ACCT 203 Chapter Notes - Chapter 2: Retained Earnings, Current Liability, Cash Register

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brownduck883

25 May 2018

School

George Mason University

Department

Accounting

Course

ACCT 203

Professor

Harley

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Chapter 2 terms

5 Steps of Adjusting

1. Analyze

2. Record

3. Summarize in T-Accounts

4. Prepare Trial Balances

5. Report Financial Statements

Permanent Adjustments

Assets, Liabilities, and equity.

Temporary Adjustments

Revenue/expenses, Dividends. These RESET.

Closing Entries

Debit: Revenue accounts

Credit: Expense Accounts

Debit/credit the difference to Retained Earnings

Dividends

Contra-Asset Account

Opposite action of an asset account.

Income Tax Payable

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Document Summary

5 steps of adjusting: analyze, record, summarize in t-accounts, prepare trial balances, report financial statements. An account that is part of the current liabilities section, taxes must be paid to the government within the year. Give a separate cash register drawer ti each cashier at the beginning of a shift. Do not make one employee responsible for all parts of a process. Ex. ) inventory buyers do no also approve payments to the supplier. Do not provide access to assets or information unless needed to fulfill assigned responsibilities. Secure assists like cash and restrict access with codes. Prepare documents to show activities that have occurred. Pay using renumbered checks, and digital tracking numbers. Compare actual outcomes to the bank statements, and compare for any possible differences. The thing that motivates or encourages one to do something. Need to counter act incentives to eliminate fraud.

Related Questions

Chandler, Inc. is owned by Roscoe Chandler and providesappraisal services to individuals and companies wishing to purchaseand sell fine art. Chandler, Inc. began business on January 1,2016, and is just completing its first year of business. Roscoeasks for your help in completing the accounting cycle for thecompany by assisting with the closing process.

Before the closing entries are made, you begin with an adjustedtrial balance. The closing entries are essentially the link fromthe adjusted trial balance to the post-closing trial balance.

Chandler, Inc.

ADJUSTED TRIAL BALANCE

December 31, 2016

	ACCOUNTTITLE	DEBIT	CREDIT
1	Cash	76,000.00
2	Accounts Receivable	29,000.00
3	Prepaid Insurance	16,000.00
4	Equipment	60,000.00
5	Accumulated Depreciation-Equipment		40,000.00
6	Accounts Payable		6,000.00
7	Salaries Payable		8,000.00
8	Income Taxes Payable		4,000.00
9	Common Stock		2,000.00
10	Retained Earnings		18,000.00
11	Dividends	5,000.00
12	Income Summary
13	Fees Earned		175,600.00
14	Rent Revenue		92,000.00
15	Interest Revenue		17,200.00
16	Salaries Expense	71,000.00
17	Selling Expense	25,600.00
18	Income Taxes Expense	15,000.00
19	Depreciation Expense-Equipment	47,200.00
20	Insurance Expense	17,000.00
21	Miscellaneous Expense	1,000.00
22	Totals	362,800.00	362,800.00

The final step of the accounting cycle is the closing process.The main goal of this stage of the cycle is to ensure that thebalance of each temporary account is returned to zero and that netincome is transferred to the retained earnings account. The firststep in successfully undertaking the closing process is tounderstand the difference between a temporary account and apermanent account. Roscoe has some questions about the process.

Answer questions (1) - (3) below.

1. If a temporary account has an ending balance of $57,000, whatis its beginning balance for the following accounting period?

2. If a permanent account has an ending balance of $57,000, whatis its beginning balance for the following accounting period?

3. Roscoe will be preparing his yearly financial statementsafter completing Chandler, Inc.âs closing process, and is asomewhat confused about the characteristics of the accounts on hisChart of Accounts. He has started by creating the chart below, andasks for your help in completing it. For each account or type ofaccount listed, choose all descriptions that apply.

Temporary Account

Permanent Account

Closed to Income SummaryAccount

Yes

Revenues

Asset accounts

Retained Earnings account

Expenses

Liability accounts

Dividends account

Roscoe has attempted to prepare the closing entries forChandler, Inc. on this panel. Heâs not sure if heâs entered thejournal entries correctly, and asks you to review them. You findthat two of the entries are correct, but two are incorrect.

Determine which entries are incorrect, and enter all four of theclosing entries for Chandler, Inc. as of Dec. 31 on the Journalpanel.

PAGE 25

JOURNAL

	DATE	DESCRIPTION	DEBIT	CREDIT
1		Closing Entries
2	Dec. 31	Income Summary	284,800.00
3		Fees Earned		175,600.00
4		Rent Revenue		92,000.00
5		Interest Revenue		17,200.00
6	31	Income Summary	176,800.00
7		Salaries Expense		71,000.00
8		Selling Expense		25,600.00
9		Income Taxes Expense		15,000.00
10		Depreciation Expense-Equipment		47,200.00
11		Insurance Expense		17,000.00
12		Miscellaneous Expense		1,000.00
13	31	Retained Earnings	461,600.00
14		Income Summary		461,600.00
15	31	Retained Earnings	5,000.00
16		Dividends		5,000.00

purpleporcupine232

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.

viridianmule62

Listed below are account balances (in $millions) taken from therecords of Symphony Stores. All of these are permanent accounts,except the last two that have yet to be closed. The installmentreceivables are current. Symphony uses a perpetual inventorysystem.

	Debit	Credit
Accounts receivable-trade	680
Building and equipment	920
Cash-checking	34
Installment receivables	50
Interest receivable	30
Inventory	16
Land	150
Note receivable Long-term	450
Petty cash funds	5
Prepaid expenses (for coming year)	20
Supplies	8
Trademark	40
Accounts payable-trade		560
Accumulated depreciation		80
Additional paid-in capital, common		485
Allowance for uncollectable accounts		20
Cash dividends payable		30
Common stock, at par		15
Income tax payable		65
Notes payable (long-term)		800
Retained earnings		48
Unearned revenues		40
Cash dividends declared-common	120
Income summary		380

TOTALS	2523	2523

What would Symphony report as total assets? Hint: Don t forgetto deduct the contra assets.

What would Symphony report as total shareholders' equity? Hint:You will need to deduct dividends.

amaranthhare726

ACCT 203 Chapter Notes - Chapter 2: Retained Earnings, Current Liability, Cash Register

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