This document discusses the flow of accounting information from the unadjusted trial balance to the adjusted trial balance and financial statements. It describes how adjustments are made on the end-of-period spreadsheet to update account balances. Then, the adjusted account balances are used to prepare the income statement, statement of owner's equity, and balance sheet. Examples are provided to illustrate how specific accounts would flow into these financial statements. The overall accounting cycle and preparation of closing entries is also summarized.

1. Warren
Reeve
Duchac
Accounting
27e
Completing the
Accounting Cycle
4
C H A P T E R
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Learning Objectives
LO1: Describe the flow of accounting information from the
unadjusted trial balance into the adjusted trial balance and
financial statements.
LO2: Prepare financial statements from adjusted account
balances.
LO3: Prepare closing entries.
LO4: Describe the accounting cycle.
LO5: Illustrate the accounting cycle for one period.
LO6: Explain what is meant by the fiscal year and the natural
business year.
LO7: Describe and illustrate the use of working capital and the
current ratio in evaluating a company’s financial condition.
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2. website, in whole or in part.
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scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
End-of-Period Spreadsheet and
Flow of Accounting Data, Net
Solution
s
Flow of Accounting Information
(slide 1 of 5)
Account balances are listed in the Unadjusted Trial Balance
columns using the ending balances found in the general ledger.
End-of-Period Spreadsheet (Work Sheet)
Unadjusted

3. Trial Balance
Dr Cr Dr Cr Dr Cr
Adjustments
Adjusted
Trial Balance
Accounts
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scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Flow of Accounting Information
(slide 2 of 5)
Adjustments are entered here. Two possibilities:
Deferrals – Existing balances are changed.

4. Accruals – New information is entered.
End-of-Period Spreadsheet (Work Sheet)
Adjustments
Adjusted
Trial Balance
Unadjusted
Trial Balance
Accounts
Dr Cr Dr Cr Dr Cr
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scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.

5. Flow of Accounting Information
(slide 3 of 5)
Adjustments are added to or subtracted from the amounts in the
Unadjusted Trial Balance columns. Account balances are now
adjusted.
Adjustments
Adjusted
Trial Balance
End-of-Period Spreadsheet (Work Sheet)
Unadjusted
Trial Balance
Dr Cr Dr Cr Dr Cr

6. Accounts
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scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Flow of Accounting Information
(slide 4 of 5)
Amounts for revenues and expenses in the Adjusted Trial
Balance columns are extended to the Income Statement
columns.
Adjusted
Trial Balance
Income Statement
Balance Sheet

7. End-of-Period Spreadsheet (Work Sheet)
Accounts
Dr Cr Dr Cr Dr Cr
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scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Flow of Accounting Information
(slide 5 of 5)
The amounts for assets, liabilities, owner’s capital, and drawing
in the Adjusted Trial Balance columns are extended to the
Balance Sheet columns.

8. Adjusted Trial Balance
Income Statement
Balance Sheet
End-of-Period Spreadsheet (Work Sheet)
Dr Cr Dr Cr Dr Cr
Accounts
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scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
The balances for the accounts that follow appear in the Adjusted
Trial Balance columns of the end-of-period spreadsheet.
Indicate whether each account would flow into the income
statement, statement of owner’s equity, or balance sheet.

9. Office Equipment
Utilities Expense
Accumulated Depreciation—Equipment
Unearned Rent
Fees Earned
Doug Johnson, Drawing
Rent Revenue
Supplies
Flow of Accounts into
Financial Statements (slide 1 of 2)
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scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Example Exercise
Flow of Accounts into
Financial Statements (slide 2 of 2)
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scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.

10. Example Exercise
Income Statement
The income statement is prepared directly from the Income
Statement or Adjusted Trial Balance columns of the end-of-
period spreadsheet (work sheet), beginning with fees earned of
$16,840.
The expenses in the income statement are listed in order of size,
beginning with the larger items. However, Miscellaneous
Expense is always the last account listed, regardless of its
amount.
©2018 Cengage Learning. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
©2018 Cengage Learning. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible
website, in whole or in part.
Financial Statements, Net