Chapter 4
Chapter 4
Chapter 4
Chapter 4
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Helps in
Reduces Not a preparing
possibility of required interim financial
errors.
report. statements.
Shows the
Links accounts
effects of
and their
proposed
adjustments.
transactions.
4-3
FastForward
P1 Worksheet
For the Month Ended December 31, 2013
4-4
This weekend
• Please complete Problem 4-5A & 4-4A and check
the answer provided on Connect. Be prepared for
such a problem on your exam.
• Also, do not forget exercise 3-1,3-2, 3-3, 3-4 and
problems 3-1A, 3-2A, 3-3A, and 3-6A
• See your syllabus for additional problems and
exercises (Practice, practice, and practice some
more)
4-5
CLOSING ENTRIES
4-6
C1
C1 Temporary and
Permanent Accounts
Revenues Assets
Withdrawals
Liabilities
Expenses
Owner’s
Capital
Temporary Permanent
Accounts Accounts
Income
Summary The closing process
applies only to
temporary accounts.
4-9
P2
IMPORTANT
Do NOT use DEBITS and CREDITS columns when
you are preparing Financial Statements
Use the Specific Account Names given on the Trial
Balance; do NOT make up your own, unless it is a
new account
No short forms whatsoever allowed in any
assignments or exams
4 - 11
Exercise 4-2A
CRUZ COMPANY
Post-Closing Trial Balance
December 31, 2013
Debit Credit
Cash ................................................................ $19,000
Supplies ......................................................... 13,000
Prepaid insurance ......................................... 3,000
Equipment ...................................................... 24,000
Accumulated depreciation–Equipment ....... $ 7,500
T. Cruz, Capital* ............................................. 51,500
Totals .............................................................. $59,000 $59,000
4 - 12
EQUITY
◦ Capital Account
4 - 14
This weekend
Please complete Problem 4-5A & 4-4A and check
the answer provided on Connect. Be prepared for
such a problem on your exam.
Also, do not forget exercise 3-1,3-2, 3-3, 3-4 and
problems 3-1A, 3-2A, 3-3A, and 3-6A
See your syllabus for additional problems and
exercises (Practice, practice, and practice some
more)
4 - 16
Exercise 4-4
WILSON TRUCKING COMPANY
Income Statement
For Year Ended December 31, 2013
Exercise 4-5
WILSON TRUCKING COMPANY
Balance Sheet
December 31, 2013
Assets
CURRENT ASSETS
Cash ................................................................ $ 8,000
Accounts receivable ..................................... 17,500
Office supplies ............................................... 3,000
Total current assets ...................................... 28,500
NON-CURRENT ASSETS
Trucks ............................................................. $172,000
Accumulated depreciation-Trucks .............. (36,000) 136,000
Land ................................................................ 85,000
Total Non-Current Assets ............................. 221,000
Total assets ...................................................... $249,500
Liabilities
CURRENT LIABILITIES
Accounts payable .......................................... $ 12,000
Interest payable ............................................. 4,000
Total current liabilities .................................. 16,000
Long-term notes payable ................................ 53,000
Total liabilities ................................................. 69,000
Equity
*
K. Wilson, Capital ........................................... 180,500
Total liabilities and equity .............................. $249,500
4 - 36
C3
C3
C3
C3
C3
C3
C3
Global View
The definition of an asset is similar under U.S. GAAP and IFRS and
involves three basic criteria:
(1) the company owns or controls the right to use the item,
(2) the right arises from a past transaction or event, and
(3) the item can be reliably measured.
Both systems define the initial asset value as historical cost for
nearly all assets.
The definition of a liability is similar under U.S. GAAP and IFRS and
involves three basic criteria:
(1) the item is a present obligation requiring a probable future resource
outlay,
(2) the obligation arises from a past transaction or event, and
(3) the obligation can be reliably measured.
4 - 44
A1
Current Ratio
Helps assess the company’s ability to pay its
debts in the near future
Current Assets
Current Ratio =
Current Liabilities
P4
P4
4 - 47
P4
End of Chapter 4