2. Also known as an accounting period.
It’s the period of time that business reports
financial information.
Business determines the length of fiscal period
based on how often it needs information to make
decisions.
Most fiscal periods begin at beginning of a month:
Jan 1, Aug 1, etc.
Summarize detail from ledger onto the trial
balance then prepare work sheet then prepare
financial statements.
3. An accounting form used to summarize the
general ledger information that’s needed to
prepare the financial statements.
4. Total debits must equal total credits
before proceeding to adjustments.
5. Record Supplies account adjustment
◦ Debit to Supplies Expense account in Adjustments debit
column.
◦ Credit to Supplies account in the Adjustments credit
column.
Record the Prepaid Insurance adjustment
◦ Debit to Insurance Expense account in Adjustments debit
column.
◦ Credit to Prepaid Insurance account in the Adjustments
credit column.
Prove the Adjustment columns to ensure debit
total equals credit total.
6. Need to update ledger accounts at end of
fiscal period. Adjustments are performed.
Need to match expenses in same period they
helped generate revenue.
7. Extend all Balance Sheet account balances
◦ Extend up-to-date asset account balances to Balance
Sheet debit column
◦ Extend up-to-date liability account balances to Balance
Sheet credit column
◦ Extend the owner’s capital and drawing account
balances to the Balance Sheet columns
Extend all Income Statement account balances
◦ Extend up-to-date revenue account balances to the Income
Statement credit column
◦ Extend up-to-date expense account balances to the Income
Statement debit column
8.
9. Total Income Statement and Balance Sheet
columns.
Calculate Net Income or Net Loss amount by
taking difference between Income Statement
credit column total and Income Statement debit
column total.
Write amount of net income or net loss below
smaller of two Income Statement column totals.
Extend the same amount to the smaller of two
Balance Sheet column totals.
10. The total amount of revenue (credit
column) is more than total amount of
expenses (debit column) therefore the
business had net income (made money).
