AC 210 Lecture Notes - Lecture 21: Trial Balance, Income Statement, Financial Statement

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silvercicada472

5 Jun 2018

School

University of Alabama

Department

Accountancy

Course

AC 210

Professor

Lisa Mc Kinney

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The Work Sheet

Many accountants use a work sheet to prepare the unadjusted trial balance, to assign

the adjusting entries to the correct accounts, to create the adjusted trial balance, and

then to prepare preliminary financial statements. A work sheet is an optional step in the

accounting cycle. It is an informal document that is not considered a financial statement,

although it gives management some information about results for a period. Work sheets

usually have five sets of debit and credit columns, which are completed from left to right

one set at a time. Have a look at the following Greener Landscape Group's work sheet

for the month of April.

Use the first set of columns to prepare a trial balance. List all open accounts on the left

side of the work sheet and enter each account's debit or credit balance in the

appropriate columns immediately to the right.

The second set of columns shows how the adjusting entries affect the accounts. While

completing these columns, list additional accounts as needed along the left side of the

work sheet. Use a letter to index the debit and credit portion of each adjusting entry so

that, latter, it is easier to journalize and post the adjustments. An explanation of each

adjustment may be written at the bottom of the work sheet. If an account has more than

one adjustment, each is shown separately, using as many lines as necessary. After

entering all the adjustments on the work sheet, make sure the column totals are equal.

The third set of columns contains the adjusted trial balance. The adjusted account

balances in these columns equal the sum of the trial balance and adjustments columns.

Consider the first three accounts on the Greener Landscape Group's work sheet. Since

no adjustments affect the cash account, that account's debit balance carries across to

the debit column of the adjusted trial balance. Accounts receivable begins with a $150

debit balance and has a $50 debit in the adjustments column. These amounts combine

to give the account a $200 debit balance in the adjusted trial balance. In the supplies

account, a $50 debit balance combines with a $25 credit in the adjustments column to

yield a $25 debit balance. Although each individual account works this way, the totals at

the bottom of the trial balance and adjustments columns cannot be combined to

determine the column totals at the bottom of the adjusted trial balanceڐadding $26,070

to $614 clearly does not yield $26,514. After entering each balance in the work sheet's

adjusted trial balance, total each column to make sure the debits and credits are equal.

Each account's adjusted trial balance transfers directly to either the fourth or fifth set of

columns. Move all revenue and expense account balances to the income statement

columns, and move all other account balances (assets, liabilities, owner's capital, and

owner's drawing) to the balance sheet columns. Then total each of the final four

columns. Unless net income is zero, the columns have unequal debit and credit totals. If

total credits are greater than total debits in the income statement columns, the company

has net income, and the difference between these columns is added to the work sheet's

income statement debit column and balance sheet credit column on a line labeled Net

Income. The difference is added to the balance sheet credit column because net

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Document Summary

Many accountants use a work sheet to prepare the unadjusted trial balance, to assign the adjusting entries to the correct accounts, to create the adjusted trial balance, and then to prepare preliminary financial statements. A work sheet is an optional step in the accounting cycle. It is an informal document that is not considered a financial statement, although it gives management some information about results for a period. Work sheets usually have five sets of debit and credit columns, which are completed from left to right one set at a time. Have a look at the following greener landscape group"s work sheet for the month of april. Use the first set of columns to prepare a trial balance. List all open accounts on the left side of the work sheet and enter each account"s debit or credit balance in the appropriate columns immediately to the right. The second set of columns shows how the adjusting entries affect the accounts.

Related Questions

QUESTION 1

Accounting is an information and measurement system thatidentifies, records, and communicates relevant, reliable, andcomparable information about an organization's businessactivities.

True

False

QUESTION 2

We use the accounting equation to identify what a company ownsand owes. The accounting equation is:

Assets = Liabilities + Equity

Assets = Liabilities â Equity

Assets = Liabilities + Revenues

Equity = Liabilities + Revenues

QUESTION 3

______ are beliefs that distinguish right from wrong. Thesebeliefs are accepted standards of gauging good and dishonestbehavior.

Accounting Standards

Ethics

Generally Accepted Accounting Principles

FASB

QUESTION 4

The _____ is a collection of all accounts within a companyâsaccounting system.

We use the accounting equation to identify what a company ownsand owes. _____ are resources a company owns or controls, _____ areclaims creditors have against a companyâs assets, and _____ is theownerâs claim on a companyâs assets.

QUESTION 6

In double entry accounting a credit to an asset account willrepresent an increase in the asset account balance; and a debitwill represent a decrease in the asset account balance.

True

False

QUESTION 7

The purchase of supplies on credit will ____ assets and ____liabilities.

During the accounting cycle, we analyze transactions toprepare statements.

True

False

QUESTION 9

The supplies account for a company has a $1,000 debit balanceat the beginning of the year. Supplies of $2,000 were purchasedduring the year and debited to the Supplies account. A December 31physical count shows $500 of supplies remaining at the end of theyear. Assume no other adjusting entries are made during the year.Using the 3-step process for creating adjusting entries, calculatethe adjustment amount for supplies (no journal entry isrequired).

During the accounting cycle, to complete step 7 youwould:

Prepare post-closing trial balance--Test clerical accuracy ofthe closing procedures.

Prepare adjusted trial balance--Summarize adjusted ledgeraccounts and amounts.

Prepare statements--Use adjusted trial balance to preparefinancial statements.

Close--Journalize and post entries to close temporaryaccounts.

QUESTION 11

The three financial statements that should be prepared duringthe accounting cycle are the:

Balance sheet, adjusted trial balance, income statement

Balance sheet, unadjusted trial balance, Statement of OwnerâsEquity

Income statement, adjusted trial balance, Statement of OwnerâsEquity

Balance sheet, Income statement, Statement of OwnerâsEquity

QUESTION 12

An optional working paper, which is not a required report oran accounting record, but is used to prepare a company's unadjustedtrial balance, adjusting entries, adjusted trial balance, andfinancial statements is a(n):

Adjusted trial balance

Worksheet

Post-closing trial balance

Unadjusted trial balance

General ledger

QUESTION 13

The two goals for completing the closing process are:

To identify accounts for closing and record the closingentries

To journalize and post transactions

To post transactions and prepare post-closing trialbalance

To reset revenues, expenses, and withdrawal account balancesto zero at the end of each period, and help summarize an accountingperiodâs revenues and expenses.

QUESTION 14

Fill in the Blank: The _____ describes a companyâs financialposition â by the types and amounts of assets, liabilities, andequity -- at a point in time.

QUESTION 15

Return on Assets is useful in evaluating management, analyzingand forecasting profits, and planning activities.

True

False

QUESTION 16

The Income Statement:

Identifies cash inflows (receipts) and cash outflows(payments) over a period-of-time.

Summarize adjusted ledger accounts and amounts

Describes a companyâs revenues and expenses along with theresulting net income or net loss -- over a period-of-time due toearnings activities

Resets revenues, expenses, and withdrawal account balances tozero at the end of each period.

QUESTION 17

An internal control system consists of the policies andprocedures used to:

Protect assets and Ensure reliable accounting

Urge adherence to company policies and Promote efficientoperations

All of the above

None of the above.

QUESTION 18

The cost-benefit principle is the second limitation of_______.

Bank reconciliations

Petty cash controls

Voucher system of controls

Internal controls

QUESTION 19

The Unadjusted Trial Balance columns of a company's work sheetshows the Store Supplies account with a balance of $750. TheAdjustments columns shows a credit of $425 for supplies used duringthe period. The amount shown as Store Supplies in the Balance Sheetcolumns of the work sheet is:

A company shows a $600 balance in Prepaid Rent in theUnadjusted Trial Balance columns of the work sheet. The Adjustmentscolumns show expired rent of $200. This adjusting entry resultsin:

$200 decrease to net income

$200 increase to net income

$200 different between the debit and credit columns of theUnadjusted Trial Balance

An error in the Balance Sheet

QUESTION 21

This semester we have discussed four major financialstatements. List the 4 financial statements and describe them. Makesure to include how they flow together.

QUESTION 22

Explain the purpose of adjusting entries at the end of aperiod.

peararmadillo281

On December 31 adjusting entries for the following transactions.1. Fees accrued but not billed, $6,300. 2. The Supplies accountbalance on December 31, $4,750; Supplies on hand, $960. 3. Wagesaccrued but not paid, $2,700. 4. Depreciation of office equipment,$1,650. 5. Rent expired during year, $10,800. need help with ageneral journal The balances for the accounts listed below appearedin the Adjusted Trial Balance columns of the work sheet. Indicatewhether each balance should be extended to (a) the Income Statementcolumns or (b) the Balance Sheet columns. 1. Salaries Payable 2.Fees Earned 3. Accounts Payable 4. Common Stock 5. Supplies Expense6. Unearned Rent 7. Retained Earnings 8. Equipment 9. AccountsReceivable 10. Accumulated Depreciation 11. Salary Expense 12.Depreciation Expense The following accounts were taken from theAdjusted Trial Balance columns of the end-of-period spreadsheet forApril 30, for Finnegan Co.: Accounts Amount AccumulatedDepreciation $32,000 Fees Earned 78,000 Depreciation Expense 7,250Rent Expense 34,000 Prepaid Insurance 6,000 Supplies 400 SuppliesExpense 1,800 Required: Prepare an income statement. Be sure tocomplete the statement heading. Refer to the lists of Accounts inthe information given, Labels, and Amount Descriptions for theexact wording of the answer choices for text entries. You will notneed to enter colons (:) on the income statement. On January 1,Hannah's Pool Service Company had a retained earnings balance of$252,000. During the year Hannah's stockholders bought anadditional $32,000 in common stock and received dividends of$52,200. For the year ended December 31 Hannah's Pool ServiceCompany reported a net income of $73,200. Required: Prepare aretained earnings statement for the year ended December 31. Referto the Instructions and the lists of Labels and Amount Descriptionsfor the exact wording of the answer choices for text entries.âLessâ or âPlusâ will automatically appear if it is required. Besure to complete the statement heading. The following data weretaken from the Adjusted Trial Balance columns of the end-of-periodspreadsheet for April 30 for Abigail Company: Accounts AmountAccumulated Depreciation $42,400 Prepaid Rent 6,800 Supplies 850Unearned Fees 7,310 Trucks 49,300 Cash 3,400 Common Stock 2,000Retained Earnings ? Required: Prepare a classified balance sheet.Be sure to complete the statement heading. Refer to the lists ofAccounts in the information given, Labels, and Amount Descriptionsfor the exact wording of the answer choices for text entries. Youwill not need to enter colons (:) on the Balance Sheet. On thebasis of the following data taken from the Adjusted Trial Balancecolumns of the work sheet for the year ended March 31 for BanesDomino's Corporation. Banes Domino's Corporation ADJUSTED TRIALBALANCE December 31, 20-- ACCOUNT TITLE DEBIT CREDIT 1 Cash30,000.00 2 Accounts Receivable 45,200.00 3 Supplies 5,000.00 4Equipment 169,900.00 5 Accumulated Depreciation 32,000.00 6Accounts Payable 12,500.00 7 Common Stock 51,600.00 8 RetainedEarnings 20,000.00 9 Dividends 47,000.00 10 Fees Earned 510,000.0011 Salary Expense 244,500.00 12 Rent Expense 48,000.00 13Depreciation Expense 25,000.00 14 Supplies Expense 9,500.00 15Miscellaneous Expense 2,000.00 16 Totals 626,100.00 626,100.00Required: Journalize the four closing entries. Refer to the Chartof Accounts for exact wording of account titles.

ultramarineswan830

I know this is a long problem,but I have been struggling with it for days. Please help as soon aspossible! Thanks!

The general ledger of Pipers Plumbing at January 1, 2015,includes the following account balances:

Cash: 4,150 (debit)

Accounts Receivable: 9,150 (debit)

Supplies: 3,150 (debit)

Equipment: 29,900 (debit)

Accumulated Deppreciation: 6,600 (credit)

Accounts Payable: 4,600 (credit)

Utilities Payable: 5,600 (credit)

Unearned Revenue: 0 (credit)

Common Stock: 19,500 (credit)

Retained Earnings: 9,150 (credit)

Totals: 45,450 (debit) 45,450 (credit)

The following is asummary of the transactions for the year:

Provide plumbing services forcash, $16,500, and on account, $61,500.

Collect on accounts receivable,$49,500.

Issue shares of common stock inexchange for $10,000 cash.

Pay salaries for the currentyear, $32,300.

Pay for utilities expenses,$12,300, of which $5,600 represents costs for 2014.

Receive cash in advance fromcustomers, $8,600.

g. Pay $2,300 cash dividends to stockholders.

2. Prepare each of the summary transactions listed above.

3. Prepare an unadjusted trial balance.

4. Record adjusting entries. Depreciation for the year on themachinery is $6,600. Plumbing supplies remaining on hand at the endof the year equal $1,000. Of the $8,600 paid in advance bycustomers, $6,300 of the work has been completed by the end of theyear.

5. Prepare an adjusted trial balance.

6. Prepare an income statement for the year ended December 31,2015.

7. Prepare a classified balance sheet for the year endedDecember 31, 2015.

8. Record closing entries.

9. Prepare a post-closing trial balance.

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AC 210 Lecture Notes - Lecture 21: Trial Balance, Income Statement, Financial Statement

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