CHAPTER SIXTEEN FINANCIAL STATEMENTS AND YEAREND ACCOUNTING FOR
- Slides: 85
CHAPTER SIXTEEN FINANCIAL STATEMENTS AND YEAR-END ACCOUNTING FOR A MERCHANDISING BUSINESS
INCOME STATEMENT § Purpose: Summarize the results of operations § Shows: o The sources of revenue o Types of expenses o Amount of net income or loss for the period § Two forms: o Single-step o Multiple-step
Northern Micro Income Statement For Year Ended December 31, 20 -- Let’s look at a Single-Step Income Statement.
Northern Micro Income Statement For Year Ended December 31, 20 -Revenues: Net Sales Interest Revenue Rent Revenue Subscriptions Revenue Total Revenues $212, 800 900 8, 000 10, 000 All the Revenue sources are listed and totaled. $231, 700
Northern Micro Income Statement For Year Ended December 31, 20 -Revenues: Net Sales Interest Revenue Rent Revenue Subscriptions Revenue Total Revenues Expenses: Cost of Goods Sold $212, 800 900 8, 000 10, 000 $231, 700 $111, 500 Cost of Goods Sold is listed with all the other expenses.
Northern Micro Income Statement For Year Ended December 31, 20 -Revenues: Net Sales Interest Revenue Rent Revenue Subscriptions Revenue Total Revenues Expenses: Cost of Goods Sold Wages Expense Advertising Expense Bank Credit Card Expense Rent Expense Supplies Expense Telephone Expense Utilities Expense $212, 800 900 8, 000 10, 000 $231, 700 $111, 500 42, 450 2, 500 1, 500 20, 000 1, 400 3, 500 12, 000
Bank Credit Card Expense Rent Expense Supplies Expense Telephone Expense Utilities Expense Insurance Expense Depreciation Expense - Building Depreciation Expense - Store Equipment Miscellaneous Expense Interest Expense Total Expenses Net Income 1, 500 20, 000 1, 400 3, 500 12, 000 1, 800 4, 000 3, 000 2, 250 3, 150 Expenses are totaled and subtracted from Revenues to determine Net Income or Loss. 209, 050 $ 22, 650
Bank Credit Card Expense Rent Expense Supplies Expense Telephone Expense Utilities Expense Insurance Expense Depreciation Expense - Building Depreciation Expense - Store Equipment Miscellaneous Expense Interest Expense Total Expenses Net Income 1, 500 20, 000 1, 400 3, 500 12, 000 1, 800 4, 000 3, 000 2, 250 3, 150 It is called Single-Step because Expenses (including Cost of Goods Sold) are subtracted from Revenues in ONE step to determine Net Income or Loss. 209, 050 $ 22, 650
Northern Micro Income Statement For Year Ended December 31, 20 -- Now let’s look at a Multi-Step Income Statement for the same company.
Northern Micro Income Statement For Year Ended December 31, 20 -Revenue from sales: Sales $214, 000 1, 200 Less Sales R &A Net Sales $212, 800 Sales Revenue (less any returns, allowances or discounts) is shown first. The other revenues are listed at the end of the statement).
Northern Micro Income Statement For Year Ended December 31, 20 -Revenue from a sales: Sales $214, 000 1, 200 Less Sales R &A Net Sales $212, 800 Cost of Goods Sold: $ 26, 000 Merch. Inv. Jan. 1, 20 -Purchases $105, 000 $ 800 Less: Purchases R&A 1, 800 1, 000 Purchases Disc. Net Purchases $103, 200 300 Add Freight-In Cost of Goods Pur. 103, 500 Goods Avail. for Sale $129, 500 18, 000 Less M. I. Dec. 31, 20 -111, 500 Cost of Goods Sold
Goods Avail. for Sale Less M. I. Dec. 31, 20 -Cost of Goods Sold Gross Profit $129, 500 18, 000 Cost of Goods Sold is computed and subtracted from Net Sales to arrive at Gross Profit. 111, 500 $101, 300
$129, 500 Goods Avail. for Sale Less M. I. Dec. 31, 20 -18, 000 Cost of Goods Sold 111, 500 $101, 300 Gross Profit Operating Expenses: Operating Expenses are $ 42, 450 Wages Expense 2, 500 Advertising Expense listed, totaled, and 1, 500 Bank Credit Card Exp. subtracted from Rent Expense 20, 000 Gross Profit 1, 400 Supplies Expense compute Telephone Expense 3, 500 “Income from Operations” Utilities Expense 12, 000 Insurance Expense 1, 800 Depreciation Exp. -Bldg. 4, 000 3, 000 Deprec. Exp. -Store Eq. Miscellaneous Expense 2, 250 Total Oper. Expenses 94, 400 $ 6, 900 Income from Operations
$129, 500 Goods Avail. for Sale Less M. I. Dec. 31, 20 -18, 000 Cost of Goods Sold 111, 500 $101, 300 Gross Profit Operating Expenses: Wages Expense $ 42, 450 2, 500 Advertising Expense 1, 500 Bank Credit Card Exp. Operating Expenses can Rent Expense 20, 000 be divided into 1, 400 Supplies Expense Telephone Expense subcategories of 3, 500 Utilities Expense Selling Expenses and 12, 000 Insurance Expense General Expenses. 1, 800 Depreciation Exp. -Bldg 4, 000 3, 000 Deprec. Exp-Store Eq. Miscellaneous Expense 2, 250 Total Oper. Expenses 94, 400 $ 6, 900 Income from Operations
SELLING EXPENSES § Expenses directly associated with selling activities § Examples: o Sales Salaries Expense o Sales Commissions Expense o Advertising Expense o Bank Credit Card Expense o Delivery Expense o Depreciation Expense - Store Equipment and Fixtures
GENERAL EXPENSES § Expenses associated with administrative, office, or general operating activities § Examples: o Rent Expense o Office Salaries Expense o Office Supplies Expense o Telephone Expense o Utilities Expense o Insurance Expense o Depreciation Expense - Office Equipment
Income from Operations Other Revenues: Interest Revenue Rent Revenue Subscriptions Revenue Total Other Rev: Other Expenses: Interest Expense Net Income $ 6, 900 $ 900 8, 000 10, 000 $ 18, 900 Other Revenues are added and Other Expenses are subtracted to arrive at Net Income. 3, 150 15, 750 $ 22, 650
STATEMENT OF OWNER’S EQUITY § Purpose: Summarize all changes in the owner’s equity during the period § Sources needed to prepare statement: o Work sheet o General Ledger Capital account § Includes: o Beginning and ending Capital balances o Investments and withdrawals by owner o Net Income or Loss
Northern Micro Statement of Owner’s Equity For Year Ended December 31, 20 -- Let’s look at the Statement of Owner’s Equity for Northern Micro.
Northern Micro Statement of Owner’s Equity For Year Ended December 31, 20 -Gary L. Fishel, capital, January 1, 20 -Add additional investments Total investment Beginning capital and investments are found in the General Ledger Capital account. $104, 400 10, 000 $114, 400
Northern Micro Statement of Owner’s Equity For Year Ended December 31, 20 -Gary L. Fishel, capital, January 1, 20 -Add additional investments Total investment Net Income for the year $ 22, 650 Net Income is found on the work sheet and on the Income Statement. $104, 400 10, 000 $114, 400
Northern Micro Statement of Owner’s Equity For Year Ended December 31, 20 -Gary L. Fishel, capital, January 1, 20 -Add additional investments Total investment Net Income for the year $ 22, 650 Less withdrawals for the year 20, 000 Increase in Capital Withdrawals, from the worksheet, are subtracted from Net Income to determine the increase in capital this period. $104, 400 10, 000 $114, 400 2, 650
Northern Micro Statement of Owner’s Equity For Year Ended December 31, 20 -Gary L. Fishel, capital, January 1, 20 -Add additional investments Total investment Net Income for the year $ 22, 650 Less withdrawals for the year 20, 000 Increase in Capital Gary L. Fishel, capital, December 31, 20 -- The ending capital is computed. $104, 400 10, 000 $114, 400 2, 650 $117, 050
Northern Micro Balance Sheet December 31, 20 -- Let’s look at Northern Micro’s Classified Balance Sheet.
Northern Micro Balance Sheet December 31, 20 -Assets Current assets:
CURRENT ASSETS § Cash and other assets which are: o Expected to be converted into cash, or o Consumed within one year or the normal operating cycle, whichever is longer § Examples: o Cash, Receivables, merchandise inventory and prepaid expenses § Listed in order of liquidity: o Most liquid shown first
OPERATING CYCLE § Length of time generally required for a business to: o Buy inventory o Sell it o Collect the cash § Generally, it is less than one year.
Northern Micro Balance Sheet December 31, 20 -Assets Current assets: Cash Accounts Receivable Merchandise Inventory Supplies Prepaid Insurance Total current assets $20, 000 15, 000 18, 000 400 600 Merchandise Inventory is a current asset that is unique to merchandising businesses. $54, 000
PROPERTY, PLANT & EQUIPMENT § Assets that are expected to be used: o For more than one year o In the operation of a business § Examples: o Land, Buildings, Office Equipment, Store Equipment, and Delivery Equipment § Assets with the longer lives are listed first.
Northern Micro Balance Sheet December 31, 20 -Assets Current assets: Cash Accounts Receivable Merchandise Inventory Supplies Prepaid Insurance Total current assets Property, plant, and equipment: Land Building Less accumulated deprec. Store Equipment Less accumulated deprec. Total prop. , pt. , and equip. $20, 000 15, 000 18, 000 400 600 $ 54, 000 $10, 000 $ 90, 000 20, 000 $ 50, 000 18, 000 70, 000 32, 000 $112, 000
Total current assets Property, plant, and equipment: Land Building Less accumulated deprec. Store Equipment Less accumulated deprec. Total prop. , pt. , and equip. Total assets $ 54, 000 $10, 000 $90, 000 20, 000 $50, 000 18, 000 70, 000 32, 000 112, 000 $166, 000
Total assets Liabilities Current liabilities: $166, 000
CURRENT LIABILITIES § Obligations that are due within one year or the normal operating cycle, whichever is longer § Require the use of current assets § Examples: o Notes Payable, Accounts Payable, Wages Payable, Utilities Payable, Unearned Subscriptions Revenue, and the current portion of Mortgage Payable
$166, 000 Total assets Liabilities Current liabilities: Notes Payable Accounts Payable Wages Payable Utilities Payable Unearned subscriptions revenue Mortgage Pay. (current portion) Total current liabilities $ 5, 000 10, 000 450 1, 500 2, 000 500 $19, 450
LONG-TERM LIABILITIES § Obligations that will extend beyond one year or the normal operation cycle, whichever is longer § Mortgage Payable is a common long-term liability. o Used to reflect an obligation that is secured by a mortgage on certain property
$166, 000 Total assets Liabilities Current liabilities: Notes Payable Accounts Payable Wages Payable Utilities Payable Unearned subscriptions revenue Mortgage Pay. (current portion) Total current liabilities Long-term liabilities: Mortgage Payable Less current portion Total liabilities $ 5, 000 10, 000 450 1, 500 2, 000 500 $19, 450 $30, 000 500 29, 500 $ 48, 950
OWNER’S EQUITY § Accounts are determined by type of organization: o Sole Proprietorships: • One capital account
$166, 000 Total assets Liabilities Current liabilities: Notes Payable Accounts Payable Wages Payable Utilities Payable Unearned subscriptions revenue Mortgage Pay. (current portion) Total current liabilities Long-term liabilities: Mortgage Payable Less current portion Total liabilities Owner’s Equity Gary L. Fishel, capital Total liabilities and owner’s equity $ 5, 000 10, 000 450 1, 500 2, 000 500 $ 19, 450 $30, 000 500 29, 500 $ 48, 950 117, 050 $166, 000
FINANCIAL STATEMENT ANALYSIS § Evaluate the financial condition of a business: o Used by management and creditors § Two types: o Balance Sheet analysis o Interstatement analysis
BALANCE SHEET ANALYSIS § Uses only the information on the Balance Sheet § Includes calculating: o Working Capital o Current Ratio o Quick Ratio
WORKING CAPITAL The amount of capital the business has available for current operations FORMULA: CURRENT ASSETS CURRENT LIABILITIES
WORKING CAPITAL Example: Northern Micro has Current Assets of $54, 000 and Current Liabilities of $19, 450. FORMULA: CURRENT ASSETS $54, 000 CURRENT LIABILITIES $19, 450 WORKING CAPITAL $34, 550
CURRENT RATIO FORMULA: CURRENT ASSETS CURRENT LIABILITIES
CURRENT RATIO EXAMPLE: Let’s look at the Current Ratio for Northern Micro. CURRENT ASSETS CURRENT LIABILITIES $54, 000 $19, 450 2. 8 to 1
CURRENT RATIO § Measures a firm’s ability to pay its current liabilities § “Rule of Thumb” = 2 to 1 § Many companies operate successfully with ratio of 1. 5 to 1. § Best to compare to industry averages
CURRENT RATIO EXAMPLE: Let’s look at the Current Ratio for Northern Micro. CURRENT $54, 000 ASSETS Northern Micro has a very good CURRENT $19, 450 current ratio! LIABILITIES 2. 8 to 1
QUICK RATIO § Gives a more defined picture of a firm’s ability to pay its current liabilities § “Rule of Thumb” = 1 to 1 § But many businesses operate successfully with a quick ratio of 0. 6 to 1.
QUICK RATIO FORMULA: QUICK ASSETS CURRENT LIABILITIES
QUICK ASSETS § Cash and all other assets that can be converted into cash quickly § Examples: o Accounts Receivable, Temporary Investments § Northern Micro has $35, 000 of Quick Assets: o $20, 000 in Cash and $15, 000 in Accounts Receivable
BALANCE SHEET ANALYSIS QUICK RATIO FORMULA: Quick assets are QUICK more than adequate $35, 000 ASSETS to meet current CURRENT obligations. $19, 450 LIABILITIES 1. 8 to 1
INTERSTATEMENT ANALYSIS § Provides a comparison of the relationships between selected income statement and balance sheet amounts § Includes: o Return on Owner’s Equity o Accounts Receivable Turnover o Average collection period o Inventory Turnover o Average days to sell inventory
RETURN ON OWNER’S EQUITY FORMULA: NET INCOME AVERAGE OWNER’S EQUITY
RETURN ON OWNER’S EQUITY EXAMPLE: Let’s compute the return for Northern Micro. NET INCOME AVERAGE OWNER’S EQUITY $ 22, 650
AVERAGE OWNER’S EQUITY FORMULA: + Owner’s Equity at the beginning of the year 2 Owner’s Equity at the end of the year
RETURN ON OWNER’S EQUITY EXAMPLE: Let’s compute the return for Northern Micro. NET INCOME AVERAGE OWNER’S EQUITY $ 22, 650 $110, 725 ($104, 400 + $117, 050) 2
RETURN ON OWNER’S EQUITY EXAMPLE: Let’s compute the return for Northern Micro. NET INCOME AVERAGE OWNER’S EQUITY $ 22, 650 $110, 725 This should be compared with prior years and other businesses of comparable nature and size. 20. 5%
ACCOUNTS RECEIVABLE TURNOVER A measure of the time required to collect cash from customers FORMULA: NET CREDIT SALES FOR THE PERIOD AVERAGE ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE TURNOVER EXAMPLE: Net credit sales for Northern Micro are $110, 000 and Accounts Receivable for January 1, and December 31 are $10, 000 and $15, 000, respectively NET CREDIT SALES $110, 000 FOR THE PERIOD AVERAGE ACCOUNTS $ 12, 500 RECEIVABLE ($10, 000 + $15, 000) 2 8. 8
ACCOUNTS RECEIVABLE TURNOVER EXAMPLE: Net credit sales for Northern Micro are $110, 000 and Accounts Receivable for January 1 and December 31 are $10, 000 and $15, 000 respectively Indicates the number of NET CREDIT SALESreceivable times accounts $110, 000 FOR THE PERIOD were collected in the accounting period. Higher number indicates AVERAGE ACCOUNTS $ 12, 500 cash is collected more quickly. RECEIVABLE 8. 8
AVERAGE COLLECTION PERIOD Number of days credit customers are taking to pay for their purchases FORMULA: Number of Days in the year Rate of turnover 365 8. 8 41. 5 days Compared with credit terms to determine if customers are paying on a timely basis
INVENTORY TURNOVER Represents the number of times merchandise inventory was turned over (sold) during the accounting period FORMULA: COST OF GOODS SOLD FOR THE PERIOD AVERAGE INVENTORY
INVENTORY TURNOVER EXAMPLE: Northern Micro’s Cost of Goods Sold was $111, 500 for the year and inventory balances for the beginning and end of the year were $26, 000 and $18, 000, respectively. COST OF GOODS SOLD $111, 500 FOR THE PERIOD AVERAGE $22, 000 INVENTORY ($26, 000 + $18, 000) 2 5. 1
INVENTORY TURNOVER § The higher the rate of turnover, the smaller the profit required on each dollar of sales to produce a satisfactory gross profit. § Grocery stores have high turnover, low profit per item. § Jewelry stores need higher profit per item to offset the low turnover.
AVERAGE DAYS TO SELL INVENTORY FORMULA: Number of Days in the year Rate of turnover Just like the Average Collection Period formula
AVERAGE DAYS TO SELL INVENTORY FORMULA: Number of Days in the year Rate of turnover 365 5. 1 71. 6 days Needs to be compared with prior years, other companies or its industry
CLOSING ENTRIES § Similar to closing entries of a service business: o But additional merchandising accounts that also must be closed § Easiest to use work sheet to prepare closing entries
ACCOUNT TITLE 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 INCOME STMT BALANCE SHEET DR. CR. Gary L. Fishel, Capital 20, 000 Gary L. Fishel, Drawing Income Summary 26, 000 18, 000 214, 000 Sales Returns & Allow. 1, 200 Interest Revenue 900 Rent Revenue 8000 10, 000 Subscriptions Revenue Purchases 105, 000 800 Purchases Ret. & Allow. Purchases Discounts 1, 000 Freight-In 300 42, 450 Wages Expense Advertising Expense 2, 500 Entry#1 Bank Credit Card Expense 1, 500 credit balance Rent Expense DEBIT - all 20, 000 1, 400 accounts Supplies Expense Income Statement 3, 500 Telephone Expense CREDIT - Income 12, 000 Summary Utilities Expense Insurance Expense 114, 400
GENERAL JOURNAL DATE DESCRIPTION Closing Entries 1 20 -2 Dec. 31 Sales 3 Subscriptions Revenue 4 Interest Revenue 5 6 7 8 9 10 11 Rent Revenue Purch. Returns & Allow. Purchases Discounts Income Summary PR DEBIT CREDIT 214, 000 10, 000 900 8, 000 800 1, 000 234, 700
ACCOUNT TITLE 21 Sales Returns & Allow. 25 26 27 28 29 30 31 32 33 34 35 36 INCOME STMT DR. CR. BALANCE SHEET CR. DR. 1, 200 Purchases 105, 000 Purch. Returns & Allow. Purchases Discounts 300 Freight-In Wages Expense 42, 450 Advertising Expense 2, 500 1, 500 Bank Credit Card Exp. Rent Expense 20, 000 1, 400 Supplies Expense Telephone Expense 3, 500 Utilities Expense 12, 000 Insurance Expense 1, 800 4, 000 Depr. Expense -Building 3, 000 Depr. Expense -Store Eq. Miscellaneous Expense 2, 250 Interest Expense 3, 150 800 1, 000 Entry #2: DEBIT- Income Summary CREDIT- Income Statement debit balance accts.
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 31 Income Summary Sales Returns & Allow. Purchases Freight-In Wages Expense Advertising Expense Bank Credit Card Exp. Rent Expense Supplies Expense Telephone Expense Utilities Expense Insurance Expense Depreciation Exp. - Bldg. Deprec. Exp. - Store Eq. Miscellaneous Expense Interest Expense 204, 050 1, 200 105, 000 300 42, 450 2, 500 1, 500 20, 000 1, 400 3, 500 12, 000 1, 800 4, 000 3, 000 2, 250 3, 150
ACCOUNT TITLE 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 INCOME STMT DR. CR. BALANCE SHEET DR. CR. Purchases 105, 000 800 Purchases Ret. & Allow. Purchases Discounts 1, 000 300 Freight-In 42, 450 Wages Expense Advertising Expense 2, 500 #3 Entry Bank Credit Card Exp 1, 500 DEBIT Income 20, 000 Summary Rent Expense Supplies Expense CREDIT -1, 400 Capital account 3, 500 amount Telephone Expense for Net Income Utilities Expense 12, 000 Insurance Expense 1, 800 4, 000 Depr. Expense Building Depr. Expense -Store Eq. 3, 000 2, 250 Miscellaneous Expense 3, 150 Interest Expense 230, 050 252, 700 224, 000 22, 650 Net Income 252, 600 252, 700 224, 000 201, 350 22, 650 224, 000
20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Utilities Expense Insurance Expense Deprec. Exp. - Building Deprec. Exp. - Store Equip. Miscellaneous Expense Interest Expense 31 Income Summary Gary L. Fishel, Capital 12, 000 1, 800 4, 000 3, 000 2, 250 3, 150 22, 650
ACCOUNT TITLE 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 INCOME STMT CR. DR. BALANCE SHEET CR. DR. Gary L. Fishel, Capital 20, 000 Gary L. Fishel, Drawing Income Summary 26, 000 18, 000 214, 000 Sales Returns & Allow. 1, 200 Interest Revenue 900 Rent Revenue 8000 10, 000 Subscriptions Revenue Purchases 105, 000# 4 Entry 800 Purchases Ret. & Allow Purchases Discounts DEBIT - Capital 1, 000 Freight-In. CREDIT to close the 300 Drawing Account 42, 450 Wages Expense Advertising Expense 2, 500 Bank Credit Card Expense 1, 500 Rent Expense 20, 000 1, 400 Supplies Expense 3, 500 Telephone Expense 12, 000 Utilities Expense Insurance Expense 114, 400
20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Utilities Expense Insurance Expense Deprec. Exp. - Building Deprec. Exp. - Store Equip. Miscellaneous Expense Interest Expense 12, 000 1, 800 4, 000 3, 000 2, 250 3, 150 31 Income Summary Gary L. Fishel, Capital 22, 650 31 Gary L. Fishel, Capital Gary L. Fishel, Drawing 20, 000 22, 650 20, 000
POST-CLOSING TRIAL BALANCE § Trial Balance taken after the temporary owner’s equity accounts have been closed § Purpose: to prove that the general ledger is in balance at the beginning of a new accounting period, before any transactions for the new accounting period are entered
Northern Micro Post-Closing Trial Balance December, 31, 20 -Account Title Acct # Debit Bal Credit Bal 20, 000 101 Cash Accounts Receivable 122 15, 000 Merchandise Inventory 131 18, 000 Supplies 400 141 145 600 Prepaid Insurance 161 10, 000 Land Building 90, 000 171 Accumulated Depreciation - Building 171. 1 20, 000 Store Equipment 181 50, 000 181. 1 18, 000 Accumulated Depreciation - Store Eq. 201 Notes Payable 5, 000 10, 000 Accounts Payable 202 219 Wages Payable 450 231 1, 500 Sales Tax Payable 241 2, 000 Unearned Subscriptions Revenue 30, 000 251 Mortgage Payable 117, 050 Gary L. Fishel, Capital 311 204, 000
REVERSING ENTRIES § Prepared at the beginning of an accounting period § Reverses adjusting entries § To simplify the recording of transactions in the new accounting period § Except for the first year of operations, only adjustments that INCREASED an ASSET OR LIABILITY account from a zero balance should be reversed.
GENERAL JOURNAL DATE DESCRIPTION Adjusting Entries 1 20 -2 Dec. 31 Income Summary 3 Merchandise Inventory 4 PR DEBIT CREDIT 26, 000 5 31 Merchandise Inventory 6 8 9 18, 000 Income Which. Summary of these adjusting entries should be reversed? 1, 400 31 Supplies Expense Supplies 1, 400 10 11 31 Insurance Expense 7 18, 000 1, 800
GENERAL JOURNAL DATE DESCRIPTION PR DEBIT CREDIT Adjusting Entries 1 20 -2 Dec. 31 Income Summary 3 Merchandise Inventory 4 5 6 31 Merchandise Inventory 26, 000 18, 000 Income Summary 7 8 9 10 11 31 Supplies Expense Never reverse adjustments Supplies for merchandise inventory. 31 Insurance Expense 1, 400 1, 800
GENERAL JOURNAL DATE DESCRIPTION PR DEBIT CREDIT Adjusting Entries 1 20 -2 26, 000 Dec. 31 Income Summary 3 Merchandise Inventory 26, 000 No asset or liability with a zero 4 balance has been increased…. 5 6 31 No Merchandise reversing. Inventory entry is needed. 18, 000 Income Summary 7 8 9 10 11 31 Supplies Expense 1, 400 Supplies 31 Insurance Expense 1, 400 1, 800
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 31 Insurance Expense Prepaid Insurance 1, 800 31 Deprec. Exp. -Building Accum. Depr. - Building 4, 000 1, 800 4, 000 No asset or liability with a zero 31 Deprec. Exp. - Store Equip. 3, 000 balance has been increased…. Accum. Depr. - Store Eq. No reversing entry is needed. 31 Wages Expense Wages Payable 31 Unearned Subscrip. Rev. Subscriptions Revenue 3, 000 450 10, 000
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 31 Insurance Expense Prepaid Insurance 1, 800 31 Deprec. Exp. -Building Accum. Depr. - Building 4, 000 31 Deprec. Exp. - Store Equip. Accum. Depr. - Store Eq. 3, 000 31 Wages Expense Wages Payable 1, 800 4, 000 3, 000 450 Never reverse adjustments for depreciation. 31 Unearned Subscrip. Rev. 10, 000 Subscriptions Revenue 450 10, 000
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 31 Insurance Expense Prepaid Insurance 1, 800 31 Deprec. Exp. -Building Accum. Depr. - Building 4, 000 31 Deprec. Exp. - Store Equip. Accum. Depr. - Store Eq. 3, 000 31 Wages Expense Wages Payable 31 Unearned Subscrip. Rev. A liability account with Subscriptions Revenue 1, 800 4, 000 3, 000 450 10, 000 a zero balance has been increased!!! Reversing entry is needed. 10, 000
11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 31 Insurance Expense Prepaid Insurance 1, 800 31 Deprec. Exp. -Building Accum. Depr. - Building 4, 000 31 Deprec. Exp. - Store Equip. No. Accum. asset. Depr. or liability with - Store Eq. 3, 000 31 1, 800 4, 000 a zero balance has been increased…. Wages Expense entry is needed. 450 No reversing Wages Payable 31 Unearned Subscript. Rev. Subscriptions Revenue 3, 000 450 10, 000
GENERAL JOURNAL DATE DESCRIPTION Reversing Entries 1 20 -2 Jan. 1 Wages Payable 3 Wages Expense 4 PR DEBIT CREDIT 450 5 6 7 8 9 10 11 Reversing entries are the reverse or opposite of the adjusting entry. 450
- Financial accounting chapter 1
- Unit 13 accounting and financial statements
- Management accounting vs financial accounting ppt
- Chapter 03 financial analysis
- How to improve current ratio
- Chapter 2 financial statements taxes and cash flow
- 16-point
- Whats a quarter past 12
- 16 national career clusters
- Jose trips over his untied shoelace
- Explain how securities firms differ from investment banks
- Adjusting accounts for financial statements chapter 3
- Financial statement of sole proprietorship
- Chapter 7 financial statements for a proprietorship
- Adjusting accounts for financial statements chapter 3
- Chapter 8 separate financial statements
- Chapter 4 analysis of financial statements
- Chapter 4 analysis of financial statements
- Working with financial statements chapter 3
- Adjusting the accounts chapter 3
- Chapter 3 adjusting accounts for financial statements
- Managerial accounting chapter 2 solutions
- Financial accounting chapter 13
- Financial accounting chapter 6
- Financial accounting chapter 9
- Financial accounting chapter 7
- Financial accounting ifrs 4th edition chapter 12
- Financial accounting chapter 3
- Chapter 2 accounting answers
- Hospitality managers are held responsible primarily for:
- Financial accounting chapter 5
- Cash flow to creditors is equal to
- Financial analysis of banks
- Partial equity method consolidation worksheet
- Purpose of financial statements
- Audit planning memorandum ey
- Sample notes to financial statements for small entities
- Analysis of financial statements
- Financial statement translation example
- Chapter 6 fge financial management
- Where is preferred dividends on financial statements
- Forecasted financial statements
- Consolidated financial statements date of acquisition
- Ssars 21 engagement letter example
- Materiality constraint
- Ias consolidated financial statements
- Common base year balance sheet
- Accounts
- What is the function of a reciprocal ledger account?
- Accounting for merchandising business ppt
- Four financial statements
- Pwc ifrs 17
- Sysco financial statements
- Four primary financial statements
- Financial statements tools
- Translation of financial statements
- Financial statements of sole trader
- A company has sales of 695 000 and cost of goods
- Ssars 24
- Lkas 01 in sinhala
- Prospective accounting
- Asc 830
- Structure of financial statements
- Common sized financial statements
- Petty cash in income statement
- Financial statements
- Ipsas 24 summary
- Boeing financial ratios
- Alan zuccari net worth
- Prospective analysis financial statements
- Aasb 8
- Bank of cyprus financial statements
- Pixar financial statements
- Financial motivators
- Tactical information system
- Construction accounting and financial management
- Cost of goods manufactured formula
- Introduction to construction financial management
- Bafs accounting
- Internal users of accounting information
- Wild financial and managerial accounting
- Construction accounting and financial management
- Kontinuitetshantering i praktiken
- Typiska novell drag
- Tack för att ni lyssnade bild
- Vad står k.r.å.k.a.n för