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    1) The accounting cycle involves analyzing, recording, posting transactions, preparing an initial trial balance, adjusting accounts, preparing financial statements, and closing accounts. 2) Key steps in the cycle include adjusting accounts for prepaid, accrued, and depreciation items to follow the matching and revenue recognition principles. 3) Preparing an adjusted trial balance incorporates the effects of adjusting entries before finalizing the financial statements.

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    1) The accounting cycle involves analyzing, recording, posting transactions, preparing an initial trial balance, adjusting accounts, preparing financial statements, and closing accounts. 2) Key steps in the cycle include adjusting accounts for prepaid, accrued, and depreciation items to follow the matching and revenue recognition principles. 3) Preparing an adjusted trial balance incorporates the effects of adjusting entries before finalizing the financial statements.

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    3 views28 pages

    Chapter 3

    Uploaded by

    isilsuyuzer
    1) The accounting cycle involves analyzing, recording, posting transactions, preparing an initial trial balance, adjusting accounts, preparing financial statements, and closing accounts. 2) Key steps in the cycle include adjusting accounts for prepaid, accrued, and depreciation items to follow the matching and revenue recognition principles. 3) Preparing an adjusted trial balance incorporates the effects of adjusting entries before finalizing the financial statements.

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    of 28

    3

    Completing the
    Accounting
    Cycle
    Accounting Cycle

    Adjust the
    Analyze Post the accounts
    and record transactions and and
    the prepare trial prepare
    transaction balance trial
    s balance

    Prepare the
    financial
    statements Close the
    accounts
    and prepare
    trial balance
    Chapter 3 Mugan-Akman 2012
    Matching Principle

    All revenues must be recorded in the accounting


    period in which the goods are sold or services are
    rendered and all expenses must be recorded in the
    accounting period in which they are incurred to
    produce such revenues

    Chapter 3 Mugan-Akman 2012


    Adjusting Entries

    At the end of the accounting period

    Make sure all revenues and expenses are recorded

    Chapter 3 Mugan-Akman 2010


    When do we need adjusting entries?

    Chapter 3 Mugan-Akman 2012


    Trial Balance

    Chapter 3 Mugan-Akman 2012


    Adjusting Entries

    Chapter 3 Mugan-Akman 2012


    Adjustment (1)Prepaid Rent

    Prepaid Rent
    1-Jan 600 31-Jan 200

    Balance 400

    Rent Expense
    31-Jan 200

    Balance 200
    Chapter 3 Mugan-Akman 2012
    Adjustment (2)Prepaid Insurance

    Prepaid Insurance
    3-Jan 120 31-Jan 10

    Balance 110

    Insurance Expense
    31-Jan 10

    Balance 10

    Chapter 3 Mugan-Akman 2012


    Adjustment (3)Office Supplies

    Office Supplies
    10-Jan 2500 31-Jan 500

    Balance 2000

    Supplies Expense
    31-Jan 500

    Balance 500

    Chapter 3 Mugan-Akman 2012


    Adjustment (4)Depreciation of Property Plant
    & Equipment

    Chapter 3 Mugan-Akman 2012


    Express Travel Agency
    Partial Statement of Financial Position
    31 January 2014
    Plant and Equipment
    Office Equipment and Furniture TL 15.000
    Less: Accumulated Depreciation (250)
    Plant and Equipment, net 14.750

    Chapter 3 Mugan-Akman 2012


    Adjusting Entries

    Chapter 3 Mugan-Akman 2012


    Adjustment (5)Unearned Revenues

    Unearned Revenues
    31-Jan 4500 22-Jan 7500

    Balance 3000

    Service Revenues
    31-Jan 12500
    31-Jan 4500
    Balance 17000
    Chapter 3 Mugan-Akman 2012
    Adjusting Entries

    Chapter 3 Mugan-Akman 2012


    Adjustment (6)Accrued Salary Expense

    Salaries Payable
    31-Jan 2500

    Balance 2500

    Salary Expense
    24-Jan 9000
    31-Jan 2500
    Balance 11500

    Chapter 3 Mugan-Akman 2012


    Adjustment (7)Accrued Interest Expense

    Interest Payable
    31-Jan 210

    Balance 210

    Interest Expense
    31-Jan 210

    Balance 210

    Chapter 3 Mugan-Akman 2012


    Adjusting Entries

    Chapter 3 Mugan-Akman 2012


    Adjustment (8)Accrued Revenues

    Accounts Receivable
    31-Jan 7500
    31-Jan 3450
    Balance 10950

    Service Revenues
    31-Jan 12500
    31-Jan 4500
    31-Jan 3450
    Balance 20450

    Chapter 3 Mugan-Akman 2012


    Effects of Adjusting Entries

    Chapter 3 Mugan-Akman 2012


    Cash Accounts Receivable Office Supplies Prepaid Rent Prepaid Insurance
    100.000 600 5.000 5.000 2.500 500 600 200 120 10
    15.000 5.000 7.500 2.000 400 110
    7.500 120 3.450
    5.000 2.500 15.950 5.000
    5.000 10.950
    9.000
    3.000 Funiture & Equip
    127.500 25.220 15.000 Accumulated Deprec. Bank Loans Accounts Payable
    102.280 250 15.000 5.000 10.000
    5.000

    Interest Payable
    Unearned Revenues Salaries Payable Capital Withdrawals
    4.500 7.500 210 2.500 100.000 3.000
    3.000

    Rent Expense
    Revenues 200 Insurance Expense Supplies Expense Salary Expense
    5.000 10 500 9.000
    7.500 2.500
    4.500 Depreciation Expense 11.500
    3.450 250 Interest Expense
    20.450 210

    Chapter 3 Mugan-Akman 2010


    Worksheet – Unadjusted to Adjusted Accounts

    Chapter 3 Mugan-Akman 2012


    Worksheet – Unadjusted to Adjusted Accounts

    Chapter 3 Mugan-Akman 2012


    Accounting Cycle

    Adjust the
    Analyze Post the accounts
    and record transactions and and
    the prepare trial prepare
    transaction balance trial
    s balance

    Prepare the
    financial Close the
    statements accounts
    and prepare
    trial balance
    Chapter 3 Mugan-Akman 2012
    Accounting Cycle

    Adjust the
    Analyze Post the accounts
    and record transactions and and
    the prepare trial prepare
    transaction balance trial
    s balance

    Prepare the
    financial Close the
    statements accounts
    and prepare
    trial balance

    Chapter 3 Mugan-Akman 2012


    Income Statement

    Chapter 3 Mugan-Akman 2012


    Statement of Financial Position

    Chapter 3 Mugan-Akman 2012


    Chapter 3 Mugan-Akman 2012

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