chapter 8 – completing the accounting cycle | draft | accounting 1, 7 th edition1 chapter 8...
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Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition1
Chapter 8Completing the Accounting Cycle
Ch8
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition2
Adjusting Entries and the Worksheet
This tutorial guides you through creating a worksheet and using it to record adjusting entries.
For more detailed instructions, refer to Section 8.2 of the Accounting 1 textbook.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition3
Adjusting Entries and the Worksheet
Start with a blank worksheet.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition4
Adjusting Entries and the Worksheet
Record the header in the familiar “who, what, when” format: the name of the company, the type of financial statement, and the date.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition5
Adjusting Entries and the Worksheet
List all accounts in order (assets, liabilities, then equity), just as you would on a trial balance.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition6
Adjusting Entries and the Worksheet
Enter the debit and credit balances of each ledger account, and rule and total the trial balance.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition7
Adjusting Entries and the Worksheet
Some amounts on the trial balance are out of date.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition8
Adjusting Entries and the Worksheet
The Supplies account has a balance of $1480.90.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition9
Adjusting Entries and the Worksheet
The Supplies account should have a balance of $526.00, based on supplies that were used up during the year.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition10
Adjusting Entries and the Worksheet
The required adjustment is $954.90.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition11
Adjusting Entries and the Worksheet
The amount of supplies used up is an expense (an income statement account).
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition12
Adjusting Entries and the Worksheet
The amount of supplies used up is the Supplies Expense (an income statement account).
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition13
Adjusting Entries and the Worksheet
The Worksheet must incorporate these differences.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition14
Adjusting Entries and the Worksheet
The Worksheet must incorporate these differences. This is the first adjustment, so it is labelled as 1.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition15
Adjusting Entries and the Worksheet
There are other adjustments required before the trial balance is up to date.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition16
Adjusting Entries and the Worksheet
The Prepaid Insurance account has a balance of $6564.00.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition17
Adjusting Entries and the Worksheet
The Prepaid Insurance account should have a balance of $4070.00, based on insurance that was used up during the year.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition18
Adjusting Entries and the Worksheet
The required adjustment is $2494.00.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition19
Adjusting Entries and the Worksheet
The amount of insurance used up is an expense (an income statement account).
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition20
Adjusting Entries and the Worksheet
The amount of insurance used up is the Insurance Expense (an income statement account).
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition21
Adjusting Entries and the Worksheet
The Worksheet must incorporate these differences.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition22
Adjusting Entries and the Worksheet
The Worksheet must incorporate these differences. This is the second adjustment, so it is labelled as 2.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition23
Adjusting Entries and the Worksheet
Late arriving invoices need to be included.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition24
Adjusting Entries and the Worksheet
Late arriving invoices need to be included. The total of the late invoices is a credit to Accounts Payable (new amounts owed).
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition25
Adjusting Entries and the Worksheet
The Worksheet showing adjustments for Late Arriving Invoices.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition26
Adjusting Entries and the Worksheet
The Worksheet showing adjustments for Late Arriving Invoices.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition27
Adjusting Entries and the Worksheet
The Worksheet showing adjustments for Late Arriving Invoices.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition28
Adjusting Entries and the Worksheet
The Worksheet showing adjustments for Late Arriving Invoices.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition29
Adjusting Entries and the Worksheet
The Worksheet showing adjustments for Late Arriving Invoices.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition30
Adjusting Entries and the Worksheet
Unearned revenue needs to be included.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition31
Adjusting Entries and the Worksheet
Unearned revenue needs to be included. Unearned revenue is a credit to the Unearned Revenue account.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition32
Adjusting Entries and the Worksheet
The Worksheet showing adjustments for Unearned Revenue.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition33
Adjusting Entries and the Worksheet
The Worksheet showing adjustments for Unearned Revenue.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition34
Adjusting Entries and the Worksheet
Once all adjustments have been made, rule and total the Adjustments column.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition35
Adjusting Entries and the Worksheet
Next, transfer all Balance Sheet accounts to the Balance Sheet column. Be sure to account for any adjustments.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition36
Adjusting Entries and the Worksheet
Transfer all Income Statement accounts to the Income Statement column. Be sure to account for any adjustments.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition37
Adjusting Entries and the Worksheet
Rule and total the Income Statement and Balance Sheet columns.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition38
Adjusting Entries and the Worksheet
Calculate the Net Income (Revenue – Expenses). Net Income goes in the outer of the last four columns.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition39
Adjusting Entries and the Worksheet
Rule and total the last four columns of the Worksheet.
Chapter 8 – Completing the Accounting Cycle | DRAFT | Accounting 1, 7th Edition40
Adjusting Entries and the Worksheet
In the case of a Net Loss, the net loss amounts would go in the inner of the last four columns.
If a company has a net loss, it means expenses are greater than revenues. The net loss amounts need to go in the inner of the last four columns, or the Worksheet will not balance.
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