"The only place where success comes before workis in dictionary"Vidal Sassoon
Principles Of Accounting (1)
Chapter 4
Completing the accounting cycle
  (Continued)
Mohamed Mahmoud
mmahmoud@eelu.edu.eg
...
Objectives :
Worksheet  preparation
Closing books
Correcting entries
The Classified Balance Sheet
Summary of the Accounting Cycle
1. Analyze business transactions
2. Journalize the transactions 
9. Prepare a post-closing...
1.Steps in Preparing a Worksheet
Illustration 4-2
Exercise 1
The trial balance for Undercover Roofing for the month ended March 31, 2009, is as follows.
Other data:
1. Supp...
Answer
a- Worksheet:
Answer
b-adjusting entries:
2. Closing books
At the end of the accounting period, the company makes the accounts ready for the next period.
2. Closing books(continued)
Note:
Owner’s Drawing is closed directly to Capital and not to Income Summary because Owner’s ...
2. Closing books (continued)
Journalize the closing entries from the financial statement columns of the worksheet.
Service...
Exercise 2
At March 31, account balances after adjustments for Al Huda Company are as follows:
                           ...
Answer
Mar. 31                 Service Revenues.................................................. 60,000
                 ...
3. The Classified Balance Sheet
Current Assets
Current Assets that a company expects to convert to cash or use up within o...
3. The Classified Balance Sheet
Long-Term Investments
Investments in stocks and bonds of other companies. 
Investments in ...
3. The Classified Balance Sheet
Property, Plant, and Equipment
3. The Classified Balance Sheet
Intangible Assets
Assets that do not have physical substance.
3. The Classified Balance Sheet
Current Liabilities
Current Liabilities: Obligations the company is to pay within the comi...
3. The Classified Balance Sheet
Long-Term Liabilities
Obligations a company expects to pay after one year.
Exercise 3
The following information is available for Amr Company for the year ended December 31, 2008:
Accounts payable  ...
Answer
  Amr COMPANY
Balance Sheet
For the Year Ended December 31, 2009
Assets
Current Assets
                 Cash       ...
4. Correcting Entries
The following errors were discovered after the transactions had been journalized and posted.  Prepar...
4. Correcting Entries (continued)
The following errors were discovered after the transactions had been journalized and pos...
Exercise 4
M. El-Beheery, CPA, was asked by Omar to review the accounting records and prepare the
financial statements for...
Answer
1. (a) Incorrect Entry:
                   Accounts Payable...........................................................
Answer
3. (a) Incorrect Entry:
               Accounts Receivable............................................................
Section 5
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Section 5

  1. 1. "The only place where success comes before workis in dictionary"Vidal Sassoon
  2. 2. Principles Of Accounting (1) Chapter 4 Completing the accounting cycle (Continued) Mohamed Mahmoud mmahmoud@eelu.edu.eg Tel: (+202) 33318449
  3. 3. Objectives : Worksheet preparation Closing books Correcting entries The Classified Balance Sheet
  4. 4. Summary of the Accounting Cycle 1. Analyze business transactions 2. Journalize the transactions 9. Prepare a post-closing trial balance 8. Journalize and post closing entries 3. Post to ledger accounts 7. Prepare financial statements 4. Prepare a trial balance 6. Prepare an adjusted trial balance 5. Journalize and post adjusting entries
  5. 5. 1.Steps in Preparing a Worksheet Illustration 4-2
  6. 6. Exercise 1 The trial balance for Undercover Roofing for the month ended March 31, 2009, is as follows. Other data: 1. Supplies on hand total $140. 2. Depreciation for March is $200. 3. Unearned revenue amounted to $130 on March 31. 4. Accrued salaries are $350. Instructions a. Prepare and complete the worksheet. B- Journalize the adjusting entries from the adjustments columns of the worksheet
  7. 7. Answer a- Worksheet:
  8. 8. Answer b-adjusting entries:
  9. 9. 2. Closing books At the end of the accounting period, the company makes the accounts ready for the next period.
  10. 10. 2. Closing books(continued) Note: Owner’s Drawing is closed directly to Capital and not to Income Summary because Owner’s Drawing is not an expense. Illustration 4-6 Owner’s Capital is a permanent account; all other accounts are temporary accounts.
  11. 11. 2. Closing books (continued) Journalize the closing entries from the financial statement columns of the worksheet. Service revenue 3,170 Income summary 3,170 Income summary 2,410 Salary expense 1,050 Supplies expense 960 Depreciation expense 200 Miscellaneous expense 200 Income summary 760 Ahmed, Capital 760 Ahmed, Capital 600 Ahmed, Drawing 600 Closing Entries need to be Posted
  12. 12. Exercise 2 At March 31, account balances after adjustments for Al Huda Company are as follows: Account Balances Accounts (After Adjustment) Cash $ 6,000 Supplies 4,000 Equipment 50,000 Accumulated Depreciation—Equipment 12,000 Accounts Payable 5,000 Huda, Capital 20,000 Huda, Drawing 12,000 Service Revenues 60,000 Popcorn Revenues 32,000 Candy Revenues 19,000 Advertising Expense 12,000 Supplies Expense 19,000 Depreciation Expense 4,000 devices Rental Expense 16,000 Rent Expense 12,000 Salaries Expense 18,000 Utilities Expense 5,000 Instructions Prepare the closing journal entries for Al Huda Company.
  13. 13. Answer Mar. 31 Service Revenues.................................................. 60,000 Popcorn Revenues................................................ 32,000 Candy Revenues................................................... 19,000 Income Summary........................................................ 111,000 (To close revenue accounts)   31 Income Summary................................................... 86,000 Advertising Expense.................................................... 12,000 Supplies Expense........................................................ 19,000 Depreciation Expense .................................................. 4,000 Devices Rental Expense ............................................. 16,000 Rent Expense.............................................................. 12,000 Salaries Expense......................................................... 18,000 Utilities Expense............................................................ 5,000 (To close expense accounts)   31 Income Summary................................................................... 25,000 Alhuda, Capital............................................................. 25,000 (To transfer net income to capital)   31 Alhuda, Capital....................................................................... 12,000 Alhuda, Drawing........................................................... 12,000 (To close drawings to capital)
  14. 14. 3. The Classified Balance Sheet Current Assets Current Assets that a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer.
  15. 15. 3. The Classified Balance Sheet Long-Term Investments Investments in stocks and bonds of other companies. Investments in long-term assets such as land or buildings that a company is not currently using in its operating activities.
  16. 16. 3. The Classified Balance Sheet Property, Plant, and Equipment
  17. 17. 3. The Classified Balance Sheet Intangible Assets Assets that do not have physical substance.
  18. 18. 3. The Classified Balance Sheet Current Liabilities Current Liabilities: Obligations the company is to pay within the coming year.
  19. 19. 3. The Classified Balance Sheet Long-Term Liabilities Obligations a company expects to pay after one year.
  20. 20. Exercise 3 The following information is available for Amr Company for the year ended December 31, 2008: Accounts payable $2,700 Accumulated depreciation, equipment 4,000 Amr, Capital 7,800 Intangible assets 2,500 Notes payable (due in 5 years) 7,500 Accounts receivable 1,500 Cash 2,600 Short-term investments 1,000 Equipment 7,500 Long-term investments 6,900 Instructions: Use the above information to prepare a classified balance sheet for the year ended December 31, 2009.
  21. 21. Answer Amr COMPANY Balance Sheet For the Year Ended December 31, 2009 Assets Current Assets Cash $2,600 Short-term investments 1,000 Accounts receivable 1,500 Total Current Assets $5,100 Investments Long-term investments 6,900 Property, Plant, and Equipment Equipment 7,500 Less Accumulated depreciation, equipment 4,000 3,500 Intangible assets2,500 Total Assets $18,000 Liabilities and Owner’s Equity Current Liabilities Accounts payable $2,700 Long-term liabilities Notes payable 7,500 Total Liabilities $10,200 Owner’s equity Amr, Capital 7,800 Total owner’s equity 7,800 Total liabilities and owner’s equity$18,000
  22. 22. 4. Correcting Entries The following errors were discovered after the transactions had been journalized and posted. Prepare the correcting entries. 1. A collection on account from a customer was recorded as a debit to Cash and a credit to Service Revenue for $780. Cash 780 Incorrect entry Service revenue 780 Cash 780 Correct entry Accounts receivable 780 Service revenue 780 Correcting entry Accounts receivable 780
  23. 23. 4. Correcting Entries (continued) The following errors were discovered after the transactions had been journalized and posted. Prepare the correcting entries. 2. The purchase of supplies on account for $1,570 was recorded as a debit to Store Supplies and a credit to Accounts Payable for $1,750. Store Supplies 1,750 Incorrect entry Accounts payable 1,750 Store Supplies 1,570 Correct entry Accounts payable 1,570 Accounts payable 180 Correcting entry Store Supplies 180
  24. 24. Exercise 4 M. El-Beheery, CPA, was asked by Omar to review the accounting records and prepare the financial statements for his upholstering shop. Elbeheery reviewed the records and found three errors. 1. Cash paid on accounts payable for $930 was recorded as a debit to Accounts Payable $390 and a credit to Cash $390. 2. The purchase of supplies on account for $500 was debited to Equipment $500 and credited to Accounts Payable $500. 3. Omar withdrew $1,200 of cash and the bookkeeper debited Accounts Receivable for $120 and credited Cash $120. Instructions: Prepare an analysis of each error showing the (a) incorrect entry. (b) correct entry. (c) correcting entry.
  25. 25. Answer 1. (a) Incorrect Entry: Accounts Payable.............................................................. 390 Cash ......................................................................... 390 (b) Correct Entry: Accounts Payable.............................................................. 930 Cash ......................................................................... 930 (c) Correcting Entry: Accounts Payable.............................................................. 540 Cash ......................................................................... 540   2. (a) Incorrect Entry: Equipment ......................................................................... 500 Accounts Payable..................................................... 500 (b) Correct Entry: Supplies............................................................................. 500 Accounts Payable..................................................... 500 (c) Correcting Entry: Supplies............................................................................. 500 Equipment ................................................................ 500  
  26. 26. Answer 3. (a) Incorrect Entry: Accounts Receivable......................................................... 120 Cash ......................................................................... 120 (b) Correct Entry: Omar, Drawing ................................................................ 1,200 Cash ......................................................................... 1,200 (c) Correcting Entry: Omar, Drawing ................................................................ 1,200 Accounts Receivable ................................................ 120

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