Completing The Accounting Cycle

4
Completing the
Accounting Cycle
1
After studying this chapter, you should be
able to:
1. Describe the flow of accounting information from the unadjusted trial
balance into the adjusted trial balance and financial statements.
2. Prepare financial statements from

adjusted account balances.
3. Prepare closing entries.
2
After studying this chapter, you should be
able to:
4. Describe the accounting cycle.
5. Illustrate the accounting cycle for one
period.
6. Explain what is meant by the fiscal
year and the natural business year.
33
4-1
Objective
Objective 11
Describe the flow of accounting
information from the
unadjusted trial balance into the
adjusted trial balance and
financial statements.
4
4-1
A B C D E F G H I J K
SolusiNet
End-of-Period Spreadsheet (Worksheet)
For the Two Months Ended December 31, 2007
Undajusted Trial Adjusted Trial
Account Tittle Balance Adjustments Balance Income Statement Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
1 Cash 2,065 2,065 2,065
2 Accounts Receivable 2,220 (d) 500 2,720 2,720
3 Supplies 2,000 (a) 1,240 760 760
4 Prepaid Insurance 2,400 (b) 200 2,200 2,200
5 Land 20,000 20,000 20,000
6 Office Equipment 1,800 1,800 1,800
7 Account Payable 900 900 900
8 Unearned Rent 360 (c) 120 240 240
9 Cinta Cita, Capital 25,000 25,000 25,000
10 Cinta Cita, Drawing 4,000 4,000 4,000
11 Fees Earned 16,340 (d)500 16,840 16,840
12 Wages Expense 4,275 (e) 250 4,525 4,525
13 Rent Expense 1,600 1,600 1,600
14 Utilities Expense 985 985 985
15 Supplies Expense 800 (a) 1,240 2,040 2,040
16 Misscellaneous Expense 455 455 455
17 42,600 42,600
18 Insurance Expense (b) 200 200 200
19 Rent Revenue (c)120 120 120
20 Wages Payable (e) 250 250 250
21 Depreciation Expense (f) 50 50 50
22 Accumulated Depreciation (f) 50 50 550
23 2,360 2,360 43,400 43,400 9,855 16,960 33,545 26,440
24 Net income 7,105 7,105
25 16,960 16,960 33,545 33,545
4-1
Spreadsheet (Work Sheet)
Trial Balance Adjustments Adjusted TB

Accounts Dr Cr Dr Cr Dr Cr
Accounts are listed in the Trial Balance column

using the ending balance found in the general
ledger. 66
4-1

Adjustments are entered here. Two possibilities:

1. Deferrals – Existing balances are changed.
2. Accruals – New information is entered. 77
4-1

Adjustments are combined with

the trial balance. Account
balances are now adjusted.
88
4-1
Adjusted TB Income State. Balance Sheet

Revenue and expense balances in the

Adjusted Trial Balance column are extended
to the Income Statement column.
99
4-1
Adjusted TB Income State. Balance Sheet

Asset, liability, owner’s equity, and

drawing balances in the Adjusted
Trial Balance column are extended
10
10
to the Balance Sheet column.
4-1
Example Exercise 4-1

The balances for the accounts listed below appear in the
Adjusted Trial Balance columns of the end-of-period
spreadsheet (work sheet). Indicate whether each balance
should be extended to (a) an Income Statement column or
(b) a Balance Sheet column.
1. Ambar Dewi, Drawing 5. Fees Earned
2. Utilities Expense 6. Accounts Payable
3. Accumulated Depreciation 7. Rent Revenue
—Equipment 8. Supplies
4. Unearned Rent
11
4-1
Follow My Example 4-1

1. Balance Sheet column
2. Income Statement column
For Practice: PE 4-1A, PE 4-1B 12

4-2
Objective
Objective 22
Prepare financial
statements from adjusted
account balances.
13
4-2
SolusiNet
Income Statement
Fees earned Rp16 840 000
Rent revenue 120 000
Total revenues Rp16 960 000
Expenses:
Wages expense Rp4 525 000
Suppliea expense 2 040 000
Rent expense 1 600 000
Utilities expense 985 000
Insurance expense 200 000
Depreciation expense 50 000
Misscellaneous expense 455 000
Total expenses 9 855 000
Net income Rp7 105 000
SolusiNet
Statement of Owner's Equity
Cinta Cita, capital, November 1, 2007 Rp 0
Investments on November 1, 2007 Rp25 000 000
Net Income for November and December 7 105 000
RP32 105 000
Less withdrawals
Increase in owner's equity
4 000 000
28 105 000
To balance
Cinta cita, capital, December 31, 2007 Rp28 105 000
sheet 14
4-2
SolusiNet
Balance Sheet
December 31, 2007
Assets Liabilities
Current assets; Current Liabilities
Cash Rp2 065 000 Accounts payable Rp 900 000
Accounts Receivable 2 720 000 Wages payable 250 000
Supplies 760 000 Unearned rent 240 000
Prepaid Insurance 2 200 000 Total liabilities Rp1 390 000
Total current assets Rp7 745 000
Property, Plant and equipment
Land Rp20 000 000
Office equipment Rp1,800,000
Less accum. depr. 50,000 1 750 000 owner's equity
Total property, plant Cinta Cita, capital Rp28 105 000
and equipment 21 750 000 Total liabilities and
Total assets Rp29 495 000 owner's equity Rp29 495 000
From statement of
owner’ equity 15
4-2

In the Balance Sheet columns of the end-of-period
spreadsheet (work sheet) for Dahsyat Consulting Co. for the
current year, the Debit column total is Rp678,450,000 and
the Credit column total is Rp599,750,000 before the amount
of net income or net loss has been included. In preparing
the income statement from the end-of-period spreadsheet
(work sheet), what is the amount of net income or net loss?
16
4-2
A net income of Rp78,700,000 (Rp678,450,000 –

Rp599,750,000) would be reported. When the Debit
column of the Balance Sheet columns is more than the
Credit column, net income is reported. If the Credit
column exceeds the Debit column, a net loss is reported.

4-2

Zaka Gading owns and operates Gading Employment
Services. On January 1, 2007, Zaka Gading, Capital had a
balance of Rp186,000,000. During the year, Zaka invested
an additional Rp40,000,000 and withdrew Rp25,000,000.
For the year ended December 31, 2007, Gading
Employment Services reported a net income of
Rp18,750,000. Prepare a statement of owner’s equity for
the year ended December 31, 2007.
18
4-2

GADING EMPLOYMENT SERVICES
STATEMENT OF OWNER’S EQUITY
For the Year Ended December 31, 2007
Zaka Gading, capital, January 1, 2007 Rp186,000,000
Additional investment during 2007 40,000,000
Total Rp226,000,000
Withdrawals Rp 25,000,000
Less net income 18,750,000
Decrease in owner’s equity 6,250,000
Zaka Gading, capital, December 31, 2007 Rp219,750,000

4-2
A classified balance sheet is a

balance sheet that was expanded
by adding subsections for current
assets; property, plant, and
equipment; and current liabilities.
20
4-2
Cash and other assets that are expected

to be converted into cash, sold or used
up usually within a year or less,
through the normal operations of the
business are called current assets.
 Cash
 Accounts Receivable
 Supplies
21
4-2
Notes receivable are written

promises by the customer to
pay the amount of the note
and possibly interest at an
agreed rate.
22
4-2
Property, plant, and equipment (also called

fixed assets) include assets that depreciate
over a period of time. Land is an exception
as it is not subject to depreciation.
 Equipment
 Machinery
 Buildings
 Land
23
4-2
Liabilities that will be due within a

short time (usually one year or less)
and that are to be paid out of current
assets are called current liabilities.
 Accounts payable
 Wages payable
 Interest payable
 Unearned fees
24
4-2
Liabilities not due for a long

time (usually more than one
year) are long-term liabilities.
 Notes payable
 Mortgage payable
 Bond payable
25
4-2
Owner’s equity is the owner’s

right to the assets of the business.
Owner’s equity is added to the
total liabilities, and the total must
be equal to the total assets.
26
4-2

The following accounts appear in the adjusted trial balance of
Mata Hati Consulting. Indicate whether each account would be
reported in the (a) current asset; (b) property, plant, and
equipment; (c) current liability, (d) long-term liability; or (e)
owner’s equity section of the December 31, 2007 balance sheet
of Hindsight Consulting.
1. Jaka Cahyadi, Capital 5. Cash
2. Notes Receivable (due 6. Unearned Rent
in 6 months) months)
3. Notes Payable (due in 7. Accumulated Depr.—
2009) Equipment
4. Land 8. Accounts Payable 27
27
4-2
1. Owner’s equity 5. Current asset

2. Current asset 6. Current liability
3. Long-term liability 7. Property, plant, and equipment
4. Property, plant, and equip. 8. Current liability

4-3
Objective
Objective 33
Prepare closing
entries.
29
4-3
Accounts that are relatively

permanent from year to year are
called real accounts. Accounts
that report amounts for only one
period are called temporary
accounts or nominal accounts.
30
4-3
To report amounts for only one period,

temporary accounts should have zero
balances at the beginning of the
period. At the end of the period the
revenue and expense account balances
are transferred to Income Summary.
31
4-3
The balance of Income Summary is

then transferred to the owner’s capital
account. The balance of the owner’s
drawing account is also transferred to
the owner’s capital account. The
entries that transfer these balances are
called closing entries.
32
4-3
33
33
4-3
Debit each revenue account

for the amount of its balance,
and credit Income Summary
for the total revenue.
Fees Earned
Income Summary 16,840 Bal. 16,840
16,960 Rent Revenue
120 Bal. 120
34
34
(In Rp000)
4-3
Wages Expense
Bal. 4,525 4,525 Income Summary
Rent Expense 9,855 16,960
Bal. 1,600 1,600
Depreciation Expense
Bal. 50 50
Utilities Expense
Bal. 985 985
Supplies Expense
Debit Income Summary
Bal. 2,040 2,040
Insurance Expense
for the total expenses
Bal. 200 200
and credit each expense
Miscellaneous Expense account for its balance.
Bal. 455 455 35
35
(In Rp000)
4-3
Income Summary
9,855 16,960
7,105
Debit Income
Cinta Cita, Capital
Summary for the
Bal. 25,000
7,105 amount of its balance
(in this case, the net
income) and credit the
Cinta Cita, Drawing capital account.
Bal. 4,000
(In Rp000) 36
36
4-3
CintaCita, Capital
4,000 Bal. 25,000
7,105 Debit the capital
account for the
balance of the
Cinta Cita, Drawing
drawing account,
Bal. 4,000 4,000
and credit drawing
for the same
amount.
37
37
Closing Entries for SolusiNet 4-3
JOURNAL Page 6
Post.
Date Description Ref. Debit Credit
Closing Entries
Step
Step 11 Dec.2007 31 Fees Earned 41 16 840 000
Rent Revenue 42 120 000
Income Summary 33 16 960 000
Step
Step 22 31 Income Summary
Wages Expense
33
51
9 855 000
4 525 000
Rent Expense 52 1 600 000
Depreciation Expense 53 50 000
Utilities Expense 54 985 000
Supplies Expense 55 2 040 000
Insurance Expense 56 200 000
Miscellaneous Expense 59 455 000
Step
Step 33 31 Income Summary 33 7 105 000
Cinta Cita, Capital 31 7 105 000
Step
Step 44 31 Cinta Cita, Capital
Cinta Cita, Drawing
31
32
4 000 000
4 000 000
38
4-3
After the closing entries

are posted, all of the
temporary accounts have
zero balances.
39
4-3
4-4
The following
After accounts
the accounts have appear in the adjusted
been adjusted trialthebalance
at July 31, end ofof
the
Hindsight
fiscal year,Consulting.
the following Indicate
balanceswhether eachfrom
are taken account wouldof
the ledger be
reported
Ungu in the
Violet (a) current asset; (b) property, plant, and
Services
equipment;
Anisa (c) current
Putri, liability, (d) long-term
Capital liability; or (e)
Rp615,850,000
owner’s equity
Anisa section
Putri, of the December 31, 2007,
Drawing balance sheet
25,000,000
of Hindsight Consulting.
Fees Earned 380,450,000
Wages Expense 250,000,000
Rent Expense 65,000,000
Supplies Expense 18,250,000
Miscellaneous Expense 6,200,000
Journalize the four entries required to close the accounts.
40
4-3
July 31 Fees Earned 380,450,000
Income Summary 380,450,000
31 Income Summary 339,450,000

Wages Expense 250,000,000
Rent Expense 65,000,000
Supplies Expense 18,250,000
Miscellaneous Expense 6,200,000
31 Income Summary 41,000,000

Anisa Putri, Capital 41,000,000
31 Terry Lambert, Capital 25,000,000

Anisa Putri, Drawing 25,000,000
41
For Practice: PE 4-5A, PE 4-5B
Exhibit 7 Post-Closing Trial Balance 4-3
SolusiNet
Post-Closing Trial Balance
December 31, 2007
Cash 2 065 000
Accounts Receivable 2 720 000
Supplies 760 000
Prepaid Insurance 2 200 000
Land 20 000 000
Office Equipment 1 800 000
Accumulated Depreciation 50 000
Accounts Payable 900 000
Wages Payable 250 000
Unearned Rent 240 000
Cinta Cita, Capital 28 105 000
29 545 000 29 545 000 42
42
4-4
Objective
Objective 44
Describe the
accounting cycle.
43
4-4
The accounting process that begins

with analyzing and journalizing
transactions and ends with preparing
the accounting records for the next
period’s transactions is called the
accounting cycle. There are ten steps
in the accounting cycle.
44
The Accounting Cycle 4-4
1. Transactions are analyzed and recorded

in the journal.
2. Transactions are posted to the ledger.
3. An unadjusted trial balance is prepared.
4. Adjustment data are assembled and
analyzed.
5. An optional end-of-period spreadsheet
(work sheet) is prepared.
45
Continued
4-4
6. Adjusting entries are journalized and

posted to the ledger.
7. An adjusted trial balance is prepared.
8. Financial statements are prepared.
9. Closing entries are journalized and
posted to the ledger.
10. A post-closing trial balance is prepared.
46
4-4
4-4
The following
From accounts
the following appear
list of stepsin inthe
theadjusted trialcycle,
accounting balance of
identify
Hindsight Consulting.
what two steps Indicate whether each account would be
are missing.
reported in the (a) current
a. Transactions asset; (b)
are analyzed andproperty,
recordedplant, andjournal.
in the
equipment; (c) current
b. Transactions liability,to(d)
are posted thelong-term
ledger. liability; or (e)
owner’s equity section
c. Adjustment of the
data are Decemberand
assembled 31,analyzed.
2007, balance sheet
of
d. Hindsight Consulting.
An optional end-of-period spreadsheet (work sheet) is
prepared.
e. Adjusting entries are journalized and posted to the
ledger.
f. Financial statements are prepared.
g. Closing entries are journalized and posted to the
ledger.
h. A post-closing trial balance is prepared. 47
21
4-4
The following two steps are missing: (1) the

preparation of an unadjusted trial balance and (2)
the preparation of the adjusted trial balance. The
unadjusted trial balance should be prepared after
step (b). The adjusted trial balance should be
prepared after step (e).
48
For Practice: PE 4-6A, PE 4-6B
4-5
Objective
Objective 55
Illustrate the accounting
cycle for one period.
Refer to the textbook for
this extended illustration.
49
4-6
Objective
Objective 66
Explain what is meant by
the fiscal year and the
natural business year.
50
4-6
The annual accounting period adopted

by a business is known as its fiscal
year. When a business adopts a fiscal
year that ends when business activities
have reached the lowest point in its
annual operation, such a fiscal year is
also called the natural year.
51
Financial History of a Business 4-6
The financial history of a business may be

shown by a series of balance sheets and
income statements, as displayed below.
52
52
Appendix
Appendix
End-of-Period
53
The end-of-period spreadsheet (work
sheet) shown in the following slides
does not have the usual spreadsheet
headings due to space constraints.
54
(In Rp000)
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Account Title Debit Credit Debit Credit Debit Credit
1 Cash 2,065
2 Accounts Receivable 2,220
3 Supplies 2,000
4 Prepaid Insurance 2,400
5 Land 20,000
6 Office Equipment 1,800
7 Accounts Payable 900 The
The
8
9
Unearned Rent
Cinta Cita, Capital
360
25,000
unadjusted
unadjusted
10
11
Cinta Cita, Drawing
Fees Earned
4,000
16,340
trial
trial balance
balance
12 Wages Expense 4,275 isis checked
checked
13 Rent Expense 1,600
14 Utilities Expense 985 for
for equality.
equality.
15 Supplies Expense 800
16 Miscellaneous Expense 455
17 42,600 42,600
18
19 55
55
20
21
22
(In Rp000)
Unadjusted Adjusted
1 Cash 2,065
3 Supplies 2,000 (a) 1,240
5 Land 20,000
6
7
Office Equipment
Accounts Payable
1,800
900
Cost
Cost of
of
8
9
Unearned Rent
Cinta Cita, Capital
360
25,000
supplies
supplies on
on
10 Cinta Cita, Drawing 4,000 hand
hand atat end
end
11 Fees Earned 16,340
12 Wages Expense 4,275 of
of period
period isis
14 Utilities Expense 985 Rp760,000.
Rp760,000.
15 Supplies Expense 800 (a) 1,240
17 42,600 42,600
18
19 56
56
20
21
22
(In Rp000)
Unadjusted Adjusted
1 Cash 2,065
3 Supplies 2,000 (a) 1,240
4 Prepaid Insurance 2,400 (b) 200
5 Land 20,000
6
7
Office Equipment
Accounts Payable
1,800
900
The
The
8 Unearned Rent 360 insurance
insurance
9 Cinta Cita, Capital 25,000
10 Cinta Cita, Drawing 4,000 expense
expense for
for
12 Wages Expense 4,275 December
December isis
Rent Expense 1,600
13
14 Utilities Expense 985 Rp200,000
Rp200,000
15
16
Supplies Expense
Miscellaneous Expense
800
455
(a) 1,240 (Rp2,400,00
(Rp2,400,00
17
18 Insurance Expense
42,600 42,600
(b) 200
0/12)
0/12)
19
57
57
20
21
22
Accounts are added as needed.
(In Rp000)
Unadjusted Adjusted
1 Cash 2,065
3 Supplies 2,000 (a) 1,240
5 Land 20,000
6
7
Office Equipment
Accounts Payable
1,800
900
Rent
Rent revenue
revenue
8 Unearned Rent 360 (c) 120 earned
earned
10 Cinta Cita, Drawing 4,000 during
during
12 Wages Expense 4,275 December
December
Rent Expense 1,600
13
14 Utilities Expense 985 was
was
15
16
Supplies Expense
800
455
(a) 1,240 Rp120,000.
Rp120,000.
17 42,600 42,600
18 Insurance Expense (b) 200
19 Rent Revenue (c) 120 58
58
20
21
22
(In Rp000)
Unadjusted Adjusted
1 Cash 2,065
3 Supplies 2,000 (a) 1,240
5 Land 20,000
6
7
Office Equipment
Accounts Payable
1,800
900
Wages
Wages
8 Unearned Rent 360 (c) 120 accrued
accrued but
but
10 Cinta Cita, Drawing 4,000 not
not paid
paid at
at
12 Wages Expense 4,275 (d) 250 the
the end
end of
of
Rent Expense 1,600
13
14 Utilities Expense 985 December
December
15
16
Supplies Expense
800
455
(a) 1,240 totaled
totaled
17
18 Insurance Expense
42,600 42,600
(b) 200
Rp250,000.
Rp250,000.
59
20 Wages Payable (d) 250
21
22
(In Rp000)
Unadjusted Adjusted
1 Cash 2,065
2 Accounts Receivable 2,220 (e) 500
3 Supplies 2,000 (a) 1,240
5 Land 20,000
6
7
Office Equipment
Accounts Payable
1,800
900
Fees
Fees accrued
accrued
8 Unearned Rent 360 (c) 120 at
at the
the end
end of
of
10 Cinta Cita, Drawing 4,000 December
December
11 Fees Earned 16,340 (e) 500
12 Wages Expense 4,275 (d) 250 but
but not
not
Rent Expense 1,600
13
14 Utilities Expense 985 recorded
recorded
15
16
Supplies Expense
800
455
(a) 1,240 total
total
17
Insurance Expense
42,600 42,600
(b) 200
Rp500,000.
Rp500,000.
18
60
21
22
(In Rp000)
Unadjusted Adjusted
1 Cash 2,065
3 Supplies 2,000 (a) 1,240
5 Land 20,000
7 Accounts Payable 900 Depreciation
Depreciation
8
9
Unearned Rent
Cinta Cita, Capital
360
25,000
(c) 120
of
of office
office
10
11
Cinta Cita, Drawing
Fees Earned
4,000
16,340 (e) 500
equipment
equipment isis
12 Wages Expense 4,275 (d) 250 Rp50,000
Rp50,000 forfor
14 Utilities Expense 985 December.
December.
17 42,600 42,600
61
21 Depreciation Expense (f) 50
22 Accum. Depreciation (f) 50
(In Rp000)
Unadjusted Adjusted
1 Cash 2,065
3
4
Supplies
Prepaid Insurance
2,000
2,400
(a) 1,240
(b) 200
To
To make
make
5
6
Land
Office Equipment
20,000
1,800
more
more
7
8
Accounts Payable
Unearned Rent
900
360 (c) 120
space,
space,
9
10
Cinta Cita, Capital
Cinta Cita, Drawing 4,000
25,000
let’s
let’s
11
12
Fees Earned
Wages Expense 4,275
16,340
(d) 250
(e) 500
remove
remove
13
14
Rent Expense
Utilities Expense
1,600
985 the
the
Supplies Expense 800 (a) 1,240
15
16 Miscellaneous Expense 455 heading.
heading.
17 42,600 42,600
62
22 Accum. Depreciation (f) 50
Unadjusted Adjusted
1 Cash 2,065
3 Supplies 2,000 (a) 1,240
5 Land 20,000
7 Accounts Payable 900
8 Unearned Rent 360 (c) 120 (In Rp000)
10 Cinta Cita, Drawing 4,000
11 Fees Earned 16,340 (e) 500
12 Wages Expense 4,275 (d) 250
14 Utilities Expense 985
17 42,600 42,600
19 Rent Revenue (c) 120
Depreciation Expense (f) 50
21
22 Accum. Depreciation
Summed
Summed (f) 50 63
63
23 and
and 2,360 2,360
24
25
ruled
ruled
The next step is to add or subtract
the adjustments from (to) the
amounts found in the Unadjusted
Trial Balance columns and enter
the results in the Adjusted Trial
Balance columns.
64
Unadjusted Adjusted
1 Cash 2,065
3 Supplies 2,000 (a) 1,240
5 Land 20,000
8 Unearned Rent 360 (c) 120
10 Cinta Cita, Drawing 4,000 (In Rp000)
11 Fees Earned 16,340 (e) 500
12 Wages Expense 4,275 (d) 250
17 42,600 42,600
19 Rent Revenue (c) 120
22 Accum. Depreciation (f) 50 65
23 2,360 2,360
24
25 65
Unadjusted Adjusted
1 Cash 2,065 2,065
2 Accounts Receivable 2,220 (e) 500 2,720
3 Supplies 2,000 (a) 1,240 760
4 Prepaid Insurance 2,400 (b) 200 2,200
5 Land 20,000 20,000
6 Office Equipment 1,800 1,800
7 Accounts Payable 900 900
8 Unearned Rent 360 (c) 120 240
9 Cinta Cita, Capital 25,000 25,000
10 Cinta Cita, Drawing 4,000 4,000
11 Fees Earned 16,340 (e) 500 16,840
12 Wages Expense 4,275 (d) 250 4,525
13 Rent Expense 1,600 1,600
14 Utilities Expense 985 985
15 Supplies Expense 800 (a) 1,240 2,040
16 Miscellaneous Expense 455 455
17 42,600 42,600
18 Insurance Expense (b) 200 200
20 Wages Payable (d) 250 250
21 Depreciation Expense (In Rp000) (f) 50 50
22 Accum. Depreciation (f) 50 66 50
23 2,360 2,360 43,400 43,400
24
25 66
Because of space
constraints, the Unadjusted
Trial Balance and the
Adjustments columns will
not be shown in the
following slides.
67
Adjusted
Trial Balance Income Statement Balance Sheet
1 Cash 2,065
3 Supplies 760
5 Land 20,000
8 Unearned Rent 240
9 Cinta Cita, Capital 25,000 (In Rp000)
12 Wages Expense 4,525
15 Supplies Expense 2,040
17
18 Insurance Expense 200
19 Rent Revenue 120
20 Wages Payable 250
21 Depreciation Expense 50
22 Accum. Depreciation 50 68
68
23 43,400 43,400
24
25
The next step is to
extend amounts in the
Adjusted Trial Balance
columns to the Income
Statement and Balance
Sheet columns.
69
Adjusted
1 Cash 2,065
3 Supplies 760
5 Land 20,000
8 Unearned Rent 240
11 Fees Earned 16,840 (In Rp000)
12 Wages Expense 4,525
15 Supplies Expense 2,040
17
18 Insurance Expense 200
19 Rent Revenue 120
20 Wages Payable 250
21 Depreciation Expense 50
22 Accum. Depreciation 50 70
70
23 43,400 43,400
24
25
Adjusted
1 Cash 2,065 2,065
2 Accounts Receivable 2,720 2,720
3 Supplies 760 760
4 Prepaid Insurance 2,200 2,200
5 Land 20,000 20,000
8 Unearned Rent 240 240
11 Fees Earned 16,840 16,840
12 Wages Expense 4,525 4,525
15 Supplies Expense 2,040 2,040 (In Rp000)
17
18 Insurance Expense 200 200
19 Rent Revenue 120 120
20 Wages Payable 250 250
21 Depreciation Expense 50 50
22 Accum. Depreciation 50 71 50
23 43,400 43,400
24 71
25
The Income
Statement and
Balance Sheet
columns are totaled.
72
Adjusted
1 Cash 2,065 2,065
3 Supplies 760 760
5 Land 20,000 20,000
11 Fees Earned 16,840 16,840
15 Supplies Expense 2,040 2,040
(In Rp000)
17
23 43,400 43,400
24 73
25
Adjusted
1 Cash 2,065 2,065
3 Supplies 760 760
5 Land 20,000 20,000
11 Fees Earned 16,840 16,840
15 Supplies Expense 2,040 2,040 (In Rp000)
17
23 43,400 43,400 9,855 16,960 33,545 26,440
24
25
74
The net income or net
loss is determined. Then
the Income Statement
and Balance Sheet
columns are totaled and
double-ruled.
75
Adjusted
1 Cash 2,065 2,065
3 Supplies 760 760
5 Land 20,000 20,000
11 Fees Earned 16,840 16,840
14 Utilities Expense 985 985 (In Rp000)
17
23 43,400 43,400 9,855 16,960 33,545 26,440
24
25
76
Adjusted
77 Trial Balance Income Statement Balance Sheet
1 Cash 2,065 2,065
3 Supplies 760 760
5 Land 20,000 20,000
11 Fees Earned 16,840 16,840
14 Utilities Expense 985 985 (In Rp000)
17
23 43,400 43,400 9,855 16,960 33,545 26,440
24 Net income 7,105 7,105
25 16,960 16,960 33,545 33,545
(In Rp000)
Income Statement Balance Sheet
9,855 16,960 33,545 26,440

7,105 7,105
16,960 16,960 33,545 33,545
Net
Net Income Income
The difference between the Income Statement column
totals is the net income (or net loss) for the period.
78
78

Completing The Accounting Cycle

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4

2. Prepare financial statements from

Spreadsheet (Work Sheet)

Trial Balance Adjustments Adjusted TB

Accounts are listed in the Trial Balance column

Spreadsheet (Work Sheet)

Trial Balance Adjustments Adjusted TB

Adjustments are entered here. Two possibilities:

Spreadsheet (Work Sheet)

Trial Balance Adjustments Adjusted TB

Adjustments are combined with

Spreadsheet (Work Sheet)

Adjusted TB Income State. Balance Sheet

Revenue and expense balances in the

Spreadsheet (Work Sheet)

Adjusted TB Income State. Balance Sheet

Asset, liability, owner’s equity, and

Example Exercise 4-1

Follow My Example 4-1

For Practice: PE 4-1A, PE 4-1B 12

Example Exercise 4-2

Follow My Example 4-2

A net income of Rp78,700,000 (Rp678,450,000 –

For Practice: PE 4-2A, PE 4-2B 17

Example Exercise 4-3

Follow My Example 4-3

For Practice: PE 4-3A, PE 4-3B 19

A classified balance sheet is a

Cash and other assets that are expected

Notes receivable are written

Property, plant, and equipment (also called

Liabilities that will be due within a

Liabilities not due for a long

Owner’s equity is the owner’s

Example Exercise 4-4

Follow My Example 4-4

1. Owner’s equity 5. Current asset

For Practice: PE 4-4A, PE 4-4B 28

Accounts that are relatively

To report amounts for only one period,

The balance of Income Summary is

Debit each revenue account

After the closing entries

31 Income Summary 339,450,000

31 Income Summary 41,000,000

31 Terry Lambert, Capital 25,000,000

The accounting process that begins

1. Transactions are analyzed and recorded

6. Adjusting entries are journalized and

Follow My Example 4-6

The following two steps are missing: (1) the

The annual accounting period adopted

The financial history of a business may be

9,855 16,960 33,545 26,440

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