WORK SHEET
Used for three major end-of-period activities:– journalizing adjusting entries– preparing financial statements– journalizing closing entries
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. Eq.A. D.-Del. Eq.Accts. Pay.Wages Pay.J J, Cap.
Del. FeesWages Exp.
J J, Drawing
Rent Exp.Sup. ExpTel. Exp.Ins. Exp.Depr. Exp.
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
From this work sheet, we can prepare the financial statements.
PREPARING FINANCIAL STATEMENTS
1st: Prepare the Income Statement. 2nd: Prepare the Statement of Owner’s
Equity. 3rd: Prepare the Balance Sheet.
Jessica Jane’s Campus DeliveryIncome Statement
For Month Ended June 30, 20--
Heading should contain 3 lines:
1. Company Name2. Statement Title3. Time period covered or date
Jessica Jane’s Campus DeliveryIncome Statement
For Month Ended June 30, 20--
Revenues are shown first.
Revenues:
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. Eq.A. D.-Del. Eq.Accts. Pay.Wages Pay.J J, Cap.
Del. FeesWages Exp.
J J, Drawing
Rent ExpSup. Exp.Tel. Exp.Ins. Exp.Depr. Exp.
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
Revenue
Jessica Jane’s Campus DeliveryIncome Statement
For Month Ended June 30, 20--
Revenues:Delivery Fees $2,150
Top amount in each column will include
“$”.
Jessica Jane’s Campus DeliveryIncome Statement
For Month Ended June 30, 20--
Revenues:Delivery Fees $2,150
When there is only one revenue account, “Total Revenues” is not computed
or shown.
Jessica Jane’s Campus DeliveryIncome Statement
For Month Ended June 30, 20--
Revenues:Delivery Fees $2,150
Expenses are shown next.
Expenses:
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. Eq.A. D.-Del. Eq.Accts PayWages Pay.J J, Cap.
Del. FeesWages Exp.
J J, Drawing
Rent Exp.Sup. Exp.Tel. Exp.Ins. Exp.Depr. Exp.
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
Expenses
Jessica Jane’s Campus DeliveryIncome Statement
For Month Ended June 30, 20--
Revenues:Delivery Fees
Expenses:Wages Expense
$2,150
$ 700
First amount in the columnis shown with a “$”.
Jessica Jane’s Campus DeliveryIncome Statement
For Month Ended June 30, 20--
Revenues:Delivery Fees
Expenses:Wages ExpenseRent Expense
Telephone Expense
$2,150
$ 700200
50Supplies Expense 60
Insurance ExpenseDepreciation Expense - Delivery Eq.
25100
Expenses are listed in either: account number order OR descending order by dollar amount.
Jessica Jane’s Campus DeliveryIncome Statement
For Month Ended June 30, 20--
Revenues:Delivery Fees
Expenses:Wages ExpenseRent Expense
Telephone Expense
$2,150
$ 700200
50Supplies Expense 60
Insurance ExpenseDepreciation Expense - Delivery Eq.
25100
Single underline indicates addition or subtraction.
Jessica Jane’s Campus DeliveryIncome Statement
For Month Ended June 30, 20--
Revenues:Delivery Fees
Expenses:Wages ExpenseRent Expense
Telephone Expense
Total Expenses
$2,150
$ 700200
50Supplies Expense 60
Insurance ExpenseDepreciation Expense - Delivery Eq.
25100
1,135
Next, expenses are totaled.
Jessica Jane’s Campus DeliveryIncome Statement
For Month Ended June 30, 20--
Revenues:Delivery Fees
Expenses:Wages ExpenseRent Expense
Telephone Expense
Total Expenses
$2,150
$ 700200
50Supplies Expense 60
Insurance ExpenseDepreciation Expense - Delivery Eq.
25100
1,135Net Income $1,015
Jessica Jane’s Campus DeliveryStatement of Owner’s Equity
For Month Ended June 30, 20--
Jessica Jane, capital, June 1, 20--
Statement starts with the Capital balance as of the beginning of the accounting period.
Jessica Jane’s Campus DeliveryStatement of Owner’s Equity
For Month Ended June 30, 20--
Jessica Jane, capital, June 1, 20-- $2,000
Instead of showing Revenue increasing & Expenses decreasing the Owner’s Equity,
this statement uses the net effect (Net Income/Loss) from the
Income Statement.
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. Eq.A. D.-Del Eq.Accts. Pay.Wages Pay.J J, Cap.
Del. FeesWages Exp
J J, Drawing
Rent ExpSup. ExpTel. ExpIns. ExpDepr. Exp
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
Be careful!! Capital from the work sheetmay not be the beginning capital balance.
It is the beginning balance PLUS anyadditional investments.
Jessica Jane’s Campus DeliveryStatement of Owner’s Equity
For Month Ended June 30, 20--
Jessica Jane, capital, June 1, 20--
Since Jessica made no additionalinvestments this period, we can
use the capital balance from the work sheet.
$2,000
Jessica Jane’s Campus DeliveryStatement of Owner’s Equity
For Month Ended June 30, 20--
Jessica Jane, capital, June 1, 20--
Next we add in the Net Income/Lossfrom the Income Statement or
from the work sheet.
$2,000
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. Eq.A. D.-Del Eq.Accts. PayWages PayJ J, Cap
Del. FeesWages Exp
J J, Drawing
Rent Exp.Sup. Exp.Tel. Exp.Ins. Exp.Depr. Exp.
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
Net Income is found in the Income Statement debit column
and the Balance Sheet credit column.
Net Income
Jessica Jane’s Campus DeliveryStatement of Owner’s Equity
For Month Ended June 30, 20--
Jessica Jane, capital, June 1, 20-- $2,000Net Income for June $1,015
Now we will go to thework sheet for the Drawing
account.
Less: Withdrawals for June
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. Eq.A. D.-Del. Eq.Accts. Pay.Wages Pay.J J, Cap.
Del. FeesWages Exp.
J J, Drawing
Rent ExpSup. ExpTel. ExpIns. ExpDepr. Exp
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
Drawing account tells us the amount of assets Jessica has withdrawn from
business for personal use. Net Income
Jessica Jane’s Campus DeliveryStatement of Owner’s Equity
For Month Ended June 30, 20--
Jessica Jane, capital, June 1, 20-- $2,000Net Income for June $1,015
Lastly, we calculate the endingCapital balance and double
rule the statement.
Less: Withdrawals for June 150Increase in Capital 865Jessica Jane, capital, June 30, 20-- $2,865
FORMS OF BALANCE SHEETS
Liabilities and Owner’s Equity are shown BELOW the Asset section.
This is the form you will see from now on in this text.
Asset section is on the LEFT, Liabilities and Owner’s Equity sections are on the RIGHT.
This is the form you saw in chapters 2-5.
REPORT FORM ACCOUNT FORM
CLASSIFIED BALANCE SHEET
Similar items are grouped togetherAssets are classified as:
• Current Assets• Property, Plant, and Equipment
Liabilities are classified as:• Current Liabilities• Long Term Liabilities
CURRENT ASSETS
Assets (including cash) that will be converted into cash or consumed within one year or the normal operating cycle, whichever is longer
Examples:– Cash, Accounts Receivable, Supplies, Prepaid
Insurance
OPERATING CYCLE
The time period required to purchase supplies and services and convert them back into cash
Start with cash
Purchase Supplies
and Services
Provide Services for Cash and “On Account”
Collect Receivables Back
to Cash
PROPERTY, PLANT, AND EQUIPMENT
Assets that are expected to serve the business for many years
Also called Plant Assets or Long-Term Assets
Examples:– Land, Buildings, and Equipment
CURRENT LIABILITIES
Liabilities that are due within one year or the normal operating cycle of the business, whichever is longer
They will be paid out of current assets.Examples:
– Accounts Payable– Wages Payable
LONG-TERM LIABILITIES
Obligations that are not expected to be paid within a year and do not require the use of current assets
Also called Long-Term DebtExample:
– Mortgage on an office building
Jessica Jane does not have any long-term liabilities.
Jessica Jane’s Campus DeliveryBalance SheetJune 30, 20--
AssetsCurrent Assets
Current Assets are listed first.
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. Eq.A. D.-Del. Eq.Accts. Pay.Wages Pay.J J, Cap.
Del. FeesWages Exp.
J J, Drawing
Rent Exp.Sup. ExpTel. Exp.Ins. Exp.Depr. Exp.
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
Current Assets
Net Income
Jessica Jane’s Campus DeliveryBalance SheetJune 30, 20--
AssetsCurrent Assets
Cash $370Accounts Receivable 650Supplies 20Prepaid Insurance 175
Total Current Assets $1,215
The long-term assets are listed next.
Property, Plant, and Equipment
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. EqA. D.-Del Eq.Accts. Pay.Wages PayJ J, Cap
Del. FeesWages Exp
J J, Drawing
Rent ExpSup. ExpTel. Exp.Ins. Exp.Depr. Exp.
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
Property, Plant, and Equipment includesthe long-term assets AND their related
Accumulated Depreciation accounts.
Net Income
Jessica Jane’s Campus DeliveryBalance SheetJune 30, 20--
AssetsCurrent Assets
Cash $370Accounts Receivable 650Supplies 20Prepaid Insurance 175
Total Current Assets $1,215Property, Plant, and Equipment
Delivery EquipmentAccumulated Depr. - Delivery Eq.
$3,600100 3,500
Book Value
Jessica Jane’s Campus DeliveryBalance SheetJune 30, 20--
AssetsCurrent Assets
Cash $370Accounts Receivable 650Supplies 20Prepaid Insurance 175
Total Current Assets $1,215Property, Plant, and Equipment
Delivery EquipmentAccumulated Depr. - Delivery Eq.
$3,600100 3,500
Total Assets $4,715
Now for the Liabilities!!!
Liabilities
Jessica Jane’s Campus DeliveryBalance SheetJune 30, 20--
AssetsCurrent Assets
Cash $370Accounts Receivable 650Supplies 20Prepaid Insurance 175
Total Current Assets $1,215Property, Plant and Equipment
Delivery EquipmentAccumulated Depr. - Delivery Eq.
$3,600100 3,500
Total Assets $4,715
Just as with assets, the current (or short-term)
are shown first.
LiabilitiesCurrent Liabilities
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. Eq.A. D.-Del. Eq.Accts. Pay.Wages Pay.J J, Cap.
Del. FeesWages Exp
J J, Drawing
Rent ExpSup. ExpTel. ExpIns. ExpDepr. Exp
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
Jessica has only two liabilities and they are both current….
Accounts Payable and Wages Payable
Net Income
Jessica Jane’s Campus DeliveryBalance SheetJune 30, 20--
AssetsCurrent Assets
Cash $370Accounts Receivable 650Supplies 20Prepaid Insurance 175
Total Current Assets $1,215Property, Plant and Equipment
Delivery EquipmentAccumulated Depr. - Delivery Eq.
$3,600100 3,500
Total Assets $4,715
Let’s shift to the lowerpart of our Balance Sheet.
LiabilitiesCurrent Liabilities
Accounts Payable $1,800
Jessica Jane’s Campus DeliveryBalance SheetJune 30, 20--
LiabilitiesCurrent Liabilities
Accounts Payable $1,800Wages Payable 50
Total Current Liabilities $1,850
Since Jessica does not have long-term liabilities, we will move on to
the Owner’s Equity section.
Owner’s Equity
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. Eq.A. D.-Del. Eq.Accts. Pay.Wages Pay.J J, Cap.
Del. FeesWages Exp.
J J, Drawing
Rent Exp.Sup. Exp.Tel. Exp.Ins. Exp.Depr. Exp.
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
Caution!!! This capital amount does not include Net Income or Drawing.
We must use the June 30th capital amount from the Statement
of Owner’s Equity. Net Income
Jessica Jane’s Campus DeliveryStatement of Owner’s Equity
For Month Ended June 30, 20--
Jessica Jane, capital, June 1, 20-- $2,000Net Income for June $1,015
This is the amount we will put on the Balance Sheet.
Less: Withdrawals for June 150Increase in Capital 865Jessica Jane, capital, June 30, 20-- $2,865
Jessica Jane’s Campus DeliveryBalance SheetJune 30, 20--
LiabilitiesCurrent Liabilities
Accounts Payable $1,800Wages Payable 50
Total Current Liabilities $1,850Owner’s Equity
Jessica Jane, Capital 2,865Total Liabilities and Owner’s Equity
$4,715
It Balances!!!Total Assets of $4,715 equals
Total Liabilities and Owner’s Equity of $4,715.
CLOSING PROCESS
Gives temporary accounts zero balances so they are prepared to accumulate new information for the next accounting period
Involves four closing journal entriesIncome Summary account is used to aid
in the closing process.
PERMANENT ACCOUNTS
All accounts reported on the Balance Sheet – Assets (including contra-assets)– Liabilities– Capital account
Contain the results of all transactions since the business started
NOT CLOSED
TEMPORARY ACCOUNTS
Accumulate information for a specific accounting period
All accounts not on the Balance Sheet– Revenues– Expenses– Drawing
These accounts are closed.
ADJ. T. B.DR.CR.
ACCOUNT TITLE
CashDR. CR.
INCOME STMT
Accts. Rec.SuppliesPpd. Ins.Del. Eq.A. D.-Del. Eq.Accts. Pay.Wages Pay.J J, Cap.
Del. FeesWages Exp.
J J, Drawing
Rent Exp.Sup. Exp.Tel. Exp.Ins. Exp.Depr. Exp.
CR. DR.BALANCE SHEET
37065020
1753600
1001800
502000
1502150
7002006050
25100
6100 6100
37065020
1753600
1001800
502000
1502150
7002006050
25100
1135 2150 4965 39501015 10152150 2150 4965 4965
Revenue
CLOSING ENTRY
Close Revenue Accounts to Income Summary
ENTRY #1
DELIVERY FEES
2,150
To reduce this account’s balance to zero, we must debit it $2,150.
2,150(1)Bal.
CLOSING ENTRY
Close Revenue Accounts to Income Summary
ENTRY #1
DELIVERY FEES INCOME SUMMARY
2,150
We are, in effect, transferring the balance to the
Income Summary account.
2,150 2,150(1) (1)
CLOSING ENTRY
Close Revenue Accounts to Income Summary
ENTRY #1
DELIVERY FEES INCOME SUMMARY
2,1502,150 2,150
Bal.
0Let’s Journalize
this entry!
(1) (1)
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
Closing Entries1
2
3
4
5
6
7
8
9
10
11
Instead of an explanation aftereach closing entry,
“Closing Entries” is written before the first entry.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
Closing Entries1
2
3
4
5
6
7
8
9
10
11
20--June 30 Delivery Fees
Income Summary
2150 00
2150 00
CLOSING ENTRY
Close Expense Accounts to Income Summary
ENTRY #2
Each expense account is closedin this one closing entry.
Wages Expense700 700 (2)Bal.
Expenses have debit balances….Therefore, to close them, they
must be credited.
Wages Expense700 700 (2)Bal.
Wages Expense is now closed; the $700 balance will be
transferred to Income Summaryalong with the balances of all the other expense accounts.
0
Income SummaryWages Expense700
Rent Expense200
Supplies Expense60
Telephone Expense
Insurance Expense Depr. Expense - Del. Eq.
50
25 100
2,150700 (2)
60 (2)
25 (2)
200 (2)
50 (2)
100 (2)
1,135(2)
All the expense account balances
are combinedand Income Summary is debited for
the total.
0
0
0
0
0
0
1,015
Bal.
Bal.
Bal.
Bal.
Bal.
Bal.
Bal.
Income SummaryWages Expense700
Rent Expense200
Supplies Expense60
Telephone Expense
Insurance Expense Depr. Expense - Del. Eq.
50
25 100
2,150700 (2)
60 (2)
25 (2)
200 (2)
50 (2)
100 (2)
1,135(2)
Let’s journalize this entry!
0
0
0
0
0
0
1,015
Bal.
Bal.
Bal.
Bal.
Bal.
Bal.
Bal.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
Closing Entries1
2
3
4
5
6
7
8
9
10
11
20--June 30 Delivery Fees
Income Summary
2150 00
2150 00
30 Income Summary 1135 00
Wages Expense 700 00
Rent Expense 200 00
Supplies Expense 60 00
Telephone Expense 50 00
Insurance Expense 25 00
Depr. Exp.-Delivery Equip. 100 00
This is a compound journal entry…..One debit which equals the six credits
CLOSING ENTRY
Close Income Summary to Capital
ENTRY #3
INCOME SUMMARY
1,135 2,150
1,015 Bal.
The balance in Income Summaryis the Net Income.
CLOSING ENTRY
Close Income Summary to Capital
ENTRY #3
INCOME SUMMARY
1,135 2,150
1,015 Bal.
By debiting Income Summary,we close the account.
1,015(3)
CLOSING ENTRY
Close Income Summary to Capital
ENTRY #3
INCOME SUMMARY J. JANE, CAPITAL
1,135 2,150
1,015 Bal.
2,000 Bal.
We transfer the Net Income into the Capital account.
1,015(3) 1,015
GENERAL JOURNAL continued
DATE DESCRIPTION PR DEBIT CREDIT
Closing Entries continued12
13
14
15
16
17
18
19
20
21
22
20--June 30 Income Summary
Capital
1015 00
1015 00
CLOSING ENTRY
Close Drawing to CapitalENTRY #4
J. JANE, DRAWING J. JANE, CAPITAL
Bal. 2,000
Bal.
1501,015150 (4)
1503,015
(4)
CLOSING ENTRY
Close Drawing to CapitalENTRY #4
J. JANE, DRAWING J. JANE, CAPITAL
Bal. 2,000
Bal.
1501,015150 (4)
1503,015
(4)
2,865 Bal.The Capital account now
reflects the ending balanceshown on the Statement of
Owner’s Equity.
GENERAL JOURNAL continued
DATE DESCRIPTION PR DEBIT CREDIT
Closing Entries continued12
13
14
15
16
17
18
19
20
21
22
20--June 30 Income Summary
Capital
1015 00
1015 00
30
J. Jane, Drawing
150 00J. Jane, Capital
150 00
The Closing Entries are then posted to the General Ledger accounts.
FOUR-COLUMN ACCOUNT
Account: Account No.
DATE ITEM PR DR. CR.BALANCE
DR. CR.
DELIVERY FEES 401
20--June 6 500 500
15 600 1100
30 1050 2150
30 Closing
J1
J1
J2
“Closing” is written in the
Item area.
FOUR-COLUMN ACCOUNT
Account: Account No.
DATE ITEM PR DR. CR.BALANCE
DR. CR.
DELIVERY FEES 401
20--June 6 500 500
15 600 1100
30 1050 2150
30 Closing 2150
J1
J1
J2
J4
A line is drawn through to signify a zero balance.
POST-CLOSING TRIAL BALANCE
Prepared after closing entries To prove the equality of the debit and
credit balances in the general ledger accounts
Only accounts which remain open (permanent accounts) are listed.
Jessica Jane’s Campus DeliveryPost-Closing Trial Balance
June 30, 20--
Account Title Acct No.
Debit Balance
Credit Balance
CashAccounts ReceivableSuppliesPrepaid InsuranceDelivery Equipment
Accounts Payable
Jessica Jane, Capital
Accumulated Depr.-Delivery Eq.
101122141145185185.1202219Wages Payable311
370650
20175
3600100
180050
28654815 4815
There are only Permanent accountson the Post-Closing
Trial Balance.
ACCOUNTING CYCLE
Analyze source documents.Journalize the transaction.Post to the ledger accounts.Prepare a trial balance.Determine and prepare the needed
adjustments on the work sheet.