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CHAPTER 4

CHAPTER 4. COMPLETING THE ACCOUNTING CYCLE. Accounting Principles, Eighth Edition. Study Objectives. Prepare a worksheet. 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 cycle.

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CHAPTER 4

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  1. CHAPTER 4 COMPLETING THEACCOUNTING CYCLE Accounting Principles, Eighth Edition

  2. Study Objectives • Prepare a worksheet. • 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 cycle. • Explain the approaches to preparing correcting entries. • Identify the sections of a classified balance sheet.

  3. Completing the Accounting Cycle Using a Worksheet Closing the Books Summary of Accounting Cycle Classified Balance Sheet Steps in preparation Preparing financial statements Preparing adjusting entries Preparing closing entries Posting closing entries Preparing a post-closing trial balance Reversing entries—An optional step Correcting entries—An avoidable step Current assets Long-term investments Property, plant, and equipment Intangible assets Current liabilities Long-term liabilities Owner’s equity

  4. Using A Worksheet Worksheet • A multiple-column form used in preparing financial statements. • Not a permanent accounting record. • Five step process. • Use of worksheet is optional. LO 1 Prepare a worksheet.

  5. Steps in Preparing a Worksheet Illustration 4-2 LO 1 Prepare a worksheet.

  6. Steps in Preparing a Worksheet Example The trial balance for Undercover Roofing for the month ended March 31, 2008, 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. LO 1 Prepare a worksheet.

  7. Steps in Preparing a Worksheet 1. Prepare a Trial Balance on the Worksheet Trial balance amounts come directly from ledger accounts. Include all accounts with balances. LO 1 Prepare a worksheet.

  8. Steps in Preparing a Worksheet 2. Enter the Adjustments in the Adjustments Columns (a) Adjustments Key: (a) Supplies used. (b) Depreciation expense. (c) Service revenue earned. (d) Salaries accrued. (b) (c) (c) (d) (a) (b) (d) Enter adjustment amounts, total adjustments columns, and check for equality. Add additional accounts as needed. LO 1 Prepare a worksheet.

  9. Steps in Preparing a Worksheet 3. Complete the Adjusted Trial Balance Columns (a) (b) (c) (c) (d) (a) (b) (d) Total the adjusted trial balance columns and check for equality. LO 1 Prepare a worksheet.

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