Completing the

Chapter 4 Accounting Cycle

Learning Objectives
After studying this chapter, you should be able to:

1.  Prepare a worksheet.

2.  Explain the process of closing the books.

3.  Describe the content and purpose of a post-closing trial balance.

4.  State the required steps in the accounting cycle.

5.  Explain the approaches to preparing correcting entries.

6.  Identify the sections of a classified statement of financial position.

4-1
 Preview of Chapter 4

Financial Accounting
IFRS Second Edition
Weygandt Kimmel Kieso
4-2
 Using a Worksheet

Preparing a Worksheet
u  Multiple-column form used in preparing financial
statements.

u  Not a permanent accounting record.

u  Five step process.

u  Use of worksheet is optional.

4-3 LO 1 Prepare a worksheet.

 Steps in Preparing a Worksheet
Illustration 4-1

4-4 LO 1 Prepare a worksheet.

 Steps in Preparing a Worksheet
1. Prepare a Trial Balance on the Worksheet Illustration 4-2
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200
Supplies 2,500
Prepaid Insurance 600
Equipment 5,000
Notes Payable 5,000
Accounts Payable 2,500
Unearned Revenue 1,200
Share Capital-Ordinary 10,000
Dividends 500
Service Revenue 10,000

Salaries and Wages Exp. 4,000

Rent Expense 900
Totals 28,700 28,700

Trial balance amounts come

directly from ledger accounts.
Include all accounts
with balances.

4-5 LO 1 Prepare a worksheet.

 Steps in Preparing a Worksheet
Illustration 3-23
General journal
showing adjusting
entries

Adjusting
Journal
Entries
(Chapter 3)

4-6
LO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
2. Enter the Adjustments in the Adjustments Columns
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200
Supplies 2,500 (a) 1,500
Prepaid Insurance 600 (b) 50
Equipment 5,000 Adjustments Key:
Notes Payable 5,000
Accounts Payable 2,500
(a) Supplies Used.
Unearned Revenue 1,200 (d) 400 (b) Insurance Expired.
Share Capital-Ordinary 10,000
Dividends 500
(c) Depreciation Expensed.
Service Revenue 10,000 (d) 400 (d) Service Revenue Earned.
(e) 200
Salaries and Wages Exp. 4,000 (g) 1,200 (e) Service Revenue Accrued.
Rent Expense 900 (f) Interest Accrued.
Totals 28,700 28,700
Supplies Expense (a) 1,500 (g) Salaries Accrued.
Insurance Expense (b) 50
Accumulated Depreciation (c) 40
Depreciation Expense (c) 40
Accounts Receivable (e) 200
Interest Expense
(f)
50
Enter adjustment amounts, total
Interest Payable (f) 50 adjustments columns,
(g) 1,200
Salaries and Wages Payable and check for equality.
Totals 3,440 3,440

Add additional accounts as needed.

4-7 LO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
3. Complete the Adjusted Trial Balance Columns
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200
Supplies 2,500 (a) 1,500 1,000
Prepaid Insurance 600 (b) 50 550
Equipment 5,000 5,000
Notes Payable 5,000 5,000
Accounts Payable 2,500 2,500
Unearned Revenue 1,200 (d) 400 800
Share Capital-Ordinary 10,000 10,000
Dividends 500 500
Service Revenue 10,000 (d) 400 10,600
(e) 200
Salaries and Wages Exp. 4,000 (g) 1,200 5,200
Rent Expense 900 900
Totals 28,700 28,700
Supplies Expense (a) 1,500 1,500
Insurance Expense (b) 50 50
Accumulated Depreciation (c) 40 40
Depreciation Expense (c) 40 40
Accounts Receivable (e) 200 200
(f)
Interest Expense 50 50
Interest Payable (f) 50 50
Salaries and Wages Payable (g) 1,200 1,200
Totals 3,440 3,440 30,190 30,190

Total the adjusted trial balance

columns and check for equality.
4-8 LO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
4. Extend Amounts to Financial Statement Columns
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200
Supplies 2,500 (a) 1,500 1,000
Prepaid Insurance 600 (b) 50 550
Equipment 5,000 5,000
Notes Payable 5,000 5,000
Accounts Payable 2,500 2,500
Unearned Revenue 1,200 (d) 400 800
Share Capital-Ordinary 10,000 10,000
Dividends 500 500
Service Revenue 10,000 (d) 400 10,600 10,600
(e) 200
Salaries and Wages Exp. 4,000 (g) 1,200 5,200 5,200
Rent Expense 900 900 900
Totals 28,700 28,700
Supplies Expense (a) 1,500 1,500 1,500
Insurance Expense (b) 50 50 50
Accumulated Depreciation (c) 40 40
Depreciation Expense (c) 40 40 40
Accounts Receivable (e) 200 200
(f)
Interest Expense 50 50 50
Interest Payable (f) 50 50
Salaries and Wages Payable (g) 1,200 1,200
Totals 3,440 3,440 30,190 30,190 7,740 10,600

Extend all revenue and expense account

balances to the income statement columns.
4-9 LO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet
5. Total Columns, Compute Net Income (Loss)
Adjusted Income Statement of
Trial Balance Adjustments Trial Balance Statement Financial Position
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200 15,200
Supplies 2,500 (a) 1,500 1,000 1,000
Prepaid Insurance 600 (b) 50 550 550
Equipment 5,000 5,000 5,000
Notes Payable 5,000 5,000 5,000
Accounts Payable 2,500 2,500 2,500
Unearned Revenue 1,200 (d) 400 800 800
Share Capital-Ordinary 10,000 10,000 10,000
Dividends 500 500 500
Service Revenue 10,000 (d) 400 10,600 10,600
(e) 200
Salaries and Wages Exp. 4,000 (g)1,200 5,200 5,200
Rent Expense 900 900 900
Totals 28,700 28,700
Supplies Expense (a) 1,500 1,500 1,500
Insurance Expense (b) 50 50 50
Accumulated Depreciation (c) 40 40 40
Depreciation Expense (c) 40 40 40
Accounts Receivable (e) 200 200 200
(f)
Interest Expense 50 50 50
Interest Payable (f) 50 50 50
Salaries and Wages Payable (g) 1,200 1,200 1,200
Totals 3,440 3,440 30,190 30,190 7,740 10,600 22,450 19,590
Net Income 2,860 2,860
Totals 10,600 10,600 22,450 22,450
Compute Net Income or Net Loss.
4-10 LO 1 Prepare a worksheet.
 Steps in Preparing a Worksheet

Review Question
Net income is shown on a worksheet in the:

a.  income statement debit column only.

b.  statement of financial position debit column only.

c.  income statement credit column and statement of

financial position debit column.

d.  income statement debit column and statement of

financial position credit column.

4-11 LO 1 Prepare a worksheet.

 Using a Worksheet

Preparing Statements from a Worksheet

u  Income statement is prepared from the income
statement columns.

u  Statement of financial position and retained earnings

statement are prepared from the statement of financial
position columns.

u  Companies journalize and post adjusting entries.

4-12 LO 1 Prepare a worksheet.

 Preparing Statements from a Worksheet
Illustration 4-4

4-13 LO 1 Prepare a worksheet.

 Preparing Statements from a Worksheet
Illustration 4-4

4-14 LO 1 Prepare a worksheet.

 Preparing Statements from a Worksheet
Illustration
4-4

4-15 LO 1
 Using a Worksheet

Preparing Adjusting Entries from a Worksheet

u  Adjusting entries are prepared from the adjustments
columns of the worksheet.

u  Journalizing and posting of adjusting entries follows the

preparation of financial statements when a worksheet is
used.

4-16 LO 1 Prepare a 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)

Accumulated Depreciation Statement of financial position (credit)
Accounts Payable Statement of financial position (credit)
Dividends Statement of financial position (debit)
Service Revenue Income statement (credit)
Salaries and Wages Expense Income statement (debit)

4-17 LO 1