Accounting Cycle Example Exercise Accounting Cycle

Document Sample
Accounting Cycle Example Exercise Accounting Cycle Powered By Docstoc
					162       Chapter 4 Completing the Accounting Cycle




  EXHIBIT 7
                                                                                                          NetSolutions
  Post-Closing                                                                                 Post-Closing Trial Balance
  Trial Balance,                                                                                  December 31, 2011
  NetSolutions
                                                                                                                                                                             Debit      Credit
                                                                                                                                                                            Balances   Balances
                              Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,065
                              Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    2,720
                              Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           760
                              Prepaid Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                2,200
                              Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     20,000
                              Office Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 1,800
                              Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                       50
                              Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              900
                              Wages Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                            250
                              Unearned Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                             240
                              Chris Clark, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         28,105
                                                                                                                                                                              29,545     29,545



         Describe the     Accounting Cycle
         accounting
cycle.                    The accounting process that begins with analyzing and journalizing transactions and
                          ends with the post-closing trial balance is called the accounting cycle. The steps in
                          the accounting cycle are as follows:
                            1. Transactions are analyzed and recorded in the journal.
                            2. Transactions are posted to the ledger.
                            3. An unadjusted trial balance is prepared.
                            4. Adjustment data are assembled and analyzed.
                            5. An optional end-of-period spreadsheet is prepared.
                            6. Adjusting entries are journalized and posted to the ledger.
                            7. An adjusted trial balance is prepared.
                            8. Financial statements are prepared.
                            9. Closing entries are journalized and posted to the ledger.
                           10. A post-closing trial balance is prepared.2

    Example Exercise 4-5
    Example Exercise 4-5
                      -5                           Accounting Cycle
                                                   Accounting yc e
                                                        n
                                                   Account g Cycle
    From the following list of steps in the accounting cycle, identify what two steps are missing.
    a. Transactions are analyzed and recorded in the journal.
    b. Transactions are posted to the ledger.
    c. Adjustment data are assembled and analyzed.
    d. An optional end-of-period spreadsheet is prepared.
    e. Adjusting entries are journalized and posted to the ledger.
    f. Financial statements are prepared.
    g. Closing entries are journalized and posted to the ledger.
    h. A post-closing trial balance is prepared.

   Follow My Example 4-5
   The following two steps are missing: (1) the preparation of an unadjusted trial balance and (2) the preparation of the
   adjusted trial balance. The unadjusted trial balance should be prepared after step (b). The adjusted trial balance should
   be prepared after step (e).

                                                                                                                                            Practice Exercises: PE 4-5A, PE 4-5B

                          2 Some accountants include the journalizing and posting of “reversing entries” as the last step in the accounting cycle. Because
                          reversing entries are not required, they are described and illustrated in Appendix B at the end of the book.

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:32
posted:11/2/2012
language:Unknown
pages:1