Accounting ACCT 2610 Lecture Notes - Lecture 4: General Ledger, Retained Earnings, Trial Balance

26 views3 pages

oliveleopard31

27 Sep 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Adjusting entries are entries necessary at the end of the accounting period to measure all revenues and expenses of that period. Prepare a trial balance to determine if debits equal credits. Adjust revenues and expenses and related balance sheet accounts (record in journal and post to ledger) Prepare a complete set of financial statements and disseminate it to users. Close revenues, gains, expenses, and losses to retained earnings (record in journal and post to ledger) Expenses are recorded when they are incurred to generate revenue. Assets are reported at amounts that represent the probable future benefits remaining at the end of the period. Liabilities are reported at amounts that represent the probable future sacrifices of assets or services owed at the end of the period. One for the cash receipt or payment either before or after the end of the period. One for the adjustment to record the revenue or expense in the proper period (the adjusting entry)

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

NUMBERS:

Service Revenue Per Hour: $90.50

Sales Revenue Per Unit: $50.50

Cost of Inventory Per Unit: $24.75

Part 1 General Journal â Post the followingjournal entries to the general journal.

Trans.	Date	Description
1	May 1	Sell 50,000 shares of common stock for $50,000 to obtain thefunds necessary to start your business.
2	May 1	Borrow $20,000 from the local bank and sign a note promising torepay the full amount of the debt in 5 years.
3	May 1	Issue 1,500 shares of $2 par value preferred stock at$30/share.
4	May 1	Purchase equipment necessary for business operations for$15,000.
5	May 1	Pay one year of rent in advance, $12,000 ($1,000 per month.)
6	May 3	Purchase supplies on account, $800.
7	May 3	Purchase 200 units of inventory with cash.
8	May 6	Provide 40 hours of services to customers for cash (calculateusing your hourly service rate).
9	May 10	Sell 100 units of inventory on account. (Perpetual method = 2entries)
10	May 12	Sell 50 units of inventory to a customer on account with a salesdiscount of 2/10, n/30.
11	May 15	Purchase an additional 300 units of inventory onaccount.
12	May 20	The customer who purchased product on May 12th pays the amountdue (within discount period).
13	May 23	Receive cash in advance for 20 hours of services to be completedin the future.
14	May 31	Sell 200 units of inventory to a customer who signs a 6-monthpromissory note at 10% interest for the balance due.
15	May 31	Pay employee salaries, $1,000.
16	May 31	Pay cash dividends to shareholders, $600.

Part 3 â GeneralLedger â Post the information from the journal entries into thegeneral ledger.

Part 4 â TrialBalance â Prepare a trial balance from the information in thegeneral ledger.

Part 2 cont. âAdjusting journal Entries â Post the following adjusting entries tothe general journal

Adj-1	May 31	Record the portion of the Prepaid Rent used in May.
Adj-2	May 31	The company has $300 of supplies left at month end
Adj-3	May 31	Record one month of depreciation on the equipment. The equipmenthas a useful life of 10 years
Adj-4	May 31	Provide 10 hours of services that were paid in advance on May23^rd.
Adj-5	May 31	Record the receipt of a $300 utilities bill due on June5^th.
Adj-6	May 31	Record accrued interest on the $20,000 â 5 year note payable.The annual interest rate is 10%.

Part 3 cont. âGeneral Ledger - Post the adjusting entries to the GeneralLedger.

Part 5 â AdjustedTrial Balance â Post the ending balances from the General Ledger tothe Adjusted Trial Balance. Debits should equal credits if you havedone the prior steps correctly.

Part 6 â Prepare theend of month Income Statement.

Part 7 â Prepare theend of month Retained Earnings Statement .

Part 8 â Prepare theend of month Balance Sheet .

Part 1 cont. - Addthe following closing entries to the general journal: