Financial accounting IFRS 4 kieoso ch04 PPT
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Financial Accounting
IFRS 4th Edition
Weygandt ● Kimmel ● Kieso
Chapter 4
Completing the
Accounting Cycle
Chapter Outline
Learning Objectives
LO 1 Prepare a worksheet.
LO 2 Prepare closing entries and a post-closing trial
balance.
LO 3 Explain the steps in the accounting cycle and how
to prepare correcting entries.
LO 4 Identify the sections of a classified statement of
financial position.
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2
Learning Objective 1
Prepare a Worksheet
LO 1
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3
The Worksheet
• Multiple-column form used in preparing financial
statements
• Not a permanent accounting record
• May be a computerized worksheet
• Prepared using a five step process
• Use of worksheet is optional
LO 1
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4
Worksheet
Account Titles
Cash
Supplies
Prepaid Insurance
Equipment
Notes Payable
Accounts Payable
Unearned Service Revenue
Owner's Capital
Owner's Drawings
Service Revenue
Salaries and Wages Expense
Rent Expense
Totals
Supplies Expense
Insurance Expense
Accumulated Depreciation
Depreciation Expense
Accounts Receivable
Interest Expense
Interest Payable
Salaries and Wages Payable
Totals
Net Income
Totals
Yazici Advertising A.S.
Worksheet
For the Month Ended October 31, 2020
Adjusted
Trial Balance
Adjustments
Trial Balance
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
15,200
15,200
2,500
(a) 1,500
1,000
600
(b)
50
550
5,000
5,000
5,000
5,000
2,500
2,500
1,200 (d) 400
800
10,000
10,000
500
500
10,000
(d) 400
10,600
(e) 200
4,000
(g) 1,200
5,200
900
900
28,700
28,700
(a) 1,500
1,500
2
Step
1 (b) Step
Step
3
50
50
(c)
40
40
Enter
Prepare
a
Enter
(c)
40
40
trial balance
adjusted
(e)adjustment
200
200
(f)
50
50
data.
on the
balances.
(f)
50
50
worksheet.
(g) 1,200
1,200
3,440
3,440
30,190
30,190
Income
Statement of
Statement
Financial Position
Dr.
Cr.
Dr.
Cr.
15,200
1,000
550
5,000
5,000
2,500
800
10,000
500
10,600
5,200
900
1,500
Step
4
50
Extend adjusted
40
40
balances
to appropriate
200
50
statement columns.
50
Step
5 1,200
7,740
10,600
22,450
19,590
2,860Total the statement
2,860
10,600
10,600
22,450
22,450
columns,
compute net income
(or net loss), and
complete worksheet.
LO 1
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5
Step 1
Account Titles
Cash
Supplies
Prepaid Insurance
Equipment
Notes Payable
Accounts Payable
Unearned Service Revenue
Share Capital—Ordinary
Dividends
Service Revenue
Salaries and Wages Expense
Rent Expense
Totals
Supplies Expense
Insurance Expense
Accumulated Depreciation
Depreciation Expense
Accounts Receivable
Interest Expense
Interest Payable
Salaries and Wages Payable
Totals
Net Income
Totals
Yazici Advertising A.S.
Worksheet
For the Month Ended October 31, 2020
Adjusted
Trial Balance
Adjustments
Trial Balance
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
15,200
15,200
2,500
(a) 1,500
1,000
600
(b)
50
550
5,000
5,000
5,000
5,000
2,500
2,500
1,200 (d) 400
800
10,000
10,000
500
500
10,000
(d) 400
10,600
(e) 200
4,000
(g) 1,200
5,200
900
900
28,700
28,700
(a) 1,500
1,500
(b) 50
50
(c)
40
40
(c)
40
40
(e) 200
200
(f)
50
50
(f)
50
50
(g) 1,200
1,200
3,440
3,440
30,190
30,190
Trial balance amounts come
directly from ledger accounts.
Include all accounts
with balances.
LO 1
Income
Statement
Dr.
Cr.
10,600
5,200
900
1,500
50
40
50
7,740
10,600
2,860
10,600
10,600
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Statement of
Financial Position
Dr.
Cr.
15,200
1,000
550
5,000
5,000
2,500
800
10,000
500
40
200
50
1,200
22,450
19,590
2,860
22,450
22,450
6
Step 2 Enter Adjustments
The adjustments are the same as in Illustration 3.23.
a. Yazici debits an additional account, Supplies Expense, ₺1,500 for the cost of
supplies used, and credits Supplies ₺1,500.
b. Yazici debits an additional account, Insurance Expense, ₺50 for the insurance
that has expired, and credits Prepaid Insurance ₺50.
c. The company needs two additional depreciation accounts. It debits
Depreciation Expense ₺40 for the month’s depreciation, and credits
Accumulated Depreciation—Equipment ₺40.
d. Yazici debits Unearned Service Revenue ₺400 for services performed, and
credits Service Revenue ₺400.
e. Yazici debits an additional account, Accounts Receivable, ₺200 for services
performed but not billed, and credits Service Revenue ₺200.
f. The company needs two additional accounts relating to interest. It debits
Interest Expense ₺50 for accrued interest, and credits Interest Payable ₺50.
g. Yazici debits Salaries and Wages Expense ₺1,200 for accrued salaries, and
CopyrightSalaries
©2019 Johnand
Wiley &
Son, Inc. Payable, ₺1,200.
LO 1 credits an additional account,
Wages
7
Step 2
Account Titles
Cash
Supplies
Prepaid Insurance
Equipment
Notes Payable
Accounts Payable
Unearned Service Revenue
Share Capital—Ordinary
Dividends
Service Revenue
Salaries and Wages Expense
Rent Expense
Totals
Supplies Expense
Insurance Expense
Accumulated Depreciation
Depreciation Expense
Accounts Receivable
Interest Expense
Interest Payable
Salaries and Wages Payable
Totals
Net Income
Totals
Yazici Advertising A.S.
Worksheet
For the Month Ended October 31, 2020
Adjusted
Income
Statement of
Trial Balance
Adjustments
Trial Balance
Statement
Financial Position
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
15,200
15,200
15,200
2,500
(a) 1,500
1,000
1,000
600
(b)
50
550
550
5,000
5,000
5,000
5,000
Adjustments
5,000
Key:
5,000
2,500
2,500
2,500
1,200 (d) 400
(a) 800
800
Supplies Used
10,000
10,000
10,000
500
500 (b) Insurance
Expired
500
10,000
(d) 400
10,600
10,600
(e) 200
(c) Depreciation
Expensed
4,000
(g) 1,200
5,200
5,200
900
900 (d) Service
900
Revenue Recognized
28,700
28,700
(a) 1,500
1,500 (e) Service
1,500
Revenue Accrued
(b) 50
50
50
Interest Accrued
(c)
40
(f) 40
40
(c)
40
40
40
Accrued
(e) 200
200 (g) Salaries
200
(f)
50
50
50
(f)
50
50
50
(g) 1,200
1,200 adjustment
total
1,200
Enter
amounts,
3,440
3,440
30,190
30,190
7,740
10,600
22,450
19,590
adjustments
2,860 columns,
and check
2,860
10,600
10,600
22,450
22,450
for equality.
Add additional accounts as needed.
LO 1
Copyright ©2019 John Wiley & Son, Inc.
8
Step 3
Account Titles
Cash
Supplies
Prepaid Insurance
Equipment
Notes Payable
Accounts Payable
Unearned Service Revenue
Share Capital—Ordinary
Dividends
Service Revenue
Salaries and Wages Expense
Rent Expense
Totals
Supplies Expense
Insurance Expense
Accumulated Depreciation
Depreciation Expense
Accounts Receivable
Interest Expense
Interest Payable
Salaries and Wages Payable
Totals
Net Income
Totals
Yazici Advertising A.S.
Worksheet
For the Month Ended October 31, 2020
Adjusted
Trial Balance
Adjustments
Trial Balance
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
15,200
15,200
2,500
(a) 1,500
1,000
600
(b)
50
550
5,000
5,000
5,000
5,000
2,500
2,500
1,200 (d) 400
800
10,000
10,000
500
500
10,000
(d) 400
10,600
(e) 200
4,000
(g) 1,200
5,200
900
900
28,700
28,700
(a) 1,500
1,500
(b) 50
50
(c)
40
40
(c)
40
40
(e) 200
200
(f)
50
50
(f)
50
50
(g) 1,200
1,200
3,440
3,440
30,190
30,190
Income
Statement
Dr.
Cr.
10,600
5,200
900
1,500
50
40
50
7,740
10,600
2,860
10,600
10,600
Statement of
Financial Position
Dr.
Cr.
15,200
1,000
550
5,000
5,000
2,500
800
10,000
500
40
200
50
1,200
22,450
19,590
2,860
22,450
22,450
Check equality of adjusted trial balance columns.
LO 1
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9
Step 4
Account Titles
Cash
Supplies
Prepaid Insurance
Equipment
Notes Payable
Accounts Payable
Unearned Service Revenue
Share Capital—Ordinary
Dividends
Service Revenue
Salaries and Wages Expense
Rent Expense
Totals
Supplies Expense
Insurance Expense
Accumulated Depreciation
Depreciation Expense
Accounts Receivable
Interest Expense
Interest Payable
Salaries and Wages Payable
Totals
Net Income
Totals
Yazici Advertising A.S.
Worksheet
For the Month Ended October 31, 2020
Adjusted
Trial Balance
Adjustments
Trial Balance
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
15,200
15,200
2,500
(a) 1,500
1,000
600
(b)
50
550
5,000
5,000
5,000
5,000
2,500
2,500
1,200 (d) 400
800
10,000
10,000
500
500
10,000
(d) 400
10,600
(e) 200
4,000
(g) 1,200
5,200
900
900
28,700
28,700
(a) 1,500
1,500
(b) 50
50
(c)
40
40
(c)
40
40
(e) 200
200
(f)
50
50
(f)
50
50
(g) 1,200
1,200
3,440
3,440
30,190
30,190
Income
Statement
Dr.
Cr.
10,600
5,200
900
1,500
50
40
50
7,740
10,600
2,860
10,600
10,600
Statement of
Financial Position
Dr.
Cr.
15,200
1,000
550
5,000
5,000
2,500
800
10,000
500
40
200
50
1,200
22,450
19,590
2,860
22,450
22,450
Extend adjusted trial balance amounts to appropriate financial statement columns.
LO 1
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10
Step 5
Account Titles
Cash
Supplies
Prepaid Insurance
Equipment
Notes Payable
Accounts Payable
Unearned Service Revenue
Share Capital—Ordinary
Dividends
Service Revenue
Salaries and Wages Expense
Rent Expense
Totals
Supplies Expense
Insurance Expense
Accumulated Depreciation
Depreciation Expense
Accounts Receivable
Interest Expense
Interest Payable
Salaries and Wages Payable
Totals
Net Income
Totals
Yazici Advertising A.S.
Worksheet
For the Month Ended October 31, 2020
Adjusted
Trial Balance
Adjustments
Trial Balance
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
15,200
15,200
2,500
(a) 1,500
1,000
600
(b)
50
550
5,000
5,000
5,000
5,000
2,500
2,500
1,200 (d) 400
800
10,000
10,000
500
500
10,000
(d) 400
10,600
(e) 200
4,000
(g) 1,200
5,200
900
900
28,700
28,700
(a) 1,500
1,500
(b) 50
50
(c)
40
40
(c)
40
40
(e) 200
200
(f)
50
50
(f)
50
50
(g) 1,200
1,200
3,440
3,440
30,190
30,190
Income
Statement
Dr.
Cr.
10,600
5,200
900
1,500
50
40
50
7,740
10,600
2,860
10,600
10,600
Statement of
Financial Position
Dr.
Cr.
15,200
1,000
550
5,000
5,000
2,500
800
10,000
500
40
200
50
1,200
22,450
19,590
2,860
22,450
22,450
Compute net income or net loss.
LO 1
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11
Steps in Preparing a Worksheet (2 of 2)
Which of the following statements is incorrect
concerning the worksheet?
a. The worksheet is essentially a working tool of the
accountant.
b. The worksheet is distributed to management and
other interested parties.
c. The worksheet cannot be used as a basis for
posting to ledger accounts.
LO 1
d. Financial statements can be prepared directly
from the worksheet before journalizing and
Copyright ©2019 John Wiley & Son, Inc.
posting the adjusting
entries.
12
Steps in Preparing a Worksheet (1 of 2)
Which of the following statements is incorrect
concerning the worksheet?
a. The worksheet is essentially a working tool of the
accountant.
b. The worksheet is distributed to management and
other interested parties.
c. The worksheet cannot be used as a basis for
posting to ledger accounts.
LO 1
d. Financial statements can be prepared directly
from the worksheet before journalizing and
Copyright ©2019 John Wiley & Son, Inc.
posting the adjusting
entries.
13
Preparing Financial Statements from a
Worksheet
• Income statement is prepared from the income
statement columns
• Statement of financial position and retained earnings
statement are prepared from the statement of
financial position columns
• Companies can prepare financial statements before
they journalize and post adjusting entries
LO 1
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14
Statements from a Worksheet (1 of 2)
Yazici Advertising A.S.
Income Statement
For the Month Ended October 31, 2020
Revenues
Service revenue
₺10,600
Expenses
Salaries and wages expense
₺5,200
Supplies expense 1,500
Rent expense
900
Insurance expense 50
Interest expense 50
Depreciation expense
40
Total expenses
7,740
Net income
₺ 2,860
LO 1
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15
Statements from a Worksheet (2 of 2)
Yazici Advertising A.S.
Retained Earnings Statement
For the Month Ended October 31, 2020
Retained earnings, October 1
Add: Net income
–0–
2,860
2,860
500
₺ 2,360
₺
Less: Dividends
Retained earnings, October 31
LO 1
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16
Yazici Advertising A.S.
Statement of Financial Position
October 31, 2020
Assets
Equipment ₺5,000
Less: Accumulated depreciation—equipment 40 ₺ 4,960
Prepaid insurance
550
Supplies
1,000
Accounts receivable
200
Cash
15,200
Total assets
₺21,910
Equity and Liabilities
Equity
Share capital—ordinary ₺10,000
Retained earnings 2,360
₺12,360
Liabilities
Notes payable 5,000
Accounts payable 2,500
Interest payable
50
Unearned service revenue
800
Salaries and wages payable
1,200
9,550
Total equity and liabilities
₺21,910
LO 1
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17
Preparing Adjusting Entries from a
Worksheet
• Adjusting entries are prepared from the adjustments
columns of worksheet
• Journalizing and posting of adjusting entries follows
the preparation of financial statements when a
worksheet is used
LO 1
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18
DO IT! 1: Worksheet
Susan Elbe is preparing a worksheet. Explain to Susan how she should
extend the following adjusted trial balance accounts to the financial
statement columns of the worksheet.
Cash
Statement of financial position (debit)
Owner’s Drawings
Statement of financial position (debit)
Accumulated Depreciation
Statement of financial position (credit)
Service Revenue
Income statement (credit)
Accounts Payable
Statement of financial position (credit)
Salaries and Wages Expense
Income statement (debit)
LO 1
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19
Learning Objective 2
Prepare Closing Entries and a PostClosing Trial Balance
LO 2
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20
Closing the Books (1 of 2)
At the end of the accounting period, the company
makes the accounts ready for the next period.
Analyze
Journalize
Post
Trial Balance Adjusting Entries
Post-Closing Trial
Adjusted Trial
Financial StatementsClosing Entries
Balance
Balance
LO 2
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21
Closing the Books (2 of 2)
LO 2
TEMPORARY
Accounts are closed
PERMANENT
Accounts are not closed
All revenue accounts
All assets accounts
All expense accounts
All liability accounts
Dividends
Equity
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22
Preparing Closing Entries (1 of 2)
Closing entries formally recognize in the ledger the
transfer of:
• Net income (or net loss) to owner’s capital
• Dividends to retained earnings
Produce a zero balance in each temporary account.
Companies generally journalize and post closing entries
only at end of the annual accounting period.
LO 2
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23
Preparing Closing Entries (2 of 2)
(Individual)
Expenses
Income
Summary
2
(Individual)
Revenues
1
3
Key:
1. Close Revenues to Income
Summary.
2. Close Expenses to Income
Summary.
3. Close Income Summary to Retained
Earnings.
4. Close Dividends to Retained
Earnings.
LO 2
Retained
Earnings
Dividends
4
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24
Closing Entries Illustrated (1 of 2)
GENERAL JOURNAL
Date
Account Titles and Explanations
2020
Oct. 31 Service Revenue
Income Summary
(To close revenue account)
31 Income Summary
Supplies Expense
Depreciation Expense
Insurance Expense
Salaries and Wages Expense
Rent Expense
Interest Expense
(To close expense accounts)
LO 2
Copyright ©2019 John Wiley & Son, Inc.
Page J3
Ref.
Debit
400
350
10,600
350
631
711
722
726
729
729
7,740
Credit
10,600
1,500
40
50
5,200
900
50
25
