Worksheets

1
Worksheets

• A working paper that accountants can use
• to summarize adjusting entries and
• account balances for preparing the
• financial statements
• Manual accounting system Optional
• Computerized accounting system Not Used

2
Balance Sheet (1)

• Current Assets assets expected to be sold or
  used up within one year
• Cash Accounts Receivable Supplies
• Long-term Assets assets not expected to be sold
  or used up within one year
• Fixed Assets (Property, Plant, and Equipment)

3
Balance Sheet (2)

• Current Liabilities liabilities that are due
  within one year
• Accounts Payable Wages Payable Notes Payable
  (short-term)
• Long-term Liabilities liabilities that usually
  will not be due for more than one year
• Fixed Assets (Property, Plant, and Equipment)
  Notes Payable (long-term)

4
Accounting Cycle

• The process that begins with analyzing
• and journalizing transactions and ends
• with the post-closing trial balance
• Cycle is repeated each month
• Most important output are the monthly Financial
  Statements

5
Permanent vs. Temporary Accounts

• Permanent accounts that are relatively
  permanent (balances are carried forward from
  month to month)
• Balance Sheet accounts (excluding Drawing)
• Temporary accounts that report amounts only for
  one period (balances are not carried forward from
  month to month)
• Income Statement accounts and Drawing

6
The Closing Process

• The process of closing temporary accounts
• at the end of the month in preparation for
• the next month
• Closing Entries journal entries that are made
  to close temporary accounts
• Income Summary a clearing account used in the
  Closing Process

7
The Closing Process
Income Summary
OWNERS CAPITAL
8
The Closing Process
Income Summary
Rent Revenue
Bal. 120
Note The balances shown are adjusted balances
before closing. The following sequence
demonstrates the closing process.
9
The Closing Process
16,840
Income Summary
16,960
Rent Revenue
Bal. 120
120
Step 1
Debit each revenue account for its balance and
credit Income Summary for the total.
10
The Closing Process
Income Summary
16,960
9,775
Step 2
Debit Income Summary for the total expenses and
credit each expense account for its balance.
11
The Closing Process
Income Summary
16,960
9,775
7,205
Step 3
Debit Income Summary for the amount of its
balance and credit the capital account.
7,205
12
The Closing Process
Income Summary
16,960
9,775
7,205
Step 4
Debit the capital account and credit the drawing
account for the balance in the drawing account.
4,000
7,205
4,000
13
The Closing Process
Fees Earned
Wages Expense
Income Summary
Rent Expense
Rent Income
Depreciation Expense
Utilities Expense
Chris Clark, Capital
Drawing
Bal. 25,000
4,000
Supplies Expense
7,205
Net Income
Bal. 28,205
Insurance Expense
All temporary accounts now have zero balances and
are ready for the next accounting period.
Chris Clark, Drawing
Miscellaneous Expense
14
Post-closing Trial Balance
NetSolutions Post-Closing Trial Balance December
31, 2005
Cash 2 065 00 Accounts Receivable 2 720
00 Supplies 760 00 Prepaid Insurance 2 300
00 Land 20 000 00 Office Equipment 1 800
00 Accumulated Depreciation 50 00 Accounts
Payable 900 00 Wages Payable 250 00 Unearned
Rent 240 00 Chris Clark, Capital 28 205 00 29
645 00 29 645 00
15
Purpose of Post Closing Trial Balance

• To ensure the ledger is in balance after closing
• entries have been made and before the
• accounting for the next month begins
• Ending account balances for a month will become
  the beginning account balances for the next month
• This is the last accounting procedure each month

16
Fiscal Year

• The annual accounting period adopted by
• a business
• Often the calendar year, but can be any
• twelve month period of time