copyright 2006 pearson education canada inc. 6-1
Post on 04-Jan-2016
220 Views
Preview:
TRANSCRIPT
Copyright 2006 Pearson Education Canada Inc. 6-1
Copyright 2006 Pearson Education Canada Inc. 6-2
Outline
The Financial Statement Worksheet Preparing Formal Financial Statements: Step 6 Closing the Books: Step 7 Closing Entries 1-4 Closing Procedures Applicable to a Corporation Reversing Entries: An Optional Procedure Accounting Cycle Flowchart
Copyright 2006 Pearson Education Canada Inc. 6-3
The Financial Statement The Financial Statement WorksheetWorksheet
A multi-column form which is used as a“tool” in the preparation of financialstatements
It has five sets of Dr. and Cr. columns:Unadjusted trial balanceAdjustmentsAdjusted trial balanceIncome statementBalance sheet
Copyright 2006 Pearson Education Canada Inc. 6-4
Trial Balance Adjustments Income Statement Balance Sheet
Account Name Debits Credits Debits Credits Debits Credits Debits Credits Debits Credits
Cash 100 100 100
Accounts Receivable 200 200 200
Notes Receivable 300 300 300
Food Inventory 110 (b)89 21 21
Prepaid Insurance 12 (a)7 5 5
Furniture and Equipment 220 220 220
Accumulated Depreciation 88 ©22 110 110
Accounts Payable 150 150 150
Notes Payable 100 100 100
Amy Neat, Capital 502 502 502
Amy Neat , Withdrawals 50 50 50
Sales 300 300 300
Other Income 20 20 20
Salaries & Wages 100 (e)7 107 107
Interest Expense 20 (d)5 25 25
Other Operating Expenses 48 48 48
1160 1,160
Insurance Expense (a)7 7 7
Cost of Food Sold (b)89 89 89
Depreciation Expense ©22 22 22
Accrued Interest Payable (d)5 5 5
Accrued Salaries Payable (e)7 7 7
Interest Income (f)18 18 18
Accrued Interest Receivable (f) 18 18 18
148 148 1212 1,212 298 338 914 874
NET INCOME 40 40
Adj Trial Bal
Neat RestaurantF/S Worksheet
Year ended July 31, 2005
Copyright 2006 Pearson Education Canada Inc. 6-5
The Financial Statement WorksheetExcellent tool for preparing adjusting entries, the
adjusted trial balance, financial statements, and closing entries
Does not replace journalizing adjusting entries in the General Journal
Does not replace posting adjusting entries from the General Journal to the General Ledger
Does not replace formal financial statements, but shows all their data on one sheet.
Copyright 2006 Pearson Education Canada Inc. 6-6
Preparing Formal Financial Statements: Step 6
Income Statement
Statement of Owner’s Equity (or Statement of Retained Earnings)
Balance Sheet
Copyright 2006 Pearson Education Canada Inc. 6-7
Closing the Books: Step 7
Entry # 1- Close revenue accounts Entry # 2- Close expense accounts Entry # 3- Close income summary account Entry # 4- Close withdrawals or dividends
(if any) to appropriate owner’s equity account
Copyright 2006 Pearson Education Canada Inc. 6-8
Closing entry #1 - Close revenue accounts
Debit each of the revenue accounts found on the income statement columns of the financial statement worksheet
2005July 31 Sales 300 Interest income 18
Other income 20 Income Summary 338 To close revenue accounts
Copyright 2006 Pearson Education Canada Inc. 6-9
Closing entry #2 - Closing expense accounts
Credit each of the expense accounts found on the income statement debit column of the financial statement worksheet.
2005July 31 Income summary 298 Salaries & Wages 107 Interest Expense 25 Other operating exp. 48 Insurance expense 7 Cost of food sold 89 Depreciation expense 22 To close expense accounts
Copyright 2006 Pearson Education Canada Inc. 6-10
Closing entry # 3-Closing the Income Summary Account
To close income summary
debit the account for the net income and credit the appropriate owner’s equity account
July 31 Income Summary 40 Amy Neat, Capital 40
To close the income summary account
Copyright 2006 Pearson Education Canada Inc. 6-11
Closing entry # 4-Closing owner’s withdrawals (or dividends)
Close the withdrawals account to the appropriate Owner’s Equity account, or Dividends account to Retained Earnings
July 31 Amy Neat, Capital 50 Amy Neat Withdrawals 50 To close the withdrawals account
Copyright 2006 Pearson Education Canada Inc. 6-12
Closing procedures applicable to corporations
Close revenue and expense accounts to income summary, just as with other types of companies
Close income summary to retained earnings
Close dividends to retained earnings
Copyright 2006 Pearson Education Canada Inc. 6-13
Reversing Entries: An Optional Procedure
Reversing accrual adjustments on the first day of each accounting period
Main purpose: simplify the recording of payments and receipts of accruals
Copyright 2006 Pearson Education Canada Inc. 6-14
Complete Accounting Cycle Flowchart
Step 1Analysis of
Business Transactions
Step 2Journalizing
Step 3Posting
Step 4Taking
The TrialBalance
Step 5AdjustingThe TrialBalance
Step 6 Financial
Statements
Step 7 Closing the
Books
top related