lecture 10 chapter 04 completing the accounting cycle task force image gallery clip art included in...

Lecture 10

Chapter 04

Completing the Accounting Cycle

Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc.

Review of Previous Lecture

• Seven Basic Steps of the Accounting Cycle• Development of Income Statement• Development of Balance Sheet• Assets Classification• Liabilities Classification• Worksheet• Structure of Worksheet

The Work Sheet

Trial Balance

Accounts Dr Cr Dr Cr Dr Cr

Adjustments Adjusted TB

Prepared from the general ledger. Accounts are listed in the following order: assets, liabilities, stockholders’ equity, revenues, and expenses.

Adjustments are entered here. Two possibilities:

1. Deferrals – Existing balances are changed.

2. Accruals – New information is entered.

Trial Balance



The Work Sheet

The Work Sheet

Adjustments are combined with the trial balance. Account balances are now adjusted.

Trial Balance



Cash 2,065Accounts Receivable 2,220Supplies 2,000Prepaid Insurance 2,400Land 20,000Office Equipment 1,800Accounts Payable 900Unearned Rent 360Capital Stock 25,000Dividends 4,000Fees Earned 16,340Wages Expense 4,275Rent Expense 1,600Utilities Expense 985Supplies Expense 800Miscellaneous Expense 455

42,600 42,600

Account Title Debit Credit Debit Credit Debit Credit

Adjusted Trial Balance Adjustments Trial Balance

Opportunities Inc.Work Sheet

For the Two Months Ended December 31, 2010

The Unadjusted Trial Balance

(a) The Supplies account has a debit of Rs.2,000. A count of supplies at the end of the period reveals that Rs.760 is on hand. Therefore, Rs.1,240 in supplies was used during the two-month period.

Cash 2,065Accounts Receivable 2,220Supplies 2,000Prepaid Insurance 2,400Land 20,000Office Equipment 1,800Accounts Payable 900Unearned Rent 360Capital Stock 25,000Dividends 4,000Fees Earned 16,340Wages Expense 4,275Rent Expense 1,600Utilities Expense 985Supplies Expense 800Miscellaneous Expense 455

42,600 42,600





(a) 1,240

(a) 1,240

(b)The Prepaid Insurance account has a debit balance of Rs.2,400, which represents prepayment of insurance for 24 months beginning December 1. Thus, the insurance expense for this month is Rs.100 (Rs.2,400 ÷ 24).

Cash 2,065Accounts Receivable 2,220Supplies 2,000 (a) 1,240Prepaid Insurance 2,400Land 20,000Office Equipment 1,800Accounts Payable 900Unearned Rent 360Capital Stock 25,000Dividends 4,000Fees Earned 16,340Wages Expense 4,275Rent Expense 1,600Utilities Expense 985Supplies Expense 800 (a) 1,240Miscellaneous Expense 455

42,600 42,600





Insurance Expense (b) 100

Accounts are added as needed.

(b) 100

(c) The Unearned Rent account has a credit balance of Rs.360, which represents the receipt of three-months’ rent beginning with December 1. Thus, the rent revenue for December is Rs.120.

Cash 2,065Accounts Receivable 2,220Supplies 2,000 (a) 1,240Prepaid Insurance 2,400 (b) 100Land 20,000Office Equipment 1,800Accounts Payable 900Unearned Rent 360Capital Stock 25,000Dividends 4,000Fees Earned 16,340Wages Expense 4,275Rent Expense 1,600Utilities Expense 985Supplies Expense 800 (a) 1,240Miscellaneous Expense 455

42,600 42,600





Insurance Expense (b) 100

(c) 120

Rent Revenue (c) 120

(d) Wages accrued but not paid at the end of December total Rs.250.

Cash 2,065Accounts Receivable 2,220Supplies 2,000 (a) 1,240Prepaid Insurance 2,400 (b) 100Land 20,000Office Equipment 1,800Accounts Payable 900Unearned Rent 360 (c) 120Capital Stock 25,000Dividends 4,000Fees Earned 16,340Wages Expense 4,275Rent Expense 1,600Utilities Expense 985Supplies Expense 800 (a) 1,240Miscellaneous Expense 455

42,600 42,600





Insurance Expense (b) 100 Rent Revenue (c) 120 Wages Payable (d) 250

(d) 250

(e) Fees accrued at the end of December, but not recorded, total Rs.500.

Cash 2,065Accounts Receivable 2,220Supplies 2,000 (a) 1,240Prepaid Insurance 2,400 (b) 100Land 20,000Office Equipment 1,800Accounts Payable 900Unearned Rent 360 (c) 120Capital Stock 25,000Dividends 4,000Fees Earned 16,340Wages Expense 4,275 (d) 250Rent Expense 1,600Utilities Expense 985Supplies Expense 800 (a) 1,240Miscellaneous Expense 455

42,600 42,600





Insurance Expense (b) 100 Rent Revenue (c) 120 Wages Payable (d) 250

(e) 500

(e) 500

(f) Depreciation of the office equipment is Rs. 50 for December.

Cash 2,065Accounts Receivable 2,220 (e) 500Supplies 2,000 (a) 1,240Prepaid Insurance 2,400 (b) 100Land 20,000Office Equipment 1,800Accounts Payable 900Unearned Rent 360 (c) 120Capital Stock 25,000Dividends 4,000Fees Earned 16,340 (e) 500Wages Expense 4,275 (d) 250Rent Expense 1,600Utilities Expense 985Supplies Expense 800 (a) 1,240Miscellaneous Expense 455

42,600 42,600





Insurance Expense (b) 100 Rent Revenue (c) 120 Wages Payable (d) 250Depreciation Expense (f) 50Accum. Depreciation (f) 50


42,600 42,600





Insurance Expense (b) 100 Rent Revenue (c) 120 Wages Payable (d) 250 Depreciation Expense (f) 50 Accum. Depreciation (f) 50


42,600 42,600




2,260 2,260Summed

and ruled

Summed and

ruled

Next, the unadjusted Trial Balance columns and the Adjustments columns are

combined to determine the amounts displayed in the Adjusted Trial Balance.


42,600 42,600




2,260 2,260

Cash 2,065 2,065Accounts Receivable 2,220 (e) 500 2,720Supplies 2,000 (a) 1,240 760Prepaid Insurance 2,400 (b) 100 2,300Land 20,000 20,000Office Equipment 1,800 1,800Accounts Payable 900 900Unearned Rent 360 (c) 120 240Capital Stock 25,000 25,000Dividends 4,000 4,000Fees Earned 16,340 (e) 500 16,840Wages Expense 4,275 (d) 250 4,525Rent Expense 1,600 1,600Utilities Expense 985 985Supplies Expense 800 (a) 1,240 2,040Miscellaneous Expense 455 455

42,600 42,600



Insurance Expense (b) 100 100 Rent Revenue (c) 120 120 Wages Payable (d) 250 250 Depreciation Expense (f) 50 50 Accum. Depreciation (f) 50 50

2,260 2,260 43,400 43,400

Lecture Overview

• Unadjusted Trial Balance

• Adjusting entries and their affect on adjustment column

• Adjustment of entries on Adjusted column

End of Lecture 10

lecture 10 chapter 04 completing the accounting cycle task force image gallery clip art included in...

Documents

accounts receivable2

rent expense1

office equipment1

wages expense4

fees earned16

prepaid insurance2

work sheet

rent revenuec