Principles of Financial

Accounting
Faculty of Commerce “English Section” – Level I
- Course Code: ACC 101
Module Leader:
Dr. Mohamed Salem
Assistant Professor of Accounting
Suez University
Teaching Assistant:
Menna Omar
 Module Contents
Ø Chapter (1): Accounting in Business. Suggested load:
3 weeks.

Ø Chapter (2): Analyzing and Recording Transactions.

Suggested load :3 weeks.

Ø Chapter (3): Adjusting Accounts and Preparing

Financial Statements. Suggested load : 3 weeks.

Ø Chapter (4): Completing the Accounting Cycle.

Suggested load : 1 week.

Ø Chapter (5): Accounting for Merchandising

Operations. Suggested load : 2 weeks.
 Recommended Textbook
Wild, J. J., Shaw, K. W., Chiappetta, B., Fundamental
Accounting Principles (Middle East Edition). 20th
Edition. McGraw Hill, Education, Inc.
Source: https://mediamatchmaker.co.uk/what-is-
the-job-of-a-qa-sheet-and-why-do-i-need-one/
 A broad principle that requires identifying the
activities of a business with specific time periods such as
months, quarters, or years is the:

a) Operating cycle of a business.

b) Time period assumption.

c) Going-concern assumption.

d) Matching principle.

e) Accrual basis of accounting:

 A broad principle that requires identifying the
activities of a business with specific time periods such as
months, quarters, or years is the:

a) Operating cycle of a business.

b) Time period assumption.

c) Going-concern assumption.

d) Matching principle.

e) Accrual basis of accounting:

Adjusting entries:

a) Affect only income statement accounts.

b) Affect only balance sheet accounts.

c) Affect both income statement and balance sheet

accounts.

d) Affect only cash flow statement accounts:

Adjusting entries:

a) Affect only income statement accounts.

b) Affect only balance sheet accounts.

c) Affect both income statement and balance sheet

accounts.

d) Affect only cash flow statement accounts:

 If a company failed to make the end-of-period
adjustment to remove from the Unearned Management
Fees account the amount of management fees that were
earned, this omission would cause:

a) An overstatement of net income.

b) An overstatement of assets.

c) An overstatement of liabilities.

d) An overstatement of equity.

e) An understatement of liabilities
 If a company failed to make the end-of-period
adjustment to remove from the Unearned Management
Fees account the amount of management fees that were
earned, this omission would cause:

a) An overstatement of net income.

b) An overstatement of assets.

c) An overstatement of liabilities.

d) An overstatement of equity.

e) An understatement of liabilities
On 1st of June Sina Pharma Co. paid $7,500 cash for
management services to be performed over a two-year
period. Sina Pharma follows a policy of recording all
prepaid expenses to asset accounts at the time of cash
payment. On 1st of June Sina Pharma should record:

a) A credit to an expense for $7,500.

b) A debit to an expense for $7,500.

c) A debit to a prepaid expense for $7,500.

d) A credit to a prepaid expense for $7,500.

e) A debit to Cash for $7,500.

On 1st of June Sina Pharma Co. paid $7,500 cash for
management services to be performed over a two-year
period. Sina Pharma follows a policy of recording all
prepaid expenses to asset accounts at the time of cash
payment. On 1st of June Sina Pharma should record:

a) A credit to an expense for $7,500.

b) A debit to an expense for $7,500.

c) A debit to a prepaid expense for $7,500.

d) A credit to a prepaid expense for $7,500.

e) A debit to Cash for $7,500.

If throughout an accounting period the fees for legal
services paid in advance by clients are recorded in an
account called Unearned Legal Fees, the end-of-period
adjusting entry to record the portion of those fees that has
been earned is:

a) Debit Cash and credit Legal Fees Earned.

b) Debit Cash and credit Unearned Legal Fees.

c) Debit Unearned Legal Fees and credit Legal Fees

Earned.

d) Debit Legal Fees Earned and credit Unearned Legal

Fees.
If throughout an accounting period the fees for legal
services paid in advance by clients are recorded in an
account called Unearned Legal Fees, the end-of-period
adjusting entry to record the portion of those fees that has
been earned is:

a) Debit Cash and credit Legal Fees Earned.

b) Debit Cash and credit Unearned Legal Fees.

c) Debit Unearned Legal Fees and credit Legal Fees

Earned.

d) Debit Legal Fees Earned and credit Unearned Legal

Fees.
On April 1, a company paid the $1,350 premium on a
three-year insurance policy with benefits beginning on
that date. What will be the insurance expense on the
annual income statement for the year ended December
31?

A. $1,350.00.

B. $450.00.

C. $1,012.50.

D. $337.50.

E. $37.50
On April 1, a company paid the $1,350 premium on a
three-year insurance policy with benefits beginning on
that date. What will be the insurance expense on the
annual income statement for the year ended December
31?

A. $1,350.00.

B. $450.00.

C. $1,012.50.

D. $337.50.

E. $37.50
 Exercise
Rabab started her own consulting firm, Rou
Company, on June 1, 2020. Rou’s trial balance is shown:
Rou Company
Trial Balance
June 30, 2020
 Exercise
Rou Company has the following data:

Required:
i. Prepare the adjusting entries for the month of June.
ii. Prepare an adjusted trial balance on June 30, 2020.
Solution
Solution
Solution
 Chapter 4
Completing the
Accounting Cycle
 Outline
• Worksheet.

• Closing entries.

• Post-Closing trial balance.

• Accounting cycle.
 Learning Objectives

• LO 1: Prepare a worksheet.

• LO 2: Prepare closing entries and post-closing trail

balance.

• LO 3: Explain the steps in accounting cycle.

Work Sheet
 Work Sheet
A worksheet is a multiple-column form used in the
adjustment process and in preparing financial statements.
Assists in
Aids the planning and
preparation of organizing an
financial audit.
statements.
Not a Helps in
Reduces
possibility of required preparing
errors. report financial
statements.
Links
accounts and Shows the effects
their of proposed
adjustments. transactions.
Steps to Prepare a Worksheet
Steps to Prepare a Worksheet
Steps to Prepare a Worksheet
Steps to Prepare a Worksheet
Steps to Prepare a Worksheet
Closing
Entries
 Prepare Closing Entries

Recording closing entries:

1. Resets revenue, Identify accounts
expense and for closing.
withdrawal account
balances to zero at
the end of the period. Record and post
closing entries.
2. Helps summarize a
period’s revenues
Prepare post-closing
and expenses in the
Income Summary trial balance.
account.
 Temporary & Permanent Accounts

Revenues
Assets

Withdrawals
Expenses

Liabilities

Owner’s
Capital
Temporary
Permanent
Accounts
Accounts

Income The closing

Summary process applies
only to temporary
accounts.
 Recording Closing Entries
1) Close Credit balances in Revenue accounts to Income
Summary.

2) Close Debit balances in Expense accounts to Income

Summary.

3) Close Income Summary account to Owner’s Capital.

4) Close Withdrawals to Owner’s Capital.

 Recording Closing Entries
FastForward
Adjusted Trial Balance
December 31, 2020
Debit Credit
Cash $ 4,350
Accounts receivable 1,800
Supplies 8,670
Prepaid insurance 2,300
Equipment 26,000
Accumulated depreciation-Equip. $ 375
Accounts payable 6,200
Salaries payable 210
Unearned consulting revenue 2,750
C. Taylor, Capital 30,000
C. Taylor, Withdrawals 200
Consulting revenue 7,850
Rental revenue 300
Depreciation expense-Equipment 375
Salaries expense 1,610
Insurance expense 100
Rent expense 1,000
Supplies expense 1,050
Utilities expense 230
Totals $ 47,685 $ 47,685
 Recording Closing Entries
1) Closing Revenue Accounts:

Date Description Dr. Cr.

Dec. 31 Consulting revenue 7,850

Rental revenue 300
Income summary 8,150
 Recording Closing Entries
2) Closing Expense Accounts:

Date Description Dr. Cr.

Dec. 31 Income Summary 4,365

Depreciation Expenses 375

Salaries Expense 1,610
Insurance Expense 100
Rent Expense 1,000
Supplies Expense 1,050
Utilities Expense 230
 Recording Closing Entries
3) Closing Income Summary to Owner’s Capital:

Date Description Dr. Cr.

Dec. 31 Income Summary 3,785

Capital 3,785
 Recording Closing Entries
4) Closing Drawing Account to Owner’s Capital:

Date Description Dr. Cr.

Dec. 31 Capital 200

Withdrawals 200
Summary
 Post-Closing Trial Balance
FastForward
Post-Closing Trial Balance • List of
December 31, 2020
Debit Credit permanent
Cash $ 4,350
Accounts receivable 1,800
accounts
Supplies 8,670 and their
Prepaid insurance 2,300
Equipment 26,000 balances
Accumulated depreciation-Equip. $ 375 after
Accounts payable 6,200
Salaries payable 210 posting
Unearned consulting revenue
C. Taylor, Capital
2,750
33,585
closing
C. Taylor, Withdrawals - entries.
Consulting revenue -
Rental revenue - • Total debits
Depreciation expense-Equipment -
Salaries expense -
and credits
Insurance expense - must be
Rent expense -
Supplies expense - equal.
Utilities expense -
Totals $ 43,120 $ 43,120
Accounting Cycle
Activity Task
 Exercise
Suppose that you have the following worksheet:

Required:
Prepare proper closing entries.
Solution