Slide

4-1
 Chapter 4

Completing the
Accounting Cycle

Financial Accounting, IRFS

Weygandt Kimmel Kieso
Slide
4-2
 Completing the Accounting Cycle

Classified
Summary of
Using a Closing the Statement of
Accounting
Worksheet Books Financial
Cycle
Position

Steps in Preparing closing Reversing entries Intangible assets

preparation entries —An optional Property, plant,
Preparing Posting closing step and equipment
financial entries Correcting Long-term
statements Preparing a post- entries—An investments
Preparing closing trial avoidable step
Current assets
adjusting entries balance
Equity
Non-current
liabilities
Current liabilities

Slide
4-3
 Using A Worksheet

Worksheet

A multiple-column form used in preparing financial

statements.

Not a permanent accounting record.

Five step process.

Use of worksheet is optional.

Slide
4-4 SO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
Illustration 4-1

Slide
4-5
SO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
Illustration 4-2
Illustration: Preparing a trial balance

Slide
4-6 SO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
1. Prepare a Trial Balance on the Worksheet
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200
Advertising Supplies 2,500
Prepaid Insurance 600
Office Equipment 5,000
Notes Payable 5,000
Accounts Payable 2,500
Unearned Revenue 1,200
Share Capital 10,000
Dividends 500
Service Revenue 10,000

Salaries Expense 4,000

Rent 900
Totals 28,700 28,700

Trial balance amounts come

directly from ledger accounts.
Include all accounts
with balances.

Slide
4-7 SO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
Illustration 3-22
General journal
showing adjusting
entries

Adjusting
Journal
Entries
(Chapter 3)

Slide
4-8 SO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
2. Enter the Adjustments in the Adjustments Columns
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200
Advertising Supplies 2,500 (a) 1,500
Prepaid Insurance 600 (b) 50
Office Equipment 5,000 Adjustments Key:
Notes Payable 5,000
Accounts Payable 2,500
(a) Supplies Used.
Unearned Revenue 1,200 (d) 400 (b) Insurance Expired.
Share Capital 10,000
Dividends 500 (c) Depreciation Expensed.
Service Revenue 10,000 (d) 400 (d) Service Revenue Earned.
(e) 200
Salaries Expense 4,000 (g) 1,200 (e) Service Revenue Accrued.
Rent 900 (f) Interest Accrued.
Totals 28,700 28,700
Advertising Supplies Expense (a)1,500 (g) Salaries Accrued.
Insurance Expense (b) 50
Accumulated Depreciation (c) 40
Depreciation Expense (c) 40
Accounts Receivable (e) 200
Interest Expense (f)
50
Enter adjustment amounts, total
Interest Payable (f) 50 adjustments columns,
(g)
Salaries Payable 1,200 and check for equality.
Totals 3,440 3,440

Add additional accounts as needed.

Slide
4-9 SO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
3. Complete the Adjusted Trial Balance Columns
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200
Advertising Supplies 2,500 (a) 1,500 1,000
Prepaid Insurance 600 (b) 50 550
Office Equipment 5,000 5,000
Notes Payable 5,000 5,000
Accounts Payable 2,500 2,500
Unearned Revenue 1,200 (d) 400 800
Share Capital 10,000 10,000
Dividends 500 500
Service Revenue 10,000 (d) 400 10,600
(e) 200
Salaries Expense 4,000 (g) 1,200 5,200
Rent 900 900
Totals 28,700 28,700
Advertising Supplies Expense (a)1,500 1,500
Insurance Expense (b) 50 50
Accumulated Depreciation (c) 40 40
Depreciation Expense (c) 40 40
Accounts Receivable (e) 200 200
(f)
Interest Expense 50 50
Interest Payable (f) 50 50
Salaries Payable (g) 1,200 1,200
Totals 3,440 3,440 30,190 30,190

Total the adjusted trial balance

Slide columns and check for equality.
4-10 SO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
4. Extend Amounts to Financial Statement Columns
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200
Advertising Supplies 2,500 (a) 1,500 1,000
Prepaid Insurance 600 (b) 50 550
Office Equipment 5,000 5,000
Notes Payable 5,000 5,000
Accounts Payable 2,500 2,500
Unearned Revenue 1,200 (d) 400 800
Share Capital 10,000 10,000
Dividends 500 500
Service Revenue 10,000 (d) 400 10,600 10,600
(e) 200
Salaries Expense 4,000 (g) 1,200 5,200 5,200
Rent 900 900 900
Totals 28,700 28,700
Advertising Supplies Expense (a)1,500 1,500 1,500
Insurance Expense (b) 50 50 50
Accumulated Depreciation (c) 40 40
Depreciation Expense (c) 40 40 40
Accounts Receivable (e) 200 200
(f)
Interest Expense 50 50 50
Interest Payable (f) 50 50
Salaries Payable (g) 1,200 1,200
Totals 3,440 3,440 30,190 30,190 7,740 10,600

Extend all revenue and expense account

Slide balances to the income statement columns.
4-11 SO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
4. Extend Amounts to Financial Statement Columns
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200 15,200
Advertising Supplies 2,500 (a) 1,500 1,000 1,000
Prepaid Insurance 600 (b) 50 550 550
Office Equipment 5,000 5,000 5,000
Notes Payable 5,000 5,000 5,000
Accounts Payable 2,500 2,500 2,500
Unearned Revenue 1,200 (d) 400 800 800
Share Capital 10,000 10,000 10,000
Dividends 500 500 500
Service Revenue 10,000 (d) 400 10,600 10,600
(e) 200
Salaries Expense 4,000 (g) 1,200 5,200 5,200
Rent 900 900 900
Totals 28,700 28,700
Advertising Supplies Expense (a)1,500 1,500 1,500
Insurance Expense (b) 50 50 50
Accumulated Depreciation (c) 40 40 40
Depreciation Expense (c) 40 40 40
Accounts Receivable (e) 200 200 200
(f)
Interest Expense 50 50 50
Interest Payable (f) 50 50 50
Salaries Payable (g) 1,200 1,200 1,200
Totals 3,440 3,440 30,190 30,190 7,740 10,600 22,450 19,590

Extend all asset, liability, and equity account

Slide balances to the statement of financial position
4-12
SO 1 Prepare a worksheet.
columns.
 Steps in Preparing a Worksheet
5. Total Columns, Compute Net Income (Loss)
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200 15,200
Advertising Supplies 2,500 (a) 1,500 1,000 1,000
Prepaid Insurance 600 (b) 50 550 550
Office Equipment 5,000 5,000 5,000
Notes Payable 5,000 5,000 5,000
Accounts Payable 2,500 2,500 2,500
Unearned Revenue 1,200 (d) 400 800 800
Share Capital 10,000 10,000 10,000
Dividends 500 500 500
Service Revenue 10,000 (d) 400 10,600 10,600
(e) 200
Salaries Expense 4,000 (g) 1,200 5,200 5,200
Rent 900 900 900
Totals 28,700 28,700
Advertising Supplies Expense (a) 1,500 1,500 1,500
Insurance Expense (b) 50 50 50
Accumulated Depreciation (c) 40 40 40
Depreciation Expense (c) 40 40 40
Accounts Receivable (e) 200 200 200
Interest Expense (f) 50 50 50
Interest Payable (f) 50 50 50
Salaries Payable (g) 1,200 1,200 1,200
Totals 3,440 3,440 30,190 30,190 7,740 10,600 22,450 19,590
Net income 2,860 2,860
Totals 10,600 10,600 22,450 22,450

Slide Compute Net Income or Net Loss.

4-13 SO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet

Review Question

Net income is shown on a worksheet in the:

a. income statement debit column only.
b. statement of financial position debit column only.
c. income statement credit column and statement of
financial position debit column.
d. income statement debit column and statement of
financial position credit column.

Slide
4-14 SO 1 Prepare a worksheet.
 Preparing Financial Statements from a Worksheet

Worksheet

Income statement is prepared from the income

statement columns.

Statement of financial position and retained earnings

statement are prepared from the statement of
financial position columns.

Companies journalize and post adjusting entries.

Slide
4-15 SO 1 Prepare a worksheet.
 Preparing Financial Statements from a Worksheet
Illustration 4-4

Slide
4-16
SO 1 Prepare a worksheet.
 Preparing Financial Statements from a Worksheet

Illustration 4-4

Slide
4-17
SO 1 Prepare a worksheet.
 Preparing Financial Statements from a Worksheet

Illustration 4-4

Slide
4-18
 Preparing Adjusting Entries from a Worksheet

Adjusting Entries

The adjusting entries are prepared from the

adjustments columns of the worksheet.

Journalizing and posting of adjusting entries follows

the preparation of financial statements when a
worksheet is used.

Slide
4-19 SO 1 Prepare a worksheet.
 Preparing Adjusting Entries from a Worksheet
Illustration 3-22
General journal
showing adjusting
entries

Adjusting
Journal
Entries
(Chapter 3)

Slide
4-20 SO 1 Prepare a worksheet.
 Closing the Books

At the end of the accounting period, the company makes

the accounts ready for the next period.
Illustration 4-5

Slide
4-21 SO 2 Explain the process of closing the books.