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Accounting Cycle (III)

Preparations of the

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Statements

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Income Statement

For the month ending May 31, 2009a es revenue

Operating expenses :aso ne expense

Depreciation: tools & equipm ent 50

eprec a on: r ucNet incom e 400$

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This statement summarizes the increases

and decreases in Retained Earnings duringthe period.

Dividends

Loss

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Statement of Retained Earnings

For the Month Ended May 31, 2009-,

Add: Net income 400

Less: Dividends 200

e a ne earn ngs, ay

ow, et s prepare t e a ance eet.5

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NUS

Balance Sheet

May 31, 2009

Assets

Cash 3,925$

Tools & equipment 2,650$Less: Accumulated depreciation 50 2,600

,

Less: Accumulated depreciation 250 14,750

Total assets 21,350$

Liabi l i t ies & Stockholders' E uit

Liabil it ies:

Notes payable 13,000$

Accounts payable 150

Total l iabi l i ties 13,150$Stockholders' equi ty:

Capi tal stock 8,000$

e a ne earn ngs

Total stockholders' equi ty 8,200

Total l iabi l i ties & stockholders' equi ty 21,350$ 6

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NUS

Income Statement

NUS

Balance SheetFor the month ending May 31, 2009

Sales revenue 750$Operating expenses:

Gasoline expense 50$

May 31, 2009

Assets

Cash 3,925$

Depreciation: truck 250 350

Net income 400$Tools & equipment 2,650$

Less: Accumulated depreciation 50 2,600

Truck 15,000$Less: Accumulated depreciation 250 14,750

NUS

Statement of Retained Earnings

For the Month Ended May 31, 2009

Retained earnings, May 1 -$

Total assets 21,350$

Liabi li ties & Stockholders' Equity

Liabilities:

Notes payable 13,000$

Add: Net income 400Subtotal 400$

Less: Dividends 200

Retained earnings, May 31 200$

Total l iabi l i ties 13,150$

Stockholders' equity:

Capital stock 8,000$

Retained earnings 200

Total stockholders' equity 8,200

Total l iabil i ties & stockholders' equity 21,350$

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os ng n ry

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Close Revenueaccounts to IncomeSummary.

The closing process

Close Expense

accounts to Income

gets the temporary

accounts ready for the

next accountin.

Close Income Summaryperiod.

Earnings.

Retained Earnings. 9

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NUS

May 31, 2009Cash 3,925$Accounts receivable 75

oo s equ pmen ,Accum. depreciation: tools & eq. 50$Truck 15,000

Accum. depreciation: truck 250Notes payable 13,000

Accounts payable 150Capital stock 8,000Dividends 200

closing entries

Sales revenue 750Gasol ine ex pense 50Depreciation ex p.: tools & eq. 50

.Total 22,200$ 22,200$

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closing entry requires a debit to the Sales Revenueaccount.

GENERAL JOURNAL

Date Account Ti tles and Ex planation Debit Credi t

Income Summary 750

To close the revenue account.

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os ng n r es or evenue ccoun s

ncome ummary

750

a es evenue

750 750

-

750

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closing entry requires a credit to the expenseaccounts.

GENERAL JOURNAL

Date Account Ti tles and Ex planation Debi t Credi t

Gasol ine Ex pense 50

Depreciation Ex p.: Tools & Equipment 50

Depreciation Ex p.: Truck 250

To close the ex pense accounts. 13

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50 50-

350 750Depr. Exp.: Tools &Equipment

50 50

-

400Depr. Exp.: Truck250 250

e ncome-

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the closing entry requires a debit to IncomeSummary.

GENERAL JOURNAL

Date Account Titles and Explanation Debit Credit

Retained Earnings 400

To close Income Summary.

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Income Summary

Retained Earnings

400

400

-

400The balance in Income

Summar is now zero.

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the closing entry requires a credit to the Dividendsaccount.

GENERAL JOURNAL

Date Account Titles and Explanation Debit Credit

Dividends 200

To close the Dividends account.

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Retained Earnings200 400

Dividends200 200

200-

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NUS

After-Closing Trial Balance

May 31, 2009

er aclosing entries

are made,,

Accounts receivable 75Tools & equipment 2,650

NUSs After-Closing Trial

ccum. eprec a on: oo s eq.

Truck 15,000

Accum. de reciation: truck 250

like this.

Notes payable 13,000

Accounts payable 150

,Retained earnings 200

Total 21,650$ 21,650$

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ree r nc p es an wo ons ra n s

Principles: Cost principle

Revenue recognition principle

Matching principle

Constraints

onserva sm Materiality

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Summary

Sequence to preparing the financial

Closin entries

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