Lecture 11 Chapter 04 Completing the Accounting Cycle

Lecture Overview • Unadjusted Trial Balance • Adjusting entries and their affect on adjustment

Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Trial Balance

Trial Balance Account Title Cash Accounts Receivable Supplies Prepaid Insurance Land Office Equipment Accounts

The Work Sheet Adjusted TB Accounts Dr Cr Income State. Dr Cr Balance Sheet

To make room on the slides for the Income statement and Balance Sheet columns,

Adjusted Trial Balance Account Title Cash Accounts Receivable Supplies Prepaid Insurance Land Office Equipment

Now, let’s extend the balances from the Adjusted Trial Balance column.

The difference between the Income Statement column totals is the net income (or net

The difference between the Balance Sheet column totals is also the income (or net

Income Statement Balance Sheet 9, 755 16, 960 33, 645 26, 440 7, 205

Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Fees earned

Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Net income

Opportunities Inc. Balance Sheet For the Two Months Ended December 31, 2010 Assets Liabilities

Lecture Overview • Structure of Worksheet • Unadjusted Trial Balance • Adjusting entries and

Slides: 26

Download presentation

Lecture 11 Chapter 04 Completing the Accounting Cycle Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc.

Lecture Overview • Unadjusted Trial Balance • Adjusting entries and their affect on adjustment column • Adjustment of entries on Adjusted column

Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Trial Balance Account Title Cash Accounts Receivable Supplies Prepaid Insurance Land Office Equipment Accounts Payable Unearned Rent Capital Stock Dividends Fees Earned Wages Expense Rent Expense Utilities Expense Supplies Expense Miscellaneous Expense Debit 2, 065 2, 220 2, 000 2, 400 20, 000 1, 800 4, 000 4, 275 1, 600 985 800 455 42, 600 Credit 900 360 25, 000 16, 340 42, 600 Adjustments Debit Credit Adjusted Trial Balance Debit The Unadjusted Trial Balance Credit

Trial Balance Account Title Cash Accounts Receivable Supplies Prepaid Insurance Land Office Equipment Accounts Payable Unearned Rent Capital Stock Dividends Fees Earned Wages Expense Rent Expense Utilities Expense Supplies Expense Miscellaneous Expense Debit 2, 065 2, 220 2, 000 2, 400 20, 000 1, 800 4, 000 4, 275 1, 600 985 800 455 42, 600 Adjustments Credit Debit 900 360 25, 000 16, 340 (e) 500 (c) 120 (d) 250 (a) 1, 240 42, 600 Insurance Expense (b) 100 Rent Revenue (c) 120 Wages Payable (d) 250 Depreciation Expense (f) 50 Accum. Depreciation (f) 2, 260 50 Credit (a) 1, 240 (b) 100 (e) 500 Adjusted Trial Balance Debit Credit

Trial Balance Account Title Cash Accounts Receivable Supplies Prepaid Insurance Land Office Equipment Accounts Payable Unearned Rent Capital Stock Dividends Fees Earned Wages Expense Rent Expense Utilities Expense Supplies Expense Miscellaneous Expense Insurance Expense (b) 100 Rent Revenue Wages Payable Depreciation Expense Accum. Depreciation 2, 260 Debit 2, 065 2, 220 2, 000 2, 400 20, 000 1, 800 4, 000 4, 275 1, 600 985 800 455 42, 600 (c) 120 (d) 250 (f) 50 43, 400 Credit Adjustments Debit (e) 900 360 25, 000 16, 340 (c) (d) 500 Credit (a) 1, 240 (b) 100 (f) 50 43, 400 120 250 50 Debit 2, 065 2, 720 760 2, 300 20, 000 1, 800 120 (e) 500 250 (a) 1, 240 42, 600 100 Adjusted Trial Balance 50 4, 000 4, 525 1, 600 985 2, 040 455 Credit 900 240 25, 000 16, 840

The Work Sheet Adjusted TB Accounts Dr Cr Income State. Dr Cr Balance Sheet Dr Cr Revenue and expense balances in the Adjusted Trial Balance column are extended to the Income Statement column.

The Work Sheet Adjusted TB Accounts Dr Cr Income State. Dr Cr Balance Sheet Dr Cr Asset, liability, and stockholders’ equity balances in the Adjusted Trial Balance column are extended to the Balance Sheet column.

To make room on the slides for the Income statement and Balance Sheet columns, the Trial Balance and Adjustments columns have been removed.

Adjusted Trial Balance Account Title Cash Accounts Receivable Supplies Prepaid Insurance Land Office Equipment Accounts Payable Unearned Rent Capital Stock Dividends Fees Earned Wages Expense Rent Expense Utilities Expense Supplies Expense Miscellaneous Expense Insurance Expense 100 Rent Revenue Wages Payable Depreciation Expense Accum. Depreciation 43, 400 Debit 2, 065 2, 720 760 2, 300 20, 000 1, 800 4, 000 4, 525 1, 600 985 2, 040 455 120 250 50 Credit Income Statement Debit Credit Balance Sheet Debit Credit 900 240 25, 000 16, 840 50 43, 400

Now, let’s extend the balances from the Adjusted Trial Balance column.

Adjusted Trial Balance Account Title Cash Accounts Receivable Supplies Prepaid Insurance Land Office Equipment Accounts Payable Unearned Rent Capital Stock Dividends Fees Earned Wages Expense Rent Expense Utilities Expense Supplies Expense Miscellaneous Expense Insurance Expense 100 Rent Revenue Wages Payable Depreciation Expense Accum. Depreciation 43, 400 Debit 2, 065 2, 720 760 2, 300 20, 000 1, 800 4, 000 4, 525 1, 600 985 2, 040 455 120 250 50 Credit Income Statement Debit Balance Sheet Credit Debit 2, 065 2, 720 760 2, 300 20, 000 1, 800 900 240 25, 000 16, 840 100 50 Credit 4, 525 1, 600 985 2, 040 455 120 50 16, 840 4, 000 900 240 25, 000 250 50 43, 400

These four columns are summed.

Adjusted Trial Balance Account Title Cash Accounts Receivable Supplies Prepaid Insurance Land Office Equipment Accounts Payable Unearned Rent Capital Stock Dividends Fees Earned Wages Expense Rent Expense Utilities Expense Supplies Expense Miscellaneous Expense Insurance Expense 100 Rent Revenue Wages Payable Depreciation Expense Accum. Depreciation 43, 400 9, 755 Debit 2, 065 2, 720 760 2, 300 20, 000 1, 800 4, 000 4, 525 1, 600 985 2, 040 455 120 250 50 16, 960 Credit Income Statement Debit Balance Sheet Credit Debit 2, 065 2, 720 760 2, 300 20, 000 1, 800 900 240 25, 000 16, 840 100 50 33, 645 Credit 4, 525 1, 600 985 2, 040 455 120 50 26, 440 16, 840 4, 000 900 240 25, 000 250 50 43, 400

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

The difference between the Balance Sheet column totals is also the income (or net loss) for the period.

Income Statement Balance Sheet 9, 755 16, 960 33, 645 26, 440 7, 205 16, 960 33, 645 Net Income

Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Fees earned Rent revenue Total revenues Expenses: Wages expense Supplies expense Rent expense Utilities expense Insurance expense Depreciation expense Miscellaneous expense Total expenses 9, 755 Net income 7, 205 16, 840 120 16, 960 4, 525 2, 040 1, 600 985 100 50 455 Every amount on this income statement was taken from the Income Statement column of the work sheet.

Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Net income for November and December Less dividends Retained earnings, December 31, 2005 7, 205 4, 000 3, 205 Either from the income statement or the work sheet.

Opportunities Inc. Balance Sheet For the Two Months Ended December 31, 2010 Assets Liabilities Current assets: Current liabilities: Cash 2, 065 Accounts payable 900 From the Accounts receivable 2, 720 Wages Retained payable 250 Supplies 760 Unearned rent 240 Earnings Prepaid insurance 2, 300 Total liabilities Statement $ 1, 390 Total current assets 7, 845 Property, plant, and equipment: Stockholders’ Equity Land 20, 000 Office equip. 1, 800 Less accum. depreciation 50 1, 750 Capital stock 25, 000 Total property, plant Retained earnings 3, 205 28, 205 and equipment 21, 750 Total liabilities and

Lecture Overview • Structure of Worksheet • Unadjusted Trial Balance • Adjusting entries and their affect on adjustment column • Adjustment of entries on Adjusted column • Preparation of Income Statement Column • Preparation of Balance Sheet Column

• End of Lecture 11