sales journal

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College Accounting First Canadian
Edition Price Haddock Brock Hahn
Reed
McGraw-Hill Ryerson
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CHAPTER 10
COMPLETING THE ACCOUNTING CYCLE FOR
A MERCHANDISING BUSINESS
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OBJECTIVE 1 Prepare a classified income
statement from the worksheet.
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FINANCIAL STATEMENTHEADINGS
Headings answer the following questions
Who?
Name of the company
What?
Name of the financial statement
When?
Period of time covered by the statement or date
of the statement
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FASHION WORLD
Income Statement (Partial)
Year
Ended December 31, 20X4 Operating Revenue


Sales

409,650.00
Less Sales Returns and Allowances

13,000.00 Net Sales


396,650.00 Cost of Goods Sold Delivered
Cost of Goods Sold
253,800.00 Less Purchase Returns
and Allowances 2,790.99 Cost of
Goods Sold 251,009.01 Gross Profit on
Sales

145,640.99 Operating Expenses
Selling Expenses Sales Salaries
Expense 56,490.00 Wages
Expense 14,700.00
Advertising Expense 7,425.00 Supplies
Expense 4,240.00 Cash Short or Over
125.00 Amortization Expense Store
Equipment 2,100.00 Total Selling Expenses
8,508.00
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Subtract Sales Returns and Allowances from Sales
to determine Net Sales.
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FASHION WORLD Income Statement
(Continued) Year Ended December 31,
20X4 Gross Profit on Sales
145,640.99 Operating Expenses Selling
Expenses Sales Salaries Expense
56,490.00 Wages Expense 14,700.00
Advertising Expense 7,425.00
Supplies Expense 4,240.00 Cash
Short or Over 125.00
Amortization Expense Store Equipment
2,100.00 Total Selling Expenses
85,080.00 General and Administrative
Expenses Rent Expense 13,500.00
Insurance Expense 1,800.00
Utilities Expense 2,915.00 Office
Salaries Expense 16,500.00 Payroll
Taxes Expense 6,331.76 Telephone
Expense 2,720.00 Uncollectible
Accounts Expense 630.00
Merchandise Inventory Loss
500.00 Amortization Expense Office
Equipment 600.00 Total General and
Administrative Expenses 45,497.75
The Total Operating Expenses are subtracted from
the Gross Profit on Sales to determine the Net
Income from Operations
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Total Operating Expenses 130,577.75
(Subtract) -
Net Income from Operations
14,898.44
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FASHION WORLD
Income Statement (Partial)
Year
Ended December 31, 20X4 Beginning Cost of Goods
Sold 253,800.00 Less Purchase
Returns and Allowances 2,790.99
Ending Cost of Goods Sold
251,009.01 Gross Profit on Sales

145,640.99
Operating Expenses Selling Expenses
Sales Salaries Expense 56,490.00
Wages Expense 14,700.00
Advertising Expense 7,425.00
Supplies Expense 4,240.00 Cash Short
or Over 125.00 Amortization
Expense Store Equipment 2,100.00 Total
Selling Expenses 8,508.00
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Financial Statement forms do not have Debit and
Credit Columns. They have Totals Columns and
Totaling Columns. Total columns are the ones
to the right and any calculations (addition
and/or subtraction) of figures used to arrive at
totals are completed to the left.
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FASHION WORLD
Income Statement (Partial)
Year
Ended December 31, 20X4 Operating Revenue


Sales

409,650.00
Less Sales Returns and Allowances

13,000.00 Net Sales


396,650.00 Cost of Goods Sold Delivered
Cost of Goods Sold
253,800.00 Less
Purchase Returns and Allowances
2,790.99 Ending Cost of Goods Sold
251,009.01 Gross Profit on Sales


145,640.99 Operating Expenses Selling
Expenses Sales Salaries Expense
56,490.00 Wages Expense
14,700.00 Advertising
Expense 7,425.00 Supplies
Expense 4,240.00 Cash Short or Over
125.00 Amortization Expense Store
Equipment 2,100.00 Total Selling Expenses
8,508.00
(Subtract) -
The Cost of Goods Sold is subtracted from net
sales to determine Gross Profit on Sales.
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FASHION WORLD Income Statement
(Continued) Year Ended December 31,
20X4 Other Income Miscellaneous
Income 68.00 Other Expenses Interest
Expense 434.95 Net Other Expense 366.
95 Net Income 14,696.29
Net Income from Operations
14,898.44
(Subtract) -

• Other Income Accounts are added.
• Interest Expense is subtracted from Total Other
  Income.
• The Net Nonoperating Expense is subtracted from
  the Net Income from Operations to determine the
  Net Income for Year.

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OBJECTIVE 2 Prepare a statement of owners
equity from the worksheet.
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The Statement of Owners Equity reports the
changes that have occurred in the owners
financial interest during the fiscal period.
This statement is prepared before the Balance
Sheet so that the amount of the ending capital is
available for use in the Owners Equity section
of the Balance Sheet.
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This is an example of a Statement of Owners
Equity when additional investment has been made
by the owner during the period.
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71,632.76
Fashion World had a decrease in capital since the
withdrawals were more than the income for the
period.
71,632.76
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This shows Fashion World with an increase in
capital.
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71,632.76
This Statement of Owners Equity shows Fashion
World with a Net Loss for Year.
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OBJECTIVE 3 Prepare a classified balance
sheet from the worksheet.
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FASHION WORLD
Balance Sheet (partial)

December 31, 20X4
Assets Current Assets Cash
7,200.00 Petty Cash
100.00 Accounts Receivable
23,568.00 Less Allow. for Doubtful Accounts
730.00 22,838.00 Merchandise
Inventory 31,500.00 Prepaid
Expenses Supplies
1,660.00 Prepaid Insurance 3,000.00
4,660.00 Total Current Assets
66,298.00 Capital Assets Plant and
Equipment

Store Equipment 12,000.00
Less Accumulated Amortization 2,100.00
9,900.00 Office Equipment
3,500.00 Less Accumulated Amortization
600.00 2,900.00 Total
Plant and Equipment 12,800.00
Total Assets 79,098.00
CURRENT ASSETS
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FASHION WORLD
Balance Sheet (partial)

December 31, 20X4
Assets Current Assets Cash
7,200.00 Petty Cash
100.00 Accounts Receivable
23,568.00 Less Allow. for Doubtful Accounts
730.00 22,838.00 Merchandise
Inventory 31,500.00 Prepaid
Expenses Supplies
1,660.00 Prepaid Insurance 3,000.00
4,660.00 Total Current Assets
66,298.00 Capital Assets Plant and
Equipment

Store Equipment 12,000.00
Less Accumulated Amortization 2,100.00
9,900.00 Office Equipment
3,500.00 Less Accumulated Amortization
600.00 2,900.00 Total
Plant and Equipment 12,800.00
Total Assets 79,098.00
PLANT AND EQUIPMENT
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FASHION WORLD
Balance Sheet (partial)

December 31, 20X4
Assets Current Assets Cash
7,200.00 Petty Cash
100.00 Accounts Receivable
23,568.00 Less Allow. for Doubtful Accounts
730.00 22,838.00 Merchandise
Inventory 31,500.00 Prepaid
Expenses Supplies
1,660.00 Prepaid Insurance 3,000.00
4,660.00 Total Current Assets
66,298.00 Capital Assets Plant and
Equipment

Store Equipment 12,000.00
Less Accumulated Amortization 2,100.00
9,900.00 Office Equipment
3,500.00 Less Accumulated Amortization
600.00 2,900.00 Total
Plant and Equipment 12,800.00
Total Assets 79,098.00
The Total Plant and Equipment is added to the
Total Current Assets. The sum is the Total
Assets.
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FASHION WORLD
Balance Sheet (Continued)

December 31, 20X4 Liabilities and Owners
Equity Current Liabilities Notes Payable
Trade
3,000.00 Notes
Payable Bank
9,000.00
Accounts Payable

3,138.00 Interest Payable

434.95 CPP Contributions Payable

610.00 EI Premiums Payable

225.00 Wages Payable
2,700.00 GST Payable
2,390.00
Less Prepaid GST
1,460.00 930.00 Provincial Sales Tax Payable

2,731.00 Total Current Liabilities


22,768.95

Owners Equity

Carolyn Wells, Capital

56,329.05
Total Liabilities and Owners Equity

79,098.00
CURRENT LIABILITIES
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FASHION WORLD
Balance Sheet (Continued)

December 31, 20X4 Liabilities and Owners
Equity Current Liabilities Notes Payable
Trade
3,000.00 Notes
Payable Bank
9,000.00
Accounts Payable

3,138.00 Interest Payable

434.95 CPP Contributions Payable

610.00 EI Premiums Payable

225.00 Wages Payable
2,700.00 GST Payable
2,390.00
Less Prepaid GST
1,460.00 930.00 Provincial Sales Tax Payable

2,731.00 Total Current Liabilities


22,768.95

Owners Equity

Carolyn Wells, Capital

56,329.05
Total Liabilities and Owners Equity

79,098.00
OWNERS EQUITY
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FASHION WORLD
Balance Sheet (Continued)

December 31, 20X4 Liabilities and Owners
Equity Current Liabilities Notes Payable
Trade
3,000.00 Notes
Payable Bank
9,000.00
Accounts Payable

3,138.00 Interest Payable

434.95 CPP Contributions Payable

610.00 EI Premiums Payable

225.00 Wages Payable
2,700.00 GST Payable
2,390.00
Less Prepaid GST
1,460.00 930.00 Provincial Sales Tax Payable

2,731.00 Total Current Liabilities


22,768.95

Owners Equity

Carolyn Wells, Capital

56,329.05
Total Liabilities and Owners Equity

79,098.00

• Total Current Liabilities and Carolyn Wells,
  Capital are added. The sum is the Total
  Liability and Owners Equity.
• This total should be equal to Total Assets.

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OBJECTIVE 4 Journalize and post the adjusting
entries.
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Adjustment a
Adjustment b
From the worksheet, journalize the adjusting
entries in the general journal. Above are
Adjustments a b.
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FASHION WORLD Worksheet (Partial)
For the Year Ended December 31, 20X4

TRIAL BALANCE
ADJUSTMENTS ACCOUNT NAME
DEBIT CREDIT
DEBIT
CREDIT Cash 7,200.00
Petty Cash 100.00 Accounts
Receivable 23,500.00

(i) 68.00
Allowance for Doubtful Accounts
100.00 (b)
630.00 Merchandise Inventory
33,009.01 (a) 500.00
Prepaid Insurance 4,800.00
(h) 1,800.00 Supplies
5,900.00
(g) 4,240.00
Store Equipment 12,000.00

Accumulated Amortization Store Equipment


(c) 2,100.00
Office Equipment 3,500.00 Accumulated
Amortization Office Equipment
(d) 600.00 Notes Payable Trade
3,000.00 Notes Payable Bank
9,000.00 Accounts Payable 3,138.00
Interest Payable 359.01
(f) 75.94
CPP Contributions Payable 610.00 EI
Premiums Payable 225.00 Wages
Payable
(e) 2,700.00 Prepaid GST
1,460.00 GST Payable 2,390.00
Provincial Sales Tax Payable 2,731.00
Carolyn Wells, Capital
71,632.76
Carolyn Wells, Drawing
30,000.00 Sales
409,650.00 Sales Returns and Allowances
13,000.00 Miscellaneous Income
(i) 68.00 Cost of Goods Sold
250,000.00 Merchandise Inventory Loss
(a) 500.00 Sales Salaries
Expense
56,490.00 Wages Expense
12,000.00 (e)
2,700.00 Advertising Expense
7,425.00 Supplies Expense

(g) 4,240.00 Cash Short
or Over 125.00
An End-of-Period Worksheet
The adjusting entries are taken from the
adjustment columns of the worksheet. Lowercase
letters are used to identify the Debit Credit
part of each entry. For example, a debit and
credit.
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Steps in Posting from Journal to Ledger
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After all adjusting entries have been posted, the
balances of the general ledger accounts should
match the amounts shown in the Adjusted Trial
Balance section of the worksheet.
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OBJECTIVE 5 Journalize and post the closing
entries.
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CLOSING ENTRIES

• The figures that are used to close the temporary
  accounts are found in the Income Statement
  section of the worksheet.

• The temporary accounts are the revenue, cost,
  and expense accounts.

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CLOSING REVENUE ACCOUNTS In order to close these
accounts, make an entry opposite its
balance (example, credits become debits).
GENERAL
JOURNAL Page 28 DATE
DESCRIPTION
POST. DEBIT
CREDIT

REF. Dec. 31 Sales

4001 409,650.00
Miscellaneous Income
4093 68.00
Income Summary
409,582.99
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CLOSING THE DRAWING ACCOUNT TO
OWNERS EQUITY
Reduce Capital With A Debit Entry
Close Drawing With A Credit Entry
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After the four closing entries have been
posted, only the Balance Sheet accounts have
balances. All other accounts have been closed.
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OBJECTIVE 6 Prepare a postclosing trial balance.
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OBJECTIVE 7 List the steps in the Accounting
cycle.
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ACCOUNTS RECEIVABLE AREA
GENERAL LEDGER AND FINANCIAL REPORTING AREA
Sales Journal
Accounts Receivable Ledger
Cash Receipts Journal
General Journal
General Ledger
Worksheet
ACCOUNTS PAYABLE AREA
Purchases Journal
Accounts Payable Ledger
Cash Payments Journal
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