Module 4 Completion The Accounting Cycle

Module 4 – Complete Accounting Cycle
Instructional Materials
in
Accounting Principles
Course Title: Accounting Principles

Couse Code: ACCO20213
Course Program: BSIT
Compiled by:
ROSALINDA R. MADELO
August 2020
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Module 4
Completion of the Accounting Cycle
Learning Objective:
After studying module 4, the students should be able to:
a. Identify accounting concepts and prepare adjustments required at the end of accounting
periods.
b. Prepare a worksheet and financial statements for a service business.
c. Record adjusting and closing entries for a single proprietorship business.
d. Rule and balance the ledgers.
e. Prepare a post-closing trial balance.
The accounting cycle for businesses consist of a series of steps repeatedly performed
during the accounting period. These steps include:
1. Analyzing business transactions based on source documents.

2. The transactions are journalized.
3. Posting of journal entries from journal to the ledger.
4. A trial balance is prepared.
5. Adjusting entries are prepared to bring the accounts up-to-date.
6. A worksheet is prepared.
7. Financial statements are prepared.
8. Adjusting entries are journalized and posted to the ledger.
9. Closing entries are journalized and posted to the ledger.
10. All accounts in the ledger are ruled and balanced.
11. A post-closing trial balance is prepared.
Step 1 had been discussed in module 2 and steps 2 to 4 in module 3. This module will discuss steps
5 to 11.
Cash and Accrual Basis of Accounting
In the cash basis of accounting, revenue is recognized in the period when cash is
received and recognizes expenses when paid. Thus, even when services had been rendered or
goods had been delivered, revenue is recognized only when payment had been received.
Likewise, recognition of expenses are made only when payment for services or goods had been
made and not during the time when they had been incurred.
In the accrual basis of accounting, revenues are recognized when services had been
rendered or when goods had been delivered regardless when cash is received. Thus, for services
rendered on account, revenue is recognized when such service had been performed. When cash
is received on a later date, no revenue is recorded. Expenses are likewise recognized when they
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had been incurred regardless when payment is made, Expenses are recognized in the period
when they are used to produce revenue.
Adjusting the Accounts
Under the accrual method of accounting, adjusting entries are made to bring the accounts
up-to-date. By doing so, a more accurate information on financial reports may be the result for a
better basis for a conclusion on business operations. These include adjustments for:
1. Prepaid Expense - is payment for expense made in one fiscal period for which part of the
payment made will be used or apply until the next fiscal period. The portion of the expenditure
that applies to the current fiscal period shall be recognized as an expense and the portion that
applies or will be used in the next fiscal period shall be recognized as a prepaid expense.
Examples of these are:
Transaction Expense Portion Prepaid Expense Portion

Payment for 3 months rent for30,000- As of the end of the month, Dec. 31, 1/3 of As of the end of the of the 2/3 month,
starting Dec. 1 of the current year. the payment made expired or was applied, payment will apply in the next two months,
thus, 10,000- is to be recognized as Rent thus, 20,000- is to be recognized as
Expense. Prepaid Rent.
Supplies amounting to 5,000- was The 3,000- portion of supplies used The portion of supplies on hand, 2,000-,
purchased in December. Inventory of (5,000- less 2,000- on hand) shall be will be used in the next accounting period
supplies as of the end of the month, 2,000- considered as an expense for the month, thus, should be recognized as Supplies.
are still unused. Supplies Expense.
Adjusting entries to be made on the above situations depend on the original entries
recorded for the payment of the expenditure. The following rule shall apply in preparing the
adjusting entry:
a. When an asset had been initially recorded,
Debit an Expense account for the portion used/expired and

Credit the Asset account initially recorded for the portion used.
This in effect, will reduce the asset initially recorded for the portion used and recognize an
expense for the same. Using the discussion above, thus:
Transaction Original Entry Adjusting Entry

Dec. 1 payment of 30,000- for 3 months Prepaid Rent ……….….. 30,000- Rent Expense ……………… 10,000-
rent Cash ……………………………….….. 30,000- Prepaid Rent ………………………... 10,000-
Supplies purchased for 5,000-; inventory Supplies …………………….. 5,000- Supplies Expense ………… 3,000-
at the end shows supplies of 2,000-. Accounts Payable ………………… 5,000- Supplies ………………….…………….. 3,000-
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b. When an expense had been initially recorded,
Debit an Asset account for the portion unused/unexpired, and

Credit the Expense account initially recorded for portion unexpired.
This in effect, will reduce the expense initially recorded for the portion unused or unexpired
and recognize an asset for the same amount. Thus:

Dec. 1 payment of 30,000- for 3 months Rent Expense …..….….. 30,000- Prepaid Rent ……………... 20,000-
rent Cash ……………………………….….. 30,000- Rent Expense ………………….…… 20,000-
Supplies purchased for 5,000-; inventory Supplies Expense .…….. 5,000- Supplies ………...…………….. 2,000-
at the end shows supplies of 2,000-. Accounts Payable ………………… 5,000- Supplies Expense ……………..…… 2,000-
2. Accrued Expense - are expenses incurred but not yet paid or recorded. Expense is to be
recognized when incurred and as payment is yet to be made, a liability will be recorded.
Examples:
Transaction Adjusting Entry

Dec. 26 - Received bill for telephone service to be paid on Jan. Utilities Expense ……………………………………………… 2,500-
10, 2,500-. Accrued Expense ……………………………………………… …………..2,500-
Unpaid salaries of employees, 5.000-. Salaries & Wages Expense ……………………………… 5,000-
Accrued Expense ……………………………………………… ………….2,500-
3. Unearned Revenue - are amounts received in advance from customers for which services or
goods have not yet been delivered. While cash had already been received from the
customers, revenue recognition will only be made upon delivery of the service. As such, a
liability will be recognized for the obligation to deliver the service or goods. Example:
Transaction Earned Portion Unearned Portion

Dec. 5 - Received payment for admission 50% or 25,000- of the payment received The remaining 50% will be recognized in
fees 50,000- in a stage play half of which was earned in December. succeeding accounting period when
had watched the play during the month. tickets are surrendered.
Dec.10 - Received 18,000- for 3 months Dec. 10 - 31 (20 days) portion of the rental Jan. 1 - Mar. 10 portion of the rental
rent for a space leased at 6,000- a month. payment had been earned, 4,000- (2/3 x payment still unearned, 14,000-.
6,000 per mo.)
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The adjusting entry to be made depends on the original entry made when the payment
was received. Using the above discussion, thus:
a. When revenue was originally recorded upon receipt, the revenue originally recorded
has to be reduced by the portion still to be earned and a liability to be recorded instead.

Dec. 5 - Received payment for admission Cash …………………………. 50,000- Admission Fees …………. 25,000-
fees in a stage play half of which had Admission Fees ………………… 50,000- Unearned Revenue ………………… 25,000-
watched the play during the month.
Dec. 10 - Received 18,000-for 3 months Cash …………………..……… 18,000- Rent Income ……………….. 14,000-
rent for a space leased at 6,000- a month. Rent Income ………………………. 18,000- Unearned Revenue …………………. 14,000-
b. When a liability was originally recorded upon receipt, the liability originally recorded
has to be reduced for the portion already earned.

Dec. 5 - Received payment for admission Cash …………………….………. 50,000- Unearned Revenue ……… 25,000-
fees 50,000- in a stage play half of which Unearned Revenue ………..…… 50,000- Admission Fees ………………..……. 25,000-
had watched the play during the month.
Dec. 10 - Received 18,000-for 3 months Cash …………………..………… 18,000- Unearned Revenue ………. 14,000-
rent for a space leased at 6,000- a month. Unearned Revenue …………..…. 18,000- Rent Income …………………..……….. 14,000-
4. Accrued Revenue - are income earned but payment has not yet been received. Revenue is
to be recognized when services are rendered even payment for which has not yet been
received. A receivable is to be recorded for the amount to be collected.
Example:
Transaction Adjusting Entry

Billed a lessee for the space leased during the month 10,000-, Rent Receivable …………………………………………… 10,000-
due on or before the 10th day of the following month. Rent Revenue …………………………………………………….………. 10,000-
5. Depreciation of Fixed Assets - depreciation is the decrease in value of a fixed asset due to
usage, wear and tear, obsolescence and mere passage of time. An expense is to be
recognized for the decrease in value and a corresponding valuation account or contra account
is recorded. For purposes of discussion, the straight line method of depreciation is to be used
in the example that follows.
Example: On Dec. 1, an item of equipment was purchased for 100,000-. It is estimated that
the equipment will have a salvage value of 10,000- after using for 10 years.
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Procedure: 1 - determine the depreciable cost by deducting salvage value from

- cost, thus,
100,000 - 10,000 = 90,000- depreciable cost
2 - determine the depreciation per year by dividing depreciable cost by
- the estimated useful life, thus
90,000 ÷ 10 years = 9,000- depreciation per year
3 - determine the amount of depreciation applicable to the accounting
- period, divide depreciation per year by 12 months to get the
depreciation per month, thus
9,000 ÷ 12 months = 750- depreciation per month
Adjusting Depreciation Expense – Equipment………………750-

entry: Accumulated Depreciation – Equipment ……………… 750-
Preparation of Worksheet
A worksheet is a columnar accounting form that is used to assemble account balances

from the trial balance, the planned adjustments to bring the accounts up-to-date and segregate
accounts as to which financial statements they are to be presented.
Procedures in Preparing a Worksheet:
1. Prepare the heading of a worksheet - Heading should show: (a) name of the business (b)
name of the report and (c) date of the report.
Dadami Lilinis Laundry Shop

Work Sheet
For the Month Ended March 31, 2019
2. Prepare the column headings of the worksheet.

Work Sheet
For the Month Ended March 31, 2019
Trial Income Balance

Acct. Account Title Balance Adjustments Statement Sheet
No. Debit Credit Debit Credit Debit Credit Debit Credit
3. Write the general ledger account balances as listed in the trial balance in the Acct. No.,
Account Title and Trial Balance columns of the work sheet.(Please see page 8 for illustration)
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4. Record the adjustment in the adjustment column of the work sheet. If the account title is
among those listed in the account title column, the amount of the adjustment is placed in the
adjustment column (debit or credit) on the same line as the account title. If the account title is
not among those earlier listed, the title is to be added in the next available line in the Account
Title column and write the amount in the adjustment column (debit or credit). Label the debit
and credit part of the adjustment with a small letter in parenthesis. Add the debit and credit
columns and double rule to indicate that totals are balanced.(Please see page 9 for the
illustration)
5. Extend adjusted amounts for each account to the Income Statement and Balance Sheet
columns.
The adjusted amount is the combination of amounts in the trial balance and adjustments
column. The adjusted amount is determined as follows:
Trial
Balance Adjustments To determine
Debit Credit Debit Credit Adjusted amount
xxx - Xxx - Add and extend the total to the debit side
xxx - - xxx Deduct and extend balance to the greater side
- xxx - xxx Add and extend the total to the credit side
xxx - - - Extend the same amount to the debit side
- xxx - - Extend the same amount to the credit side
- - Xxx - Extend the same amount to the debit side
- - - xxx Extend the same amount to the credit side
Where to extend. Assets, contra assets, liabilities, capital and drawing accounts are
extended to the Balance Sheet columns. Revenue and expenses are extended to the Income
Statement columns. (Please see page 10 for the illustration)
6. Determine the amount of the Net Income or Net loss.
Add the amounts in the debit and credit column of the Income Statement and Balance
Sheet. The debit total and the credit total are not equal in both Income Statement and Balance
Sheet columns. The difference between the debit and the credit is either a net income or net
loss.
Income Statement column: If debit is greater than credit, the difference is a net loss and
vice versa, if the credit is greater than debit, the difference is a net income.
Balance Sheet column: If debit is greater than credit, the difference is a net income, and
vice versa, if the credit is greater than the debit, the difference is a net loss. (Please see page
11 for the illustration)
Procedure:
 Write "Net Income" or "Net Loss" in the Account Title column.
 Insert the amount of the net income/loss below the total of the smaller column.
 Add the amounts in both the debit and credit columns. Both columns are now equal.
 Double rule the totals.
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Worksheet
For the Month Ended, March 31, 2019

Step No. 3 illustration
Acct. Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet
No. Account Title Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
111 Cash 51,000.00
112 Accounts Receivable 20,000.00
113 Laundry Supplies 20,000.00
121 Laundry Equipment 60,000.00
211 Accounts Payable 35,000.00
311 Maila Bahin, Capital 100,000.00
312 Maila Bahin, Drawing 3,000.00
411 Laundry Shop Revenue 35,000.00
511 Wages Expense 3,000.00
512 Rent Expense 8,000.00
513 Utilities Expense 5,000.00
170,000.00 170,000.00
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Worksheet
111 Cash 51,000.00

113 Laundry Supplies 20,000.00 a) 3,000.00
312 Maila Bahin, Drawing 3,000.00
411 Laundry Shop Revenue 35,000.00
511 Wages Expense 3,000.00
512 Rent Expense 8,000.00
513 Utilities Expense 5,000.00
170,000.00 170,000.00
514 Laundry Supplies Expense a) 3,000.00
515 Depreciation Expense - LE b) 500.00
122 Accumulated Depreciation b) 500.00
3,5000.00 3,500.00
[9]
Worksheet
111 Cash 51,000.00 51,000.00 51,000.00

112 Accounts Receivable 20,000.00 20,000.00 20,000.00
113 Laundry Supplies 20,000.00 a) 3,000.00 17,000.00 17,000.00
121 Laundry Equipment 60,000.00 60,000.00
211 Accounts Payable 35,000.00 35,000.00 35,000.00
311 Maila Bahin, Capital 100,000.00 100,000.00 100,000.00
312 Maila Bahin, Drawing 3,000.00 3,000.00 3,000.00
411 Laundry Shop Revenue 35,000.00 35,000.00 35,000.00
511 Wages Expense 3,000.00 3,000.00 3,000.00
512 Rent Expense 8,000.00 8,000.00 8,000.00
513 Utilities Expense 5,000.00 5,000.00 5,000.00
170,000.00 170,000.00
514 Laundry Supplies Expense a) 3,000.00 3,000.00 3,000.00
515 Depreciation Expense - LE b) 500.00 500.00 500.00
122 Accumulated Depreciation b) 500.00 500.00 500.00
3,5000.00 3,500.00 170,500.00 170,500.00
[10]
Worksheet
111 Cash 51,000.00 51,000.00 51,000.00

112 Accounts Receivable 20,000.00 20,000.00 20,000.00
113 Laundry Supplies 20,000.00 a) 3,000.00 17,000.00 17,000.00
121 Laundry Equipment 60,000.00 60,000.00
211 Accounts Payable 35,000.00 35,000.00 35,000.00
311 Maila Bahin, Capital 100,000.00 100,000.00 100,000.00
312 Maila Bahin, Drawing 3,000.00 3,000.00 3,000.00
411 Laundry Shop Revenue 35,000.00 35,000.00 35,000.00
511 Wages Expense 3,000.00 3,000.00 3,000.00
512 Rent Expense 8,000.00 8,000.00 8,000.00
513 Utilities Expense 5,000.00 5,000.00 5,000.00
170,000.00 170,000.00
514 Laundry Supplies Expense a) 3,000.00 3,000.00 3,000.00
515 Depreciation Expense - LE b) 500.00 500.00 500.00
122 Accumulated Depreciation b) 500.00 500.00 500.00
3,5000.00 3,500.00 170,500.00 170,500.00 19,500.00 35,000.00 151,000.00 135,500.00
Net Income 15,500.00 15,500.00
35,000.00 35,000.00 151,000.00 151,000.00
[11]
Preparation of Financial Statements

An up-dated financial information needed by owners, managers and other interested
parties can now be prepared based on the completed worksheet. An updated account balances
appearing in the financial reports can help users of the report make good business decisions.
These financial reports include:
1. Income Statement
2. Statement of Changes in Owner's Equity
3. Balance Sheet
4. Cash Flow Statement
Discussions and presentation of the aforementioned statements had already been

discussed in Module 2.
Journalize and Post Adjusting Journal Entries
Amounts appearing in the general ledger needs to be updated to reflect the true balances
of accounts as of the end of the accounting period. Adjustments used in the preparation of the
worksheet need to be journalized and posted in the general ledger. The word "Adjusting" is written
in the Item column of the ledger.
General Journal page 3
Date Description P/R Debit Credit

2019 Adjusting Entries
Mar. 31 Laundry Supplies Expense 514 3,000-
Laundry Supplies 113 3,000-
Shop supplies consumed during the
month.
31 Depreciation Expense – Laundry Equipment 500-

Accumulated Depreciation – LE 500-
Depreciation for the month.
SHOP SUPPLIES Account No. 113
Date Items F Debit Date Items F Credit

2019 2019
March 1 GJ31 20,000- March 31 Adjusting GJ3 3,000-
[12]
SHOP SUPPLIES EXPENSE Account No. 514

2019
March 31 GJ3 3,000-
Journalize and Post Closing Entries
Accounts used to accumulate information from one fiscal period to the next are called
permanent accounts or real accounts. Permanent accounts include all assets, liabilities and
owner's capital account, or, all accounts that are shown in the balance sheet. The ending balance
of permanent accounts for one fiscal period becomes the beginning account balance in the next
fiscal period.
Accounts used to accumulate information until it is transferred to the owner's capital

account are called temporary accounts or nominal accounts. Temporary accounts include the
revenue, expense, owner's drawing and income summary accounts. Temporary accounts show
changes affecting the owner's capital account during a single fiscal period, and are not carried
forward. Thus, temporary accounts at the beginning of the next fiscal period starts with zero
balance.
Journal entries used to close temporary accounts to zero balance and prepare for the new
fiscal period are called closing entries. To close a temporary account, an amount equal to its
balance is recorded on the opposite side to its balance. Thus, a temporary account with a debit
balance needs to be credited for the same amount of the balance. Likewise, a temporary account
with credit balance needs to be debited for the same amount of the balance. As double entry
bookkeeping requires a debit and a credit, a temporary account Income Summary is used to
summarize the closing entries for revenue and expense accounts. For a service business, there
are four closing entries to be made namely:
1. Need to close revenue accounts or temporary accounts with credit balances. As revenue
accounts have credit balance, the closing entry would require a debit revenue account
and credit to Income Summary.
2. Need to close expense accounts or temporary accounts with debit balances. Temporary
accounts have normal debit balances as shown in the debit column of the work sheet and
these must be reduced to zero. As such, the closing entry would require that each expense
accounts be credited for an amount equal to its balance and a debit to Income Summary
for the total of the amounts credited.
3. Need to close Income Summary. Income Summary does not have normal balance. As
revenue and expense accounts had been closed to this the difference between the amount
debited and credited to account, Income Summary is equal to the net income or net loss
of the business.
Income Summary
Debited to close all Credited to close the
expense accounts revenue account
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When the credit side is greater than the debit side, the difference is a net income.
Income Summary would be closed by a debit to the account. A corresponding credit entry
shall be made to the owner's capital account to increase the capital for the amount of net
income earned. But when the debit side is greater than the credit side, the difference is a
net loss. Income Summary would be credited and the owner's capital account would be
debited to be reduced for the amount of net loss incurred.
4. Need to close the owner's drawing account. Withdrawals are assets that owners take out
of the business for personal use. It is not a revenue or expense account, thus, it is not
closed to Income Summary account. Drawing is a temporary account that reduces the
owner's capital. To close this temporary account, it is directly closed to the capital account.
Since drawing has a normal debit balance, the closing entry would require a credit to the
drawing account and a debit to capital.
Closing entries for Dadami Lilinis Laundry Shop is shown below.
General Journal page 4

2019 Closing Entries
March 31 Laundry Shop Revenue 411 35,000-
Income Summary Account 313 35,000-
To close revenue account.
31 Income Summary Account 19,500-

Wages Expense 3,000-
Rent Expense 8,000.-
Utilities Expense 5,000-
Laundry Supplies Expense 3,000-
Depreciation Expense – LE 500-
To close expense accounts.
General Journal Page 5

2019 Closing Entries
March 31 Income Summary 15,500-
Maila Bahin, Cpital 15,500-
31 Maila Bahin, Capital 3,000.-

Maila Bahin, Drawing 3,000.-
[14]
Posting the closing entries to the general ledger is similar to the procedures previously done. In
addition, the word "Closing" is written on the item column of the general ledger.
LAUNDRY SHOP REVENUE Account No. 41

2019 2019
March3 31 Closing GJ 4 35,000- March 13 GJ1 15,000-
15 GJ1 20,000.-
Ruling and Balancing the Accounts
At the end of the fiscal period (12th month), accounts are ruled and balanced to close the
books for the fiscal period ended. Balances of permanent accounts at the end of the accounting
period are opened as the beginning balance for the new fiscal period. Nominal accounts had been
closed to zero balance, thus, will not have beginning balances.
Permanent Accounts
Procedure:
1. Insert balance of the account to the side which is smaller. Use last day of the month, write
"Balance" on item column, place a check (√) on F column and the amount.
Asset accounts have normal debit balances, thus, transfer to the credit side to
close and balance the accounts, while Liabilities and capital accounts have normal credit
balances, thus, transfer to the debit side to close and balance the accounts.
2. Draw a single line on the amount column immediately after the last entry and on the same
line of the other column.
3. Add, then observe that both debit and credit sides are equal. Draw a double line on all
columns except on the item column.
4. Open the balance to the side originally greater as the beginning balance of the next
accounting period.
CASH Account No. 111

2019 201
March 1 GJ 1 100,000- March 8 GJ 1 20,000-
13 GJ1 15,000.- 15 GJ 1 3,000-
51,000.- 18 GJ 2 8,000-
25 GJ 2 30,000-
31 GJ2 3,000.-
31 Balance √ 51,000-
115,000- 115,000-
April 1 Balance √ 51,000-
Step #5 Step #4 Step #3 Step #1 Step #2 Step #3
[15]
ACCOUNTS PAYABLE Account No. 211

2019 2019
March 25 GJ 2 30,000- March 5 GJ 1 60,000-
31 Balance √ 35,000.- 18 GJ2 5,000.-
65,000- 65,000-
MAILA BAHIN, CAPITAL Account No. 311

2019 2019
March 31 Closing GJ5 3,000- March 1 GJ 1 100,000-
31 Balance √ 112,500- 31 Closing GJ5 15,500.-
115,500- 115,500-
Nominal Accounts
Procedure:
1. Draw a single line immediately after the last entry of the longer column and on the game
line of the shorter column.
2. Add. Note that the total of both debit and credit columns are equal. The temporary account
thus have zero balance.
3. Draw a double line on all columns except the item columns. Transaction of the accounting
period just ended had been closed and separated with the transactions of the next
accounting period.
4. If both sides have only one entry each, a double line is drawn on all columns except the
items column.
MAILA BAHIN, DRAWING Account No. 312

2019 2019
March 31 Closing GJ5 3,000- March 31 GJ 2 3,000-
Step #4
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INCOME SUMMARY Account No. 313

2019 2019
March 31 Closing GJ 4 19,500- March 31 Closing GJ4 35,000-
31 Closing GJ 5 15,500-
35,000- 35,000-
Step #3 Step #2 Step #1 Step #2
LAUNDRY SHOP REVENUE Account No. 411

2019 2019
March 31 Closing GJ4 35,000.- March 13 GJ1 15,000.-
15 GJ 1 20,000-
35,000.00 35,000.-
WAGES EXPENSE Account No. 511

2019 2019
March 15 GJ 1 3,000- March 31 Closing GJ 4 3,000-
Post-Closing Trial Balance
After the accounts had been ruled and balanced, the business entity prepares a trial
balance to verify that the total debits equal the total credits in the ledger after the accounts had
been closed. Only general ledger accounts balances are included in the post-closing trial balance.
Permanent accounts (assets, liabilities, capital) have balances and do appear in the post-closing
trial balance. Nominal accounts (drawing, income summary, revenue, expenses, had been closed
and have zero balances, thus, will not appear in the post-closing trial balance.
[17]
Post-closing trial balance of the sample business follows:
Dadami Lilinies Laundry Shop

Post-Closing Trial Balance
March 31, 2019
Acct.
No. Account Title Debit Credit
111 Cash 51,000.00
113 Laundry Supplies 17,000.00
122 Accumulated Depreciation – LE 500.00
148,000.00 144,000.00
[18]
Discussion Questions
1. Differentiate cash basis accounting from the accrual basis of accounting.

2. What are adjusting entries? Give the accounts that needs to be adjusted at the end of the
accounting period.
3. After the trial balance is completed, why are financial statements not prepared yet?
4. What are fixed assets? Give examples.
5. What is depreciation? Are all fixed assets subject to depreciation?
6. What are the factors to be considered in computing depreciation?
7. What are the effects on the financial statements of failure to record depreciation?
8. What is a work sheet? Why is it a valuable accounting tool?
9. Why do adjusting entries necessary to be journalized and posted even if they have been
entered already in the work sheet?
10. In what order are assets listed on the statement of financial position?
11. What are closing entries? Which types of accounts are closed?
12. What is a post-closing trial balance? What purpose does it serve?
Problem Solving in application of the completion of the accounting process
Given below is the Chart of Accounts of Unifast Delivery Service which you will use in answering
the requirements of this problem.
Account Account
No. Account Title No. Account Title
ASSETS CAPITAL
111 Cash 311 Ron Paspas, Capital
112 Accounts Receivable 312 Ron Paspas, Drawing
113 Notes Receivable 313 Income Summary
114 Interest Receivable REVENUE
115 Supplies 411 Delivery Service Revenue
116 Prepaid Insurance 412 Interest Revenue
117 Prepaid Rent EXPENSES
121 Building 511 Supplies Expense
122 Accumulated Depreciation - Building 512 Insurance Expense
123 Trucks 513 Rent Expense
124 Accumulated Depreciation – Trucks 514 Depreciation Expense – Bldg.
LIABILITIES 515 Depreciation Expense – Trucks
211 Accounts Payable 516 Salaries Expense
212 Salaries Payable 517 Utilities Expense
213 Notes Payable 518 Interest Expense
214 Mortgage Payable 519 Miscellaneous Expense
215
[19]
Presented is the Trial Balance of Unifast Delivery Service as of August 31, 2019
Unifast Delivery Service

Trial Balance
August 31, 2019
Account No. Account Title Debit Credit
111 Cash 24,100.-
112 Accounts Receivable 72,000.-
113 Notes Receivable 10,000.-
115 Supplies 27,000.-
116 Prepaid Insurance 7,200.-
117 Prepaid Rent 81,000.-
121 Building 680.000.-
122 Accumulated Depreciation - Building 54,000.-
123 Trucks 820,000.-
124 Accumulated Depreciation – Trucks 45,000.-
211 Accounts Payable 318,000.-
213 Notes Payable 470,000.-
214 Mortgage Payable 200,000.-
311 Ron Paspas, Capital 586,200.-
312 Ron Paspas, Drawing 15,000.-
411 Delivery Service Revenue 118,000.-
516 Salaries Expense 42,000.-
517 Utilities Expense 12,000.-
519 Miscellaneous Expense 900.-
1,791,200.- 1,791,200.-
Additional information for adjustments:
a. The supplies on hand on August 31, 2019 amounts to P15,000.-

b. The prepaid insurance balance of P7,200.- applies to two-year period beginning
August 1, 2019.
c. The prepaid rent of P81,000.- applies to a one-year policy beginning August 1,
2019.
d. The depreciation on the building for the month of August is P10,000.
e. The depreciation on the trucks for the month of August is P5,000.
f. Salaries incurred but unpaid as of August 31 is P7,000.-
g. The company rendered delivery services to customers as of August 31 in the
amount of P15,000 that will not be billed until September.
h. Interest on notes receivable and notes payable is 10%per annum.
[20]
Requirements:
1. Prepare a worksheet.
2. Prepare the following financial statements:
a. Income Statement
b. Statement of Owner’s Equity
c. Statement of Financial Position(Balance Sheet)
3. Journalize the adjusting entries and closing entries
4. Prepare the Post Closing Trial Balance
Note: For your answers please see the forms to be used on succeeding pages.
[21]
1. Worksheet
[22]
2. Financial Statements
a. Income Statements
b. Statement of Owner’s Equity
[23]
c. Statement of Financial Position
[24]
3. Journalizing of adjusting and closing entries
[25]
4. Post-Closing Trial Balance
[26]
References
(n.d.). Retrieved September 23, 2020, from Chron: https://smallbusiness.chron.com/

Accounting Theory. (n.d.). Retrieved September 23, 2020, from Weebly:
https://accountingtheory.weebly.com/functions-of-accounting.html
Baguino, A. D., Dela Crus, M. S., Doquenia, M. M., Espino, L. M., Fonte, J. G., Hernane, M. B., .
. . Vedasto, C. M. (n.d.). Principles of Accounting (Vol. 2).
Baguino, M. D., Dela Crus, M. S., Doquenia, M. M., Espino, L. M., Fonte, J. G., Hernane, M. B.,
. . . Vedasto, C. M. (n.d.). Principles of Accounting (Vol. 1).
Corporate Finance & Accounting. (n.d.). Retrieved September 23, 2020, from Investopedia:
https://www.investopedia.com/terms/d/double-entry.asp
Harina, R. (n.d.). College Accounting 1 (Revised ed.).
Lim, & Adriano. (n.d.). Introduction to Accounting Principles and Procedures.
Macapilit, C. H. (n.d.). Worktext in Basic Accounting (Service Business/Merchandising) (Revised
ed.).
Madelo, R. R., & Esmeralda, E. D. (2015). Bookkeeping Part 1 – Single Proprietorship Service
Business (3rd ed.).
Salvador, S. M., Baysa, G. T., Dela Isla, J. M., Del Rosario, N. M., & Geronimo, E. F. (n.d.).
Bookkeeping I.
Sarmiento, S. A. (n.d.). Basic Accounting Made Easy.
Simple Journal Entry. (n.d.). Retrieved September 23, 2020, from AccountingTools:
https://www.accountingtools.com/c.articles/2017/5/16/simple-journal-entry
Topic 1: Accounting Information: Users and Uses. (n.d.). Retrieved September 23, 2020, from
MyEducator: https://app.myeducator.com/reader/web/516/topic1/ap8j1/
Value Added Tax (VAT) in the Philippines - An Introduction. (n.d.). Retrieved from MPM:
https://mpm.ph/value-added-tax-vat/
Vicente, M. V. (n.d.). Hand out on Seminar on Accounting for Non-Accountants (PICPA).
What is an Account? (n.d.). Retrieved September 23, 2020, from My Accounting Course:
https://www.myaccountingcourse.com/accounting-dictionary/account
[27]

Module 4 Completion The Accounting Cycle

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Module 4 Completion The Accounting Cycle

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Module 4 – Complete Accounting Cycle

Course Title: Accounting Principles

1. Analyzing business transactions based on source documents.

Cash and Accrual Basis of Accounting

Adjusting the Accounts

Transaction Expense Portion Prepaid Expense Portion

a. When an asset had been initially recorded,

Debit an Expense account for the portion used/expired and

Transaction Original Entry Adjusting Entry

b. When an expense had been initially recorded,

Debit an Asset account for the portion unused/unexpired, and

Transaction Original Entry Adjusting Entry

Transaction Adjusting Entry

Transaction Earned Portion Unearned Portion

Transaction Original Entry Adjusting Entry

Transaction Original Entry Adjusting Entry

Transaction Adjusting Entry

Procedure: 1 - determine the depreciable cost by deducting salvage value from

Adjusting Depreciation Expense – Equipment………………750-

A worksheet is a columnar accounting form that is used to assemble account balances

Procedures in Preparing a Worksheet:

Dadami Lilinis Laundry Shop

2. Prepare the column headings of the worksheet.

Dadami Lilinis Laundry Shop

Trial Income Balance

6. Determine the amount of the Net Income or Net loss.

For the Month Ended, March 31, 2019

111 Cash 51,000.00

112 Accounts Receivable 20,000.00

113 Laundry Supplies 20,000.00

121 Laundry Equipment 60,000.00

211 Accounts Payable 35,000.00

311 Maila Bahin, Capital 100,000.00

312 Maila Bahin, Drawing 3,000.00

411 Laundry Shop Revenue 35,000.00

511 Wages Expense 3,000.00

512 Rent Expense 8,000.00

513 Utilities Expense 5,000.00

For the Month Ended, March 31, 2019

111 Cash 51,000.00

112 Accounts Receivable 20,000.00

113 Laundry Supplies 20,000.00 a) 3,000.00

121 Laundry Equipment 60,000.00

211 Accounts Payable 35,000.00

311 Maila Bahin, Capital 100,000.00

312 Maila Bahin, Drawing 3,000.00

411 Laundry Shop Revenue 35,000.00

511 Wages Expense 3,000.00

512 Rent Expense 8,000.00

513 Utilities Expense 5,000.00

514 Laundry Supplies Expense a) 3,000.00

515 Depreciation Expense - LE b) 500.00

122 Accumulated Depreciation b) 500.00

For the Month Ended, March 31, 2019

111 Cash 51,000.00 51,000.00 51,000.00

112 Accounts Receivable 20,000.00 20,000.00 20,000.00

113 Laundry Supplies 20,000.00 a) 3,000.00 17,000.00 17,000.00

121 Laundry Equipment 60,000.00 60,000.00

211 Accounts Payable 35,000.00 35,000.00 35,000.00

311 Maila Bahin, Capital 100,000.00 100,000.00 100,000.00

312 Maila Bahin, Drawing 3,000.00 3,000.00 3,000.00

411 Laundry Shop Revenue 35,000.00 35,000.00 35,000.00