trial balance and adjusting and closing entries(demie)
TRANSCRIPT
Trial Balance and Adjusting and Closing Entries
Trial Balance. The trial balance (TB) is a list of all the accounts with balances in the GL. The accounts
shall be listed following the sequence in the charts of accounts. The TB is prepared to check the quality of
the debit and credit balances of all GL accounts as of a given period and to serve as basis for the
preparation of Financial Statements (FSs).
Purposes of the Trial Balancce. The TB is prepared for the following purposes:
1. Prove the mathematical equality of the debit and credit coolumns;
2. Serve as a basis for the preparation of FSs.
Types of Trial Balance. Two types of TB shall be prepared at yearend, the Pre-Closing and
Post-Closing TBs.
The Pre-Closing TB shall be prepared after all the adjusting entries have been recorded in the GJ
and the accounts posted to the GL and respective SL.
The Post-Closing TB shall be prepared at yearend after all the closing journal entries have been
recorded in the GJ and the accounts posted to the GL.
Submission of Trial Balance. TB shall be prepared in four copies and shall be submitted within
thirty (30) days after the close of each month. The yearend Pre-Closing and Post-Closing TBs shall be
submitted on or before February 14 of each year to be distributed as follows:
Original – COA Auditor who has supervision over the City/Municipality where the barangay is
located
2nd copy – Sangguniang Barangay
3rd copy – PB/BRK
4th copy - City/Municipal Accountant
Adjusting Journal Entries. Prior to the preparation of the Pre-Closing TB, adjusting journal
entries shall be prepared to recognize all revenues and expenses earned and incurred during the period but
not yet recorded.
Depreciation expenses for PPE shall be taken up monthly. Depreciation is the systematic and
gradual allocation of cost.
Adjusting Journal Entries
Pro-forma Accounting Entries
1. Accrued Items
a. Asset/Revenue Adjustments
Rent Receivables 133 xx
Rent Income 642 xx
To record receivable for the rental of barangay equipment.
b. Liability/Expense adjustments
Honoraria 720 xx
Due to Officers and Employees 403 xx
To record unpaid honoraria of the Punong Barangay.
2. Prepaid Items
a. Asset/Expense adjustments
Rent Expenses 782 xx
Prepaid Rent 177 xx
To record the expired portion of the advance rental paid to the ABC
company.
b. Liability/Revenue Adjustments
Other Deferred Credits 455 xx
Rent Income 642 xx
To adjust the rental collected in advance from the lessee.
3. Depreciation
Depreciation – Office Equipment 921 xx
Accumulated Deprn. – Office Equipment 321 xx
To record depreciation expense of office equipment for the month.
4. Transfer of Public Infrastractures and Reforestration Projects to the registries
Government Equity 501 xx
Roads, Highways and Bridges 251 xx
Other Public Infrastractures 260 xx
To transfer completed public infrastructures to the specific registries.
Closing Journal Entries. These journal entries shall be prepared to close the balances of all
nominal/intermediate accounts at the end of the accounting period prior to the preparation of the Post-
Closing TB and generation of the FSs.
Closing Journal Entries
Pro-forma Accounting Entries
1. Closing of Income Accounts
Account Title Account Dr. Cr.
Code
Internal Revenue Allotment 665 xx
Real Property Tax 588 xx
Tax on Sand, Gravel and Other Quary Products 593 xx
Permit Fees 605 xx
Fines and Penalties – Permits and Licences 609 xx
Clearance and Certification Fees 613 xx
Garbage Fees 616 xx
Other Service Income 628 xx
Rent Income 642 xx
Income from Grants and Donations 662 xx
Income and Expense Summary 512 xx
To close the income accounts to the Income and Expense Summary
account.
2. Closing of the Expense accounts
Income and Expense Summary 512 xx
Salaries and Wages - Regular 701 xx
Honoraria 720 xx
Travelling Expense 751 xx
Office Supplies Expenses 755 xx
Gasoline, Oil and Lubricants 761 xx
Telephone Expenses - Landline 772 xx
Repairs and Maintenance – Office Equipment 821 xx
Depreciation – Office Building 911 xx
Depreciation – Motor Vehicles 941 xx
To close the expense accounts to the Income and Expense Summary
account.
3. Closing of the balance of the Income and Expense Summary account
a. Income exceeds the expenses
Income and Expense Summary 512 xx
Retained Operating Surplus 513 xx
To close Income and Expense Summary account to Retained Operating
Surplus account.
b. Expenses exceeds the income
Retained Operating Surplus 513 xx
Income and Expense Summary 512 xx
To close Income and Expense Summary account to Retained Operating
Surplus account.
4. Closing of Prior Years’ Adjustment account
a. Account with credit balance
Prior Years’ Adjustment 684 xx
Retained Operating Surplus 513 xx
To close the credit balance of Prior Years’ Adjustments account to
Retained Operating Surplus account.
b. Account with debit balance
Retained Operating Surplus 513 xx
Prior Years’ Adjustment 684 xx
To close the debit balance of Prior Years’ Adjustments account to
Retained Operating Surplus account.
5. Closing of Retained Operating Surplus account
a. Account with credit balance
Retained Operating Surplus 513 xx
Government Equity 501 xx
To close the credit balance of Retained Operating Surplus account to
Government Equity.
c. Account with debit balance
Government Equity 501 xx
Retained Operating Surplus 513 xx
To close the debit balance of Retained Operating Surplus account to
Government Equity.
Working Trial Balance. It is a tool for sorting and accumulating information needed for the
preparation of the financial statements. It is a columnar sheet used to adjust and close the account
balances. The suggested format is as follows:
AccountsUnadjusted
Trial Balance
Adjustments
Pre-Closing
Trial Balance
Statement of Income
and Expenses
Closing Entries
Post-Closing
Trial Balance
Balance Sheet
TitleCod
eDr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
A B C D E F G H
a. The account title and code columns. The accounts shall be presented following the sequence in
the Chart of Accounts.
b. The Unadjusted TB columns shall show the debit and credit balance of the GL accounts.
c. Adjustment columns shall show the adjusting/correcting entries effected to the accounts.
d. Pre-Closing TB columns shall show the balances of all the accounts after the adjustments are
effected.
e. Statement of Income and Expenses columns shall show the debit and credit balances of all the
nominal accounts.
f. Closing entries columns shall show the amounts debited and credited to close the nominal
accounts.
g. Post-Closing TB columns shall show the debit and credit balances of the accounts after posting
the closing entries.
h. Balance Sheet columns shall show the debit and credit balances of all the real accounts in the
Post-Closing TB.
Preparation of Pre-Closing Trial Balance
Narrative Procedures
Area of Responsibility/ Person Responsible
Seq Activity
Barangay Bookkeeper
A
1
2
Unadjusted TB
Totals, rules and extracts the balances of the GL accounts.
Lists all GL accounts with debit and credit balances. Totals the
debits and credits of the unadjusted Tb and check the equality of
the debit and credit totals.
Note 1. In case the TB does not balance, the following shall be
done:
Check individual footings and balances for any error
Check the balances per GL
Check the footings and extraction of balance in the GL
City/Municipal Accountant
Barangay Bookkeeper
B
3
4
5
6
7
8
9
Pre-Closing TB
Prepares JEV for the yearend adjusting/correcting journal entries.
Signs the “Prepared by” portion of the JEV.
Forwards the JEV to the City/Municipal Accountant for review
and approval.
Review and approves the JEV.
Returns JEV to the Barangay Bookkeeper for recording in the
books.
Receives the approved JEV and records adjusting/correcting
entries in the GJ. Files JEV.
Posts the entries in the GJ to the GL and SL. Foots and extracts
the balances of the GL and SL.
Based on the GL balances, prepares the Pre-Closing TB. Initials
below the name of the City/Municipal Accountant.
Note 2. The Pre-Closing TB shall be prepared in four copies to
be distributed as follows:
Original – COA Auditor
2nd Copy - Sangguniang Barangay
3rd Copy – PB/BRK
4th Copy - City/Municipal Accountant
Area of Responsibility/ Person Responsible
Seq Activity
City/Municipal Accountant
10
11
Forwards the Pre-Closing TB to the City/Municipal Accountant
for review and certification.
Reviews and certifies the Pre-Closing TB.
Barangay Bookkeeper
12
13
14
Returns the Pre-Closing TB to the Barangay Bookkeeper for
release.
Receives the certified Pre-Closing TB.
Releases the Pre-Closing TB to the concerned offices thru the
releasing officer of the City/Municipality and retains the 3 rd copy
for file.
PREPARATION OF PRE-CLOSING TRIAL BALANCEProcedural Flow Chart
Barangay Bookkeeper City/Municipal Accountant
A. Unadjusted Trial Balance
totals, rules and extracts
2
1
receives and records
posts, foots, and extracts
Prepares Note 2
forwards
releases
receives
B. Pre-Closing Trial Balance
Notes:1. In case the TB does not balance, the following shall be done:
- Checks individual footings and balances for any error- Checks the balances per GL- Checks the footings and extraction of balance in the GL
2. The PreCTB shall be prepared in four copies to be distributed as follows:Original – COA Auditor2nd Copy – Sangguniang Barangay3rd Copy – PB/BRK
4th Copy – City/Municipal Accountant
Legend:GJ – General JournalGL – General LedgerSL – Subsidiary LedgerTB – Trial Balance
Adj/Cor – Adjusting/Correcting EntriesJEV – Journal Entry Voucher
PreCTB – Preclosing Trial Balance
Preparation of Post-Closing Trial Balance
Narrative Procedures
Area of Responsibility/ Person Responsible
Seq Activity
lists and totals Note 1
GLUnadjusted
TB
3
Adj/Cor JEV
prepares
Adj/Cor JEV
4forwards
Adj/Cor JEV
reviews and approves
5
6returns
GL
7
GLSL
8
9
PreCTB 1-4
10PreCTB 1-4
reviews and certifies
11
returns12
PreCTB 3
PreCTB 1-2,4 14
13
-Process
-File
-Document
-Books
-Records/Prepares/Foots/
- - Flow of Documents
Symbols:
Barangay Bookkeeper
City/Municipal Accountant
Barangay Bookkeeper
City/Municipal Accountant
1
2
3
4
5
6
7
8
9
10
11
Retrieves the Pre-Closing TB.
Prepares the JEV for the closing journal entries and signs the
“Prepared by” portion of the JEV.
Forwards the JEV to the City/Municipal Accountant
Reviews and approves the JEV.
Returns the approved JEV to the Barangay Bookkeeper for
recording in the books.
Records the approved JEV in the GJ and files.
Post entries from the GJ to the GL and SL. Foots and extracts the
balances of the GL and SL.
Based on the GL balances, prepares the Post-Closing TB. Initials
below the name of the City/Municipal Accountant.
Forwards the Post-Closing TB to the City/Municipal Accountant.
Reviews and certifies the Post-Closing TB.
Returns the certified Post-Closing TB to the Barangay
Bookkeeper.
PREPARATION OF POST-CLOSING TRIAL BALANCEProcedural Flow Chart
Barangay Bookkeeper City/Municipal Accountant
4
Legend:GJ – General Journal
GL – General LedgerSL – Subsidiary Ledger
PCTB – Post-Closing Trial Balance PreCTB – Pre-Closing Trial Balance
JEV – Journal Entry Voucher
Financial Statements
Financial Statements and Supporting Schedules. The following barangay FSs and
supporting schedules shall be prepared annually:
PreCTB
1
JEV
2
retrieves
prepares forwards
3
JEV
reviews and approves
JEVreturns
5
6records
GJ
GJSL
7
posts, foots and extracts
8
PCTB
prepares
9
forwardsPCTB
10
reviews and certifies
PCTB returns
11
-Process
-File
-Document
-Books
-Records/Prepares/Foots/Extracts
-Flow of Documents
Symbols:
1. Balance Sheet (BS) is a formal statement showing the financial condition of the barangay as of a
particular date. It shows information on the three elements of financial position, namely: assets,
liabilities and government equity. It shall be prepared based on information taken from the
yearend Post-Closing TB.
2. Statement of Income and Expenses (SIE) is a statement showing the results of operations of the
barangay for a particular period ended. This statement shall be prepared based on the information
taken from Pre-Closing TB.
3. Statement of Cash Flows (SCF) is a statement summarizing all cash transactions of the barangay.
It shall be prepared using the Direct Method. It shows the amount of cash received and disbursed
for the operating, investing and financing activities and the net cash provided by/(used in) each
activity as of a given date. The ending balance of SCF should tally with the cash balance per BS.
4. Statement of Changes in Government Equity (SCGE) is a statement showing the result or
changes in Government Equity account as of a given period.
5. Supporting schedules shall be prepared as follows:
a. Schedule of Public Infrastructures
b. Schedule of Reforestation Projects
c. Schedule of Accounts Receivables
d. Schedule of Accounts Payable
e. Other schedule that may be required
6. Noyes to Financial Statements shall be made an integral part of the FSs. The disclosures pertain
to additional information to enhance the value of financial data in the FSs. These may explain
information that cannot be expressed in money terms and description of present accounting
policies.
The FSs shall be prepared in four copies to be distributed as follows:
Original – COA Auditor who has supervision over the City/Municipality where the
barangay is located
2nd Copy – Sangguniang Barangay
3rd Copy – PB/BRK
4th Copy - City/Municipal Accountant
7. The FSs shall be supported with the statement of Management Responsibility for Financial
Statements.
Preparation of Post-Closing Trial Balance
Narrative Procedures
Area of Responsibility/ Seq Activity
Person Responsible
Barangay Bookkeeper
A
1
2
B
3
4
C
5
6
7
D
8
9
10
E
11
12
13
Statement of Income and Expenses
Retrieves the Pre-Closing TB from file.
Prepares the SIE of a specific barangay in detailed and condensed
format.
Balance Sheet
Retrieves the Post-Closing TB from file.
Prepares the BS in detailed and condensed format.
Statement of Changes in Government Equity
Retrieves the GL from file.
Prepares the SCGE based on the postings made on the GL of the
Government Equity account.
Reconciles the ending balance of the SCGE with the BS.
Statement of Cash Flows
Retrieves the CRDReg, CDReg, CHBReg, CkDReg, and the
previous year’s SCF from file.
Prepares the SCF.
Note 1. The ending balance of Cash in the previous year’s SCF
shall be forwarded as beginning balance of Cash in current
year’s SCF.
Reconciles the ending balance of the SCF with the total of the
cash accounts in the BS.
Statement of Management Responsibility for the Financial
Statements
Compiles all the FSs prepared.
Prepares the “Statement of Management Responsibility for the
Financial Statements” (SMRFS). Initials below the name of the
City/Municipal Accountant.
Submits the SMRFS with the prepared BS, SIE, SCF and SGE to
the City/Municipal Accountant for signature on the SMRFS.
Area of Responsibility/ Person Responsible
Seq Activity
Note 2. The detailed and condensed FSs and the SMRFS shall be
City/Municipal Accountant
Punong Barangay
Barangay Bookkeeper
14
15
16
17
18
prepared in four (4) copies to be distributed as follows:
Original – COA Auditor
2nd Copy – Sangguniang Barangay
3rd Copy – PB/BRK
4th Copy - City/Municipal Accountant
Reviews and signs the SMRFS.
Forwards the SMRFS to the Punong Barangay for
countersignature.
Signs the SMRFS and returns to the City/Municipal Accountant
for release.
Forwards the signed SMRFS with the FS to the Barangay
Bookkeeper for recording in the logbook and release to concerned
offices.
Receives and releases the FS, complete with all the supporting
schedules, to the concerned offices and retains a copy for file.
PREPARATION OF FINANCIAL STATEMENTS
Procedural Flow Chart
CRDRegCRDReg
CRDRegCRDReg
SMRFS1-4
Barangay Bookkeeper City/Municipal Accountant Punong Baranngay
Consolidation of Trial Balance and Financial Statements
signs
prepares
SIE – C/D1-4
2
PreCTB
retrieves 1
prepares
BS – C/D1-4
4
PCTB
retrieves 3
5retrieves
GL
6
SCGE1-4
prepares7reconciles
10
prepares submits
forwards
forwards
8retrieves
9
SCF1-4
PreparesNote 1
reconciles
SCF11
compiles 12
SMRFS1-4
13
SCF1-4
SCGE1-4
SIE - C/D1-4
BS - C/D1-4
SMRFS1-4
SCF1-4
SCGE1-4
SIE - C/D1-4
BS - C/D1-4
14
reviews and signs
15
SCF1-4
SCGE1-4
SIE - C/D1-4
BS - C/D1-4
16
SMRFS1-4
SCF1-4
SCGE1-4
SIE - C/D1-4
BS - C/D1-4
18
receives and releasesNote 2
17
Legend:BS-C/D - Balance Sheet-Condensed/DetailedSIE-C/D - Statement of Income and Expenses
Condensed/DetailedSCGE - Statement of Changes in Government
EquitySCF - Statement of Cash FlowsCRDReg - Cash Receipts and Deposits RegisterCDReg - Cash Disbursement RegisterCHBReg - Cash on Hand and in Bank RegisterCkDReg - Check Disbursement RegisterSMRFS - Statement of Management
Responsibility for the Financial Statements
PreCTB - Pre-Closing Trial BalancePCTB - Post-Closing Trial Balance
-Process
-Document
-Books
-Records/Prepares/Foots/Extracts
-Flow of Documents
Symbols: Notes:
1. The ending balance of cash in previous year’s SCF shall be forwarded as beginning balance of Cash in current year’s SCF.
2. The detailed and condensed FSs and the SMFRS shall be prepared in 4 copies to be distributed as follows:
Original – COA Auditor2nd copy – Sangguniang Barangay3rd copy – PB/BRK4th copy – City/Municipal Accountant
Consolidation of Trial Balance. The City/Municipal Accountant shall prepare the Consolidated
Pre-Closing and Post-Closing TBs of all barangays under the city/municipality at yearend.
Consolidation of Financial Statements. The City/Municipal Accountant shall consolidate the
following FSs and schedules of all barangays under the city/municipality at yearend:
a. Detailed and Condensed Balance Sheet
b. Detailed and Condensed Statement of Income and Expenses
c. Statement of Cash Flows (Direct Method)
d. Statement of Changes in Government Equity
e. Schedule of Infrastructure Projects and Reforestation Projects (if applicable)
f. Schedule of Accounts Receivable
g. Schedule of Accounts Payable
Submission of Consolidated TBs and FSs. The City/Municipal Accountant shall
submit the Consolidated TBs and FSs for Barangays together with those of the City/Municipality
to the GAFMIS Sector, Commission on Audit, Central Office, and COA Auditor/ATL in printed
and digital copies within 60 days after the 31st of December.
Consolidation of Pre-Closing and Post-Closing Trial Balances
Narrative Procedures
Area of Responsibility/ Person Responsible
Seq Activity
Barangay Bookkeeper
City/Municipal
Accountant
Barangay Bookkeeper
1
2
3
4
5
Prepares the Consolidated Pre-Closing and Post-Closing TBs of
all the barangays of the City/Municipality based on the individual
Pre-Closing and Post-Closing TB of each barangay.
Note 1. The Consolidated Pre-Closing and Post-Closing TB shall
be prepared in three copies to be distributed as follows:
Original – GAFMIS, COA, CO
2nd Copy – COA Auditor/ATL
3rd Copy – City/Municipal Accountant
Submits the Consolidated Pre-Closing and Post-Closing TBs to
the City/Municipality Accountant.
Receives, reviews and certifies the Consolidated Pre-Closing and
Post-Closing TBs.
Returns the certified Consolidated Pre-Closing and Post-Closing
TBs to the Barangay Bookkeeper.
Releases the certified Consolidated Pre-Closing and Post-Closing
TBs to concerned offices and retains a copy for file.
CONSILIDATION OF PRE-CLOSING AND POST-CLOSING TRIAL BALANCE
Procedural Flow Chart
Barangay Bookkeeper City/Municipal Accountant
Consolidation of Financial Statements
PreCTB
PostCTB
1
preparesNote 1
CPostCTB1-3
CPreCTB1-3
2
submits
CPostCTB1-3
CPreCTB1-3
3receives, reviews and certifies
CPreCTB1 CPostCTB
1
CPreCTB2 CPostCTB
2
CPreCTB3 CPostCTB
3
4
returns
5
releases
COA-GAFMIS COA Auditor City/Municipal Accountant
Legend:
PreCTB - Pre-Closing Trial BalancePCTB - Post-Closing Trial BalanceCPreCTB - Consolidated Pre-Closing Trial BalanceCPostCTB - Consolidated Post-Closing Trial Balance
-Process
-Document
-File
-Records/Prepares/Foots/Extracts
-Flow of DocumentsSymbols:
Notes
1. The Consolidated Pre-Closing Trial Balance and Post-Closing Trial Balance shall be prepared in three copies to be distributed as follows:
Original – GAFMIS, COA, CO2nd copy – COA Auditor/ATL3rd copy – City/Municipal Accountant
Narrative Procedures
Area of Responsibility/ Person Responsible
Seq Activity
Barangay Bookkeeper 1
2
3
Retrieves the Individual FS and prepares the Consolidated
Detailed FSs (CDFS) of all the barangays of the
City/Municipality.
Prepares the Consolidated Detailed FSs (CCFS) based on the
Consolidated Detailed FSs of all the barangays within the
City/Municipality.
Prepares the transmittal letter for signature of the
City/Municipality Accountant transmitting the following:
Consolidated Condensed FSs (BS, SIE)
Consolidated Detailed FSs (BS, SIE, SCF and SCGE)
Other Schedules
Note 1. The Consolidated FSs shall be prepared and distributed
as follows:
Original – GAFMIS, COA (Central Office in printed and
digital copies (diskette or compact disk))
2nd Copy – COA Auditor
3rd Copy – City/Municipal Accountant
City/Municipal Accountant
Barangay Bookkeeper
4
5
6
7
8
Forwards the transmittal letter together with the CDFS and CCFS
to the City/Municipal Accountant.
Receives the transmittal letter and consolidated FSs. Checks the
completeness and correctness of the Consolidated FSs, and signs
the transmittal letter.
Forwards the signed transmittal letter and Consolidated FSs to the
Barangay Bookkeeper for release.
Receives the signed transmittal letter and Consolidated FSs.
Releases the signed transmittal letter and Consolidated FSs to
concerned Offices and retains a copy for file.
Note 2. The Consolidated FSs shall be submitted within 60 days
after the 31st day of December.
CONSILIDATION OF FINANCIAL STATEMENTSProcedural Flow Chart
Barangay Bookkeeper City/Municipal Accountant
Duties and Responsibilities of the City/Municipal Accountant and Budget Officer
Legend:IFS -Individual Financial SystemsCDFS - Consolidated Detailed Financial StatementsCCFS - Consolidated Condensed Financial Statements
-Process
-Document
-File
-Records/Prepares/Foots/Extracts
-Flow of DocumentsSymbols:
Notes:
1. The Consolidated FS shall be prepared and to be distributed as follows:Original – GAFMIS, COA, Central Office in printed and digital copies (diskette or compact disc)2nd copy – COA Auditor3rd copy – City/Municipal Accountant
2. The Consolidated FS shall be submitted within 60 days after the 31st day of December.
IFS
1 retrieves and prepares
CDFS1-3
2
CCFS1-3
3preparesNote 1
Transmittal Letter
4
forwards
CCFS1-3
Transmittal Letter
5 receives, checks and signs
CCFS1-3
CDFS1-3
Transmittal Letter
CCFS1-2
CDFS1-2
Transmittal Letter
CCFS3
CDFS3
Transmittal Letter
6 forwards
7 receives
8 releases Note 2
The City/Municipal Accountant and Budget Officer shall perform the following duties and
responsibilities for the barangay financial transactions:
City/Municipal Accountant
1. Maintain the General Journal, General Ledger, Subsidiary Ledgers and Registries of PI/RP for
each of the barangays under city/municipality;
2. Prepare JEV to record the financial transactions of barangays based on the certified registers and
supporting documents submitted by the BRK;
3. Record the JEVs in the General Journal and post journal entries to the General Ledgers and
Subsidiary Ledgers;
4. Prepare the required monthly and yearend TBs, FSs and reports/schedules for each of the
barangays;
5. Prepare and submit the Bank Reconciliation Statement to COA Auditor/ATL concerned;
6. Consolidate the yearend TBs and FSs and reports/schedules of the barangays; and
7. Submit monthly and yearend barangay individual financial reports to the Sangguniang Barangay,
and the printed and digital copies of the consolidated yearend TBs, FSs, and reports/schedules of
the barangays together with those of the City/Municipality to GAFMIS-COA and to the
Auditor/ATL concerned.
Budget Officer
1. Consolidate the SACB of each barangay for the five funds.
2. Submit the CSACB of all barangays under the city/municipality to GAFMIS, COA thru the
Auditor/ATL and to DBM.