4
Completing the Accounting
Cycle
1
Completing the Accounting Cycle
After studying this chapter, you should be able to:
1
Describe the flow of accounting
information from the unadjusted trial
balance into the adjusted trial balance
and financial statements.
2
Prepare financial statements from
adjusted account balances.
3
Prepare closing entries.
After
studying this
you should
the chapter,
accounting
cycle. be able to:
4 Describe
4-2
2
Completing the Accounting Cycle (continued)
4-3
1-3
5
Illustrate the accounting cycle for one
period.
6
Explain what is meant by the fiscal year
and the natural business year.
3
1
Describe the flow of accounting
information from the unadjusted
trial balance into the adjusted
trial balance and financial
statements.
4-4
1-4
4
1
Exhibit 1
4-5
1-5
End-of-Period Spreadsheet (Work Sheet)
5
1
Flow of Accounting Information
Spreadsheet (Work Sheet)
Trial Balance
Accounts
Dr
Cr
Adjustments
Adjusted TB
Dr
Dr
Cr
Cr
Accounts are listed in the Trial Balance column using
the ending balance found in the general ledger.
4-6
1-6
6
1
Flow of Accounting Information
Spreadsheet (Work Sheet)
Trial Balance
Accounts
Dr
Cr
Adjustments
Adjusted TB
Dr
Dr
Cr
Cr
Adjustments are entered here. Two possibilities:
1. Deferrals – Existing balances are changed.
2. Accruals – New information is entered.
4-7
1-7
7
1
Flow of Accounting Information
Spreadsheet (Work Sheet)
Trial Balance
Accounts
Dr
Cr
Adjustments
Adjusted TB
Dr
Dr
Cr
Cr
Adjustments are combined with
the trial balance. Account
balances are now adjusted.
4-8
1-8
8
1
Flow of Accounting Information
Spreadsheet (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.
4-9
1-9
9
1
Flow of Accounting Information
Spreadsheet (Work Sheet)
Adjusted TB
Accounts
4-10
1-10
Dr
Cr
Income State.
Dr
Cr
Balance Sheet
Dr
Cr
Asset, liability, owner’s equity, and
drawing balances in the Adjusted
Trial Balance column are extended
to the Balance Sheet column.
10
1
Example Exercise 4-1
Flow of Accounts into Financial Statements
The balances for the accounts listed below appear in
the Adjusted Trial Balance columns of the end-ofperiod spreadsheet (work sheet). Indicate whether
each balance should be extended to (a) an Income
Statement column or (b) a Balance Sheet column.
1. Amber Bablock, Drawing
2. Utilities Expense
3. Accumulated
Depreciation—Equipment
4. Unearned Rent
4-11
4-11
1-11
5.
6.
7.
8.
Fees Earned
Accounts Payable
Rent Revenue
Supplies
11
Example Exercise 4-1 (continued)
1
Follow My Example 4-1
1.
2.
3.
4.
5.
6.
7.
8.
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
4-12
4-12
1-12
12
2
Prepare financial
statements from
adjusted account
balances.
4-13
1-13
13
2
The income statement is prepared
directly from the Income Statement
or Adjusted Trial Balance columns
of the spreadsheet (work sheet).
4-14
1-14
14
2
Exhibit 2
4-15
1-15
Financial Statements Prepared from Work Sheet
to statement of owner’s equity
15
2
Example Exercise 4-2
Determining the Net Income from End-of-Period
Spreadsheet
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?
4-16
4-16
1-16
16
Example Exercise 4-2 (continued)
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
4-17
4-17
1-17
17
2
The first item presented on
the statement of owner’s
equity is the balance of the
owner’s capital account at
the beginning of the period.
4-18
1-18
18
2
Exhibit 2
Financial Statements Prepared
from Work Sheet (continued)
from the income statement
to the balance sheet
4-19
1-19
19
2
Example Exercise 4-3
Statement of Owner’s Equity
Zack Gaddis owns and operates Gaddis
Employment Services. On January 1, 2009, 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,
2009.
4-20
4-20
1-20
20
Example Exercise 4-3 (continued)
2
Follow My Example 4-3
GADDIS EMPLOYMENT SERVICES
STATEMENT OF OWNER’S EQUITY
For the Year Ended December 31, 2009
Zack Gaddis, capital, January 1, 2009 $186,000
Additional investment during 2009
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, 2009
$219,750
For Practice: PE 4-3A, PE 4-3B
4-21
4-21
1-21
21
2
The balance sheet is prepared
directly from the Balance
Sheet or Adjusted Trial
Balance columns of the
spreadsheet (or worksheet).
4-22
1-22
22
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.
4-23
1-23
23
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
4-24
1-24
24
2
Notes receivable are written
promises by the customer to
pay the amount of the note and
possibly interest at an agreed
rate.
4-25
1-25
25
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
4-26
1-26
26
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
4-27
1-27
27
2
Liabilities not due for a long
time (usually more than one
year) are long-term liabilities.
• Notes payable
• Mortgage payable
• Bond payable
4-28
1-28
28
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.
4-29
1-29
29
2
Exhibit 2
Financial Statements Prepared
from Work Sheet (continued)
from the statement of owner’s equity
4-30
1-30
30
2
Example Exercise 4-4
Classified Balance Sheet
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, 2009 balance sheet of Hindsight Consulting.
1. Jason Corbin, Capital
2. Notes Receivable (due
in 6 months)
3. Notes Payable (due in
2011)
4. Land
4-31
4-31
1-31
5. Cash
6. Unearned Rent
7. Accumulated Depr.—
Equipment
8. Accounts Payable
31
Example Exercise 4-4 (continued)
2
Follow
My Example 4-4
Follow My Example 4-4
1.
2.
3.
4.
Stockholders’ equity
Current asset
Long-term liability
Property, plant, and
equipment
5. Current asset
6. Current liability
7. Property, plant, and
equipment
8. Current liability
For Practice: PE 4-4A, PE 4-4B
4-32
4-32
1-32
32
3
Prepare closing entries.
4-33
1-33
33
3
Closing Entries
Accounts that are relatively
permanent from year to year are
called real accounts. Accounts that
report amounts for only one period
are called temporary accounts or
nominal accounts.
4-34
1-34
34
3
Closing Entries
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.
4-35
1-35
35
3
Closing Entries
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.
4-36
1-36
36
3
Exhibit 3
4-37
1-37
The Closing Process
37
3
Exhibit 4
Flowchart of Closing Entries for NetSolutions
Debit each revenue account
for the amount of its balance,
and credit Income Summary
for the total revenue.
Fees Earned
Income Summary
16,960
16,840 Bal. 16,840
Rent Revenue
120 Bal.
4-38
1-38
120
38
3
Flowchart of Closing Entries for
NetSolutions (continued)
Exhibit 4
Wages Expense
Bal.
4,525
4,525
Rent Expense
Bal.
1,600
Income Summary
9,855
16,960
1,600
Depreciation Expense
Bal.
50
50
Utilities Expense
Bal.
985
985
Supplies Expense
Bal.
2,040
2,040
Insurance Expense
Bal.
200
200
Miscellaneous Expense
4-39
1-39
Bal.
455
Debit Income Summary
for the total expenses and
credit each expense
account for its balance.
455
39
3
Flowchart of Closing Entries
for NetSolutions (continued)
Exhibit 4
Income Summary
9,855
7,105
16,960
Chris Clark, Capital
Bal. 25,000
7,105
Debit Income
Summary for the
amount of its balance
(in this case, the net
income) and credit the
capital account.
Chris Clark, Drawing
Bal.
4-40
1-40
4,000
40
3
Exhibit 4
Flowchart of Closing Entries
for NetSolutions (continued)
Chris Clark, Capital
4,000
Bal. 25,000
7,105
Chris Clark, Drawing
Bal.
4-41
1-41
4,000
4,000
Debit the capital
account for the balance
of the drawing
account, and credit
drawing for the same
amount.
41
3
Exhibit 4
4-42
1-42
Flowchart of Closing Entries
for NetSolutions (summary)
42
3
Exhibit 5
Closing Entries for NetSolutions
Step 1
Step 2
Step 3
4-43
1-43
Step 4
43
3
After the closing entries
are posted, all of the
temporary accounts have
zero balances.
4-44
1-44
44
3
Exhibit 6
4-45
1-45
Ledger for NetSolutions
45
3
Exhibit 6
4-46
1-46
Ledger for NetSolutions
(continued)
46
3
Exhibit 6
4-47
1-47
Ledger for NetSolutions (continued)
47
3
Exhibit 6
4-48
1-48
Ledger for NetSolutions (continued)
48
3
Example Exercise 4-5
Closing Entries
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.
4-49
4-49
1-49
49
Example Exercise 4-5 (continued)
3
Follow My Example 4-5
July 31
31
31
31
Fees Earned…………………………….. 380,450
Income Summary………………….
Income Summary……………………… 339,450
Wages Expense……………………
Rent Expense………………………
Supplies Expense…………………
Miscellaneous Expense………….
Income Summary……………………….
41,000
Terry Lambert, Capital……………
Terry Lambert, Capital…………………
Terry Lambert, Drawing…………..
380,450
250,000
65,000
18,250
6,200
41,000
25,000
25,000
For Practice: PE 4-5A, PE 4-5B
4-50
4-50
1-50
50
3
A post-closing trial balance is
prepared after the closing
entries have been posted. The
purpose of the PCTB is to
verify that the ledger is in
balance at the beginning of the
next period.
4-51
1-51
51
3
Exhibit 7
4-52
1-52
Post-Closing Trial Balance
52
4
Describe the accounting
cycle.
4-53
1-53
53
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.
4-54
1-54
54
4
Accounting Cycle
1. Transactions are analyzed and recorded
in the journal.
2. Transactions are posted to the ledger.
3. An unadjusted trial balance is prepared.
4. Adjustment data are assembled and
analyzed.
5. An optional end-of-period spreadsheet
(work sheet) is prepared.
4-55
1-55
(continued)
55
4
Accounting Cycle (continued)
6. Adjusting entries are journalized and
posted to the ledger.
7. An adjusted trial balance is prepared.
8. Financial statements are prepared.
9. Closing entries are journalized and
posted to the ledger.
10. A post-closing trial balance is prepared.
4-56
1-56
56
4
Example Exercise 4-6
Accounting Cycle
From the following list of steps in the accounting cycle,
identify what two steps are missing.
a. Transactions are analyzed and recorded in the journal.
b. Transactions are posted to the ledger.
c. Adjustment data are assembled and analyzed.
d. An optional end-of-period spreadsheet (work sheet) is
prepared.
e. Adjusting entries are journalized and posted to the
ledger.
f. Financial statements are prepared.
g. Closing entries are journalized and posted to the ledger.
h. A post-closing trial balance is prepared.
4-57
4-57
1-57
57
Example Exercise 4-6 (continued)
4
Follow My Example 4-6
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).
For Practice: PE 4-6A, PE 4-6B
4-58
4-58
1-58
58
5
Illustrate the
accounting cycle for
one period.
4-59
1-59
59
5
Exhibit 9
Journal
entries for
April, Kelly
Consulting
4-60
1-60
60
5
Exhibit 9
Journal
entries for
April, Kelly
Consulting
(continued)
4-61
1-61
61
5
Exhibit 10
4-62
1-62
Unadjusted Trial Balance, Kelly Consulting
62
5
Exhibit 11
4-63
1-63
4-63
End-of-Period Spreadsheet (Work Sheet)
63
5
Exhibit 12
Adjusting
Entries,
Kelly
Consulting
4-64
1-64
64
5
Exhibit 13
4-65
1-65
Adjusted Trial Balance, Kelly Consulting
65
5
Exhibit 14
4-66
1-66
Financial Statements, Kelly Consulting
66
5
Exhibit 14
4-67
1-67
Financial Statements, Kelly
Consulting (continued)
67
5
Exhibit 14
4-68
1-68
Financial Statements, Kelly
Consulting (continued)
68
5
Exhibit 15
4-69
1-69
Closing Entries, Kelly Consulting
69
5
Exhibit 16
4-70
1-70
Post-Closing Trial Balance, Kelly Consulting
70
5
Exhibit 17
4-71
1-71
Ledger, Kelly Consulting
71
5
Exhibit 17
4-72
1-72
Ledger, Kelly Consulting (continued)
72
5
Exhibit 17
4-73
1-73
Ledger, Kelly Consulting (continued)
73
5
Exhibit 17
4-74
1-74
Ledger, Kelly Consulting (continued)
74
6
Explain what is meant
by the fiscal year and
the natural business
year.
4-75
1-75
75
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.
4-76
1-76
76
6
Financial History of a Business
4-77
1-77
77
Appendix 1:
End-of-Period
Spreadsheet (Work
Sheet)
4-78
1-78
78
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-79
1-79
Debit
Adjusted
Trial Balance
Adjustments
Credit
Debit
Credit
Debit
Credit
2,065
2,220
2,000
2,400
20,000
1,800
900
360
25,000
4,000
16,340
4,275
1,600
The
unadjusted
trial balance
is checked
for equality.
985
800
455
42,600
42,600
79
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-80
4-80
1-80
Debit
Adjustments
Credit
2,065
2,220
2,000
2,400
20,000
1,800
Debit
Credit
Adjusted
Trial Balance
Debit
Credit
Supplies
needs
adjusting
900
360
25,000
4,000
16,340
4,275
1,600
985
800
455
42,600
42,600
80
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-81
4-81
1-81
Debit
Adjustments
Credit
Debit
2,065
2,220
2,000
2,400
20,000
1,800
Credit
Adjusted
Trial Balance
Debit
Credit
(a) 1,240
(a) Cost of
supplies on
hand at
December 31
is $760.
900
360
25,000
4,000
16,340
4,275
1,600
985
800
455
42,600
(a) 1,240
42,600
81
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-82
4-82
1-82
Debit
Adjustments
Credit
Debit
2,065
2,220
2,000
2,400
20,000
1,800
Credit
Adjusted
Trial Balance
Debit
Credit
(a) 1,240
(b) 200
(b) The insurance
expense for
December is
$200 ($2,400
÷ 12).
900
360
25,000
4,000
16,340
4,275
1,600
985
800
455
42,600
(a) 1,240
(b) 200
42,600
82
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-83
4-83
1-83
Debit
Adjusted
Trial Balance
Adjustments
Credit
Debit
2,065
2,220
2,000
2,400
20,000
1,800
Credit
Debit
Credit
(a) 1,240
(b) 200
(c) Rent
revenue
earned
during
December
was $120.
900
360
25,000
(c)
120
4,000
16,340
(c)
120
4,275
1,600
985
800
455
42,600
(a) 1,240
(b) 200
42,600
83
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-84
4-84
1-84
Debit
Adjusted
Trial Balance
Adjustments
Credit
2,065
2,220
2,000
2,400
20,000
1,800
Debit
(d)
Credit
Debit
Credit
500
(a) 1,240
(b) 200
900
360
25,000
(c)
120
4,000
16,340
(d)
(c)
(d) Fees accrued
at the end of
December,
but not
recorded,
totaled $500.
500
120
4,275
1,600
985
800
455
42,600
(a) 1,240
(b) 200
42,600
84
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-85
4-85
1-85
Debit
Adjustments
Credit
2,065
2,220
2,000
2,400
20,000
1,800
Debit
(d)
Credit
Debit
Credit
500
(a) 1,240
(b) 200
900
(e)
360
25,000
(c)
120
4,000
16,340
4,275
1,600
(d)
(c)
(e)
985
800
455
42,600
Adjusted
Trial Balance
(e) Wages
accrued but
250
not paid at
the end of
December
totaled $250.
500
120
250
(a) 1,240
(b) 200
42,600
85
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-86
4-86
1-86
Debit
Adjusted
Trial Balance
Adjustments
Credit
2,065
2,220
2,000
2,400
20,000
1,800
Debit
(d)
Credit
Credit
500
(a) 1,240
(b) 200
(f)
50
(e)
250
(d)
(c)
500
120
900
360
25,000
(c)
120
4,000
16,340
4,275
1,600
985
800
455
42,600
Debit
(e)
250
(f)
50
(f) Depreciation
of office
equipment is
$50 for
December.
(a) 1,240
(b) 200
42,600
86
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-87
4-87
1-87
Debit
Adjusted
Trial Balance
Adjustments
Credit
2,065
2,220
2,000
2,400
20,000
1,800
Debit
(d)
Credit
Debit
Credit
500
(a) 1,240
(b) 200
(f)
50
(e)
250
(d)
(c)
500
120
900
360
25,000
(c)
120
4,000
16,340
4,275
1,600
985
800
(e)
250
(f)
50
(a) 1,240
(b) 200
455
Summed
42,600 42,600
and ruled
2,360
2,360
87
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.
4-88
1-88
88
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-89
4-89
1-89
Debit
Adjusted
Trial Balance
Adjustments
Credit
2,065
2,220
2,000
2,400
20,000
1,800
Debit
(d)
Credit
500
(a) 1,240
(b) 200
(f)
Debit
2,065
2,720
760
2,200
20,000
1,800
50
900
250
240
25,000
50
900
360
25,000
(c)
120
4,000
4,000
16,340
4,275
1,600
(d)
(c)
(e)
(f)
985
800
455
42,600
Credit
250
50
(a) 1,240
(b) 200
42,600
16,840
120
4,525
500
120
2,360
2,360
1,600
50
985
2,040
200
455
43,400
43,400
89
Because of space constraints,
the Unadjusted Trial Balance
and the Adjustments columns
will not be shown in the
following slides.
4-90
1-90
90
The next step is to extend
amounts in the Adjusted
Trial Balance columns to
the Income Statement and
Balance Sheet columns.
4-91
1-91
91
Adjusted
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-92
4-92
1-92
Debit
Income Statement
Credit
Debit
Credit
2,065
2,220
2,000
2,400
20,000
1,800
Balance Sheet
Debit
2,065
2,720
760
2,200
20,000
1,800
50
900
250
240
25,000
900
360
25,000
4,000
4,000
16,340
4,275
1,600
50
985
800
455
42,600
Credit
16,840
120
4,525
1,600
50
985
2,040
200
455
42,600
92
Adjusted
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
4-93
4-93
1-93
Debit
Income Statement
Credit
Debit
Credit
2,065
2,220
2,000
2,400
20,000
1,800
Balance Sheet
Debit
2,065
2,720
760
2,200
20,000
1,800
50
900
250
240
25,000
900
360
25,000
4,000
4,000
16,340
4,275
1,600
50
985
800
455
42,600
Credit
42,600
16,840
120
4,525
1,600
50
985
2,040
200
455
9,855
16,960
33,545
26,440
93
The four columns are summed.
Income Statement
Balance Sheet
9,855
7,105
16,960
16,960
33,545
16,960
33,545
26,440
7,105
33,545
Net Income
The difference between the Income
Statement columns totals is the net
income (or net loss) for the period.
4-94
1-94
94
Adjusted
Trial Balance
Account Title
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
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depr.
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital
Chris Clark, Drawing
Fees Earned
Rent Revenue
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Exp.
Net4-95
income
1-95
4-95
Debit
Income Statement
Credit
Debit
Credit
2,065
2,220
2,000
2,400
20,000
1,800
Balance Sheet
Debit
2,065
2,720
760
2,200
20,000
1,800
50
900
250
240
25,000
900
360
25,000
4,000
4,000
16,340
4,275
1,600
50
985
800
455
42,600
Credit
42,600
16,840
120
4,525
1,600
50
985
2,040
200
455
9,855
7,105
16,960
16,960
33,545
16,960
33,545
26,440
7,105
33,545
95
4-96
1-96
96