Completing the Accounting Cycle Chapter 4 Prepare an accounting work sheet. Objective 1 The Accounting Cycle  The accounting cycle is the process by which accountants prepare financial statements for an entity for a specific period of time. The Accounting Cycle  For a new business, begin by setting up ledger accounts.  For an established business, begin with account balances carried over from the previous period. Accounts Receivable 1,350 Accounts Receivable 1,700 Service Revenue 1,700 Accounts Receivable 1,350 1,700 3,050 Accounts Receivable 1,350 1,700 The Accounting Cycle Work Sheet Cash Accounts receivable 12,100 3,050 Balance Sheet Income Statement The Accounting Cycle Postclosing Trial Balance Cash Accounts receivable 12,100 3,050 Adjusting entries Closing entries Cash Accounts Receivable 12,100 3,050 The Accounting Cycle The Accounting Work Sheet  What is the work sheet?  A work sheet is a multi-columned document used by accountants to help move data from the trial balance to the financial statements.  It is an internal document. Adjusted Trial Balance Adjustments Trial Balance Account Title Dr. Cr. Dr. Cr. Dr. Cr. Cash Accounts receivable Supplies Equipment Accum. depreciation Accounts payable Salary payable Unearned revenue Capital Withdrawals Revenue Salary expense Supplies expense Depreciation expense Totals 12,100 1,350 250 15,500 1,000 12,000 42,200 7,500 1,200 1,100 1,500 7,200 23,700 42,200 The Accounting Work Sheet ©2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 4 - 9 The Accounting Work Sheet a The company has earned revenue of $1,700 which will be collected next month. b Inventory of supplies at month end totaled $150. c Depreciation for the period was calculated as $200. [...]... 0 3,050 150 15,500 7,700 1,200 1,100 1,500 7,200 1,000 12,00 0 100 44,100 25,400 18,700 200 31,80 13,100 44,10 25,400 0 31,800 Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 4 - 14 0 Objective 2 Use the work sheet to complete the accounting cycle Recording the Adjusting Entries The work sheet helps identify the accounts that need adjustments Actual adjustment of the accounts requires... Expense 4,450 28,500 Accounts) 24,050 (Close Income Summary) Capital Account 2,500 24,050 (Close Withdrawals Withdrawals Account) 2,500 2,500 Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 4 - 23 Postclosing Trial Balance The accounting cycle ends with the postclosing trial balance The postclosing trial balance is dated as of the end of the period for which the statements have been prepared... 100 200 12,300 25,400 Balance Sheet Dr Cr 12,10 0 3,050 150 15,500 7,700 1,200 1,100 1,500 7,200 1,000 12,00 0 100 44,100 25,400 18,700 200 31,80 44,10 0 Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 4 - 13 0 The Accounting Work Sheet Account Title Cash Accounts receivable Supplies Equipment Accum depreciation Accounts payable Salary payable Unearned revenue Capital Withdrawals Revenue... b) 100 Depreciation expense c) 200 Totals 2,000 42,200 42,200 2,000 ©2002 Prentice Hall, Inc Business Publishing Accounting, 5/E Adjusted Trial Balance Dr Cr 12,100 3,050 150 15,500 7,700 1,200 1,100 1,500 7,200 1,000 25,400 12,000 100 200 44,100 44,100 Horngren/Harrison/Bamber 4 - 11 The Accounting Work Sheet Account Title Cash Accounts receivable Supplies Equipment Accum depreciation Accounts payable... 150 15,500 7,700 1,200 1,100 1,500 7,200 Income Statement Dr Cr 1,000 25,400 12,00 0 100 44,100 200 44,10 Business Publishing Accounting, 5/E 0 Balance Sheet Dr Cr 12,10 0 3,050 150 15,500 7,700 1,200 1,100 1,500 7,200 1,000 31,80 0 18,700 Horngren/Harrison/Bamber 4 - 12 The Accounting Work Sheet Account Title Cash Accounts receivable Supplies Equipment Accum depreciation Accounts payable Salary payable... Current assets are cash, or will be converted to cash, in one year or within the normal business operating cycle What are some other examples? – short-term receivables – inventory – prepaid expenses Current Liabilities Current liabilities are debts or obligations due within one year or within the operating cycle What are some examples? – accounts and salary payables – short-term notes payable – unearned revenue...The Accounting Work Sheet Trial Balance Adjustments Account Title Dr Cr Dr Cr Cash 12,100 Accounts receivable a) 1,700 1,350 Supplies 250 b) 100 Equipment 15,500 Accum depreciation 7,500 c) 200 Accounts payable... Assets and Liabilities Long-term assets include all other assets – property, equipment, and intangibles Long-term liabilities are all other debts due in longer than one year or the entity’s operating cycle The Classified Balance Sheet Debit side Current assets Long-term assets Credit side Current liabilities Long-term liabilities Listed in the order of decreasing liquidity Listed in the order of how . Completing the Accounting Cycle Chapter 4 Prepare an accounting work sheet. Objective 1 The Accounting Cycle  The accounting cycle is the process by which. 3,050 Accounts Receivable 1,350 1,700 The Accounting Cycle Work Sheet Cash Accounts receivable 12,100 3,050 Balance Sheet Income Statement The Accounting Cycle Postclosing Trial Balance Cash Accounts receivable 12,100 3,050 Adjusting. income 7,700 1,200 1,100 1,500 7,200 25,400 44,100 12,10 0 3,050 150 15,500 1,000 12,00 0 100 200 44,10 0 12,10 0 3,050 150 15,500 1,000 31,80 0 31,80 0 7,700 1,200 1,100 1,500 7,200 18,700 13,100 31,800 12,000 100 200 12,300 13,100 25,400 25,400 25,400 25,400 The Accounting Work Sheet ©2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 4 - 14 Use the work sheet to complete the accounting cycle. Objective