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Step 5 in Accounting Preparing a Worksheet

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Step 5 in Accounting Preparing a Worksheet Powered By Docstoc
					                                                     Chapter


 Adjustments and the                                     5
     Worksheet

Section 2: Financial Statements
       Section Objectives
       3.   Complete the worksheet.

       4.   Prepare an income statement, statement of
            owner's equity, and balance sheet from the
            completed worksheet.

       5.   Journalize and post the adjusting entries.
Preparing Financial Statements
         The worksheet is now completed.


The fifth step in the accounting cycle is preparing
the financial statements.
            The Accounting Cycle
                    Step 2              Step 3
                Journalize the         Post the
    Step 1        data about         data about      Step 4
   Analyze       transactions       transactions    Prepare
transactions                                           a
                                                   worksheet


                                                         Step 5
                                                        Prepare
                                                       financial
                                                      statements

   Step 9                                           Step 6
  Interpret                                         Record
the financial                           Step 7     adjusting
information             Step 8          Record      entries
                      Prepare a         closing
                    postclosing         entries
                    trial balance
Objective 4




 Prepare an income statement,
 statement of owner’s equity,
 and balance sheet from the
 completed worksheet.
Preparing the Income Statement
                                 JT’s Consulting Services
                                         Worksheet
                               Month Ended December 31, 2007

                      TRIAL BALANCE      ADJUSTMENTS        ADJ. TRIAL BAL.     INCOME STMT.     BALANCE SHEET
ACCOUNT NAME
                      DEBIT   CREDIT     DEBIT     CREDIT   DEBIT     CREDIT    DEBIT   CREDIT   DEBIT    CREDIT
Cash                 83,500                                  83,500                              83,500
Accounts Receivable   5,000                                   5,000                               5,000
Supplies              3,000                        (a) 1,000  2,000                               2,000
Prepaid Rent          7,000                        (b) 3,500  3,500                               3,500
Equipment            22,000                                  22,000                              22,000
Accum. Depr.—Equip.                                (c) 367                367                                367
Accounts Payable              7,000                                    7,000                               7,000
Jason Taylor, Cap.           90,000                                   90,000                              90,000
Jason Taylor, Draw.   4,000                                  4,000                                4,000
Fees Income                  35,000                                   35,000            35,000
Salaries Expense      7,000                                 7,000                7,000
Utilities Expense       500                                   500                  500
Supplies Expense                       (a) 1,000            1,000                1,000
Rent Expense                           (b) 3,500            3,500                3,500
Depr. Exp.—Equip.                      (c)   367              367                  367
Totals              132,000 132,000        4,083    4,083 120,583 120,583       12,367 35,000 120,000 97,367
Net Income                                                                      22,633                22,633
                                                                                35,000 35,000 120,000 120,000
                    JT’s Consulting Services
                       Income Statement
                 Month Ended December 31, 2007
Revenue
 Fees Income                                     $35,000
Expenses
 Salaries Expense                       $7,000
 Utilities                                500
 Supplies Expense                        1,000
 Rent Expense                            3,500
 Depreciation Expense - Equipment         367
   Total Expenses                                $12,367
Net Income for the Month                         $22,633
Preparing the Statement
   of Owner’s Equity
QUESTION:

            What does the statement of
            owner’s equity report?



 ANSWER:


     The statement of owner’s equity reports the
     changes that have occurred in the owner’s
     financial interest during the reporting period.
   From the Balance Sheet section of the worksheet
    use the amounts for:

     owner’s capital
     owner’s withdrawals, if any
     owner’s investments, if any

    From the Income Statement section of the
     worksheet, use the amount calculated for net
     income or net loss.
                                 JT’s Consulting Services
                                         Worksheet
                               Month Ended December 31, 2007

                      TRIAL BALANCE      ADJUSTMENTS        ADJ. TRIAL BAL.     INCOME STMT.     BALANCE SHEET
ACCOUNT NAME
                      DEBIT   CREDIT     DEBIT     CREDIT   DEBIT     CREDIT    DEBIT   CREDIT   DEBIT    CREDIT
Cash                 83,500                                  83,500                              83,500
Accounts Receivable   5,000                                   5,000                               5,000
Supplies              3,000                        (a) 1,000  2,000                               2,000
Prepaid Rent          7,000                        (b) 3,500  3,500                               3,500
Equipment            22,000                                  22,000                              22,000
Accum. Depr.—Equip.                                (c) 367                367                                367
Accounts Payable              7,000                                    7,000                               7,000
Jason Taylor, Cap.           90,000                                   90,000                              90,000
Jason Taylor, Draw.   4,000                                  4,000                                4,000
Fees Income                  35,000                                   35,000            35,000
Salaries Expense      7,000                                 7,000                7,000
Utilities Expense       500                                   500                  500
Supplies Expense                       (a) 1,000            1,000                1,000
Rent Expense                           (b) 3,500            3,500                3,500
Depr. Exp.—Equip.                      (c)   367              367                  367
Totals              132,000 132,000        4,083    4,083 120,583 120,583       12,367 35,000 120,000 97,367
Net Income                                                                      22,633                22,633
                                                                                35,000 35,000 120,000 120,000
                         JT’s Consulting Services
                       Statement of Owner’s Equity
                      Month Ended December 31, 2007

Jason Taylor, Capital, December 1, 2007                 90,000

Net Income for December                        22,633

Less Withdrawals for December                   4,000

Increase in Capital                                     18,633

Jason Taylor, Capital, December 31, 2007                108,633
Preparing the Balance Sheet
                        JT’s Consulting Services
                             Balance Sheet
                           December 31, 2007
     Assets                                        Liabilities
Cash                 $83,500.00       Accounts Payable                      $   7,000.00
Accounts Receivable    5,000.00
Supplies               2,000.00
Prepaid Rent           3,500.00                  Owner’s Equity
Equipment             22,000.00      Jason Taylor, Capital                    108,633.00
Total Assets       $ 115,633.00      Total Liabilities and Owner’s Equity   $ 115,633.00




The balance sheet in Chapter 4 was prepared using the account form.
QUESTION:


      What is an account form balance sheet?


ANSWER:


      An account form balance sheet is a
      balance sheet that lists the assets
      on the left and liabilities and owner’s
      equity on the right.
In actual practice, the report form
balance sheet is used more often.
QUESTION:


      What is a report form balance sheet?


ANSWER:


      A report form balance sheet is a
      balance sheet that lists the asset
      accounts first, followed by liabilities
      and owner’s equity.
                         JT’s Consulting Services
                              Balance Sheet
                      Month Ended December 31, 2007
                   Assets
Cash                                                     $83,500
Accounts Receivable                                       5,000
Supplies                                                  2,000
Prepaid Rent                                              3,500
Equipment                                      22,000
Less Accumulated Depreciation                     367     21,633
Total Assets                                            $115,633
       Liabilities and Owner’s Equity
Liabilities
  Accounts Payable                                        $ 7,000
Owner’s Equity
 Jason Taylor, Capital                                    108,633
Total Liabilities and Owner’s Equity                     $115,633
       Thank You
             for using

College Accounting, 11th Edition



      Price • Haddock • Brock

				
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