Chapter 6 Complete

Report
1
The Accounting Cycle
 As we have learned, accounting is a systematic process of
recording the financial transactions of a business and arranging
the subsequent data in a usable format.
 The above mentioned process is known as the Accounting
Cycle.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
2
THE ACCOUNTING CYCLE
1
2
8
3
7
4
6
5
1.
2.
3.
4.
5.
Analyzes transactions
Journalize
Post
Prepare work sheet
Prepare financial
statements
6. Journalize adjusting
and closing entries
7. Post adjusting and
closing entries
8. Prepare post-closing
trial balance
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 8-3
3
The Accounting Cycle
 So far we have learned how to analyze business transactions,
journalize the transactions in the general journal, and post the
journal entries to the general ledger.
 Now we will begin to explore the next step of the accounting
cycle, which is preparing an Accounting Work Sheet.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-2
5
Accounting Work Sheets
 An Accounting Work Sheet is a columnar accounting form used
to summarize the General Ledger information needed to
prepare Financial Statements.
 The Work Sheet is used for four reasons:
1. Summarize general ledger account balances to prove debits equal
credits
2. Plan needed changes to the general ledger accounts to bring account
balances up to date
3. Separate general ledger account balances according to the financial
statements to be prepared
4. Calculate the amount of net income or net loss
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
6
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-2
7
PREPARING THE HEADING OF A
WORK SHEET
1
2
page 153
Name of Company
Name of Report
3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Date of Report
LESSON 6-1
8
PREPARING A TRIAL BALANCE ON A
WORK SHEET
2
1
3
5
page 154
1. Write the general ledger
account titles.
2. Write the general ledger
debit account balances.
Write the general ledger
credit account balances.
3. Rule a single line across the
two Trial Balance columns.
4
4. Add both the Trial Balance
Debit and Credit columns.
5. Write each column’s total
below the single line.
6. Rule double lines across
6 both Trial Balance columns.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
ACCOUNTING
WORK SHEETS
Planning Adjusting Entries
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
10
ADJUSTING ENTRIES
 We Journalize transactions in the General Journal on
a daily basis.
 We Post journal entries to the General Ledger at
least monthly or when called for in the Accounting
Cycle.
 We create Work Sheets to summarize and report
financial information periodically during the Fiscal
Period.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
11
ADJUSTING ENTRIES
 So why do we need adjusting entries?
 In order to provide accurate financial information,
some General Ledger Accounts must be brought up
to date.
 Why must these accounts be brought up to date?
 The accounting concept of Matching Revenues with
Expenses.
 Sometimes a business will pay cash for an expense
in one period, but the expense is not used until a
latter period. Example: Supplies and Insurance
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
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ADJUSTING ENTRIES
 However, the accounting concept of Matching
Revenues with Expenses - states that we must
record expenses in the period that they are used
to produce revenue.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
13
SUPPLIES ADJUSTMENT ON A
WORK SHEET
page 158
2
3
1
1. Write the debit amount.
2. Write the credit amount.
3. Label the two parts of this adjustment.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-2
14
PREPAID INSURANCE ADJUSTMENT
ON A WORK SHEET
page 159
2
3
1
1. Write the debit amount.
2. Write the credit amount.
3. Label the two parts of this adjustment.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-2
15
PROVING THE ADJUSTMENTS COLUMNS
page 160
OF A WORK SHEET
1
2
1. Rule a single line.
2. Add both the Adjustments Debit and Credit columns.
Write each column’s total.
3. Rule double lines.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
3
LESSON 6-2
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TIME CHECK
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
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PREPARING A WORK SHEET
 Please turn to page 160 in your text book.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
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PREPARING A WORK SHEET
page 160 C
1. Write the heading.
2. Record the trial balance.
3. Record the supplies adjustment.
4. Record the prepaid insurance adjustment.
5. Prove the Adjustments columns.
6. Extend all balance sheet account balances.
7. Extend all income statement account balances.
8. Calculate and record the net income (or net loss).
9. Total and rule the Income Statement and Balance Sheet
columns.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-2
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-2
20
1
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-2
21
1
2
496400
10000
15000
10000
102500
120000
(a)
(b)
6
71500
10000
20000
5000
500000
4
62500
356500
356500
21300
(b)
10000
(a)
71500
2800
30000
Net Income
8
20000
5000
500000
3
62500
11000
881500 881500
10000
31000
110000
81500
21300
10000
2800
7
30000
71500
5
11000
81500 146600 356500 734900 525000
209900
209900
356500 356500 734900 734900
9
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-2
LESSON 6-3
Extending Financial
Statement Information
on a Work Sheet
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
23
EXTENDING BALANCE SHEET ACCOUNT
page 162
BALANCES ON A WORK SHEET
2
1. Debit balances without adjustments
2. Debit balances with adjustments
3. Credit balances without adjustments
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
1
3
LESSON 6-3
24
EXTENDING INCOME STATEMENT ACCOUNT
BALANCES ON A WORK SHEET
page 163
1
2
3
1. Sales balance
2. Expense balances without adjustments
3. Expense balances with adjustments
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-3
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RECORDING NET INCOME, AND
TOTALING AND RULING A WORK SHEET
4
1. Single rule
2. Totals
3. Net income
3
4. Extend net income
5. Single rule
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
6
page 164
1
2
7
5
6. Totals
7. Double rule
LESSON 6-3
26
CALCULATING AND RECORDING A NET
LOSS ON A WORK SHEET
page 165
1
3
1.
2.
3.
4.
Single rule
Totals
Net loss
Extend net loss
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
4
2
LESSON 6-3
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TERMS REVIEW




page 166
balance sheet
income statement
net income
net loss
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-3
LESSON 6-4
Finding and Correcting
Errors on the Work Sheet
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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CORRECTING ACCOUNTING ERRORS ON
THE WORK SHEET
 Some errors in accounting records are not
discovered until a work sheet is prepared.
 Example errors in posting to the General Ledger.
 The error may not be found until the Trial Balance
does not balance.
 Information can also be incorrectly transferred from
the General Ledger to the work sheet’s Trial Balance.
 Other errors may include incorrectly recording
Adjusting Entries.
 The Work Sheet is your first check for errors!
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
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CHECKING FOR TYPICAL CALCULATION
ERRORS
 When two column totals are not in balance, subtract
the smaller total from the lager total to find the
difference.
 Check the difference between the two amounts
against the following guidelines:
 The difference is 1, such as $.01, $.10, $1.00, or $10.00 –
the error is most likely addition.
 The difference can be divided evenly by 2 – look for the
result.
 The difference can be divided evenly by 9 – look for a
transposed number.
 The difference is an omitted amount – look for an amount
equal to the difference.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-1
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CORRECTING AN ERROR IN POSTING TO
page 168
THE WRONG ACCOUNT
2 Correct entry
1 Incorrect entry
1. Draw a line through the entire incorrect entry. Recalculate the account
balance and correct the work sheet.
2. Record the posting in the correct account. Recalculate the account
balance, and correct the work sheet.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-4
32
CORRECTING AN INCORRECT AMOUNT
page 169
2
1
3
1. Draw a line through the incorrect amount.
2. Write the correct amount just above the correction in the same space.
3. Recalculate the account balance, and correct the account balance on
the work sheet.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-4
33
CORRECTING AN AMOUNT POSTED TO
THE WRONG COLUMN
page 169
2
1
3
5
4
6
4. Draw a line through the incorrect item in the account.
5. Record the posting in the correct amount column.
6. Recalculate the account balance, and correct the work sheet.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-4

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