chapter 4-1 chapter 4 completing the accounting cycle accounting principles, eighth edition
TRANSCRIPT
Chapter 4-1
CHAPTER CHAPTER 44
COMPLETING THECOMPLETING THEACCOUNTING ACCOUNTING
CYCLECYCLEAccounting Principles, Eighth Edition
Chapter 4-2
Correcting entriesCorrecting entries
are unnecessary if the records are error-free.
are made whenever an error is discovered.
must be posted before closing entries.
Instead of preparing a correcting entry, it is possible to reverse the incorrect entry and then prepare the correct entry.
Correcting Entries—An Avoidable Correcting Entries—An Avoidable StepStepCorrecting Entries—An Avoidable Correcting Entries—An Avoidable StepStep
LO 5 Explain the approaches to preparing correcting entries.LO 5 Explain the approaches to preparing correcting entries.
Chapter 4-3
BE4-9BE4-9 At Batavia Company, the following errors were discovered after the transactions had been journalized and posted. Prepare the correcting entries.
1. A collection on account from a customer was recorded as a debit to Cash and a credit to Service Revenue for $780.
Correcting Entries—An Avoidable Correcting Entries—An Avoidable StepStepCorrecting Entries—An Avoidable Correcting Entries—An Avoidable StepStep
LO 5 Explain the approaches to preparing correcting entries.LO 5 Explain the approaches to preparing correcting entries.
Cash 780Incorrect entry Service revenue
780Cash 780Correct
entry Accounts receivable 780Service revenue 780Correcting Correcting
entryentry Accounts receivable 780
Chapter 4-4
BE4-9BE4-9 At Batavia Company, the following errors were discovered after the transactions had been journalized and posted. Prepare the correcting entries.
2. The purchase of supplies on account for $1,570 was recorded as a debit to Store Supplies and a credit to Accounts Payable for $1,750.
Correcting Entries—An Avoidable Correcting Entries—An Avoidable StepStepCorrecting Entries—An Avoidable Correcting Entries—An Avoidable StepStep
Look page 157 -158 Look page 157 -158
Store Supplies 1,750Incorrect entry Accounts payable
1,750Store Supplies 1,570Correct
entry Accounts payable 1,570Accounts payable 180Correcting Correcting
entryentry Store Supplies180
Chapter 4-5
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
Look illustration 4-18 page 160Look illustration 4-18 page 160
Presents a snapshot at a point in time.
To improve understanding, companies group similar assets and similar liabilities together.
Assets Liabilities and Owner’s Equity
Current assets Current liabilitiesLong-term investments Long-term liabilitiesProperty, plant, and equipment Owner’s equityIntangible assets
Illustration 4-17Standard Standard ClassificationsClassifications
Chapter 4-6
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
Assets that a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer.
Operating cycle is the average time it takes from the purchase of inventory to the collection of cash from customers.
Current AssetsCurrent Assets
Chapter 4-7
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
Companies usually list current asset accounts in the order they expect to convert them into cash.
Illustration 4-19Current AssetsCurrent Assets
Chapter 4-8
Cash, and other resources that are reasonably expected to be realized in cash or sold or consumed in the business within one year or the operating cycle, are called:
a. Current assets.
b. Intangible assets.
c. Long-term investments.
d. Property, plant, and equipment.
Review QuestionReview Question
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Chapter 4-9
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Investments in stocks and bonds of other companies.
Investments in long-term assets such as land or buildings that a company is not currently using in its operating activities.
Long-Term InvestmentsLong-Term Investments
Illustration 4-20
Chapter 4-10
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Long useful lives.
Currently used in operations.
Depreciation - allocating the cost of assets to a number of years.
Accumulated depreciation - total amount of depreciation expensed thus far in the asset’s life.
Property, Plant, and Property, Plant, and EquipmentEquipment
Chapter 4-11
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Illustration 4-21
Property, Plant, and Property, Plant, and EquipmentEquipment
Chapter 4-12
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Assets that do not have physical substance.
Intangible AssetsIntangible Assets
Illustration 4-22
Chapter 4-13
Patents and copyrights are
a. Current assets.
b. Intangible assets.
c. Long-term investments.
d. Property, plant, and equipment.
Review QuestionReview Question
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Chapter 4-14
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Obligations the company is to pay within the coming year.
Usually list notes payable first, followed by accounts payable. Other items follow in order of magnitude.
Liquidity - ability to pay obligations expected to be due within the next year.
Current LiabilitiesCurrent Liabilities
Chapter 4-15
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Illustration 4-23
Current LiabilitiesCurrent Liabilities
Chapter 4-16
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Obligations a company expects to pay after one year.
Long-Term LiabilitiesLong-Term Liabilities
Illustration 4-24
Chapter 4-17
Which of the following is not a long-term liability?
a. Bonds payable
b. Current maturities of long-term obligations
c. Long-term notes payable
d. Mortgages payable
Review QuestionReview Question
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Chapter 4-18
The Classified Balance SheetThe Classified Balance SheetThe Classified Balance SheetThe Classified Balance Sheet
LO 6 Identify the sections of a classified balance sheet.LO 6 Identify the sections of a classified balance sheet.
Proprietorship - one capital account.
Partnership - capital account for each partner.
Corporation - Capital Stock and Retained Earnings.
Owner’s EquityOwner’s Equity
Illustration 4-25