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4-1
COMPLETING THE ACCOUNTING CYCLE
CHAPTER 4CHAPTER 4
4-2
Steps in Accounting CycleSteps in Accounting Cycle
Analyze source
documents.
Journalize transactions
in the journal.
Post entries to the accounts in the ledger.
Prepare a trial
balance.
Prepare financial
statements.Do post-closing
trial balance
Journalize and post closing
entries
Journalize and post adjusting
entries
134
4-3
Expanded Accounting EquationExpanded Accounting Equation
ASSETS + EXP. = LIAB. + S/H EQUITY + REV.
A + E = L + S/E + R Dr. Cr.
+ -Bal.
Dr. Cr.
+-Bal.
Permanent Temporary Permanent Permanent Temporary
4-4
Each revenue and expense mustmust have a $0 balance at the beginning of the next year.
Each revenue and expense mustmust have a $0 balance at the beginning of the next year.
Each revenue and expense account normally has a balance at year-end.
Each revenue and expense account normally has a balance at year-end.
How do we get the revenues and expenses to How do we get the revenues and expenses to $0 balances for the beginning of the next year?$0 balances for the beginning of the next year?How do we get the revenues and expenses to How do we get the revenues and expenses to
$0 balances for the beginning of the next year?$0 balances for the beginning of the next year?
A Norm, a Rule and a QuestionA Norm, a Rule and a Question
4-5
Transferring (“pouring”) the balances in revenue and expense accounts into the Income Summary account.
Transferring the balance in Income Summary to Retained Earnings.
Transferring the balance in the Dividends account to Retained Earnings.
The Closing ProcessThe Closing Process
.
4-6
The Closing ProcessThe Closing Process
CloseRevenues
Close Expenses
4-7
The Closing ProcessThe Closing Process
4-8
Income SummaryTemporary accountExists only during the closing processDoes not appear on any financial statement
Income SummaryTemporary accountExists only during the closing processDoes not appear on any financial statement
The Closing ProcessThe Closing Process
Close Income Summary
4-9
The Closing ProcessThe Closing Process
4-10
The Closing ProcessThe Closing Process
Close Dividends
Summary of StepsClose Revenues to Income SummaryClose Expenses to Income SummaryClose Income Summary to Retained EarningsClose Dividends to Retained
Earnings
Summary of StepsClose Revenues to Income SummaryClose Expenses to Income SummaryClose Income Summary to Retained EarningsClose Dividends to Retained
Earnings
4-11
Used to bring revenue and expense accounts to $0 balances for the start of
the next fiscal year
Revenues have a normal balance on the credit side.
Revenues
25,000
Closing Journal EntriesClosing Journal EntriesT- Account ExampleT- Account Example
4-12
Revenues
25,000
How do we bring Revenues to a $0 balance?
Closing Journal EntriesClosing Journal EntriesT- Account ExampleT- Account Example
Used to bring revenue and expense accounts to $0 balances for the start of
the next fiscal year
4-13
Remember: To reduce a credit balance account, debit the account.
Revenues
25,000
How do we bring Revenues to a $0 balance?
Closing Journal EntriesClosing Journal EntriesT- Account ExampleT- Account Example
Used to bring revenue and expense accounts to $0 balances for the start of
the next fiscal year
4-14
Revenues
25,000
We need to debit the account for $25,000 to reduce the account to $0.
How do we bring Revenues to a $0 balance?
Closing Journal EntriesClosing Journal EntriesT- Account ExampleT- Account Example
Used to bring revenue and expense accounts to $0 balances for the start of
the next fiscal year
4-15
Revenues
25,000
We need to debit the account for $25,000 to reduce the account to $0.
0
How do we bring Revenues to a $0 balance? 25,000
Closing Journal EntriesClosing Journal EntriesT- Account ExampleT- Account Example
Used to bring revenue and expense accounts to $0 balances for the start of
the next fiscal year
4-16
In the previous example, a $25,000 debit was made to close out Revenues.
A corresponding $25,000 credit must be made to Income SummaryIncome Summary.
Income Summary Revenues
25,000
0
25,000
Closing Journal EntriesClosing Journal EntriesT- Account ExampleT- Account Example
4-17
In the previous example, a $25,000 debit was made to close out Revenues.
A corresponding $25,000 credit must be made to Income SummaryIncome Summary.
Revenues
25,000
0
Income Summary
25,000 25,000
Closing Journal EntriesClosing Journal EntriesT- Account ExampleT- Account Example
4-18
Closing Journal Entries use the same format as other journal entries:
GENERAL JOURNALPage: 1
Date Description PR Debit Credit
MM/DDAccount Name ### $$$ Account Name ### $$$To record closing entry
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
4-19
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
GENERAL JOURNALPage: 97
Date Description PR Debit Credit
On 12/31/99, Revenues has a $25,000 balance at year-end. Prepare the journal
entry to close the account.
4-20
GENERAL JOURNALPage: 97
Date Description PR Debit Credit
31-Dec Revenues 25,000 Income Summary 25,000to close Revenues
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
On 12/31/99, Revenues has a $25,000 balance at year-end. Prepare the journal
entry to close the account.
4-21
GENERAL JOURNALPage: 97
Date Description PR Debit Credit
31-Dec Revenues 25,000 Income Summary 25,000to close Revenues
Post the entry to the Revenue account.Post the entry to the Revenue account.
ACCOUNT NAME: REVENUES ACCOUNT No. 400
Date Description PR Debit Credit Balance
End of Year Balance 25,000 25,000
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
4-22
GENERAL JOURNALPage: 97
Date Description PR Debit Credit
31-Dec Revenues 400 25,000 Income Summary 25,000to close Revenues
Post the entry to the Revenue account.Post the entry to the Revenue account.
ACCOUNT NAME: REVENUES ACCOUNT No. 400
Date Description PR Debit Credit Balance
End of Year Balance 25,000 25,00031-DecClose to Income Summary G97 25,000 0
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
4-23
GENERAL JOURNALPage: 97
Date Description PR Debit Credit
31-Dec Revenues 400 25,000 Income Summary 600 25,000to close Revenues
ACCOUNT NAME: INCOME SUMMARY ACCOUNT No. 600
Date Description PR Debit Credit Balance
31-DecTo close Revenues G97 25,000 25,000
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal ExampleAlso, post to the Income Summary account.Also, post to the Income Summary account.
4-24
GENERAL JOURNALPage: 97
Date Description PR Debit Credit
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
On 12/31/99, Rent Expense was $8,000 and Salaries Expense was $15,000. Prepare
the closing journal entry.
4-25
GENERAL JOURNALPage: 97
Date Description PR Debit Credit
31-Dec Income Summary 23,000 Rent Expense 8,000 Salaries Expense 15,000to close expenses
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
On 12/31/99, Rent Expense was $8,000 and Salaries Expense was $15,000. Prepare
the closing journal entry.
4-26
ACCOUNT NAME: RENT EXPENSE ACCOUNT No. 515
Date Description PR Debit Credit Balance
31-DecBalance 8,000 8,00031-DecIncome Summary G97 8,000 0
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
After posting, the Rent Expense and Salaries Expense accounts have $0 balances.
After posting, the Rent Expense and Salaries Expense accounts have $0 balances.
ACCOUNT NAME: SALARIES EXPENSE ACCOUNT No. 507
Date Description PR Debit Credit Balance
31-DecBalance 15,000 15,00031-DecIncome Summary G97 15,000 0
4-27
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
ACCOUNT NAME: INCOME SUMMARY ACCOUNT No. 600
Date Description PR Debit Credit Balance
31-DecTo close Revenues G97 25,000 25,00031-DecTo close Expenses G97 23,000 2,000
Page:GENERAL JOURNALPage: 97
Date Description PR Debit Credit
After posting, the Income Summary account has a $2,000 balance that must be closed to Retained Earnings.
After posting, the Income Summary account has a $2,000 balance that must be closed to Retained Earnings.
4-28
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
ACCOUNT NAME: INCOME SUMMARY ACCOUNT No. 600
Date Description PR Debit Credit Balance
31-DecTo close Revenues G97 25,000 25,00031-DecTo close Expenses G97 23,000 2,000
Page: 97GENERAL JOURNALPage: 97
Date Description PR Debit Credit
31-Dec Income Summary 600 2,000 Retained Earnings 2,000
After posting, the Income Summary account has a $2,000 balance that must be closed to Retained Earnings.
After posting, the Income Summary account has a $2,000 balance that must be closed to Retained Earnings.
4-29
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
ACCOUNT NAME: INCOME SUMMARY ACCOUNT No. 600
Date Description PR Debit Credit Balance
31-DecTo close Revenues G97 25,000 25,00031-DecTo close Expenses G97 23,000 2,00031-DecTo close R/E G97 2,000 0
GENERAL JOURNALPage: 97
Date Description PR Debit Credit
31-Dec Income Summary 600 2,000 Retained Earnings 2,000
After posting, the Income Summary account has a $2,000 balance that must be closed to Retained Earnings.
After posting, the Income Summary account has a $2,000 balance that must be closed to Retained Earnings.
4-30
GENERAL JOURNALPage: 97
Date Description PR Debit Credit
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
On 12/31/99, the Dividends account has a $1,300 balance. Prepare the closing
entry.
4-31
GENERAL JOURNALPage: 97
Date Description PR Debit Credit
31-Dec Retained Earnings 1,300 Dividends 1,300to close dividends
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
On 12/31/99, the Dividends account has a $1,300 balance. Prepare the closing
entry.
4-32
Closing Journal EntriesClosing Journal EntriesGeneral Journal ExampleGeneral Journal Example
Assuming Retained Earnings had a pre-closing ending balance of $7,000, ...
Assuming Retained Earnings had a pre-closing ending balance of $7,000, ...
ACCOUNT NAME: Retained Earnings ACCOUNT No. 310
Date Description PR Debit Credit Balance
31-Dec Balance 7,000 7,00031-Dec To close Income Summary G97 2,000 9,00031-Dec To close Dividends G97 1,300 7,700
… after posting the closing of the Income Summary and Dividends accounts, the ending
balance is $7,700.
… after posting the closing of the Income Summary and Dividends accounts, the ending
balance is $7,700.
4-33
Income Summary
Expenses Revenues
7,000 Beg. bal.
Overview of accounts affected.
Overview of accounts affected.
Retained Earnings
Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-34
Income Summary
Expenses Revenues
Owner’s Capital
$ 7,000
Once more, close out Revenues with a debit to Revenues
and a credit to Income Summary.
Once more, close out Revenues with a debit to Revenues
and a credit to Income Summary.
Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-35
Income Summary
Expenses Revenues
$ 7,000
Owner’s Capital
25,000
Once more, close out Revenues with a debit to Revenues
and a credit to Income Summary.
Once more, close out Revenues with a debit to Revenues
and a credit to Income Summary.
25,000Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-36
Income Summary
Expenses Revenues
$ 7,000
Owner’s Capital
25,000
In effect, you have “poured” the
Revenues credit balance into the
Income Summary.
In effect, you have “poured” the
Revenues credit balance into the
Income Summary.
25,000Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-37
Income Summary
Expenses Revenues
25,000
25,000Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
Close out Expenses with a credit to Expenses and a debit to Income
Summary.
Close out Expenses with a credit to Expenses and a debit to Income
Summary.
4-38
Income Summary
Expenses Revenues
25,000
$ 7,000
Owner’s Capital
25,000
Close out Expenses with a credit to Expenses and a debit to Income
Summary.
Close out Expenses with a credit to Expenses and a debit to Income
Summary.
Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
18,100
18,100
4-39
Income Summary
Expenses Revenues
$ 7,000
Owner’s Capital
25,000
25,00018,100
18,100
Bal. 18,100 25,000 Bal.
In effect, you have “poured” the
Expenses debit balance into the
Income Summary.
In effect, you have “poured” the
Expenses debit balance into the
Income Summary.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-40
Income Summary
Expenses Revenues
$ 7,000
Owner’s CapitalDetermine the
ending balance in Income Summary.
Determine the ending balance in Income Summary.
25,000
25,00018,100
18,100
Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-41
Income Summary
Expenses Revenues
$ 7,000
Owner’s CapitalDetermine the
ending balance in Income Summary.
Determine the ending balance in Income Summary.
25,000
25,00018,100
18,100
6,900
Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-42
Income Summary
Expenses Revenues
7,000 Beg. bal.25,000
25,00018,100
18,100
6,900 bal.
Then, close Income Summary to
Retained Earnings.
Then, close Income Summary to
Retained Earnings.
Retained Earnings
Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-43
Income Summary
Expenses Revenues
$ 25,000
6,900
25,000
25,00018,100
18,100
6,900
Retained Earnings
6,900 bal.
7,000 Beg. bal.
Then, close Income Summary to
Retained Earnings.
Then, close Income Summary to
Retained Earnings.
Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-44
Income Summary
Expenses Revenues
25,000
18,100
18,100
6,900
Retained Earnings
6,900 bal.
7,000 Beg. bal.
25,000The $6,900 credit to Retained Earnings represents what?
The $6,900 credit to Retained Earnings represents what?
Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
6,900
4-45
Income Summary
Expenses Revenues
25,000
18,100
18,100
6,900
Retained Earnings
6,900 bal.
7,000 Beg. bal.
25,000Bal. 18,100 25,000 Bal.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
Net Income!Net Income!
6,900
4-46
7,000 B. bal.
6,900 N.I.
Dividends
2,000
Retained Earnings
Dividends must alsoalso be closed to Retained Earnings at the end of the year.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-47
2,000
Close Dividends with a creditcredit to Dividends and
a debitdebit to Retained Earnings.
Close Dividends with a creditcredit to Dividends and
a debitdebit to Retained Earnings.
Dividends Retained Earnings
7,000 B. bal.
6,900 N.I.
Dividends must alsoalso be closed to Retained Earnings at the end of the year.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-48
2,000 2,000 2,000
Dividends Retained Earnings
7,000 B. bal.
6,900 N.I.
Close Dividends with a creditcredit to Dividends and
a debitdebit to Retained Earnings.
Close Dividends with a creditcredit to Dividends and
a debitdebit to Retained Earnings.
Dividends must alsoalso be closed to Retained Earnings at the end of the year.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-49
2,000 2,000 Div. 2,000
Determine the ending balance in Retained
Earnings.
Determine the ending balance in Retained
Earnings.
Dividends Retained Earnings
7,000 B. bal.
6,900 N.I.
Dividends must alsoalso be closed to Retained Earnings at the end of the year.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-50
2,000 2,000
11,900 E. bal.
Dividends Retained Earnings
7,000 B. bal.
6,900 N.I.
Determine the ending balance in Retained
Earnings.
Determine the ending balance in Retained
Earnings.
Div. 2,000
Dividends must alsoalso be closed to Retained Earnings at the end of the year.
Closing Journal EntriesClosing Journal EntriesOnce More!Once More!
4-51
Maybe I’ll just do a little account
closing of my own!
4-52
The Work SheetThe Work Sheet
It is a columnar spreadsheet for summarizing information needed to adjust and close the books.
It is only an accounting tool and not part of the formal accounting records.
When completed, information for preparing financial statements can be taken directly from the Work Sheet.
It is a columnar spreadsheet for summarizing information needed to adjust and close the books.
It is only an accounting tool and not part of the formal accounting records.
When completed, information for preparing financial statements can be taken directly from the Work Sheet.
4-53
The Work SheetThe Work Sheet
The work sheet format is illustrated below:
COMPANY NAMEWork Sheet
For the Year Ended December 31, 1999Account Title Trial Balance Adjustments Adjusted T/B
Debit Credit Debit Credit Debit Credit
4-54
COMPANY NAMEWork Sheet
For the Year Ended December 31, 1999Account Title Trial Balance Adjustments Adjusted T/B
Debit Credit Debit Credit Debit Credit
The Work SheetThe Work Sheet
The information in these columns comes from the general ledger.
The information in these columns comes from the general ledger.
The work sheet format is illustrated below:
4-55
COMPANY NAMEWork Sheet
For the Year Ended December 31, 1999Account Title Trial Balance Adjustments Adjusted T/B
Debit Credit Debit Credit Debit Credit
The Work SheetThe Work Sheet
The adjustments are entered initially
here and are journalized and
posted later.
The adjustments are entered initially
here and are journalized and
posted later.
The work sheet format is illustrated below:
4-56
COMPANY NAMEWork Sheet
For the Year Ended December 31, 1999Account Title Trial Balance Adjustments Adjusted T/B
Debit Credit Debit Credit Debit Credit
The Work SheetThe Work Sheet
This information is determined
mathematically from the previous
two sets of columns.
This information is determined
mathematically from the previous
two sets of columns.
The work sheet format is illustrated below:
4-57
The Work SheetThe Work Sheet
There are three additional sets of columns that are normally present on
the work sheet for a corporation.COMPANY NAME
Work Sheet For the Year Ended December 31, 1999
Income Stmt Stmt of R/E Balance SheetDebit Credit Debit Credit Debit Credit Debit Credit
Adjusted T/B
4-58
There are three additional sets of columns that are normally present on
the work sheet for a corporation.COMPANY NAME
Work Sheet For the Year Ended December 31, 1999
Income Stmt Stmt of R/E Balance SheetDebit Credit Debit Credit Debit Credit Debit Credit
Adjusted T/B
The Work SheetThe Work Sheet
The Income Statement columns are used to facilitate
preparation of the formal Income
Statement.
The Income Statement columns are used to facilitate
preparation of the formal Income
Statement.
4-59
There are three additional sets of columns that are normally present on
the work sheet for a corporation.COMPANY NAME
Work Sheet For the Year Ended December 31, 1999
Income Stmt Stmt of R/E Balance SheetDebit Credit Debit Credit Debit Credit Debit Credit
Adjusted T/B
The Work SheetThe Work Sheet
The Statement of Retained Earnings columns are used
to facilitate preparation of the
formal Statement of Retained Earnings.
The Statement of Retained Earnings columns are used
to facilitate preparation of the
formal Statement of Retained Earnings.
4-60
There are three additional sets of columns that are normally present on
the work sheet for a corporation.COMPANY NAME
Work Sheet For the Year Ended December 31, 1999
Income Stmt Stmt of R/E Balance SheetDebit Credit Debit Credit Debit Credit Debit Credit
Adjusted T/B
The Work SheetThe Work Sheet
The Balance Sheet columns are used
to facilitate preparation of the
formal Balance Sheet.
The Balance Sheet columns are used
to facilitate preparation of the
formal Balance Sheet.
4-61
There are three additional sets of columns that are normally present on
the work sheet for a corporation.COMPANY NAME
Work Sheet For the Year Ended December 31, 1999
Income Stmt Stmt of R/E Balance SheetDebit Credit Debit Credit Debit Credit Debit Credit
Adjusted T/B
The Work SheetThe Work Sheet
Are work sheets used when
accounting is computerized?
Are work sheets used when
accounting is computerized?
4-62
There are three additional sets of columns that are normally present on
the work sheet for a corporation.COMPANY NAME
Work Sheet For the Year Ended December 31, 1999
Income Stmt Stmt of R/E Balance SheetDebit Credit Debit Credit Debit Credit Debit Credit
Adjusted T/B
The Work SheetThe Work Sheet
Are work sheets used when
accounting is computerized? (Listen for the answer on the
video.)
Are work sheets used when
accounting is computerized? (Listen for the answer on the
video.)
4-63
ROLL ‘EM !ROLL ‘EM !
Video #1(Approx. 7 min.)
Video #2(Approx. 7 min.)
4-64
Accounting Systems: Accounting Systems: Manual to ComputerizedManual to Computerized
144 to 148
4-65
Let’s move on to a discussion of the Classified Balance Sheet.
4-66
Classified Balance SheetClassified Balance Sheet
Contains the same three major categories as before:
Assets
Liabilities
Stockholders’ Equity
However, the major categories are subdividedsubdivided to provide more useful information.
4-67
Classified Balance Sheet Classified Balance Sheet Subdivisions of AssetsSubdivisions of Assets
Current Assets
Property, Plant, and Equipment
Long-Term Investments
Intangibles
4-68
Cash and other assets that a business can convert to cash or use up within one year
(or one operating cycle, whichever is longer).
Cash and other assets that a business can convert to cash or use up within one year
(or one operating cycle, whichever is longer).
Classified Balance Sheet Classified Balance Sheet Current AssetsCurrent Assets
Cash Accounts Receivable
InventoryPrepaid Expenses
Short-term Investments
Examples ?Shown in what order on the
Balance Sheet?Shown in what order on the
Balance Sheet?
4-69
Assets with useful lives of more than one year acquired for use in the business
rather than for resale.
Assets with useful lives of more than one year acquired for use in the business
rather than for resale.
Classified Balance Sheet Classified Balance Sheet Property, Plant & EquipmentProperty, Plant & Equipment
Land
Natural Resources
BuildingsEquipment
Leasehold Improvements
Examples ?
Alternative, informal term used for Property, Plant & Equipment?
Alternative, informal term used for Property, Plant & Equipment?
“Fixed Assets”“Fixed Assets”
4-70
Classified Balance Sheet Classified Balance Sheet Long-Term InvestmentsLong-Term Investments
Consists of securities of another company held with the intention of
holding the securities for more than one year.
4-71
Rights or economic benefits that are not physical in nature.
Rights or economic benefits that are not physical in nature.
Classified Balance Sheet Classified Balance Sheet Intangible AssetsIntangible Assets
Patents
Goodwill
Copyrights
TrademarksExamples ?
4-72
ASSETS
Current Assets Cash 75,000$
Accounts Receivable (net) 100,000 Merchandise Inventories 80,000
Total Current Assets 255,000$
Property and Equipment Land 200,000$ Buildings 300,000
Less: Accumulated Depreciation (150,000)
Net Property and Equipment 350,000$ Investment in Other Company 250,000
Patents 10,000
Total Assets 865,000$
Classified Balance Sheet Classified Balance Sheet Assets Section ExampleAssets Section Example
Similar p.149
4-73
Current Liabilities
Long-Term Liabilities
Bil
ls
Bil
ls
Bill
s
Classified Balance Sheet Classified Balance Sheet LiabilitiesLiabilities
4-74
Debts due within one year (or one operating cycle, whichever is longer).
Usually paid with current assets.
Debts due within one year (or one operating cycle, whichever is longer).
Usually paid with current assets.
Classified Balance Sheet Classified Balance Sheet Current LiabilitiesCurrent Liabilities
Wages Payable Taxes
Payable
Unearned Revenues
Short-term Notes
Payable
Accounts Payable
Examples ?Shown in what order on the Balance Sheet? (p. 152)
Shown in what order on the Balance Sheet? (p. 152)
4-75
Debts that are due more than one year after the Balance Sheet date.
Due dates should appear on the Balance Sheet.
Debts that are due more than one year after the Balance Sheet date.
Due dates should appear on the Balance Sheet.
Mortgages Payable
Bonds Payable
Long-term Notes
Payable
Classified Balance Sheet Classified Balance Sheet Long-Term LiabilitiesLong-Term Liabilities
Examples ?
4-76
LIABILITIES
Current Liabilities Accounts Payable 125,000$ Unearned Revenues 1,000 Wages Payable 10,000
Total Current Liabilities 136,000$
Long-Term Liabilities Notes Payable (Due 12/31/99) 90,000$ Bonds Payable (Due 12/31/2021) 200,000
Total Long-Term Liabilities 290,000$
Total Liabilities 426,000$
Classified Balance Sheet Classified Balance Sheet Liabilities Section ExampleLiabilities Section Example
Similar p.149
4-77
Paid-In Capital Amounts paid into the company by the owners
as investments. Includes: Common Stock and Preferred
Stock.
Retained Earnings The cumulative income of the company since
its inception less the amounts distributed to the owners in the form of dividends since its inception.
Classified Balance Sheet Classified Balance Sheet Stockholders’ EquityStockholders’ Equity
4-78
STOCKHOLDERS' EQUITY
Common Stock 300,000$ Additional Paid-In Capital 95,000
Retained Earnings 44,000
Total Stockholders' Equity 439,000$
Classified Balance Sheet Classified Balance Sheet Stockholders’ Equity Section ExampleStockholders’ Equity Section Example
Similar p.149
4-79
A = L + SE865,000 = 426,000 + 439,000
Classified Balance Sheet Classified Balance Sheet Stockholders’ Equity Section ExampleStockholders’ Equity Section Example
STOCKHOLDERS' EQUITY
Common Stock 300,000$ Additional Paid-In Capital 95,000
Retained Earnings 44,000
Total Stockholders' Equity 439,000$
4-80
About Test #1About Test #1
Will be challenging because the material covered is challenging
Most questions are T/F or M/CQuestions are 5-pt., 3-pt. & 1-pt.
No tricks such as patterns in answersOrder of answers is random
Coverage is even over the 4 chapters and introduction
Time allowed: 75 minutes
4-81
Best way to study Notes first Study guide and/or Hermanson tutorials
Calculators will be provided Must wait outside classroom Have your questions ready for next
actual class See course home page for office hours
About Test #1About Test #1
4-82
Let’s wrap up Chapter 4 with some
virtual keypad questions. Click the keypad!
Chapter 4 Wrap UpChapter 4 Wrap Up
Recommended