ACC 100 Accounting I Week 4 Discussion 1

  

“Financial Statement Accuracy” Please respond to the following:Identify the key steps in the closing process that provide the most opportunity to make mistakes in processing account transactions. Make at least two (2) recommendations for improving the accuracy and reliability of the information in the gaps that you have identified. Justify your response.
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Accounting I
ACC 100
Completing The Accounting Cycle
Topics




Using a worksheet
Closing the books
Summary of the accounting cycle
The Classified Balance Sheet
Using A Worksheet
Aids the
preparation
of financial
statements
Shows the
effects of
proposed
transactions
Reduces the
possibility of
errors
Worksheet
Helps in
preparing
interim
financial
statements
Links
accounts and
adjustments to
their impacts
of financial
statements
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial
Balance
Account
Debit
Adjustments
Credit
Debit
Credit
1
2
Prepare
a Trial
Balance
Enter in
adjusting
journal
entries
Adjusted Trial
Balance
Debit
Credit
3
Prepare
an
Adjusted
Trial
Balance
Income
Statement
Debit
Credit
Balance Sheet
Debit
4
Enter
accounts
for the
Income
Statement
Credit
5
Enter
accounts
for the
Balance
Sheet
Steps in Completing the Worksheet
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial
Balance
Account
Debit
Adjustments
Credit
Debit
Credit
Adjusted Trial
Balance
Debit
Credit
Income
Statement
Debit
Credit
Balance Sheet
Debit
1
Prepare
a Trial
Balance
Steps in Completing the Worksheet
Credit
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial Balance
Account
Deb
it
Cash
3,000
Acc Receivable
1,500
Supplies
2,500
Prepaid Rent
8,000
Equipment
10,00
0
Credit
Adjustments
Debit
Credit
Debit
Owners cap
Debit
2,000
2,000
500
500
7,000
1,000
1,000
10,000
10,000
Credit
2,000
2,000
1,000
1,000
1,000
10,000
10,000
10,000
1,000
15,000
500
1,000
15,500
15,500
Supplies Exp
2,000
2,000
2,000
Rent Exp
7,000
7,000
7,000
Dep Exp-Equi
2,000
2,000
2,000
26,00
0
Credit
2,000
1,000
Revenue
Debit
Balance Sheet
3,000
2,000
Accts payable
Credit
Income Statement
3,000
500
Acc dep- Equip.
Own withdraw
Adjusted Trial Balance
26,000
11,500
11,500
28,500
28,500
Net Inc
11,000
15,500
4,500
15,500
4,500
15,500
17,500
17,500
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial
Balance
Account
Debit
Adjustments
Credit
Debit
Credit
Adjusted Trial
Balance
Debit
Credit
Income
Statement
Debit
Credit
Balance Sheet
Debit
2
Enter in
adjusting
journal
entries
Steps in Completing the Worksheet
Credit
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial Balance
Account
Debit
Cash
3,000
Acc Receiv
1,500
Supplies
2,500
Prepaid Rent
8,000
Equipment
Credit
Adjustments
Debit
Credit
Debit
2,000
500
500
7,000
1,000
1,000
10,000
10,000
Credit
2,000
2,000
1,000
1,000
1,000
10,000
10,000
10,000
1,000
15,000
500
1,000
15,500
15,500
Supplies Exp
2,000
2,000
2,000
Rent Exp
7,000
7,000
7,000
Dep Exp-Equi
2,000
2,000
2,000
26,000
Debit
2,000
1,000
Revenue
Credit
2,000
2,000
Owners cap
Debit
Balance Sheet
3,000
10,000
Accts payable
Credit
Income Statement
3,000
500
Acc dep- Equi
Own withdraw
Adjusted Trial Balance
26,000
11,500
11,500
28,500
28,500
Net Inc
11,000
15,500
4,500
15,500
4,500
15,500
17,500
17,500
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial
Balance
Account
Debit
Adjustments
Credit
Debit
Credit
Adjusted Trial
Balance
Debit
Credit
Income
Statement
Debit
Credit
Balance Sheet
Debit
3
Prepare
an
Adjusted
Trial
Balance
Steps in Completing the Worksheet
Credit
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial Balance
Account
Debit
Cash
3,000
Acc Receiv
1,500
Supplies
2,500
Prepaid Rent
8,000
Equipment
Credit
Adjustments
Debit
Credit
Debit
2,000
500
500
7,000
1,000
1,000
10,000
10,000
Credit
2,000
2,000
1,000
1,000
1,000
10,000
10,000
10,000
1,000
15,000
500
1,000
15,500
15,500
Supplies Exp
2,000
2,000
2,000
Rent Exp
7,000
7,000
7,000
Dep Exp-Equi
2,000
2,000
2,000
26,000
Debit
2,000
1,000
Revenue
Credit
2,000
2,000
Owners cap
Debit
Balance Sheet
3,000
10,000
Accts payable
Credit
Income Statement
3,000
500
Acc dep- Equi
Own withdraw
Adjusted Trial Balance
26,000
11,500
11,500
28,500
28,500
Net Inc
11,000
15,500
4,500
15,500
4,500
15,500
17,500
17,500
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial
Balance
Account
Debit
Adjustments
Credit
Debit
Credit
Adjusted Trial
Balance
Debit
Credit
Income
Statement
Debit
Credit
Balance Sheet
Debit
4
Enter
accounts
for the
Income
Statement
Steps in Completing the Worksheet
Credit
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial Balance
Account
Debit
Cash
3,000
Acc Receiv
1,500
Supplies
2,500
Prepaid Rent
8,000
Equipment
Credit
Adjustments
Debit
Credit
Debit
2,000
500
500
7,000
1,000
1,000
10,000
10,000
Credit
2,000
2,000
1,000
1,000
1,000
10,000
10,000
10,000
1,000
15,000
500
1,000
15,500
15,500
Supplies Exp
2,000
2,000
2,000
Rent Exp
7,000
7,000
7,000
Dep Exp-Equi
2,000
2,000
2,000
26,000
Debit
2,000
1,000
Revenue
Credit
2,000
2,000
Owners cap
Debit
Balance Sheet
3,000
10,000
Accts payable
Credit
Income Statement
3,000
500
Acc dep- Equi
Own withdraw
Adjusted Trial Balance
26,000
11,500
11,500
28,500
28,500
Net Inc
11,000
15,500
4,500
15,500
4,500
15,500
17,500
17,500
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial
Balance
Account
Debit
Adjustments
Credit
Debit
Credit
Adjusted Trial
Balance
Debit
Credit
Income
Statement
Debit
Credit
Balance Sheet
Debit
Credit
5
Enter
accounts
for the
Balance
Sheet
Steps in Completing the Worksheet
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial Balance
Account
Debit
Cash
3,000
Acc Receiv
1,500
Supplies
2,500
Prepaid Rent
8,000
Equipment
Credit
Adjustments
Debit
Credit
Debit
2,000
500
500
7,000
1,000
1,000
10,000
10,000
Credit
2,000
2,000
1,000
1,000
1,000
10,000
10,000
10,000
1,000
15,000
500
1,000
15,500
15,500
Supplies Exp
2,000
2,000
2,000
Rent Exp
7,000
7,000
7,000
Dep Exp-Equi
2,000
2,000
2,000
26,000
Debit
2,000
1,000
Revenue
Credit
2,000
2,000
Owners cap
Debit
Balance Sheet
3,000
10,000
Accts payable
Credit
Income Statement
3,000
500
Acc dep- Equi
Own withdraw
Adjusted Trial Balance
26,000
11,500
11,500
28,500
28,500
Net Inc
11,000
15,500
4,500
15,500
4,500
15,500
17,500
17,500
Using A Worksheet
Abby’s Antique Shop
Accounting Worksheet
December 31, 2011
Trial Balance
Account
Debit
Cash
3,000
Acc Receivable
1,500
Supplies
2,500
Prepaid Rent
8,000
Equipment
Credit
Adjustments
Debit
Credit
Debit
2,000
500
500
7,000
1,000
1,000
10,000
10,000
Credit
2,000
2,000
1,000
1,000
1,000
10,000
10,000
10,000
1,000
15,000
500
1,000
15,500
15,500
Supplies Exp
2,000
2,000
2,000
Rent Exp
7,000
7,000
7,000
Dep Exp-Equip
2,000
2,000
2,000
26,000
Debit
2,000
1,000
Revenue
Credit
2,000
2,000
Owners cap
Debit
Balance Sheet
3,000
10,000
Accts payable
Credit
Income Statement
3,000
500
Acc dep- Equip
Own withdraw
Adjusted Trial Balance
26,000
11,500
11,500
28,500
28,500
Net Inc
11,000
15,500
4,500
15,500
4,500
15,500
17,500
17,500
PROPERTIES
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At any time
At any time
Unlimited times
Closing The Books
Temporary
Accounts
• Revenue Accounts
• Expense Accounts
• Withdrawal Accounts
Permanent
Accounts
• Asset Accounts
• Liability Accounts
• Capital Accounts
Income Statement
Abby’s Antique Shop
Income Statement for the Period Ending
December 31, 2011
Revenue
Temporary
Accounts
$15,500
Expenses:
Supplies
$2,000
Rent
7,000
Depreciation Expense
2,000
Total Expenses`
Net Income
11,000
$4,500
Closing The Books
Revenue
$15,500
Income Summary $15,500
To close out the revenue account for the period
ending 12/31/2011
Income Summary $11,000
Supplies Expense
$2,000
Rent Expense
7,000
Depreciation Expense
2,000
To close out the expense accounts for the
period ending 12/31/2011
Balance Sheet
Abby’s Antique Shop
Balance Sheet
December 31, 2011
ASSETS:
Cash
Accounts Receivable
Supplies
Prepaid Rent
$3,000
2,000
Permanent
Accounts
500
1,000
Equipment
10,000
Accumulated Depreciation
(2,000)
TOTAL ASSETS
;$14,500
LIABILITIES AND OWNERS EQUITY:
Accounts Payable
Abby, capital
Temporary
Account
Abby, withdrawals
TOTAL LIABILITIES AND O/E:
$1,000
$14,500
(1,000)
$14,500
Closing the Books
Abby, capital $1,000
Abby, withdrawal $1,000
To transfer the withdrawal account to capital for
the period ending 12/31/2011
Closing The Books
Income Summary
Abby, capital
$4,500
$4,500
To record the transfer of net income to capital.
Closing The Books
Abby’s Antique Shop
Post Closing Trial Balance
December 31, 2011
:Account
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Debit
Credit
$3,000
2,000
500
1,000
10,000
Accumulated
Depreciation
$2,000
Accounts Payable
1,000
Abby, capital
13,500
$16,500
$16,500
PROPERTIES
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Unlimited times
Summary Of The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Post to the
ledger
Prepare a
trial balance
Journalize
and post
adjusting
entries
Prepare a
post closing
trial balance
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
Summary Of The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Post to the
ledger
Prepare a
trial balance
Journalize
and post
adjusting
entries
Prepare a
post closing
trial balance
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
Summary Of The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Post to the
ledger
Prepare a
trial balance
Journalize
and post
adjusting
entries
Prepare a
post closing
trial balance
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
Summary Of The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Post to the
ledger
Prepare a
trial balance
Journalize
and post
adjusting
entries
Prepare a
post closing
trial balance
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
Summary Of The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Post to the
ledger
Prepare a
trial balance
#5 step
Prepare a
post closing
trial balance
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
Journalize
and post
adjusting
entries
Summary Of The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Post to the
ledger
Prepare a
post closing
trial balance
Prepare a
trial balance
Journalize
and post
adjusting
entries
#6
step
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
Summary Of The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Post to the
ledger
Prepare a
trial balance
Journalize
and post
adjusting
entries
#7
step
Prepare a
post closing
trial balance
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
Summary Of The Accounting Cycle
Analyze
business
transactions
Journalize
the
transactions
Prepare a
post closing
trial balance
Post to the
ledger
Prepare a
trial balance
Journalize
and post
adjusting
entries
#8
step
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
Summary Of The Accounting Cycle
Journalize
the
transactions
Analyze
business
transactions
Post to the
ledger
Prepare a
trial balance
#9
step
Journalize
and post
adjusting
entries
Prepare a
post closing
trial balance
Journalize
and post
closing
entries
Prepare
financial
statements
Prepare an
adjusted
trial balance
The Classified Balance Sheet
Snap shot of a firms financial
position at a “point in time.”
Reveals the assets, liabilities and
equity of a firm.
Many assets are carried at historical
cost.
The Classified Balance Sheet
Current
Liabilities
Current Assets
Long-Term
Investments
Property Plant
and Equipment
Intangible
Assets
Assets
Divided into
classifications
Long Term
Liabilities
Owners
(Stockholders)
Equity
Liabilities
and Equity
The Classified Balance Sheet
Current Assets
Long-term
investments
Property Plant
and Equipment
Intangible
Assets
• Cash
• Accounts Receivable
• Inventory
• Prepaid Expenses
• Land purchase for speculation
• Funds set aside for plant expansion
• Investments from other entities
• Land productively used by firm
• Buildings productively used by firm
• Equipment productively used by firm
• Purchased patents
• Purchased copyrights
• Purchased goodwill
The Classified Balance Sheet
Current
Liabilities
Longterm
Liabilities
• Accounts Payable
• Notes Payable
• Salaries Payable
• Bank loans
• Mortgage notes
The Classified Balance Sheet
Capital
Stock
Owners
Capital
• Used when a
business is
incorporated
• Used when a
business is a
proprietorship
PROPERTIES
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Summary




Using a worksheet
Closing the books
Summary of the accounting cycle
The Classified Balance Sheet

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