBLEM maintains an office for the practice of veterinary medicine. The account balances as of September 1 are given

More information

Adjusting the Accounts

Adjusting the Accounts HOSP 1210 (Financial Acct) Learning Centre Adjusting the Accounts Anytime we prepare financial statements or reach the end of an accounting period, there are account adjustments that need to be made to

More information

ACCT 652 Accounting. Review of last week. Should you always take discounts? 5/17/15. ACCT652 Week 4 1

ACCT 652 Accounting. Review of last week. Should you always take discounts? 5/17/15. ACCT652 Week 4 1 ACCT 652 Accounting Week 4 Special Journals, Cash, and Internal Controls Some slides Times Mirror Higher Education Division, Inc. Used by permission Michael D. Kinsman, Ph.D. Review of last week Some highlights

More information

1. If the assets owned by a business total $100,000 and liabilities total $70,000, stockholders' equity totals $30,000.

1. If the assets owned by a business total $100,000 and liabilities total $70,000, stockholders' equity totals $30,000. Rallis Page 1 Name: _ Date: 1. If the assets owned by a business total $100,000 and liabilities total $70,000, stockholders' equity totals $30,000. A) True B) False 2. If total liabilities decreased by

More information

The Matching Concept and the Adjusting Process

The Matching Concept and the Adjusting Process The Matching Concept and the Adjusting Process o b j e c t i v e s After studying this chapter, you should be able to: 4 Explain how the matching concept relates to the accrual basis of accounting. Explain

More information

SECTION 8.1 REVIEW QUESTIONS (page 275)

SECTION 8.1 REVIEW QUESTIONS (page 275) CHAPTER 8 Completing the Accounting Cycle SECTION 8.1 REVIEW QUESTIONS (page 275) 1. Year-end financial statements are superior to interim financial statements because all accounts are brought up to date,

More information

She Wears A Bullet-Proof Vest:

She Wears A Bullet-Proof Vest: She Wears A Bullet-Proof Vest: Detailed Solving Steps for the 2014 Regional Accounting Exam s Work Sheet Problems Prepared by: LaVerne Funderburk, CPA UIL Accounting State Contest Director 2014 UIL Capital

More information

Chapter 6 Statement of Cash Flows

Chapter 6 Statement of Cash Flows Chapter 6 Statement of Cash Flows The Statement of Cash Flows describes the cash inflows and outflows for the firm based upon three categories of activities. Operating Activities: Generally include transactions

More information

CHAPTER 3 THE ADJUSTING PROCESS

CHAPTER 3 THE ADJUSTING PROCESS 1. a. Under cash-basis accounting, revenues are reported in the period in which cash is received and expenses are reported in the period in which cash is paid. b. Under accrual-basis accounting, revenues

More information

BAT 4M: Chapter 3 ANSWERS TO QUESTIONS

BAT 4M: Chapter 3 ANSWERS TO QUESTIONS BAT 4M: Chapter 3 ANSWERS TO QUESTIONS 01. (a) Under the time period assumption, an accountant is required to determine the relevance of each business transaction to specific accounting periods, and its

More information

Learning Objectives: Quick answer key: Question # Multiple Choice True/False. 14.1 Describe the important of accounting and financial information.

Learning Objectives: Quick answer key: Question # Multiple Choice True/False. 14.1 Describe the important of accounting and financial information. 0 Learning Objectives: 14.1 Describe the important of accounting and financial information. 14.2 Differentiate between managerial and financial accounting. 14.3 Identify the six steps of the accounting

More information

CHAPTER 3. BE3-2 Advertising. Dec. 31 Advertising Supplies Expense 7200 Advertising Supplies 7200 to adjust. BE3-3 Bere Co.

CHAPTER 3. BE3-2 Advertising. Dec. 31 Advertising Supplies Expense 7200 Advertising Supplies 7200 to adjust. BE3-3 Bere Co. CHAPTER 3 BE3-2 Advertising Advertising Supplies Supplies Expense 8700 7200 7200 1500 7200 Dec. Advertising Supplies Expense 7200 Advertising Supplies 7200 BE3-3 Bere Co. Prepaid Insurance Insurance Expense

More information

Chapter 4: Accounting Records

Chapter 4: Accounting Records Chapter 4: Accounting Records Structure and terminology of Double Entry Bookkeeping The T account records the effect of transactions under one accounting aspect two opposite effects possible, e.g. inflows

More information

Debits and Credits CHAPTER

Debits and Credits CHAPTER 3 CHAPTER Debits and Credits As you learned in the last chapter, accountants use the accounting equation to analyze a firm s transactions and determine the effects of those transactions on the firm s assets,

More information

CHAPTER 3 Solutions MEASURING BUSINESS INCOME

CHAPTER 3 Solutions MEASURING BUSINESS INCOME CHAPTER 3 Solutions MEASURING BUSINESS INCOME Chapter 3, SE 1. 1. 2. 3. 4. c b d a Chapter 3, SE 2. Dec. 31 Insurance Expense 800 Prepaid Insurance To record insurance expired during the year $460 + $1,040

More information

Financial Statements Tutorial

Financial Statements Tutorial Financial Statement Review: Financial Statements Tutorial There are four major financial statements used to communicate information to external users (creditors, investors, suppliers, etc.) - 1. Balance

More information

COMPONENTS OF THE STATEMENT OF CASH FLOWS

COMPONENTS OF THE STATEMENT OF CASH FLOWS ILLUSTRATION 24-1 OPERATING, INVESTING, AND FINANCING ACTIVITIES COMPONENTS OF THE STATEMENT OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES + Sales and Service Revenue Received Cost of Sales Paid Selling

More information

ACCOUNTING 30S WORKSHEET ON ADJUSTING ENTRIES

ACCOUNTING 30S WORKSHEET ON ADJUSTING ENTRIES ACCOUNTING 30S WORKSHEET ON ADJUSTING ENTRIES Put on your thinking caps and sharpen your pencils boys and girls it's time to practice with adjusting entries! 1. Give in general journal form the year-end

More information

Analyzing Business Transactions Using T Accounts

Analyzing Business Transactions Using T Accounts pri639_ch03_053-088.qxd 9/7/3 4:54 PM Page 53 Analyzing Business Transactions Using T Accounts Chapter 3 When Alexander Graham Bell invented the telephone in 876, and gave birth to www.att.com the company

More information

William B. Pollard, Appalachian State University, Boone, NC 28608, pollardwb@appstate.edu INTRODUCTION

William B. Pollard, Appalachian State University, Boone, NC 28608, pollardwb@appstate.edu INTRODUCTION TEACHING PRINCIPLES OF ACCOUNTING: HELPING STUDENTS IDENTIFY TEN DIFFERENCES WHEN COMPARING A TRIAL BALANCE, AN ADJUSTED TRIAL BALANCE AND A BALANCE SHEET William B. Pollard, Appalachian State University,

More information

For More Course Tutorials Visit www.uoptutorial.com

For More Course Tutorials Visit www.uoptutorial.com ACC 205 WEEK 2 EXERCISE ASSIGNMENT REVENUE AND EXPENSES(NEW) Click Here to Buy the Tutorial http://www.uoptutorial.com/index.php?route=product/p roduct&path=641&product_id=9760 For More Course Tutorials

More information

Adjusting Accounts and Preparing Financial Statements

Adjusting Accounts and Preparing Financial Statements wil79549_ch03_0090-0133 07/30/2008 5:36 pm Page 90 pinnacle 201:MHBR055:mhwiL19:wiL19ch03: A Look Back Chapter 2 explained the analysis and recording of transactions. We showed how to apply and interpret

More information

Course: Introduction to Accounting and Financial Reporting I, ACCT 113. Required Text: Fundamentals of Accounting Principles, Latest edition; Larson

Course: Introduction to Accounting and Financial Reporting I, ACCT 113. Required Text: Fundamentals of Accounting Principles, Latest edition; Larson Institution: Great Bay Community College Course: Introduction to Accounting and Financial Reporting I, ACCT 113 Required Text: Fundamentals of Accounting Principles, Latest edition; Larson Packet Contents:

More information

Accruals and prepayments

Accruals and prepayments 5 Accruals and prepayments this chapter covers... In the last chapter we have looked at the preparation of financial statements or final accounts using the extended trial balance, or spreadsheet, approach.

More information

BUS312A/612A Financial Reporting I. Homework 9.10.2014 & 9.15.2014 The Accounting Cycle Review Chapter 3

BUS312A/612A Financial Reporting I. Homework 9.10.2014 & 9.15.2014 The Accounting Cycle Review Chapter 3 BUS312A/612A Financial Reporting I Homework 9.10.2014 & 9.15.2014 The Accounting Cycle Review Chapter 3 E3-1 (Transaction Analysis-Service Company) During the first month of operations of her business

More information

CHAPTER 3: PREPARING FINANCIAL STATEMENTS

CHAPTER 3: PREPARING FINANCIAL STATEMENTS CHAPTER 3: PREPARING FINANCIAL STATEMENTS I. TIMING AND REPORTING A. The Accounting Period Time period assumption an organization s activities can be divided into specific time periods. Examples: a month,

More information

Accounting Principles Dr. Mishari Alfraih. Adjusting the Accounts

Accounting Principles Dr. Mishari Alfraih. Adjusting the Accounts Accrual- vs. Cash-Basis Accounting Accrual-Basis Accounting Adjusting the Accounts Transactions recorded in the periods in which the events occur Revenues are recognized when earned, rather than when cash

More information

Periodicity Assumption... Time Period Assumption... Chapter 4 Accrual Accounting Concepts

Periodicity Assumption... Time Period Assumption... Chapter 4 Accrual Accounting Concepts Financial Accounting: Tools for Business Decision Making, 4th Ed. CHAPTER 4 Kimmel, Weygandt, Kieso Chapter 4 Accrual Accounting Concepts KEY THINGS WE LL DO: Refresh and expand Ch.3 concepts. Differentiate

More information

Cash in bank checking account $22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total $30,690 Requirement 2

Cash in bank checking account $22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total $30,690 Requirement 2 Chapter 7 Solutions EXERCISES Exercise 7 2 Cash and cash equivalents includes: Cash in bank checking account $22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total

More information

Debits and Credits: Analyzing and Recording Business Transactions

Debits and Credits: Analyzing and Recording Business Transactions 63802_02_ch2_p039-076 2/26/09 11:30 AM Page 39 2 Debits and Credits: Analyzing and Recording Business Transactions DID YOU KNOW? In 2006 20% of sales came from Staples brands. The company plans to increase

More information

Basic Partnership Accounting

Basic Partnership Accounting Basic Partnership Accounting We now turn to the basic accounting for partnerships. The major accounting issues relate to forming the partnership, dividing income or loss, and preparing financial statements.

More information

CHAPTER 4 Accrual Accounting Concepts Study Objectives

CHAPTER 4 Accrual Accounting Concepts Study Objectives CHAPTER 4 Accrual Accounting Concepts Study Objectives Explain the revenue recognition principle and the matching principle. Differentiate between the cash basis and the accrual basis of accounting. Explain

More information

A = L + OE. Transaction 1 Assets = Liabilitites + Owners equity + 1,000,000 Cash + 1,000,000 Common stock

A = L + OE. Transaction 1 Assets = Liabilitites + Owners equity + 1,000,000 Cash + 1,000,000 Common stock FINANCIAL STATEMENT ANALYSIS Henry Jarva Aalto University, Spring 2015 Student name: EXERCISE 1. Provide journal entries for Transactions 5 8, Adjusting Entries 2 7, and prepare Exhibit 1. 2. Calculate

More information

INTRODUCTION TO ACCOUNTING ACNT 1303 Lecture Notes. Chapter 1 The Nature of Accounting

INTRODUCTION TO ACCOUNTING ACNT 1303 Lecture Notes. Chapter 1 The Nature of Accounting INTRODUCTION TO ACCOUNTING ACNT 1303 Lecture Notes GENERAL INFORMATION FOR COMPLETING THE CLASS The following is a summary of the twelve chapters that you will be completing this semester. Be sure that

More information

a. $ 65,000. b. $ 80,000. c. $130,000. d. $145,000.

a. $ 65,000. b. $ 80,000. c. $130,000. d. $145,000. 注 意 1. 本 試 題 卷 共 50 題, 總 分 100 分 第 01-15 題, 每 題 1.75 分, 合 計 26.25 分 ; 第 16-35 題, 每 題 2 分, 合 計 40 分 ; 第 36-50 題, 每 題 2.25 分, 合 計 33.75 答 錯 不 倒 扣 2. 請 將 答 案 按 試 題 題 號, 依 序 填 入 答 案 卡 1.FastForward had cash

More information

YAVAPAI COLLEGE/PRESCOTT UNIFIED SCHOOL DISTRICT District Instructional Guide (DIG) Year-Long Semester Pacing Guide 2015/2016 School Year

YAVAPAI COLLEGE/PRESCOTT UNIFIED SCHOOL DISTRICT District Instructional Guide (DIG) Year-Long Semester Pacing Guide 2015/2016 School Year YAVAPAI COLLEGE/PRESCOTT UNIFIED SCHOOL DISTRICT District Instructional Guide (DIG) Year-Long Semester Pacing Guide 2015/2016 School Year School: Prescott High dual enrolled with Yavapai College Grade

More information

Exam 1 chapters 1-4 Needles 10ed

Exam 1 chapters 1-4 Needles 10ed Exam 1 chapters 1-4 Needles 10ed Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Which of the following is the most appropriate definition of accounting?

More information

CENTRAL SUSQUEHANNA INTERMEDIATE UNIT Application: Fund Accounting. Account Classes Directory Set Up Learning Guide

CENTRAL SUSQUEHANNA INTERMEDIATE UNIT Application: Fund Accounting. Account Classes Directory Set Up Learning Guide CENTRAL SUSQUEHANNA INTERMEDIATE UNIT Application: Fund Accounting Account Classes Directory Set Up Learning Guide 2009 Central Susquehanna Intermediate Unit, USA Table of Contents INTRODUCTION...3 Account

More information

JOHN A. LOGAN COLLEGE L. Hines SM 14. ACC 100-VI BUSINESS ACCOUNTING 3 cr. (3-0) (online)

JOHN A. LOGAN COLLEGE L. Hines SM 14. ACC 100-VI BUSINESS ACCOUNTING 3 cr. (3-0) (online) JOHN A. LOGAN COLLEGE L. Hines SM 14 ACC 100-VI BUSINESS ACCOUNTING 3 cr. (3-0) (online) COURSE DESCRIPTION: This is a practical accounting course for non-accounting majors. It includes a study of the

More information

ACCRUAL ACCOUNTING CONCEPTS

ACCRUAL ACCOUNTING CONCEPTS c04accrualaccountingconcepts.qxd 8/3/10 1:50 PM Page 162 chapter 4 ACCRUAL ACCOUNTING CONCEPTS 162 the navigator Scan Study Objectives Read Feature Story Scan Preview Read Text and Answer Do it! p. 175

More information

Veideretti Cabinets, Incorporated

Veideretti Cabinets, Incorporated Veideretti Cabinets, Incorporated 2 nd Web-Based Edition Transactions for June 24-30, And the June 30 th Bank Reconciliation Page 1 TRANSACTIONS FOR JUNE 24-26 June 24: Paying an expense A $120 check (30429)

More information

Accounting Basics. Prepared for First Year MBA

Accounting Basics. Prepared for First Year MBA Accounting Basics Prepared for First Year MBA Overview S No Particulars 01 Introduction to Accounting 02 Accounting Equation 03 Types of Transactions 04 Purchase and Sales 05 Types of Accounts 06 Golden

More information

Topic 2 Parent Company s Investment in Subsidiary

Topic 2 Parent Company s Investment in Subsidiary 1 Parent Company s Investment in Subsidiary Company 2 Consolidated Balance Sheet - Heading Topic 2 Parent Company s Investment in Subsidiary Consolidated Balance Sheet 3 Parent Invests in Subsidiary 4

More information

Using T-Accounts to Record Transactions. Web. Extension of Chapter 3. Illustration of the Recording of Income Transactions

Using T-Accounts to Record Transactions. Web. Extension of Chapter 3. Illustration of the Recording of Income Transactions Using T-Accounts to Record Transactions Extension of Chapter 3 Web The web reading entitled Using T-Accounts to Record Transactions Extension of Chapter 2 described the use of T-accounts to record transactions

More information

FINANCIAL STATEMENTS-II

FINANCIAL STATEMENTS-II MODULE - 3 15 FINANCIAL STATEMENTS-II You have learnt that Income Statement i.e. Trading & Profit and Loss Account and Position Statement i.e., Balance Sheet are two financial statements, which are prepared

More information

Introduction to QuickBooks Online Edition Course Manual

Introduction to QuickBooks Online Edition Course Manual Introduction to QuickBooks Online Edition Course Manual Module 8 End of Period Activities and Financial Statements Copyright Notice. Each module of the Introduction To QuickBooks Course Manual may be viewed

More information

how to prepare a cash flow statement

how to prepare a cash flow statement business builder 4 how to prepare a cash flow statement zions business resource center zions business resource center 2 how to prepare a cash flow statement A cash flow statement is important to your business

More information

Financial Statements for Manufacturing Businesses

Financial Statements for Manufacturing Businesses Management Accounting 31 Financial Statements for Manufacturing Businesses Importance of Financial Statements Accounting plays a critical role in decision-making. Accounting provides the financial framework

More information

UNIVERSITY OF WATERLOO School of Accounting and Finance

UNIVERSITY OF WATERLOO School of Accounting and Finance UNIVERSITY OF WATERLOO School of Accounting and Finance AFM 101 Professor Duane Kennedy Mid-Term Examination Fall 2008 Date and Time: October 16, 2008, 7:15 8:45pm Pages: 16, including cover Name: Student

More information

PROFESSOR S NAME ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8)

PROFESSOR S NAME ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) Page 137 NAME ANSWER KEY PROFESSOR S NAME SECTION SCORE ACC 255 FALL 2011 COVER SHEET FOR COMPREHENSIVE PROBLEM 2 (CHAPTERS 2, 5-8) INSTRUCTIONS: COMPLETE ALL

More information

Principles of Financial Accounting ACC-101-TE. TECEP Test Description

Principles of Financial Accounting ACC-101-TE. TECEP Test Description Principles of Financial Accounting ACC-101-TE TECEP Test Description This TECEP is an introduction to the field of financial accounting. It covers the accounting cycle, merchandising concerns, and financial

More information

Classification of Manufacturing Costs and Expenses

Classification of Manufacturing Costs and Expenses Management Accounting 51 Classification of Manufacturing Costs and Expenses Introduction Management accounting, as previously explained, consists primarily of planning, performance evaluation, and decision

More information

Cash Receipts, Cash Payments, and Banking Procedures

Cash Receipts, Cash Payments, and Banking Procedures 9-1 McGraw-Hill 2009 The McGraw-Hill Companies, Inc. All rights reserved. Cash Receipts, Cash Payments, and Banking Procedures Section 1: Cash Receipts Section Objectives 1. Record cash receipts in a cash

More information

Authored for ENMU Tutoring Services. By Jessica Huff

Authored for ENMU Tutoring Services. By Jessica Huff By Jessica Huff The standard accounting equation is Assets=Liabilities + Stockholders Equity. Depending on which item someone is looking at will determine what the normal balance is. The normal balance

More information

2011 PBL National Leadership Conference Accounting for Professionals Test

2011 PBL National Leadership Conference Accounting for Professionals Test 2011 PBL National Leadership Conference Accounting for Professionals Test 1. Turn off all electronic devices. 2. Please print your name, school, and state on your event envelope. Each page of the test

More information

Audit Program for Prepaid Expenses and Other Assets

Audit Program for Prepaid Expenses and Other Assets Form AP 20 Index Audit Program for Prepaid Expenses and Other Assets Legal Company Name Client: Balance Sheet Date: Instructions: The auditor should refer to the audit planning documentation to gain an

More information

APPENDIX 1 The Statement of Financial Position

APPENDIX 1 The Statement of Financial Position APPENDIX 1 The Statement of Financial Position 1. Assets: the resources of the organization which are used to provide service and generate value 2. Current assets: assets which can be converted to cash

More information

Transaction Analysis SPOTLIGHT. 2 Chapter 40878 Page 53 09/25/07 jhr APPLE COMPUTER, INC.

Transaction Analysis SPOTLIGHT. 2 Chapter 40878 Page 53 09/25/07 jhr APPLE COMPUTER, INC. 2 Chapter 40878 9/25/07 3:18 PM Page 53 2 Transaction Analysis 2 Chapter 40878 Page 53 09/25/07 jhr SPOTLIGHT APPLE COMPUTER, INC. How do you manage your music library? You may use Apple Computer s itunes,

More information

FINAL EXAM The Hashemite University, Department of Accounting, Dr Husam Al-Khadash Principle of Accounting,

FINAL EXAM The Hashemite University, Department of Accounting, Dr Husam Al-Khadash Principle of Accounting, FINAL EXAM The Hashemite University, Department of Accounting, Dr Husam Al-Khadash Principle of Accounting, Name: Seat No. Student No. Question One (11 marks): Identify the answer of each of the following

More information

Financial Transactions and Fraud Schemes

Financial Transactions and Fraud Schemes Financial Transactions and Fraud Schemes Accounting Concepts 2013 Association of Certified Fraud Examiners, Inc. Accounting Basics Assets = Liabilities + Owners Equity Accounting Basics By definition,

More information

Consolidated Interim Earnings Report

Consolidated Interim Earnings Report Consolidated Interim Earnings Report For the Six Months Ended 30th September, 2003 23th Octorber, 2003 Hitachi Capital Corporation These financial statements were prepared for the interim earnings release

More information

Sample Test for entrance into Acct 3110 and Acct 3310

Sample Test for entrance into Acct 3110 and Acct 3310 Sample Test for entrance into Acct 3110 and Acct 3310 1. Which of the following financial statements could properly have the following in the date line: For the Year Ended December 31, 2010"? a. Balance

More information

AUDIT PLAN: RECEIVABLES

AUDIT PLAN: RECEIVABLES Audit procedures for receivables AUDIT PLAN: RECEIVABLES Completeness Agree the balance from the individual sales ledger accounts to the aged receivables listing and vice versa. Match the total of the

More information

UNIVERSITY OF WATERLOO School of Accounting and Finance

UNIVERSITY OF WATERLOO School of Accounting and Finance UNIVERSITY OF WATERLOO School of Accounting and Finance AFM 101 Professor Shari Mann Professor Donna Psutka Professor Mindy Wolfe Mid-Term Examination Fall 2010 Date and Time: October 21, 2010, 6:30 8:00pm

More information

Introduction to Accounting

Introduction to Accounting Introduction to Accounting Text File Slide 1 Introduction to Accounting Welcome to SBA s online training course, Introduction to Accounting. This program is a product of the agency s Small Business Training

More information

Balance Sheet Accounts

Balance Sheet Accounts Page 1 of 6 Balance Sheet Accounts The Chart of Accounts is normally arranged or grouped by the Major Types of Accounts. The Balance Sheet Accounts (Assets, Liabilities, & Equity) are presented first,

More information

INCOME STATEMENT. BALANCE SHEET (Beginning) WHAT'S MY CASH FLOW? Cash Flow Statements. For the 12 Months Ending 12/31/2005.

INCOME STATEMENT. BALANCE SHEET (Beginning) WHAT'S MY CASH FLOW? Cash Flow Statements. For the 12 Months Ending 12/31/2005. Cash Flow Statements INCOME STATEMENT Revenue $ 800,000 Operating Expenses $ 770,000 Depreciation expense $ 20,000 Total expenses $ 790,000 Net Income $ 10,000 Explanation: Using the Income Statement,

More information

Chapter 21 The Statement of Cash Flows Revisited

Chapter 21 The Statement of Cash Flows Revisited Chapter 21 The Statement of Cash Flows Revisited AACSB assurance of learning standards in accounting and business education require documentation of outcomes assessment. Although schools, departments,

More information

B. Division of Costs The purpose of a Manufacturing Account is to ascertain Cost of Production ( ).

B. Division of Costs The purpose of a Manufacturing Account is to ascertain Cost of Production ( ). Manufacturing Accounts ( ) S5 Manufacturing Account/LWL A. Function of a Manufacturing Acccount For those businesses which deal with manufacturing products. It is common in today s business to act both

More information

General Ledger Year-End Procedures 2014

General Ledger Year-End Procedures 2014 General Ledger Year-End Procedures 2014 Introduction As we approach the end of the year, it is necessary to prepare for the annual audit as well as finish up the year s work from an accounting perspective.

More information

SAMPLE XYZ Contracting Corporation Financial Statements December 31, 20XX

SAMPLE XYZ Contracting Corporation Financial Statements December 31, 20XX Name SAMPLE Financial Statements December 31, 20XX CPA Accounting Firm Name Table of Contents Page Accountant s Review Report 1 Financial Statements Balance Sheet 2 Income Statement 3 Schedule of General

More information

ACCOUNTING PARAPROFESSIONAL TEST

ACCOUNTING PARAPROFESSIONAL TEST Louisiana Department of State Civil Service Sample Questions for Series 9242 APT TEST ACCOUNTING PARAPROFESSIONAL TEST ************************************** This booklet contains SAMPLE QUESTIONS ONLY.

More information

Chapter 10 Schedule M-1 Audit Techniques

Chapter 10 Schedule M-1 Audit Techniques Chapter 10 Schedule M-1 Audit Techniques By Ken Johnson (Central Mountain) And Alta Chesney, (Gulf Coast) and Fred Sanchez (Gulf Coast), Reviewers INTERNAL REVENUE SERVICE TAX EXEMPT AND GOVERNMENT ENTITIES

More information

Bookkeeper's Hiring Test

Bookkeeper's Hiring Test Basic Test Payroll Option Depreciation Option Test Name: AIPB Hiring Test Test Form: 3 Test Points: 20.00 Name: Bookkeeper's Hiring Test Date: Form: 3 [1]BASIC BANK01 - BAT 004 Which of the following accounts

More information

for Sage 100 ERP Accounts Receivable Overview Document

for Sage 100 ERP Accounts Receivable Overview Document for Sage 100 ERP Accounts Receivable Document 2012 Sage Software, Inc. All rights reserved. Sage Software, Sage Software logos, and the Sage Software product and service names mentioned herein are registered

More information

Lesson 1. Business, Accounting, and You ASSIGNMENT 1: INTRODUCTION TO ACCOUNTING. Why Study Accounting?

Lesson 1. Business, Accounting, and You ASSIGNMENT 1: INTRODUCTION TO ACCOUNTING. Why Study Accounting? Business, Accounting, and You Assignment 1 introduces three types of business and the entities used in creating these businesses. Generally Accepted Accounting Principles (GAAP) and International Financial

More information

SOLE TRADER FINAL ACCOUNTS

SOLE TRADER FINAL ACCOUNTS 6 SOLE TRADER FINAL ACCOUNTS CASE STUDY Starting out in business Olivia Boulton used to work as a buyer of kitchen and cookware goods for a large department store in central London. She was good at her

More information