Completing the Accounting Cycle

1
Chapter 4

• Completing the Accounting Cycle

2
Accountants Work Sheet

• Special tool for accountants
• Starts with Preliminary Trial Balance
• Columns for adjustments
• End up with Adjusted Trial Balance
• Useful for preparing financial statements
• Can be prepared prior to the actual booking of
  the adjusting entries

3
Accountants Work Sheet

• Computers have increased and lessened its
  usefulness
• Spreadsheets mechanized the math
• Reporting generating capability of accounting
  packages lessened need. Record entry, push a
  button and get
• Updated trial balance
• Set of financial statements

4
Accountants Work Sheet

• Various methods
• Books way shown on between pages 146 and 147
• Method most frequently shown in accounting texts
• My method
• Used frequently by real world accountants
• Other variations on the theme
• You can use either method, but

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Accountants Work Sheet - Books Way

• Too many columns
• Two for Preliminary Trial Balance
• Two for Adjustments
• Two for Adjusted Trial Balance
• Two for Balance Sheet
• Two for Income Statement

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Accountants Work Sheet - Books Way

• Confusing math when crossfooting (adding across
  columns)
• Adding debits to debits gives you a debit
• Adding credits to credits gives you a credit
• Adding debits to credits may result in either a
  credit or a debit depending on the size of the
  debit and the size of the credit youre adding to
• Adding credits to debits may result in either a
  debit or a credit depending on the size of the
  credit and the size of the debit youre adding to

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Accountants Work Sheet - Books Way

• Confusing hanging balancing figures
• Complicated way to handle inventory for
  merchandising companies
• Beginning inventory
• Ending inventory

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Accountants Work Sheet - Toms Way

• Not too many columns
• One for Preliminary Trial Balance
• Two for Adjustments
• one for debits one for credits
• One for Adjusted Trial Balance
• Already separate sections for
• Balance Sheet accounts
• Income Statement accounts
• Easily see net income or loss for period
• No funny hanging balancing figures

9
SourceExcel/AC 205 Classes/Ch 4 Exhibits 8-12
Work Sheet.XLS
10
SourceExcel/AC 205 Classes/Ch 4 Exhibits 8-12
Work Sheet.XLS
11
Accountants Work Sheet - Toms Way

• Math is always the same
• Start with the value in the Preliminary column
• Add to it the value in the Debit Adjustment
  column
• Subtract from it the value in the Credit
  Adjustment column
• Because math is so mechanical, easily lends
  itself to computer spreadsheets

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Accountants Work Sheet - Toms Way

• Debits and Credits take care of themselves
• positive number is a debit balance
• negative number is a credit balance
• Retains two columns for adjustments so that you
  can check that the total of debit adjustments
  equals the total of the credit adjustments
  (balance sheet section)

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SourceExcel/AC 205 Classes/Ch 4 Exhibits 8-12
Work Sheet.XLS