lecture 13 task force image gallery clip art included in this electronic presentation is used with...
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Lecture 13
Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc.
Overview Chapter 4• Property, Plant and Equipment• Effect of Omitting Adjustment• Summary of Basic Adjustments• Preparation of Income Statement Column• Preparation of Balance Sheet Column• Closing Entries• After Closing Trial Balance
Adjusted Trial Balance Adjustments Trial Balance
Account Title Dr. Cr. Dr. Cr. Dr. Cr.CashAccounts receivableSuppliesEquipmentAccum. depreciationAccounts payableSalary payableUnearned revenueCapitalWithdrawalsRevenueSalary expenseSupplies expenseDepreciation expense
Totals
12,1001,350
25015,500
1,000
12,000
42,200
7,5001,2001,1001,5007,200
23,700
42,200
The Accounting Work Sheet
The Accounting Work Sheet
a The company has earned revenue of Rs. 1,700 which will be collected next month.
b Inventory of supplies at month end totaled 150.
c Depreciation for the period was calculated as Rs.200.
Adjusted Trial Balance Adjustments Trial Balance
Account Title Dr. Cr. Dr. Cr. Dr. Cr.CashAccounts receivableSuppliesEquipmentAccum. depreciationAccounts payableSalary payableUnearned revenueCapitalWithdrawalsRevenueSalary expenseSupplies expenseDepreciation expense
Totals
12,1001,350
25015,500
1,000
12,000
42,200
7,5001,2001,1001,5007,200
23,700
42,200
a) 1,700
b) 100c) 200
2,000
b) 100
c) 200
a) 1,700
2,000
12,1003,050
15015,500
1,000
12,000100200
44,100
7,7001,2001,1001,5007,200
25,400
44,100
The Accounting Work Sheet
Adjusted Income Balance Trial Balance Statement Sheet
Account Title Dr. Cr. Dr. Cr. Dr. Cr.CashAccounts receivableSuppliesEquipmentAccum. depreciationAccounts payableSalary payableUnearned revenueCapitalWithdrawalsRevenueSalary expenseSupplies expenseDepreciation expense
Totals
7,7001,2001,1001,5007,200
25,400
44,100
12,1003,050
15015,500
1,000
12,000100200
44,100
12,1003,050
15015,500
1,000
31,800
7,7001,2001,1001,5007,200
18,700
The Accounting Work Sheet
Adjusted Income Balance Trial Balance Statement Sheet
Account Title Dr. Cr. Dr. Cr. Dr. Cr.CashAccounts receivableSuppliesEquipmentAccum. depreciationAccounts payableSalary payableUnearned revenueCapitalWithdrawalsRevenueSalary expenseSupplies expenseDepreciation expense
Totals
7,7001,2001,1001,5007,200
25,400
44,100
12,1003,050
15015,500
1,000
12,000100200
44,100
12,1003,050
15015,500
1,000
31,800
7,7001,2001,1001,5007,200
18,700
12,000100200
12,300
25,400
25,400
The Accounting Work Sheet
Adjusted Income Balance Trial Balance Statement Sheet
Account Title Dr. Cr. Dr. Cr. Dr. Cr.CashAccounts receivableSuppliesEquipmentAccum. depreciationAccounts payableSalary payableUnearned revenueCapitalWithdrawalsRevenueSalary expenseSupplies expenseDepreciation expenseTotals
Net income
7,7001,2001,1001,5007,200
25,400
44,100
12,1003,050
15015,500
1,000
12,000100200
44,100
12,1003,050
15015,500
1,000
31,800
31,800
7,7001,2001,1001,5007,200
18,70013,10031,800
12,000100200
12,30013,10025,400
25,400
25,400
25,400
The Accounting Work Sheet
Close the revenue,expense, and
withdrawal accounts.
Closing the Accounts
• Closing the accounts is the end of period process that prepares the accounts for recording transactions during the next period.
Closing Entries
RevenuesincreaseOwner’s Equity.
Expenses and WithdrawalsdecreaseOwner’s Equity.
Closing the Accounts
Closing the Accounts
• Revenues and Expense accounts are closed to Income Summary.
• Income Summary is closed to Capital.• Withdrawals are closed to Capital.• In a corporation, Dividends are closed to
Retained Earnings.
Income Summary
A credit balance represents net income.
A debit balance represents net loss.
Closing the Accounts
RevenueIncomeSummary12,000
7,5009,000
Salary Exp3,300
28,500
1,5001,800
4,450 28,500
Rent Exp800 800
Supplies Exp350 350
24,050
24,050
(Close Revenue Account)
(Close ExpenseAccounts)
(Close IncomeSummary)
Withdrawals2,500 2,500
2,500
CapitalAccount
(CloseWithdrawalsAccount)
Closing the Accounts
Postclosing Trial Balance
• The accounting cycle ends with the postclosing trial balance.
• The postclosing trial balance is dated as of the end of the period for which the statements have been prepared.
Permanent Accounts• What accounts never close?– Assets– Liabilities– Owner’s equity• Balances of permanent accounts carry over to
the next period.
Classify assets and liabilitiesas current or long-term.
Classification of Assets
• Current Assets• Property Plant and Equipment
Current AssetsCashAccounts ReceivableBills ReceivableAll Prepaid ExpensesRent ReceivableSuppliesInventoryInvestment
Property, Plant and Equipment
LandBuildingOffice EquipmentPatentCopy RightsLong Term Investments MachineryVehiclesFurniture
Classify Liabilities
Short Term Liabilities
Accounts PayableBills PayableShort term loansTax PayableInterest PayableSalary payableWages payable
Long Term liabilities
Long term loansDebenturesBondsMortgage
Questions to Solve• Stadium Parking was organized on 1 July to operate a parking lot near new sports arena.
The following transactions occurred during July prior to the company beginning its regular business operations
• July 1. Imran opened a bank account in the name of the business with a deposit of Rs. 45000 cash.
• July 2. purchased land to be used as the parking lot for a total price of Rs. 140000. A cash down payment of Rs. 28000 was made and not payable was issued for the balance.
• July 5. purchased a small portable building for Rs. 4000 cash. Purchase price include installation charges.
• July 12. purchased office equipment on credit from Suzuki company for Rs. 3000.
• July 28. Paid Rs. 2000 of the amount owed to Suzuki company.
Instructions• Prepare Journal Entries for the month of July• Post to ledger accounts.• Prepare Trial Balance.
The EndThe End
Chapter 4