completing the accounting cycle
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4. Completing the Accounting Cycle. Student Version. 1. Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements. 4-2. 1. Exhibit 1. End-of-Period Spreadsheet (Work Sheet). 2. - PowerPoint PPT PresentationTRANSCRIPT
1
Accounting Using Excel for Success
PowerPoint Presentation by:PowerPoint Presentation by:Douglas Cloud, Professor Emeritus Accounting, Pepperdine UniversityDouglas Cloud, Professor Emeritus Accounting, Pepperdine University
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4
Completing the Accounting Cycle
Student Version
21-24-2
1
4-2
Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements.
31-34-3
1End-of-Period Spreadsheet (Work Sheet)Exhibit 1
41-44-4
Prepare financial statements from adjusted account balances.
2
4-4
51-54-5 to statement of owner’s equity
2Financial Statements Prepared from Work SheetExhibit 2
61-64-6
from the income statement
to the balance sheet
2Financial Statements Prepared from Work Sheet (continued)Exhibit 2
71-74-7
A classified balance sheet is a balance sheet that was expanded by adding subsections for current assets; property, plant, and equipment; and current liabilities.
2
81-84-8
• Cash and other assets that are expected to be converted into cash, sold or used up usually within a year or less, through the normal operations of the business, are called current assets.
2
• Property, plant, and equipment (also called fixed assets) include assets that depreciate over a period of time. Land is an exception as it is not subject to depreciation.
(continued)
91-94-9
• Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called current liabilities.
2
• Liabilities not due for a long time (usually more than one year) are long-term liabilities.
• Owner’s equity is the owner’s right to the assets of the business.
101-104-10
from the statement of owner’s equity
2Financial Statements Prepared from Work Sheet (continued)Exhibit 2
111-114-11
Prepare closing entries.
3
4-11
121-124-12
Accounts that are relatively permanent from year to year are called real accounts. Accounts that report amounts for only one period are called temporary accounts or nominal accounts.
3
Closing Entries
131-134-13
Debit each revenue account for the amount of its balance, and credit Income Summary for the total revenue.
Fees Earned
Bal. 16,840
Rent Revenue
Bal. 120
Income Summary 16,840
120
16,960
3Flowchart of Closing Entries for NetSolutions Exhibit 4
141-144-14
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance ExpenseBal. 200
Miscellaneous ExpenseBal. 455
Income Summary
Debit Income Summary for the total expenses and
credit each expense account for its balance.
16,960
Bal. 4,525
Bal. 1,600
Bal. 50
Bal. 985
Bal. 2,040
9,855
455
200
2,040
985
50
1,600
4,525
3Flowchart of Closing Entries for NetSolutions (continued)Exhibit 4
151-154-15
Chris Clark, Capital
Bal. 25,000
Chris Clark, Drawing
Bal. 4,000
Income Summary
16,9609,8557,105
7,105
Debit Income Summary for the
amount of its balance (in this case, the net
income) and credit the capital account.
3Flowchart of Closing Entries for NetSolutions (continued) Exhibit 4
161-164-16
Chris Clark, Capital
Bal. 25,0007,105
Chris Clark, Drawing
Bal. 4,000 4,000
4,000 Debit the capital account for the balance
of the drawing account, and credit
drawing for the same amount.
3Flowchart of Closing Entries for NetSolutions (continued) Exhibit 4
171-174-17
3Closing Entries for NetSolutions
Step 2
Step 3
Step 1
Step 4
Exhibit 5
181-184-18
After the closing entries are posted, all of the temporary accounts have zero balances.
3
191-194-19
A post-closing trial balance is prepared after the closing entries have been posted. The purpose of the PCTB is to verify that the ledger is in balance at the beginning of the next period.
3
201-204-20
3Post-Closing Trial BalanceExhibit 7
211-214-21
Describe the accounting cycle.
4
4-21
221-224-22
The accounting process that begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period’s transactions is called the accounting cycle. There are ten steps in the accounting cycle.
4
231-234-23
2. Transactions are posted to the ledger.3. An unadjusted trial balance is prepared.4. Adjustment data are assembled and
analyzed.5. An optional end-of-period spreadsheet
(work sheet) is prepared.
1. Transactions are analyzed and recorded in the journal.
(continued)
Accounting Cycle4
241-244-24
7. An adjusted trial balance is prepared.8. Financial statements are prepared.9. Closing entries are journalized and
posted to the ledger.10. A post-closing trial balance is prepared.
6. Adjusting entries are journalized and posted to the ledger.
Accounting Cycle (continued)4
251-254-25
5
Illustrate the accounting cycle for one period.
4-25
261-264-26
5
Journal entries for April, Kelly Consulting
Exhibit 9
271-274-27
5
Journal entries for April, Kelly Consulting (continued)
Exhibit 9
281-284-28
5Unadjusted Trial Balance, Kelly ConsultingExhibit 10
291-294-29
5End-of-Period Spreadsheet (Work Sheet)Exhibit 11
4-29
301-304-30
5
Adjusting Entries, Kelly Consulting
Exhibit 12
311-314-31
5Adjusted Trial Balance, Kelly ConsultingExhibit 13
321-324-32
5
Financial Statements, Kelly ConsultingExhibit 14
331-334-33
5Financial Statements, Kelly Consulting (continued)Exhibit 14
341-344-34
Financial Statements, Kelly Consulting (continued)Exhibit 14
5
351-354-35
5
Closing Entries, Kelly ConsultingExhibit 15
361-364-36
5Post-Closing Trial Balance, Kelly ConsultingExhibit 16
371-374-37
6
Explain what is meant by the fiscal year and the natural business year.
4-37
381-384-38
The annual accounting period adopted by a business is known as its fiscal year. When a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation, such a fiscal year is also called the natural year.
6
391-394-39
Financial History of a Business
6
401-404-40
5Ledger, Kelly ConsultingExhibit 17
411-414-41
5Ledger, Kelly Consulting (continued)Exhibit 17
421-424-42
5Ledger, Kelly Consulting (continued)Exhibit 17
431-434-43
5Ledger, Kelly Consulting (continued)Exhibit 17
441-444-44