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					               CHAPTER 4


      COMPLETING THE
        ACCOUNTING
          CYCLE
          Accounting Principles, Eighth Edition

Chapter
  4-1
                     Study Objectives

     1.   Prepare a worksheet.
     2. Explain the process of closing the books.
     3. Describe the content and purpose of a post-closing
        trial balance.
     4. State the required steps in the accounting cycle.
     5. Explain the approaches to preparing correcting
        entries.
     6. Identify the sections of a classified balance sheet.



Chapter
  4-2
              Completing the Accounting Cycle


                                            Summary of
      Using a           Closing the                            Classified
                                            Accounting
     Worksheet            Books                              Balance Sheet
                                              Cycle

   Steps in            Preparing            Reversing        Current assets
   preparation         closing entries      entries—An       Long-term
   Preparing           Posting closing      optional step    investments
   financial           entries              Correcting       Property, plant,
   statements          Preparing a          entries—An       and equipment
   Preparing           post-closing trial   avoidable step
                                                             Intangible assets
   adjusting entries   balance
                                                             Current liabilities
                                                             Long-term
                                                             liabilities
Chapter
                                                             Owner’s equity
  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.




Chapter
  4-4                                     LO 1 Prepare a worksheet.
    Steps in Preparing a Worksheet
                                     Illustration 4-2




Chapter
  4-5
    Steps in Preparing a Worksheet
   Example
  The trial balance for Undercover Roofing for the month ended March
  31, 2008, is as follows.
                            Trial Balance    Other data:
      Account Titles        Dr.        Cr.   1. Supplies on hand total $140.
 Cash                     $ 2,500
 Accounts Receivable        1,800            2. Depreciation for March is
 Roofing Supplies           1,100               $200.
 Equipment                  6,000
                                             3. Unearned revenue amounted
 Accumulated Depreciation           $ 1,200
 Accounts Payable                      1,400    to $130 on March 31.
 Unearned Revenue                        300 4. Accrued salaries are $350.
 I. Spy, Capital                      7,000
 I. Spy, Drawing             600
                                               Instructions
 Service Revenue                      3,000
 Salaries Expense             700              a. Prepare and complete the
 Miscellaneous Expense        200                 worksheet.
     Totals              $ 12,900   $ 12,900

Chapter
  4-6                                                  LO 1 Prepare a worksheet.
     Steps in Preparing a Worksheet
 1. Prepare a Trial Balance on the Worksheet
                                                                   Adjusted             Income
                            Trial Balance        Adjustments    Trial Balance         Statement      Balance Sheet
     Account Titles        Dr.          Cr.      Dr.     Cr.   Dr.          Cr.     Dr.        Cr.   Dr.        Cr.
Cash                        2,500
Accounts Receivable         1,800
Roofing Supplies            1,100
Equipment                   6,000
Accumulated Depreciation                 1,200
Accounts Payable                         1,400
Unearned Revenue                           300
I. Spy, Capital                          7,000
I. Spy, Drawing               600
Service Revenue                          3,000
Salaries Expense              700
Miscellaneous Expense         200

                                                       Trial balance amounts
     Totals                12,900       12,900


                                                        come directly from
    Include all                                          ledger accounts.
   accounts with
     balances.
Chapter
  4-7                                                                             LO 1 Prepare a worksheet.
     Steps in Preparing a Worksheet
 2. Enter the Adjustments in the Adjustments Columns
                                                                       Adjusted             Income
                            Trial Balance          Adjustments      Trial Balance         Statement      Balance Sheet
     Account Titles        Dr.          Cr.       Dr.      Cr.     Dr.          Cr.     Dr.        Cr.   Dr.        Cr.
Cash                        2,500
Accounts Receivable         1,800
Roofing Supplies            1,100                       (a) 960
Equipment                   6,000                                            Adjustments Key:
Accumulated Depreciation                 1,200          (b) 200
Accounts Payable                         1,400                               (a) Supplies used.
                                           300 (c) 170
Unearned Revenue
                                                                             (b) Depreciation expense.
I. Spy, Capital                          7,000
I. Spy, Drawing               600                                            (c) Service revenue earned.
Service Revenue                          3,000          (c) 170
Salaries Expense              700              (d) 350                       (d) Salaries accrued.
Miscellaneous Expense         200
     Totals                12,900       12,900
Supplies Expense                               (a) 960
Depreciation Expense                           (b) 200
                                                        (d) 350
                                                                                  Enter adjustment
Salaries Payable
     Totals                                       1,680    1,680

                                                                                   amounts, total
                  Add additional                                                adjustments columns,
                   accounts as                                                 and check for equality.
Chapter              needed.
  4-8                                                                                 LO 1 Prepare a worksheet.
     Steps in Preparing a Worksheet
 3. Complete the Adjusted Trial Balance Columns
                                                                       Adjusted                Income
                            Trial Balance          Adjustments      Trial Balance            Statement      Balance Sheet
     Account Titles        Dr.          Cr.       Dr.      Cr.     Dr.          Cr.        Dr.        Cr.   Dr.        Cr.
Cash                        2,500                                   2,500
Accounts Receivable         1,800                                   1,800
Roofing Supplies            1,100                       (a) 960       140
Equipment                   6,000                                   6,000
Accumulated Depreciation                 1,200          (b) 200                  1,400
Accounts Payable                         1,400                                   1,400
Unearned Revenue                           300 (c) 170                             130
I. Spy, Capital                          7,000                                   7,000
I. Spy, Drawing               600                                     600
Service Revenue                          3,000          (c) 170                  3,170
Salaries Expense              700              (d) 350              1,050
Miscellaneous Expense         200                                     200
     Totals                12,900       12,900
Supplies Expense                               (a) 960               960
Depreciation Expense                           (b) 200               200
Salaries Payable                                        (d) 350                   350
     Totals                                       1,680    1,680   13,450      13,450


                        Total the adjusted
                       trial balance columns
Chapter               and check for equality.
  4-9                                                                                    LO 1 Prepare a worksheet.

				
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