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1、CHAPTER 4,COMPLETION OF THE ACCOUNTING CYCLE完成会计循环,Study Objectives,Prepare a work sheet.Explain the process of closing the books.Describe the content and purpose of a post-closing trial balance.State the required steps in the accounting cycleExplain the approaches to preparing correcting entries.Id
2、entify the sections of a classified balance sheet,The Accounting Cycle,The accounting cycle is the process by which accountants prepare financial statements for an entity for a specific period of time.,The Accounting Cycle,For a new business,begin by setting up ledger accounts.For an established bus
3、iness,begin with account balances carried over from the previous period.,Analyzing transaction,Journalizing,Posting,Trial Balance,Adjusting,Adjusted Trial Balance,Financial Statements,Journalizing PostingClosing entry,Post-closingTrial Balance,How to make accounting cycle work Easier?,Using Workshee
4、t,WORK SHEET 工作底稿,A work sheet is a multiple-column form that may be used in the adjustment process and in preparing financial statements.,Work sheet,WORK SHEET 工作底稿,It is a working tool or a supplementary device for the accountant and not a permanent accounting record.Use of a work sheet should mak
5、e the preparation of adjusting entries and financial statements easier.,WORK SHEET,The use of a work sheet is optional.When a work sheet is used,financial statements are prepared from the worksheet.Adjustments are journalized and posted from the work sheet after financial statements are prepared.,FO
6、RM AND PROCEDURE FOR A WORK SHEET,STEPS IN PREPARING A WORKSHEET,Prepare a trial balance on the worksheetEnter the adjustments in the adjustments columnsEnter adjusted balances in the adjusted trial balance columns,STEPS IN PREPARING A WORKSHEET,Extend adjusted trial balance amounts to appropriate f
7、inancial statement columnsTotal the statement columns,compute net income(loss),and complete the worksheet.,1 PREPARING A TRIAL BALANCE,15,200 2,500 600 5,000 5,000 2,500 1,200 10,000 500 10,000,4,000 900 28,700 28,700,2 ENTER THE ADJUSTMENTS,a 1,500 b 50 d 400 d 400 e 200 g 1,200 a 1,500 b 50 c 40 c
8、 40 f 50 e 200 f 50 g 1,200,3 ENTER ADJUSTED BALANCES,15,200 1,000 550 5,000 5,000 2,500 800 10,000 500 10,600 5,200 900 1,500 50 40 40 50 200 50 1,200,4 EXTEND ADJUSTED BALANCES,10,600 5,200 900 1,500 50 40 50,15,200 1,000 550 5,000 5,000 2,500 800 10,000 500 40 200 50 1,200,4 EXTEND ADJUSTED BALAN
9、CES,GENERAL JOURNAL,Date,Account Titles and Explanation,Ref.,Debit,Credit,2002,a,Oct.31,b,31,c,31,d,31,e,31,f,31,g,31,ADJUSTING ENTRIES JOURNALIZED,Advertising Supplies Expense 1,500 Advertising Supplies 1,500 Insurance Expense 50 Prepaid Insurance 50 Depreciation Expense 40 Accumulated Depreciation
10、-Office Equipment 40 Unearned Revenue 400 Service Revenue 400 Accounts Receivable 200 Service Revenue 200 Interest Expense 50 Interest Payable 50 Salaries Expense 1,200 Salaries Payable 1,200,PIONEER ADVERTISING AGENCY,Income Statement,For the Month Ended October 31,2002,Revenues,Service Revenue,Exp
11、enses,Salaries expense,Advertising supplies expense,Rent expense,Insurance expense,Interest expense,Depreciation expense,Total expenses,Net income,INCOME STATEMENT,$10,600$5,200 1,500 900 50 50 40 7,740$2,860,The income statement is prepared from the income statement columns of the work sheet.,RETAI
12、NED EARNINGS STATEMENT,$-0-2,860 2,860 500$2,360,The Retained Earnings statement is prepared from the balance sheet columns of the work sheet.,$15,200 200$5,000 1,000 2,500 550 50$5,000 800 1,200 40 4,960 9,550 10,000 2,360$21,910$21,910,PIONEER ADVERTISING AGENCY,Balance Sheet,October 31,2002,Asset
13、s,Liabilities and Stockholders Equity,Cash,Liabilities,Accounts receivable,Notes payable,Advertising supplies,Accounts payable,Prepaid insurance,Interest payable,Office equipment,Unearned Revenue,Less:Accumulated,Salaries payable,depreciation,Total liabilities,Stockholders equity,Common Stock,Retain
14、ed earnings,Total liabilities and,Total assets,stockholders equity,BALANCE SHEET,TEMPORARY VERSUS PERMANENT ACCOUNTS 临时性账户与永久性账户,TEMPORARY(NOMINAL)PERMANENT(REAL)These accounts are closed These accounts are not closed All revenue accounts All asset accounts All expense accounts All liability account
15、s Dividends Stockholders equity,CLOSING ENTRIES 结账分录,Closing entries formally recognize in the ledger the transfer of net income(loss)and dividends to retained earnings.Journalizing and posting closing entries is a required step in the accounting cycle 会计循环.A temporary account,Income Summary利润汇总,is
16、used in closing revenue and expense accounts to minimize the amount of detail in the permanent retained earnings account.,DIAGRAM OF CLOSING PROCESS,1 Debit each revenue account for its balance,and credit Income Summary for total revenues.2 Debit Income Summary for total expenses,and credit each exp
17、ense account for its balance.,Revenue 30000 Income Summary 30000,Income summary 8000 Expense 8000,Service revenue,30,000,Rent expense,Salary expense,3000,5000,Income summary,3000,5000,30000,30000,3000,5000,22,000,3,3 Debit(credit)Income Summary and credit(debit)Retained Earnings for the amount of ne
18、t income(loss).,DIAGRAM OF CLOSING PROCESS,Income summary 22000 Retained earning 22000,22,000,22,000,Income summary,4 Debit Retained Earnings for the balance in the Dividendsaccount and credit Dividends for the same amount.,DIAGRAM OF CLOSING PROCESS,Retained earnings 5000 Dividend 5000,Income summa
19、ry,22000,Dividend,5000,22000,5000,Retained earnings,22000,5000,17,000,GENERAL JOURNAL,Date,Account Titles and Explanation,Ref.,Debit,Credit,2002,(1),Oct.31,Service Revenue,400,Income Summary,350,(To close revenue account),INCOME SUMMARY,NO.350,Date,Explanation,Debit,Credit,Balance,2002,Oct.31,10,600
20、,10,600,31,31,Service Revenue,NO.400,Date,Explanation,Debit,Credit,Balance,2002,Oct.31,10,600,31,0,10,600,CLOSING ENTRIES JOURNALIZED,10,600 10,600,INCOME SUMMARY,NO.350,Date,Explanation,Debit,Credit,Balance,2002,Oct.31,10,600,10,600,31,7,740,2,860,GENERAL JOURNAL,Date,Ref.,Debit,Credit,(2),Oct.31,3
21、50,726,Advertising Supplies Expense,611,729,Insurance Expense,722,905,Depreciation Expense,711,7,740 5,200 1,500 900 50 50 40,CLOSING ENTRIES JOURNALIZED,2,860 2,860,CLOSING ENTRIES JOURNALIZED,2,860,2,860,RETAINED EARNINGS,NO.320,Date,Explanation,Debit,Credit,Balance,2002,Oct.31,2,860,31,500,2,360,
22、CLOSING ENTRIES JOURNALIZED,500,CAUTIONS RELATING TO CLOSING ENTRIES,Avoid unintentionally doubling the revenue and expense balances rather than zeroing them.Do not close dividends through the Income Summary account.Dividends are not expenses,and they are not a factor in determining net income.,POST
23、ING CLOSING ENTRIES,All temporary accounts have zero balances after posting the closing entries.The balance in Retained Earnings represents the accumulated undistributed earnings of the corporation at the end of the accounting period,POSTING CLOSING ENTRIES,The Income Summary account is used only in
24、 closing.No entries are journalized and posted to this account during the year.As part of the closing process,the temporary accounts(revenues,expenses and dividends)are totaled,balanced,and double ruled.The permanent accounts(assets,liabilities,stockholders equity)are not closed.,Salaries Expense,72
25、6,4,000,(2),5,200,1,200,5,200,5,200,Depreciation Expense,711,40,(2),40,Dividends,332,500,(4),500,Interest Expense,905,50,(2),50,Insurance Expense,722,50,(2),50,Rent Expense,729,900,(2),900,Advertising Supplies Expense,611,1,500,(2),1,500,POSTING OF CLOSING ENTRIES,Service Revenue,400,(1),10,600,10,0
26、00,400,200,10,600,10,600,R,etained Earnings,320,(4),500,0,(3),2,860,2,360,Income Summary,350,(2),7,740,(1),10,600,(3),2,860,10,600,10,600,4,3,2,2,1,POST-CLOSING TRIAL BALANCE,After all closing entries have been journalized and posted,a post-closing trial balance is prepared.The purpose of this trial
27、 balance is to prove the equality of the permanent account balances that are carried forward into the next accounting period.,PIONEER ADVERTISING AGENCY,Post-Closing Trial Balance,October 31,2002,Debit,Credit,Cash,Accounts Receivable,Advertising Supplies,Prepaid Insurance,Office Equipment,Accumulate
28、d Depreciation Office Equipment,Notes Payable,Accounts Payable,Interest Payable,Unearned Revenue,Salaries Payable,Common Stock,Retained Earnings,POST-CLOSING TRIAL BALANCE,15,200 200 1,000 550 5,000 40 5,000 2,500 50 800 1,200 10,000 2,360$21,950$21,950,The post-closing trial balance is prepared fro
29、m the permanent accounts in the ledger.,The post-closing trial balance provides evidence that the journalizing and posting of closing entries has been properly completed.,STEPS IN THE ACCOUNTING CYCLE会计循环中的步骤,Analyze business transactionsJournalize the transactionsPost to ledger accountsPrepare a tr
30、ial balanceJournalize and post adjusting entriesPrepare an adjusted trial balancePrepare financial statementsJournalize and post closing entriesPrepare a post-closing trial balance,CORRECTING ENTRIES改错分录,Errors that occur in recording transactions should be corrected as soon as they are discovered b
31、y preparing correcting entries.Correcting entries are unnecessary if the records are free of errors.They involve any combination of balance sheet and income statement accounts,EXAMPLE OF CORRECTING ENTRY 1,Cash50Service Revenue50 Cash50Accounts Receivable50 Service Revenue50Accounts Receivable50,Del
32、ivery Equipment45Accounts Payable45,EXAMPLE OF CORRECTING ENTRY 2,Office Equipment 450 Delivery Equipment 45 Accounts Payable 405,Office Equipment 450Accounts Payable 450,STANDARD BALANCE SHEET CLASSIFICATIONS,Financial statements become more useful when the elements are classified into significant
33、subgroups.A classified balance sheet generally has the following standard classifications:,CURRENT ASSETS 流动资产,Current assets are cash and other resources that are reasonably expected to be realized in cash or sold or consumed in the business within one year of the balance sheet date or the companys
34、 operating cycle,whichever is longer.Current assets are listed in the order of their liquidity流动性.,CURRENT ASSETS 流动资产,The operating cycle of a company is the average time that is required to go from cash to cash in producing revenues.Examples of current assets are Cash Short-term investments 短期投资Re
35、ceivables 应收账款 prepaid expenses 待摊费用.,LONG-TERM INVESTMENTS,Long-term investments长期投资 are resources that can be realized in cash,but the conversion into cash in not expected within one year or the operating cycle,whichever is longer.Examples include:investments in stocks 股票投资 and bonds of another co
36、mpany 债券投资or investment in land held for resale.,PROPERTY,PLANT,AND EQUIPMENT,Tangible resources of a relatively permanent nature that are used in the business and not intended for sale are classified as property,plant,and equipment固定资产.Examples include:land,buildings,machinery,equipment,furniture a
37、nd fixtures.,INTANGIBLE ASSETS,Intangible assets无形资产 are non-current resources that do not have physical substanceExamples include patents,copyrights,trademarks,or trade names that give the holder exclusive right of use for a specified period of time.,CURRENT LIABILITIES,Current liabilities流动负债 are
38、obligations that are reasonably expected to be paid from existing current assets or through the creation of other current liabilities within one year or the operating cycle,whichever is longer.,CURRENT LIABILITIES,Examples include:accounts payable,wages payable,interest payable,and current maturitie
39、s of long-term debt.,LONG-TERM LIABILITIES,Obligations expected to be paid after one year are classified as long-term liabilities.Examples include:long-term notes payable 长期应付票据bonds payable,长期债券mortgages payable,应付抵押and lease liabilities.应付租赁,STOCKHOLDERS EQUITY,The content of the owners equity sec
40、tion varies with the form of business organization.In a proprietorship,there is one capital account.In a partnership,there are separate capital accounts for each partner.,STOCKHOLDERS EQUITY,For a corporation,owners(stockholders)equity is divided into two accounts:Common Stock Retained Earnings,CLAS
41、SIFIED BALANCE SHEET IN REPORT FORM资产负债表的报告格式,Agency Company Balance Sheet October 31,2002,Homework,E 4-1,E4-8P4-1A,P4-2A,Example,P4-5B,Journalizing of transactions,9,0001,400,3,0001,2001,5001,200 200 900,10,400,8,000,2,400,DR Cash CR,2,5003,000,1,400,5,500,1,400,4,100,DR Accounts receivable CR,900,
42、900,900,DR Cleaning supplies CR,1,200,1,200,1,200,DR Prepaid insurance CR,6,000,6,000,6,000,DR Equipment CR,1,500,3,000900,1,500,3,900,2,400,DR Accounts payable CR,9,000,9,000,9,000,DR Common stock CR,2,5003,000,5,500,5,500,DR service revenue CR,900,900,900,DR Dividend CR,1,200,1,200,1,200,DR salary expense CR,200,200,200,DR Gas&oil expense CR,Trial Balance,Adjustments of some transaction,Retained earnings,July 1$0 Add:net income$4200Less:dividend 900Retained earnings,July 31$3300,Retained earnings statement,
