Accounting 20
Module 1
Lesson 3
Accounting 20
1
Lesson 3
Accounting 20
2
Lesson 3
Lesson 3 - Ten-Column Worksheet
Read pages 257 to 284 in the textbook.
Topics:
•
•
•
•
•
•
•
•
•
•
Introduction
Adjustments
Prepaid Expenses
Expanding a Six-Column Worksheet to Ten Columns
Remember These Important Points
Do You Understand?
Conclusion
Self Test
Answers For Self Test
Assignment 3
After studying lesson 3, the student should be able to
•
identify the need for a ten-column worksheet.
•
analyze simple adjustments and correctly record and label the accounting entries in
the appropriate columns of the ten-column worksheet.
•
complete the remaining columns of the ten-column worksheet after identifying and
recording the period-end adjustments in the Adjustments column.
•
analyze and prepare General Journal entries for given prepaid expense
adjustments.
•
calculate depreciation of given fixed assets using the straight-line method.
•
demonstrate the use of the Accumulated Depreciation account as a contra fixed
asset and its correct placement on the Balance Sheet.
•
prepare the necessary period-end adjustment entries to record depreciation expense.
Accounting 20
3
Lesson 3
Accounting 20
4
Lesson 3
Introduction
In Accounting 10 you learned how to prepare a six-column worksheet. Remember the
primary function of the worksheet is the accountant's working paper for summarizing all
necessary information in order to prepare an accurate set of financial statements. The sixcolumn worksheet will perform such a function provided all ledger accounts are up to date
at the time you prepare your trial balance and financial statements. However, certain
information concerning the operations of the business often does not appear in the ledger
accounts at the time the trial balance is prepared. As a result, certain accounts must be
updated. This updating or adjusting process can also be entered on the worksheet to
provide the necessary information for accurate financial statements.
Adjustments
The financial statements of a business must present a complete picture of its operations
and present condition. For example, when preparing the income statement all revenues
earned should be reported along with all expenses incurred during that accounting period.
This matching of current period revenue and expenses is necessary to determine an
accurate net income or net loss. Otherwise known as the matching principle. This topic
will concentrate on adjustments for supplies used, insurance expired, and the depreciation
of fixed assets in order that the matching principle can be observed.
Prepaid Expenses
A prepaid expense is an asset that comes into existence when you pay in advance for
expenses that will benefit one or more future accounting periods. The asset account
Prepaid Expenses is normally debited in such situations because it represents an
unexpired cost which will benefit future periods and assist in earning revenue. As time
passes, and this asset becomes used, an adjusting entry must be made to reflect this in the
prepaid expense account. Two common examples of prepaid expenses are Prepaid
Insurance and Office Supplies. We will now examine these in detail.
Accounting 20
5
Lesson 3
Prepaid Insurance
At the beginning of the next accounting period, G. Browning takes out a three-year
insurance policy at a cost of $360. The journal entry at the time of paying the premium
will be:
20-Jan. 1
Prepaid Insurance
360
Cash
360
To record the purchase of a 3-year insurance policy.
The prepaid insurance account is an asset until the three-year insurance policy expires
because it represents something of value owned by the business.
On December 31, one year has passed since the policy was taken out. An adjustment will
be necessary to record the cost of the expired portion of the Prepaid Insurance. This
expired portion amounts to one-third of the $360 because one-third of the term (one-third
of the three years) has passed.
1998
Beginning
of 1990
Prepaid
Ins. $120
1998
Prepaid
Ins. $120
End of
1990
1999
Prepaid
Ins. $120
1999
Prepaid
Ins. $120
2000
Prepaid
Ins. $120
2000
Prepaid
Ins. $120
Insurance
Expense $120
The following adjusting entry will thus be required:
20-Dec. 31
Insurance Expense
Prepaid Insurance
120
120
To record the current year's cost
of insurance (l/3 of $360)
Accounting 20
6
Lesson 3
T-accounts after adjusting entry:
Prepaid Insurance
Dr
360
Insurance Expense
Cr
Dr
120
Cr
120
This adjusting entry will be made at the end of each accounting period during the life of
the policy. This entry when posted will charge the Insurance Expense account with the
insurance expense for the period. This entry will also reduce Prepaid Insurance to its
current level.
Note that after the first year, the Insurance Expense would be shown as an operating
expense on the income statement in the amount of $120, and the Prepaid Insurance would
be shown on the balance sheet as a Current Asset in the amount of $240 ($360 - $120).
Office Supplies
Mr. Browning needs letterhead, pens, paper clips and other office supplies on hand at all
times to use in his business. On January 12, he notices his supplies are practically gone.
Therefore, he purchases $400 worth of supplies, enough to last for at least one year. To
record this purchase, he made the following entry:
20-January 12
Office Supplies
Cash
400
400
Purchased adequate office
supplies for this year and
next.
Accounting 20
7
Lesson 3
The Office Supplies account is an asset, which represents a form of prepaid expense in
that it will benefit the entire year plus possibly part of the next year. At the end of the
year, Mr. Browning will have to count the office supplies still left on hand to determine
the portion that was used during the accounting period. Let's assume his count revealed
that $155 of office supplies was still on hand. Since he started with $400 on January 12,
he must have used $245 ($400 - $155).
Beginning
of 20__
End of
20__
$400
$155
Office Supplies
Expense $245
The $245 represents the Office Supplies Expense for the year, and the adjusting entry will
be:
20-December 31
Office Supplies Expense
Office Supplies
Supplies used in the
current year.
245
245
The Office Supplies Expense account will appear on the Income Statement under
Operating Expenses in the amount of $245, and the Office Supplies account will appear on
the balance sheet as a Current Asset in the amount of $155 ($400 - $245).
Depreciation
The process of writing off or allocating the cost of a plant asset (fixed asset), except land,
over its estimated useful life is called depreciation, or depreciating the asset. Land is not
depreciated because it has no measurable life span. Plant assets, however, are long-term
assets with an estimated productive life of more than one year. Such assets have been
purchased over their useful life to assist in generating revenue for the business.
Accounting 20
8
Lesson 3
Since a benefit is received from these assets each year, a portion of the cost of the asset
should be charged to depreciation expense for the accounting period to match the expenses
against the revenues that it helps to generate during that period. When using the
straight-line depreciation method, an equal amount of the asset's depreciation is charged
(assigned) to each accounting period.
When making the journal entry for the depreciation at the end of the accounting period,
the Depreciation Expense account is debited and a contra account called Accumulated
Depreciation is credited.
For example, if a business purchased machinery at the cost of $100 000 and during the
year the machinery depreciated $10 000, this depreciation would be recorded in a separate
account called Accumulated Depreciation--not as a credit to the Machinery account. This
is done so that the accumulated depreciation and the original cost of the asset will always
be shown separately on the balance sheet. Thus, the depreciation expense which has
accumulated in the Accumulated Depreciation account, and which is classified as a Contra
Fixed Asset account, is shown on the balance sheet as a deduction to the related asset.
Example:
Machinery
Less Accumulated
Depreciation
$100 000
10 000
90 000
Remember that depreciation is an estimate of the benefits expected from using a fixed
asset and a process of charging the cost of a fixed asset over its estimated or productive
useful life. Depreciation is not a method of valuing the asset. The difference between the
cost of the fixed asset and the accumulated depreciation is called the book value. This
book value is not the market value. Market value is the amount you would receive if you
sold the asset. The book value is nothing more than the original cost price of the asset
minus the accumulated depreciation.
An example of an asset that would be depreciated is Dental Equipment. Assume the
following purchase took place:
20-January 1
Dental Equipment
Cash
8 200
8 200
Purchased Dental Chair
with an expected life
of ten years and no
resale value.
Accounting 20
9
Lesson 3
Straight-line Depreciation
A basic formula is used to calculate the amount of annual depreciation using the straightline method. First, the total amount of depreciation over the productive life of the asset is
determined. This is done by taking the cost price of the asset and subtracting any salvage
value (resale value) that you might expect to get from the sale of the asset at the end of its
useful or productive life. In this case, it is expected that you will have no salvage value for
the dental chair. Therefore, the calculation for the total amount of depreciation would be:
Asset Cost - Disposal Value = Total Depreciation
or
$8 200 - $0 = $8 200
The annual depreciation is then calculated by taking the total depreciation and dividing
by the number of years of the expected productive life of the asset. In this case, the life of
the equipment is 10 years.
Total Depreciation  Estimated Life of the Asset
$8 200  10 = $820 per year
Condensed, the formula looks like this:
Asset Cost - Salvage Value OR
Estimated Life
$8 200 - 0 = $820
10
The journal entry necessary for the adjustment each year would appear like this:
20-Dec. 31
Depreciation Expense-Dental Equipment
820
Accumulated Depreciation-Dental Equipment
820
To record one year of depreciation expense.
Before any adjusting entries are formally entered into the General Journal, the
information is recorded on the worksheet. The worksheet shows how the adjustments are
entered and their effect on the income statement and balance sheet columns.
Accounting 20
10
Lesson 3
Expanding the Six-Column Worksheet to Ten Columns
In Accounting 10, you prepared six-column worksheets. Recall that the column headings
were Trial Balance, Income Statement and Balance Sheet. Now that you can prepare
adjustments for prepaid assets and depreciation on fixed assets, you must expand the
worksheet to include these adjustment calculations.
Remember that the worksheet is an accountant's tool for expanding the trial balance for
computing, classifying, and sorting account balances to prepare the period-end financial
statements. The worksheet is not a permanent document so it can be prepared in pencil.
The following steps will help you to learn how to complete a ten-column worksheet.
Step 1: Complete the Trial Balance Section
Complete the three-line heading in the same manner that you did for the six-column
worksheet. Who, what, and when are the questions to be answered.
Copy the Trial Balance onto the worksheet. Debits must equal credits.
Step 2: Completing the Adjustment Section
Using the illustration on page 278 of the textbook, determine which accounts require
adjusting entries. These include ((106) Supplies on Hand, (108) Prepaid Insurance, (109)
Prepaid Advertising, (111) Accumulated Depreciation/Automobile, and (113) Accumulated
Depreciation/Furniture. In order for the adjustment section of the worksheet to be
completed, the following information must be included:
•
a month-end count of the supplies
•
the unused portion of the prepaid insurance and prepaid advertising
•
the depreciation calculations for the automobile and furniture.
Remember: You will be looking at changes. The letters A through E in the
following headings refer to the letter codes discussed (page 280 of the text).
Accounting 20
11
Lesson 3
A.
Adjusting for Supplies Used
Supplies on Hand in the trial balance shows a debit balance of $900 for January 1,
20--. On December 31, 20-- the unused supplies have been counted and that total is
$300. The change is $600 ($900 - $300). Supplies costing $600 have been used up
(expired) resulting in an expense, Supplies Expense. To record this change, debit
$600 to Supplies Expense and credit the Supplies on Hand by $600. On page 280
see how this entry is illustrated. Note that the credit column of the adjustments
section lists the Supplies on Hand entry. Since there is no Supplies Expense
account listed, the entry is recorded in the Account Title column, beneath the trial
balance items. The debit entry for Supplies Expense is then recorded in the debit
column of the adjustment section.
Each adjustment, as it is recorded, should be identified with a letter. This will
permit easy identification of the related entries and assist in the preparation of
General Journal entries in the future.
B.
Adjusting for Expired Insurance
Assume that your insurance policy was bought on September 1, 20-- for $600. The
cost per month is $50 ($600  12). Four months of the insurance premium have
been used up at December 31, 20--. Therefore, adjustment B is entered to debit
Insurance Expense and credit Prepaid Insurance for $200.
C.
Adjusting for Prepaid Advertising. Assume that a three-month block of radio
advertising time was bought on October 1, 20-- for $750. The cost per month is
$250 ($750  3). The adjusting entry for letter reference C is to debit Advertising
Expense and then to credit Prepaid Advertising.
D.
Adjusting for the Automobile. Before we determine the adjustment for depreciation
on the automobile for the year, we should look at the calculation for depreciation on
the automobile in the year it was purchased. The automobile was bought on
October 1, 20--.
Therefore, only three months of depreciation would apply in the year 20--. The
calculation of how to determine the depreciation is shown below.
Assume that the automobile cost the firm $19 000 on October 1, 20--. The firm
estimates that there will be disposal value of $1 000 and that the useful life will be
five years. Therefore, three months (October, November and December of 20--) have
been recorded in the Accumulated Depreciation/Auto account ($900).
Accounting 20
12
Lesson 3
Notice the calculation for this account on page 279 of the text.
Note in the illustration (trial balance from the previous year) that Accumulated
Depreciation/Auto account indicates a credit balance of $900. Remember that this
is the contra account of the asset Automobile. By deducting the amount of the
Accumulated Depreciation/Auto account from the Automobile account you can
determine the book value of the asset. Therefore, the book value of the automobile
after three months from the previous year must be $18 100 ($19 000 - $900).
When you examine the trial balance, however, you will realize that the adjustment
for the current full year of 20-- has not yet been completed. You have already
calculated the yearly amount, $3 600. The entry required (D) is to debit
Depreciation Expense/Auto and to credit Accumulated Depreciation/Auto.
E.
Adjusting for Furniture
On March 1 of the current year the furniture cost the firm $6 300. The business
estimates that there will be a disposal value of $300 and the useful life will be ten
years. Therefore, ten months of depreciation, $500, must be recorded from March 1
to December 31, 20-- of the current year. Since no previous depreciation has been
recorded on furniture, observe that both the depreciation expense and accumulated
depreciation accounts are shown below the trial balance as the letter E.
Note the calculation for this account on page 281 of the text.
Step 3: Completing the Adjusted Trial Balance
The trial balance figures must be corrected or updated by transferring them to the
Adjusted Trial Balance section. This occurs after the adjustments are recorded and the
balance totals are completed. Accounts such as Cash and Accounts Receivable are not
adjusted so the figure in the trial balance is simply transferred to the Adjusted Trial
Balance.
Supplies on Hand has a debit balance of $900 in the trial balance. A credit adjustment
equal to $600 exists in the adjustments column.
Subtract the credit adjustment from the debit figure in the trial balance section ($900 $600). The difference of $300 is transferred to the appropriate column on the debit side of
the adjusted trial balance.
Accounting 20
13
Lesson 3
Prepaid Insurance and Prepaid Advertising accounts had figures in the adjustments
column. Therefore, a calculation must be made to be transferred to the debit side of the
adjusted trial balance. The credit adjustment is subtracted from the debit trial balance
figure. For Prepaid Insurance the figure transferred is $400 ($600 - $200). For Prepaid
Advertising, Ø is transferred to the debit side of the adjusted trial balance ($750 - $750).
Draw a single line across both columns of the adjusted trial balance and total the debit
and credit columns. Again, these two columns must agree. If they do not, locate the error
before you proceed. After agreement is obtained, double underline the two columns.
Step 4: Moving the Adjusted Trial Balance Amounts into the Statement Columns
After the Adjusted Trial Balance columns have been proved correct, the individual
amounts are copied to one column of either the Income Statement section or the Balance
Sheet section.
A debit amount from the Adjusted Trial Balance must be moved to the debit column of the
appropriate financial statement section. A credit amount from the Adjusted Trial Balance
must be moved to the credit column of the appropriate financial statement section.
Each account balance in the Adjusted Trial Balance section must be transferred to either
the debit or the credit column of the related statement section. Assets, liabilities, and the
owner's equity capital and drawing accounts must be moved to the Balance Sheet
columns. Similarly, revenue and expense accounts must be transferred to the correct
Income Statement columns.
Step 5: Calculating the Net Income (or Net Loss) and Completing the Worksheet
After all amounts have been transferred, the totals of the statement must be calculated
and entered. If you are uncertain of this procedure, return to Topic 1, Chapter 5 for
assistance.
Accounting 20
14
Lesson 3
Remember These Important Points
•
A worksheet is a working paper used by an accountant to sort out the general ledger
balances under the proper financial statement section. A worksheet may be done in
pencil.
•
The first step in preparing a worksheet is to complete the three-line heading.
Line 1 shows the name of the firm.
Line 2 shows the name of the working paper - Worksheet.
Line 3 gives the date of the financial period for which revenues and expenses are
matched.
•
The second step in preparing a worksheet is to copy the year-end trial balance in
the appropriate sections of the worksheet. The totals of this trial balance also
appear and the double line ruling shows that the trial balance is complete.
•
The third step is to calculate the necessary adjustments.
•
The fourth step is to complete the adjusted trial balance.
•
The fifth step is to move amounts from the adjusted trial balance to an appropriate
financial statement section.
•
A good rule to remember in moving adjusted trial balance amounts is move a debit
from the adjusted trial balance to the debit column of the related financial
statement, or to move a credit from the adjusted trial balance to the credit column
of the related financial statement.
•
The sixth step in preparing a worksheet is to total the columns in all of the financial
statement sections.
•
The seventh step in preparing the worksheet is to complete the Income Statement
section.
Accounting 20
15
Lesson 3
•
The totals of the Income Statement are analyzed as follows:
the total Debit column is made up of expense account balances; therefore, this
column reports the total expenses.
the total Credit column is made up of revenue account balances; therefore, this
column reports the total revenue.
•
A match-up of total revenues with total expenses is done by placing the lower figure
under the higher one. Thus, if the total expenses are less than the total revenue,
the total expense figure is placed under the total revenue in the Credit column. On
the other hand, if total revenue is less than total expenses, the total revenue is
entered under the total expense figure in the Debit column.
•
After total expenses are lined up with total revenue, the result is Net Income or Net
Loss. A Net Income always results when total revenues are greater than total
expenses. A Net Loss results when total expenses are greater than total revenues.
•
After the Net Income or Net Loss is calculated and identified on the worksheet,
move the Net Income or Net Loss to the Balance Sheet section.
•
A Net Income is moved to the Credit side of the Balance Sheet because it increases
Owner's Equity on that side.
•
A Net Loss is moved to the Debit side of the Balance Sheet because it decreases
Owner's Equity on that side.
•
The final step in preparing the worksheet is to total the columns of the Balance
Sheet to make them balance. Of course, a double ruling is made across all financial
statement columns to show completion of the worksheet.
Do You Understand?
Prepaid expense - an expense payment made in advance to benefit more than one
accounting period; hence, a current asset whose cost will be used up in the very near
future.
Prepaid insurance - a prepaid expense account identifying the unused amount of
insurance coverage still owned by the business.
Accounting 20
16
Lesson 3
Operating cycle - the time it takes to complete the following:
(1)
(2)
performance of a service
collection of cash from the accounts receivable.
Physical deterioration - wear and tear resulting from use and climatic factors.
Obsolescence - the process of becoming out of date that occurs through technical
innovation.
Depreciation expense - the expired cost of using a fixed asset.
Accumulated depreciation - the total of the expired costs of any one asset.
Depreciation - is a process of allocating the cost of a fixed asset over its estimated useful
life.
Contra account - an account in direct opposition to its related account.
Straight-line method - one of the most common methods to determine an amount of
depreciation expense per year.
Straight-line Depreciation = Asset Cost - Disposal Value
Estimated Life
Disposal value - estimated value of the fixed asset when it is sold, scrapped, or traded
(also referred to as a scrap value or salvage value).
Book value - original asset cost less accumulated depreciation.
Conclusion
The 10-column worksheet is a convenient place to have all the data necessary to prepare
adjusting and closing entries, and to prepare the financial statements in a rough form. In
this section, you have become aware of the necessity for adjusting certain accounts at the
end of a fiscal period. This gives the true balance of each of these accounts.
These adjustments must be made as Taxation Canada requires that accurate income and
expense accounts be reported to them.
Accounting 20
17
Lesson 3
Self Test
Accounting 20
1.
Problem 7-1, page 263 of the text
2.
MC 7-1, page 264 of the text
3.
Problem 7-5, page 274 of the text
4.
Problem 4 on the next page
18
Lesson 3
Problem 4
The Gray’s Dental Clinic prepared their year-end trial balance on September 30, 20__.
Instructions:
1.
Complete a ten-column worksheet for the year ended September 30, 20__.
The following adjustments are necessary:
(a)
Prepaid Insurance on hand, September 30, is $200.
(b)
The unused balance in the Office Supplies account is $235.
(c)
An additional $2 000 in Depreciation Expense is to be recorded for the Equipment.
Accounting 20
19
Lesson 3
P 7-1a-e
General Journal
D a te
20__
Accounting 20
Page
Ac c o u n t Title a n d E x p la n a tio n
20
P ost
R e f.
D e bit
Cre d it
Lesson 3
MC 7-1
General Journal
D a te
20__
Page
Ac c o u n t Title a n d E x p la n a tio n
P ost
R e f.
D e bit
Cre d it
Key Figure to Check: advertising has been used up for three months.
Accounting 20
21
Lesson 3
P7-5a
Key Figure to Check: the estimated useful life is four years.
Vehicle
D a te
Account No. 150
Ex p la n a ti o n
P ost
Re f.
D e bi t
Cre d i t
Accumulated Depreciation/Vehicle
D a te
Accounting 20
Ex p la n a ti o n
B a la n c e
Account No. 151
P ost
Re f.
D e bi t
22
Cre d i t
B a la n c e
Lesson 3
P roble m 4
Gray's Dental Clinic
Worksheet
For the Year Ended September 30, 20_
Acct.
Account Title
No.
Trial Balance
Debit
Credit
Cash
101
8 0 0 0 00
Accounts Receivable
105
10 0 0 0 00
Prepaid Insurance
107
3 0 0 00
Office Supplies
109
5 0 0 00
Equipment
121
15 0 0 0 00
Accumulated Depreciation - Equipment
122
2 0 0 0 00
Accounts Payable
201
1 2 0 0 00
J. Grey, Capital
301
20 0 0 0 00
J. Grey, Drawing
302
Dental Fees Earned
401
Salaries Expense
501
82 0 0 0 00
Rent Expense
502
8 4 0 0 00
Utilities Expense
507
2 0 2 0 00
Miscellaneous Expense
512
9 5 0 00
Adjust
Debit
11 0 3 0 00
115 0 0 0 00
138 2 0 0 00 138 2 0 0 00
Insurance Expense
Office Supplies Expense
Depreciation Expense - Equipment
Accounting 20
23
Lesson 3
m e n ts
Cre d i t
Accounting 20
Ad ju s te d Tri a l B a la n c e
D e bi t
Cre d i t
In c o m e S ta te m e n t
D e bi t
Cre d i t
24
B a la n c e S h e e t
D e bi t
Cre d i t
Lesson 3
Answers For Self Test
P 7-1
DATE
20__
Dec. 31
ACCOUNT TITLE AND EXPLANATION
Supplies Expense
POST
REF.
DEBIT
CREDIT
575.00
Supplies on Hand
575.00
To adjust for supplies used up during the year.
31
Supplies Expense
40.00
Supplies on Hand
40.00
To adjust for supplies used up during December.
31
Supplies Expense
800.00
Supplies on Hand
800.00
To adjust for supplies used up during the year.
31
Insurance Expense
400.00
Prepaid Insurance
400.00
To adjust for supplies used up during the year.
31
Insurance Expense
500.00
Prepaid Insurance
500.00
(1200  12) x 5
To adjust for five months of expired insurance.
31
Rent Expense
150.00
Prepaid Rent
150.00
To adjust for one month of expired rent.
($450  3 = $150 per month)
Accounting 20
25
Lesson 3
Dec.
31
Insurance Expense
1 050.00
Prepaid Insurance
1 050.00
To adjust for two insurance policies.
(10A $1 200  12 x 9) (10B $1 800  12 x 1)
(10A = $900)
(10B = $150)
($900 + $150 = $1 050)
MC 7-1a
20__
Dec. 31
Advertising Expense
525
Prepaid Advertising
525
To adjust for three months of advertising
used up.
MC 7-1b
The matching principle would have been violated if the adjustment had not been
completed.
Accounting 20
26
Lesson 3
MC 7-1c
Both the income statement and the balance sheet would have been affected if the
adjustment had not been made. The expense figure would have been understated by $525
in the Advertising Expense account in the income statement. If you assume that the
business reported a net income of $1 000, then this net income would be overstated.
Corrected, it should have read $475 (1 000 - $525). The balance sheet would also be
affected because it accepts the net income (loss) figure into the owner's equity section. If
the net income was overstated, then the total owner's equity figure would also be
overstated. Also on the balance sheet, the Prepaid Advertising balance would be
overstated in the assets section because three months of advertising has been used up.
Without the adjusting entry, the Prepaid Advertising account would still show a balance
of $700 instead of the adjusted amount of $175 ($700 - $525).
MC 7-1d
Prepaid Advertising
Oct. 1
700.00
Bal. on
Dec. 31
175.00
Dec. 31
Advertising Expense
525.00
Dec. 31
525.00
P 7-5a
Vehicle cost is $25 700.
Disposal value is zero.
Useful life is 4 years.
Straight-line calculation: (Original cost - any disposal value)  no. of years of useful life.
($25 700 - $0)  4 years
= $6 425 per year
Accounting 20
27
Lesson 3
P 7-5b
Account Vehicle
DATE
20__
Jan. 2
EXPLANATION
Account No. 150
POST
REF.
New all-terrain vehicle; 4wheel drive
DEBIT
CREDIT
25 700.00
25 700.00
Account Accumulated Depreciation--Vehicle
DATE
20__
EXPLANATION
POST
REF.
BALANCE
Account No. 151
DEBIT
CREDIT
BALANCE
Dec. 31
Year 1 depreciation
6 425.00
6 425.00
Dec. 31
Year 2 depreciation
6 425.00
12 850.00
Dec. 31
Year 3 depreciation
6 425.00
19 275.00
Dec. 31
Year 4 depreciation
6 425.00
25 700.00
Accounting 20
28
Lesson 3
P roble m 4
Gray's Dental Clinic
Worksheet
For the Year Ended September 30, 20_
Acct.
Account Title
No.
Trial Balance
Debit
Credit
Adjust
Debit
Cash
101
8 0 0 0 00
Accounts Receivable
105
10 0 0 0 00
Prepaid Insurance
107
3 0 0 00
Office Supplies
109
5 0 0 00
Equipment
121
15 0 0 0 00
Accumulated Depreciation - Equipment
122
2 0 0 0 00
Accounts Payable
201
1 2 0 0 00
J. Grey, Capital
301
20 0 0 0 00
J. Grey, Drawing
302
Dental Fees Earned
401
Salaries Expense
501
82 0 0 0 00
Rent Expense
502
8 4 0 0 00
Utilities Expense
507
2 0 2 0 00
Miscellaneous Expense
512
9 5 0 00
11 0 3 0 00
115 0 0 0 00
138 2 0 0 00 138 2 0 0 00
Insurance Expense
503
a)
1 0 0 00
Office Supplies Expense
504
b)
2 6 5 00
Depreciation Expense - Equipment
505
c)
2 0 0 0 00
2 3 6 5 00
Net Income
Accounting 20
29
Lesson 3
m e n ts
Cre d i t
Ad ju s te d Tri a l B a la n c e
D e bi t
Cre d i t
In c o m e S ta te m e n t
D e bi t
Cre d i t
B a la n c e S h e e t
D e bi t
Cre d i t
8 0 0 0
00
8 0 0 0
00
10 0 0 0
00
10 0 0 0
00
a)
1 0 0 00
2 0 0
00
2 0 0
00
b)
2 6 5 00
2 3 5
00
2 3 5
00
15 0 0 0
00
15 0 0 0
00
c) 2
0 0 0 00
11 0 3 0
4 0 0 0
00
4 0 0 0
00
1 2 0 0
00
1 2 0 0
00
20 0 0 0
00
20 0 0 0
00
11 0 3 0
00
44 4 6 5
00 25 2 0 0
00
19 2 6 5
00
00 44 4 6 5
00
00
115 0 0 0
2 3 6 5 00
00
82 0 0 0
00
82 0 0 0
00
8 4 0 0
00
8 4 0 0
00
2 0 2 0
00
2 0 2 0
00
9 5 0
00
9 5 0
00
1 0 0
00
1 0 0
00
2 6 5
00
2 6 5
00
2 0 0 0
00
2 0 0 0
00
140 2 0 0
00
95 7 3 5
00
140 2 0 0
00
115 0 0 0
00
115 0 0 0
00
95 7 3 5
00
19 2 6 5
00
44 4 6 5
Accounting 20
30
Lesson 3