Beruflich Dokumente
Kultur Dokumente
A = L + OE
+ Revenues - Expenses
+ Owner Investments - Owner Withdrawals
+ Gains - Losses
Accounting Equation for a
Corporation
A = L + SE
+ Paid-in Capital + Retained Earnings
The
At the End Accounting
of the Year Processing
Close Temporary Post-Closing
Cycle
Accounts Trial Balance
C3 The Accounting Cycle
Prepare
Start Reverse post-closing
(optional) trial balance
Analyze POST
transactions
Closing
Entries
Journalize
Prepare
Post statements
Prepare Prepare
Adjusting
unadjusted POST adjusted
Entries
trial balance trial balance
3-5
The Accounting Processing
Cycle
On July 1, two individuals each invested $30,000 in a new
business, Dress Right Clothing Corporation. Each
investor was issued 3,000 shares of common stock.
July 1
Cash 60,000
Common stock 60,000
General Ledger
GENERAL LEDGER
Account: Acct. No. ##
Balance
Post.
Date Item Ref. Debit Credit DR (CR)
3-13
Adjusting Entries
At the end of the period, adjusting entries are
required to satisfy the realization principle and
the matching principle.
Adjustments
Paid (or received) cash before Paid (or received) cash after
expense (or revenue) recognized expense (or revenue) recognized
Supplies
During 2009, Scott Company purchased $15,500
of supplies. Scott recorded the expenditures as
Supplies. On December 31, a count of the
supplies indicated $2,655 on hand.
What adjustment is required?
Dec. 31 Supplies Expense 12,845
Supplies 12,845
To record supplies used during 2009
Supplies 126 Supplies Expense 652
Bought 15,500 Dec. 31 12,845 Dec. 31 12,845
Bal. 2,655
3-16
P1
Depreciation
3-17
Depreciation
Recall the Furniture and Fixtures for $12,000 listed on
Dress Right’s unadjusted trial balance. Assume the
following:
July $12,000 - $0
Depreciation = = $200 per month
Expense 60 months
July 31
Depreciation expense 200
Accumulated depreciation-
furniture and fixtures 200
Depreciation
After posting, the accounts look like this:
Furniture and Fixtures Depreciation Expense
Beg. bal. - Beg. bal. -
12,000 200
Bal. 12,000 Bal. 200
Accumulated Depreciation
- Beg. bal.
200
200 Bal.
P1
Unearned (Deferred) Revenues
Cash received in
advance of
Buy your season tickets for
providing all home basketball games NOW!
products or
services. “Go Big Blue”
Revenue
Liability
Debit Unadjusted Credit
Adjustment Balance Adjustment
3-21
P1 Unearned (Deferred) Revenues
Unearned Revenue
Oct.1 100,000
3-22
P1
Unearned (Deferred) Revenues
3-23
P1 Accrued Expenses
We’re about one-half
done with this job and
Costs incurred in a want to be paid for
period that are our work!
both unpaid and
unrecorded.
Expense Liability
Debit Credit
Adjustment Adjustment
3-24
P1
Accrued Expenses
3-25
P1
Accrued Expenses
3-26
P1 Accrued Revenues
Smith & Jones, CPAs, had $31,200 of work
completed but not yet billed to clients.
Let’s make the adjusting entry necessary on
December 31, 2009, the end of the company’s fiscal
year.
3-27
Estimates
Accountants often must make estimates of
future events to comply with the accrual
accounting model.
Examples
Depreciation
Uncollectible
accounts
$
DRESS RIGHT CLOTHING CORPORATION
Adjusted Trial Balance
July 31, 2011
Account Title Debits Credits
Cash $ 68,500
Accounts receivable 2,000 This is the Adjusted
Allowance for uncollectible accounts $ 500
Supplies 1,200 Trial Balance for
Prepaid rent
Inventory
22,000
38,000
Dress Right after all
Furniture and fixtures 12,000 adjusting entries have
Accumulated depr.-furniture & fixtures 200
Accounts payable 35,000 been recorded and
Note payable 40,000
Unearned rent revenue 750
posted.
Salaries payable 5,500
Interest payable 333
Common stock 60,000
Retained earnings 1,000 Dress Right will use
Sales revenue
Rent revenue
38,500
250
these balances to
Cost of goods sold 22,000 prepare the financial
Salaries expense 10,500
Supplies expense 800 statements.
Rent expense 2,000
Depreciation expense 200
Interest expense 333
Bad debt expense 500
Totals $ 181,033 $ 181,033
The Income Statement
Dress Right Clothing Corporation
Income Statement
For Month Ended July 31, 2011
Sales revenue $ 38,500
Cost of goods sold 22,000
Gross profit 16,500
Other expenses:
Salaries $ 10,500
Supplies 800
Rent 2,000
Depreciation 200
Bad debt 500
Total operating expenses 14,000
Operating income 2,500
Other income (expense):
Rent revenue 250
Interest expense (333) (83)
Net income $ 2,417
Analyze POST
transactions
Closing
Entries
Journalize
Prepare
Post statements
Prepare Prepare
Adjusting
unadjusted POST adjusted
Entries
trial balance trial balance
3-36
The Closing Process
Revenues Assets
Shareholders’
Liabilities
Dividends
Expenses
Equity
Temporary Permanent
Accounts Accounts
Income
The closing process applies
Summary
only to temporary accounts.
P4
Recording Closing Entries
3-38
P4
Recording Closing Entries
$ 7,000
3-39
P4
Recording Closing Entries
3-40
P4
Recording Closing Entries
3-41
P4
Recording Closing Entries
Income Summary
Determine the
$ 18,100 $ 25,000 balance in the
$ 6,900 Income Summary
account.
3-42
P4
Recording Closing Entries
3-43
P4
Recording Closing Entries
3-44
P4
Recording Closing Entries
Analyze POST
transactions
Closing
Entries
Journalize
Prepare
Post statements
Prepare Prepare
Adjusting
unadjusted POST adjusted
Entries
trial balance trial balance
3-46
P5 Post Closing Trial Balance
Trial Balance prepared after the
closing entries have been posted.
The purpose is to insure that all
nominal or temporary accounts
have been closed.
The only accounts on this trial
balance should be assets,
liabilities, and equity accounts.
3-47
Post-Closing Trial Balance
DRESS RIGHT CLOTHING CORPORATION
Post-Closing Trial Balance
July 31, 2011
Account Title Debits Credits
Cash $ 68,500 Lists permanent
Accounts receivable 2,000
accounts and their
Allowance for uncollectible accounts $ 500
Supplies 1,200 balances.
Prepaid rent 22,000
Inventory 38,000
Furniture and fixtures 12,000
Accumulated depr.-furniture & fixtures 200
Accounts payable 35,000
Note payable 40,000
Unearned rent revenue 750
Salaries payable 5,500
Interest payable 333 Total debits equal
Common stock 60,000 total credits.
Retained earnings 1,417
Totals $ 143,700 $ 143,700
Conversion From Cash Basis to
Accrual Basis
Increases Decreases