Accounting(Accountingcycle)
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The Accounting Cycle The Accounting Cycle Identification and Identification and recording recording Journalizing Journalizing Posting Posting Trial balance Trial balance Adjusting entries Adjusting entries Adjusted trial balance Adjusted trial balance Preparing financial Preparing financial statements statements Closing Closing Post-closing trial Post-closing trial balance balance Reversing entries Reversing entries Complete Accounting Complete Accounting Cycle Cycle
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Transcript of Accounting(Accountingcycle)
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The Accounting CycleIdentification and recordingJournalizingPostingTrial balanceAdjusting entriesAdjusted trial balancePreparing financial statementsClosingPost-closing trial balanceReversing entriesComplete Accounting Cycle
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Normal Balance CreditNormal Balance DebitDebits and Credits
Chapter 3-*
Assets
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Expense
Chapter 3-*
Liabilities
Debit / Dr.
Credit / Cr.
Normal Balance
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Equity
Chapter 3-*
Debit / Dr.
Credit / Cr.
Normal Balance
Revenue
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The Accounting CycleTransactions1. Journalization6. Financial Statements7. Closing entries8. Post-closing trail balance9. Reversing entries3. Trial balance2. Posting5. Adjusted trial balance4. AdjustmentsWork Sheet
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Transactions and EventsWhat to Record?FASB states, transactions and other events and circumstances that affect a business enterprise.Types of Events:External between a business and its environment. Internal event occurring entirely within a business.
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A supplier of a companys raw material is paid an amount owed on account.ExternalNot Recorded2.A customer pays its open account.External3.A new chief executive officer is hired.Not Recorded4.The biweekly payroll is paid.5.Raw materials are entered into production.InternalExternal6.A new advertising agency is hired.Not Recorded7.The accountant determines the federal income taxes owed based on the income earned.InternalReview Transactions and EventsExternalInternal
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Revenue Recognition PrincipleDictates that revenue be recognized in the accounting period in which it is earnedRevenue is considered earned when the service has been provided or when the goods are delivered
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Matching PrincipleRequires that expenses be recorded in the same period in which the revenues they helped produce are recorded
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Cash Basis of AccountingRevenue is recorded only when cash is receivedExpense is recorded only when cash is paid
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Accrual Basis AccountingAdheres to the time period assumption and revenue recognition and matching principlesRevenue is recorded when earned, rather than when cash is receivedExpense recorded when incurred, rather than when cash is paidAccrual accounting records events when the economic event occurs
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Adjusting EntriesAdjusting entries are made to adjust or update accounts at the end of the accounting periodAdjusting entries can be categorized asPrepaymentsAccruals
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Types of Adjusting EntriesPrepaymentsPrepaid expensesUnearned revenuesAccrualsAccrued revenuesAccrued expenses
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Cash has been spent but the item acquired has not been used or consumed (prepaid expenses)Cash has been collected but the revenue has not been earned (unearned revenues)Prepayments
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AccrualsRevenue has been earned, but not collected (accrued revenues)Expenses were incurred, but not yet paid (accrued expenses)Note: Entry has not yet been recorded!
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Adjusted Trial BalanceAdjusted trial balance proves the equity of total debit balances and total credit balances after the adjusting entries have been madeFinancial statements can be easily prepared from the adjusted trial balance
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Closing the BooksClosing entriesTransfer the temporary account balances to update the retained earnings accountReduce the balances in the temporary accounts to zero to prepare for the next periods postings
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Required Steps in the Accounting CycleAnalyze business transactionsJournalize the transactionsPost to general ledger accountsPrepare a trial balanceJournalize and post adjusting entries (prepayments and accruals)
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Required Steps in the Accounting CyclePrepare an adjusted trial balancePrepare financial statementsJournalize and post closing entriesPrepare a post-closing trial balance
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General Journal a chronological record of transactions. Journal Entries are recorded in the journal. 1. JournalizingGeneral Journal
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Trial Balance
Acct. No.AccountDebitCredit
100Cash140,000
105Accounts receivable35,000
110Inventory30,000
130Building150,000
200Accounts payable60,000
220Note payable150,000
300Common stock100,000
330Retained earnings
400Sales75,000
500Cost of goods sold30,000
385,000385,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Sheet1
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
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Posting the process of transferring amounts from the journal to the ledger accounts. General LedgerGeneral JournalJan. 3Sale of stockGJ1100,000100,000100GJ12. Posting
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Trial Balance
Acct. No.AccountDebitCredit
100Cash140,000
105Accounts receivable35,000
110Inventory30,000
130Building150,000
200Accounts payable60,000
220Note payable150,000
300Common stock100,000
330Retained earnings
400Sales75,000
500Cost of goods sold30,000
385,000385,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Sheet1
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Sheet1 (2)
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Trial Balance
Acct. No.AccountDebitCredit
100Cash140,000
105Accounts receivable35,000
110Inventory30,000
130Building150,000
200Accounts payable60,000
220Note payable150,000
300Common stock100,000
330Retained earnings
400Sales75,000
500Cost of goods sold30,000
385,000385,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Sheet1
DateAccount TitleRef.DebitCredit
Jan.3Cash100,000
Common stock100,000
10Building130150,000
Note payable220150,000
Sheet1 (2)
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
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Trial Balance a list of each account and its balance; used to prove equality of debit and credit balances.3. Trial Balance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Acct. No.AccountDebitCredit
100Cash$140,000
105Accounts receivable35,000
110Inventory30,000
130Building150,000
200Accounts payable$60,000
220Note payable150,000
300Common stock100,000
330Retained earnings
400Sales75,000
500Cost of goods sold30,000
$385,000$385,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
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4. Adjusting EntriesRevenues - recorded in the period in which they are earned.Expenses - recognized in the period in which they are incurred.Adjusting entries - needed to ensure that the revenue recognition and matching principles are followed.
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Classes of Adjusting Entries1.Prepaid Expenses. Expenses paid in cash and recorded as assets before they are used or consumed.Prepayments3. Accrued Revenues. Revenues earned but not yet received in cash or recorded. 4. Accrued Expenses. Expenses incurred but not yet paid in cash or recorded.2. Unearned Revenues. Revenues received in cash and recorded as liabilities before they are earned.Accruals
-
Payment of cash that is recorded as an asset because service or benefit will be received in the future.Adjusting Entries Prepaid ExpensesinsurancesuppliesadvertisingCash PaymentExpense RecordedBEFORErentmaintenance on equipmentfixed assetsPrepayments often occur in regard to:
-
Example: On Jan. 1st, Phoenix Corp. paid $12,000 for 12 months of insurance coverage. Show the journal entry to record the payment on Jan. 1st. Adjusting Entries Prepaid ExpensesCash12,000Prepaid insurance12,000Jan. 1DebitCreditPrepaid Insurance12,00012,000DebitCreditCash
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Example: On Jan. 1st, Phoenix Corp. paid $12,000 for 12 months of insurance coverage. Show the adjusting journal entry required at Jan. 31st. Adjusting Entries Prepaid ExpensesPrepaid insurance1,000Insurance expense1,000Jan. 31DebitCreditPrepaid Insurance12,0001,000DebitCreditInsurance expense1,00011,000
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Receipt of cash that is recorded as a liability because the revenue has not been earned.Adjusting Entries Unearned Revenuesrentairline ticketsschool tuitionCash ReceiptRevenue RecordedBEFOREmagazine subscriptionscustomer depositsUnearned revenues often occur in regard to:
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Example: On Nov. 1st, Phoenix Corp. received $24,000 from Arcadia High School for 3 months rent in advance. Show the journal entry to record the receipt on Nov. 1st. Unearned rent revenue24,000Cash24,000Nov. 1DebitCreditCash24,00024,000DebitCreditUnearned Rent RevenueAdjusting Entries Unearned Revenues
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Example: On Nov. 1st, Phoenix Corp. received $24,000 from Arcadia High School for 3 months rent in advance. Show the adjusting journal entry required on Nov. 30th. Rent revenue8,000Unearned rent revenue8,000Nov. 30DebitCreditRent Revenue8,00024,000DebitCreditUnearned Rent RevenueAdjusting Entries Unearned Revenues8,00016,000
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Revenues earned but not yet received in cash or recorded.Adjusting Entries Accrued Revenuesrentinterestservices performedBEFOREAccrued revenues often occur in regard to:Cash ReceiptRevenue RecordedAdjusting entry results in:
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Example: On July 1st, Phoenix Corp. invested $300,000 in securities that return 5% interest per year. Show the journal entry to record the investment on July 1st. Cash300,000Investments300,000July 1DebitCreditInvestments300,000300,000DebitCreditCashAdjusting Entries Accrued Revenues
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Example: On July 1st, Phoenix Corp. invested $300,000 in securities that return 5% interest per year. Show the adjusting journal entry required on July 31st. Interest revenue1,250Interest receivable1,250July 31DebitCreditInterest Receivable1,2501,250DebitCreditInterest RevenueAdjusting Entries Accrued Revenues
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Expenses incurred but not yet paid in cash or recorded.Adjusting Entries Accrued ExpensesrentinteresttaxesBEFOREAccrued expenses often occur in regard to:Cash Payment, if any*Expense Recordedsalariesbad debts*Adjusting entry results in:
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Notes payable200,000Cash200,000Feb. 2DebitCreditCash200,000200,000DebitCreditNotes PayableAdjusting Entries Accrued ExpensesExample: On Feb. 2nd, Phoenix Corp. borrowed $200,000 at a rate of 9% per year. Interest is due on first of each month. Show the journal entry to record the borrowing on Feb. 2nd.
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Example: On Feb. 2nd, Phoenix Corp. borrowed $200,000 at a rate of 9% per year. Interest is due on first of each month. Show the adjusting journal entry required on Feb. 28th.Interest payable1,500Interest expense1,500Feb. 28DebitCreditInterest Expense1,5001,500DebitCreditInterest PayableAdjusting Entries Accrued Expenses
-
Shows the balance of all accounts, after adjusting entries, at the end of the accounting period. 5. Adjusted Trial Balance
-
6. Preparing Financial StatementsFinancial Statements are prepared directly from the Adjusted Trial Balance. Balance SheetIncome StatementStatement of Cash FlowsStatement of Retained Earnings
-
6. Preparing Financial StatementsBalance SheetAssume the following Adjusted Trial Balance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Adjusted Trial BalanceDebitCredit
Cash$140,000
Accounts receivable35,000
Building190,000
Note payable$150,000
Common stock100,000
Retained earnings38,000
Dividends declared10,000
Sales185,000
Interest income17,000
Cost of goods sold47,000
Salary expense25,000
Depreciation expense43,000
$490,000$490,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Balance Sheet
Assets
Cash$140,000
Accounts receivable35,000
Building190,000
Total assets$365,000
Liabilities
Note payable150,000
Stockholders' equity
Common stock100,000
Retained earnings115,000
Total liab. & equity$365,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
-
6. Preparing Financial StatementsIncome StatementAssume the following Adjusted Trial Balance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Adjusted Trial BalanceDebitCredit
Cash$140,000
Accounts receivable35,000
Building190,000
Note payable$150,000
Common stock100,000
Retained earnings38,000
Dividends declared10,000
Sales185,000
Interest income17,000
Cost of goods sold47,000
Salary expense25,000
Depreciation expense43,000
$490,000$490,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Income Statement
Revenues:
Sales$185,000
Interest income17,000
Total revenue202,000
Expenses:
Cost of goods sold47,000
Salary expense25,000
Depreciation expense43,000
Total expenses115,000
Net income$87,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
-
6. Preparing Financial StatementsStatement of Retained EarningsAssume the following Adjusted Trial Balance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Adjusted Trial BalanceDebitCredit
Cash$140,000
Accounts receivable35,000
Building190,000
Note payable$150,000
Common stock100,000
Retained earnings38,000
Dividends declared10,000
Sales185,000
Interest income17,000
Cost of goods sold47,000
Salary expense25,000
Depreciation expense43,000
$490,000$490,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Statement of Retained Earnings
Beginning balance$38,000
+ Net income87,000
- Dividends(10,000)
Ending balance115,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
-
7. Closing EntriesTo reduce the balance of the income statement (revenue and expense) accounts to zero. To transfer net income or net loss to owners equity.Balance sheet (asset, liability, and equity) accounts are not closed.Dividends are closed directly to the Retained Earnings account.
-
7. Closing EntriesExample: Assume the following Adjusted Trial Balance
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Acct. No.AccountDebitCredit
100Cash$140,000
105Accounts receivable35,000
130Building190,000
220Note payable$150,000
300Common stock100,000
330Retained earnings38,000
380Dividends declared10,000
400Sales185,000
430Interest income17,000
500Cost of goods sold47,000
520Salary expense25,000
550Depreciation expense43,000
$490,000$490,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
-
Example: Prepare the Closing journal entry from the adjusted trial balance on the previous slide.7. Closing EntriesSales185,000Income summary202,000Interest income17,000Income summary115,000Cost of goods sold47,000Salary expense25,000Depreciation expense43,000Income summary87,000Retained earnings87,000Retained earnings10,000Dividends declared10,000
-
8. Post-Closing Trial BalanceExample continued:
Chart of Accounts
Chart of Accounts
Acct. No.Account
100Cash
105Accounts receivable
110Inventory
130Building
200Accounts payable
220Note payable
300Common stock
330Retained earnings
400Sales
500Cost of goods sold
General Ledger
General Journal
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
15Inventory11060,000
Accounts payable20060,000
20Accounts receivable10575,000
Sales40075,000
20Cost of goods sold50030,000
Inventory11030,000
29Cash10040,000
Accounts receivable10540,000
General Ledger
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
20GJ40,000140,000
Accounts ReceivableAcct. No. 105
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,00075,000
GJ40,00035,000
InventoryAcct. No. 110
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,00060,000
20GJ30,00030,000
BuildingAcct. No. 130
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000150,000
Accounts payableAcct. No. 200
DateExplanationRef.DebitCreditBalance
Jan.15GJ60,000(60,000)
Notes payableAcct. No. 220
DateExplanationRef.DebitCreditBalance
Jan.10GJ150,000(150,000)
Common stockAcct. No. 300
DateExplanationRef.DebitCreditBalance
Jan.3Sale for cashGJ100,000(100,000)
Retained EarningsAcct. No. 330
DateExplanationRef.DebitCreditBalance
0.0
SalesAcct. No. 400
DateExplanationRef.DebitCreditBalance
Jan.20GJ75,000(75,000)
Cost of Goods SoldAcct. No. 500
DateExplanationRef.DebitCreditBalance
Jan.20GJ30,00030,000
Trial Balance
Acct. No.AccountDebitCredit
100Cash$140,000
105Accounts receivable35,000
130Building190,000
220Note payable$150,000
300Common stock100,000
330Retained earnings115,000
380Dividends declared0.0
400Sales0.0
430Interest income0.0
500Cost of goods sold0.0
520Salary expense0.0
550Depreciation expense0.0
$365,000$365,000
Journal Entry
No.AccountDebitCredit
110,000
Class Solution
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.100,000100,000
2.150,000150,000
3.60,00060,000
4.75,000(30,000)75,00030,000
540,000(40,000)
140,00035,00030,000150,000=60,000150,000+100,0000.075,00030,0000.0
DebitCreditCashAccounts ReceivableCommon Stock
1.Cash100,000100,00075,00040,000100,000
Common stock100,00040,000
2.Building150,000140,0000.035,0000.00.0100,000
Notes payable150,000
3.Inventory60,000BuildingAccounts PayableSales
Accounts payable60,000150,00060,00075,000
4.Accounts receivable75,000
Sales75,000150,0000.00.060,0000.075,000
Cost of goods sold30,000Notes PayableInventoryCost of Goods Sold
Inventory30,000150,00060,00030,00030,000
5Cash40,000
Accounts receivable40,0000.0150,00030,0000.030,0000.0
Class
Assets=Liabilities+Equity
AccountsAccountsNotesCommonRetainedCost of
CashReceivableInventoryBuildingPayablePayableStockEarningsSalesGoods Sold
1.
2.
3.
4.
5
0.00.00.00.0=0.00.0+0.00.00.00.00.0
DebitCreditCashCommon stockAccounts receivable
1.
2.0.00.00.00.00.00.0
3.BuildingNotes payableSales
4.
0.00.00.00.00.00.0
InventoryAccounts payableCost of goods sold
5
0.00.00.00.00.00.0
6Retained earningsDebitCredit
CashA
Accounts receivableA
InventoryA
0.00.0BuildingA
Accounts payableL
Notes payableL
Common stockE
Retained earningsE
SalesR
Cost of goods soldE
0.00.0
Accounting Equation
Assets=Liabilities+Equity
T-Accounts
Cash
0.00.0
Inventory
0.00.0
Journal slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
10Building130150,000
Note payable220150,000
Posting slide
DateAccount TitleRef.DebitCredit
Jan.3Cash100100,000
Common stock300100,000
CashAcct. No. 100
DateExplanationRef.DebitCreditBalance
Jan.3Sale of common stockGJ100,000100,000
-
9. Reversing EntriesReversing entries is an optional step that a company may perform at the beginning of the next accounting period.
Service Cost - Actuaries compute service cost as the present value of the new benefits earned by employees during the year. Future salary levels considered in calculation.Interest on Liability - Interest accrues each year on the PBO just as it does on any discounted debt.Actual Return on Plan Assets - Increase in pension funds from interest, dividends, and realized and unrealized changes in the fair market value of the plan assets.Amortization of Unrecognized Prior Service Cost - The cost of providing retroactive benefits is allocated to pension expense in the future, specifically to the remaining service-years of the affected employees.Gain or Loss - Volatility in pension expense can be caused by sudden and large changes in the market value of plan assets and by changes in the projected benefit obligation. Two items comprise the gain or loss: difference between the actual return and the expected return on plan assets and, amortization of the unrecognized net gain or loss from previous periods****3PowerPoint Slides*4PowerPoint Slides*5PowerPoint Slides*5PowerPoint Slides*9PowerPoint Slides*10PowerPoint Slides*20PowerPoint Slides*20PowerPoint Slides
