1. Lecture 09 Chapter 04 Completing the Accounting Cycle Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc.

2. Review of Lecture The Matching Concept and the Adjusting Process Reporting Revenues and Expenses Deferred Expenses (Prepaid Expenses) Deferred Revenue (Unearned Revenue) Accrued Expenses (Accrued Liabilities) Accrued Revenues (Accrued Assets) Fixed Assets Effect of Omitting Adjustment Summary of Basic Adjustments Adjusted Trial Balance Vertical Analysis and Interpretation

4. 1.Transactions are analyzed and recorded in the journal. 2.Transactions are posted to the ledger. 3.A trial balance is prepared, adjustment data are assembled, and an optional work sheet is completed. 4.Financial statements are prepared. 5.Adjusting entries are journalized and posted. 6.Closing entries are journalized and posted. 7.A post-closing trial balance is prepared.

5. Opportunities Inc.’ Adjusted Trial Balance for December 31, 2010

6. Opportunities Adjusted Trial Balance December 31, 2010 Cash2 065 Accounts Receivable2 720 Supplies760 Prepaid Insurance2 300 Land20 000 Office Equipment1 800 Accumulated Depreciation50 Accounts Payable900 Wages Payable250 Unearned Rent240 Javid Iqbal, Capital25 000 Javid Iqbal, Drawing4 000 Fees Earned16 840 Rent Revenue120 Wages Expense4 525 Rent Expense1 600 Utilities Expense985 Supplies Expense2 040 Insurance Expense100 Miscellaneous Expense45543 400

8. Opportunities Adjusted Trial Balance December 31, 2010 Cash2 065 Accounts Receivable2 720 Supplies760 Prepaid Insurance2 300 Land20 000 Office Equipment1 800 Accumulated Depreciation50 Accounts Payable900 Wages Payable250 Unearned Rent240 Javid Iqbal, Capital25 000 Javid Iqbal, Drawing4 000 Fees Earned16 840 Rent Revenue120 Wages Expense4 525 Rent Expense1 600 Utilities Expense985 Supplies Expense2 040 Insurance Expense100 Miscellaneous Expense45543 400

11. That’s correct. Cash and other assets that are expected to be converted into cash, sold, or used up usually in less than a year are current assets.

14.  Accounts payable  Wages payable  Interest payable  Unearned fees

15. Mortgage note payable Mortgage payable Bond payable

17. Trial Balance AccountsDrCrDrCrDrCr AdjustmentsAdjusted TB Prepared from the general ledger. Accounts are listed in the following order: assets, liabilities, stockholders’ equity, revenues, and expenses.

18. Trial Balance AccountsDrCrDrCrDrCr AdjustmentsAdjusted TB

19. Adjustments are combined with the trial balance. Account balances are now adjusted. Trial Balance AccountsDrCrDrCrDrCr AdjustmentsAdjusted TB

20. Cash2,065 Accounts Receivable2,220 Supplies2,000 Prepaid Insurance2,400 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360 Capital Stock25,000 Dividends4,000 Fees Earned16,340 Wages Expense4,275 Rent Expense1,600 Utilities Expense985 Supplies Expense800 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010

21. Review of Lecture

22. End of Lecture 09

23. Lecture 10 Chapter 04 Completing the Accounting Cycle Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc.

24. Review of Previous Lecture

25. Cash2,065 Accounts Receivable2,220 Supplies2,000 Prepaid Insurance2,400 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360 Capital Stock25,000 Dividends4,000 Fees Earned16,340 Wages Expense4,275 Rent Expense1,600 Utilities Expense985 Supplies Expense800 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010

27. Cash2,065 Accounts Receivable2,220 Supplies2,000 Prepaid Insurance2,400 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360 Capital Stock25,000 Dividends4,000 Fees Earned16,340 Wages Expense4,275 Rent Expense1,600 Utilities Expense985 Supplies Expense800 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 (a) 1,240

29. Cash2,065 Accounts Receivable2,220 Supplies2,000(a) 1,240 Prepaid Insurance2,400 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360 Capital Stock25,000 Dividends4,000 Fees Earned16,340 Wages Expense4,275 Rent Expense1,600 Utilities Expense985 Supplies Expense800(a) 1,240 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Insurance Expense(b) 100 Accounts are added as needed. (b) 100

31. Cash2,065 Accounts Receivable2,220 Supplies2,000(a) 1,240 Prepaid Insurance2,400(b) 100 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360 Capital Stock25,000 Dividends4,000 Fees Earned16,340 Wages Expense4,275 Rent Expense1,600 Utilities Expense985 Supplies Expense800(a) 1,240 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Insurance Expense(b) 100 (c) 120 Rent Revenue(c) 120

33. Cash2,065 Accounts Receivable2,220 Supplies2,000(a) 1,240 Prepaid Insurance2,400(b) 100 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360(c) 120 Capital Stock25,000 Dividends4,000 Fees Earned16,340 Wages Expense4,275 Rent Expense1,600 Utilities Expense985 Supplies Expense800(a) 1,240 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Insurance Expense(b) 100 Rent Revenue (c) 120 Wages Payable(d) 250 (d) 250

35. Cash2,065 Accounts Receivable2,220 Supplies2,000(a) 1,240 Prepaid Insurance2,400(b) 100 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360(c) 120 Capital Stock25,000 Dividends4,000 Fees Earned16,340 Wages Expense4,275(d) 250 Rent Expense1,600 Utilities Expense985 Supplies Expense800(a) 1,240 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Insurance Expense(b) 100 Rent Revenue (c) 120 Wages Payable(d) 250 (e) 500

37. Cash2,065 Accounts Receivable2,220(e) 500 Supplies2,000(a) 1,240 Prepaid Insurance2,400(b) 100 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360(c) 120 Capital Stock25,000 Dividends4,000 Fees Earned16,340(e) 500 Wages Expense4,275(d) 250 Rent Expense1,600 Utilities Expense985 Supplies Expense800(a) 1,240 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Insurance Expense(b) 100 Rent Revenue (c) 120 Wages Payable(d) 250 Depreciation Expense(f) 50 Accum. Depreciation(f) 50

38. Cash2,065 Accounts Receivable2,220(e) 500 Supplies2,000(a) 1,240 Prepaid Insurance2,400(b) 100 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360(c) 120 Capital Stock25,000 Dividends4,000 Fees Earned16,340(e) 500 Wages Expense4,275(d) 250 Rent Expense1,600 Utilities Expense985 Supplies Expense800(a) 1,240 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Insurance Expense(b) 100 Rent Revenue (c) 120 Wages Payable(d) 250 Depreciation Expense(f) 50 Accum. Depreciation(f) 50

39. Cash2,065 Accounts Receivable2,220(e) 500 Supplies2,000(a) 1,240 Prepaid Insurance2,400(b) 100 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360(c) 120 Capital Stock25,000 Dividends4,000 Fees Earned16,340(e) 500 Wages Expense4,275(d) 250 Rent Expense1,600 Utilities Expense985 Supplies Expense800(a) 1,240 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Insurance Expense(b) 100 Rent Revenue (c) 120 Wages Payable(d) 250 Depreciation Expense(f) 50 Accum. Depreciation(f) 502,260 Summed and ruled

41. Cash2,065 Accounts Receivable2,220(e) 500 Supplies2,000(a) 1,240 Prepaid Insurance2,400(b) 100 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent360(c) 120 Capital Stock25,000 Dividends4,000 Fees Earned16,340(e) 500 Wages Expense4,275(d) 250 Rent Expense1,600 Utilities Expense985 Supplies Expense800(a) 1,240 Miscellaneous Expense45542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Insurance Expense(b) 100 Rent Revenue (c) 120 Wages Payable(d) 250 Depreciation Expense(f) 50 Accum. Depreciation(f) 502,260

42. Cash2,0652,065 Accounts Receivable2,220(e) 5002,720 Supplies2,000(a) 1,240760 Prepaid Insurance2,400(b) 1002,300 Land20,00020,000 Office Equipment1,8001,800 Accounts Payable900900 Unearned Rent360(c) 120240 Capital Stock25,00025,000 Dividends4,0004,000 Fees Earned16,340(e) 50016,840 Wages Expense4,275(d) 2504,525 Rent Expense1,6001,600 Utilities Expense985985 Supplies Expense800(a) 1,2402,040 Miscellaneous Expense45545542,600 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Adjustments Trial Balance Insurance Expense(b) 100 100 Rent Revenue (c) 120120 Wages Payable(d) 250250 Depreciation Expense(f) 5050 Accum. Depreciation(f) 5050 2,2602,26043,40043,400

43. Revenue and expense balances in the Adjusted Trial Balance column are extended to the Income Statement column. Adjusted TB AccountsDrCrDrCrDrCr Income State.Balance Sheet

44. Asset, liability, and stockholders’ equity balances in the Adjusted Trial Balance column are extended to the Balance Sheet column. Adjusted TB AccountsDrCrDrCrDrCr Income State.Balance Sheet

46. Cash2,065 Accounts Receivable2,720 Supplies760 Prepaid Insurance2,300 Land20,000 Office Equipment1,800 Accounts Payable900 Unearned Rent240 Capital Stock25,000 Dividends4,000 Fees Earned16,840 Wages Expense4,525 Rent Expense1,600 Utilities Expense985 Supplies Expense2,040 Miscellaneous Expense455 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Income Statement Balance Sheet Insurance Expense100 Rent Revenue 120 Wages Payable250 Depreciation Expense50 Accum. Depreciation50 43,40043,400

48. Cash2,0652,065 Accounts Receivable2,7202,720 Supplies760760 Prepaid Insurance2,3002,300 Land20,00020,000 Office Equipment1,8001,800 Accounts Payable900900 Unearned Rent240240 Capital Stock25,00025,000 Dividends4,0004,000 Fees Earned16,84016,840 Wages Expense4,5254,525 Rent Expense1,6001,600 Utilities Expense985985 Supplies Expense2,0402,040 Miscellaneous Expense455455 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Income Statement Balance Sheet Insurance Expense100100 Rent Revenue 120120 Wages Payable250250 Depreciation Expense5050 Accum. Depreciation5050 43,40043,400

50. Cash2,0652,065 Accounts Receivable2,7202,720 Supplies760760 Prepaid Insurance2,3002,300 Land20,00020,000 Office Equipment1,8001,800 Accounts Payable900900 Unearned Rent240240 Capital Stock25,00025,000 Dividends4,0004,000 Fees Earned16,84016,840 Wages Expense4,5254,525 Rent Expense1,6001,600 Utilities Expense985985 Supplies Expense2,0402,040 Miscellaneous Expense455455 Account TitleDebitCreditDebitCreditDebitCredit Adjusted Trial Balance Income Statement Balance Sheet Insurance Expense100100 Rent Revenue 120120 Wages Payable250250 Depreciation Expense5050 Accum. Depreciation5050 43,40043,4009,75516,96033,64526,440

53. 9,75516,96033,64526,4407,205 16,96016,96033,64533,645 Income Statement Balance Sheet Net Income

54. Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Fees earned16,840 Rent revenue120 Total revenues16,960 Expenses: Wages expense 4,525 Supplies expense2,040 Rent expense1,600 Utilities expense985 Insurance expense100 Depreciation expense50 Miscellaneous expense455 Total expenses 9,755 Net income 7,205 Every amount on this income statement was taken from the Income Statement column of the work sheet.

55. Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Net income for November and December 7,205 Less dividends 4,000 Retained earnings, December 31, 20053,205

56. Opportunities Inc. Work Sheet For the Two Months Ended December 31, 2010 Net income for November and December 7,205 Less dividends 4,000 Retained earnings, December 31, 20053,205

57. Opportunities Inc. Balance Sheet For the Two Months Ended December 31, 2010 Stockholders’ Equity

60. RETAINED EARNINGS Income Summary 1 Revenues are transferred to Income Summary2 Expenses are transferred to Income Summary 3 Net Income or Net Loss is transferred to Retained Earnings 4 Dividends are transferred to Retained Earnings Closing Process

61. RETAINED EARNINGS Income Summary 1 Revenues are transferred to Income Summary2 Expenses are transferred to Income Summary 3 Net Income or Net Loss is transferred to Retained Earnings 4 Dividends are transferred to Retained Earnings

62. Wages Expense Bal.4,525 Rent Expense Bal.1,600 Depreciation Expense Bal.50 Utilities Expense Bal.985 Supplies Expense Bal.2,040 Insurance Expense Bal.100 Miscellaneous Expense Bal.455 Fees Earned Bal.16,840 Rent Revenue Bal.120 Retained Earnings Bal.25,000 Dividends Bal.4,000 Income Summary

63. Wages Expense Bal.4,525 Rent Expense Bal.1,600 Depreciation Expense Bal.50 Utilities Expense Bal.985 Supplies Expense Bal.2,040 Insurance Expense Bal.100 Miscellaneous Expense Bal.455 Fees Earned Bal.16,840 Rent Revenue Bal.120 Retained Earnings Dividends Bal.4,000 Income Summary Debit each revenue account for the amount of its balance, and credit Income Summary for the total revenue. 16,840 120 16,960

64. Wages Expense Bal.4,525 Rent Expense Bal.1,600 Depreciation Expense Bal.50 Utilities Expense Bal.985 Supplies Expense Bal.2,040 Insurance Expense Bal.100 Miscellaneous Expense Bal.455 Retained Earnings Dividends Bal.4,000 Income Summary Debit Income Summary for the total expenses and credit each expense account for its balance. Fees Earned Bal.16,840 Rent Revenue Bal.120 16,840 120 16,9609,775 455 100 2,040 985 50 1,600 4,525

65. Wages Expense Bal.4,525 Rent Expense Bal.1,600 Depreciation Expense Bal.50 Utilities Expense Bal.985 Supplies Expense Bal.2,040 Insurance Expense Bal.100 Miscellaneous Expense Bal.455 Retained Earnings Dividends Bal.4,000 Income Summary Debit Income Summary for the amount of its balance (in this case, the net income) and credit Retained Earnings. Fees Earned Bal.16,840 Rent Revenue Bal.120 16,840 120 16,9609,775 455 100 2,040 985 50 1,600 4,525 7,205

66. Wages Expense Bal.4,525 Rent Expense Bal.1,600 Depreciation Expense Bal.50 Utilities Expense Bal.985 Supplies Expense Bal.2,040 Insurance Expense Bal.100 Miscellaneous Expense Bal.455 Retained Earnings Dividends Bal.4,000 Income Summary Debit Retained Earnings for the balance of Dividends and credit Dividend for the same amount. Fees Earned Bal.16,840 Rent Revenue Bal.120 16,840 120 16,9609,775 455 100 2,040 985 50 1,600 4,525 7,205 4,000 7,205

67. Wages Expense Bal.4,525 Rent Expense Bal.1,600 Depreciation Expense Bal.50 Utilities Expense Bal.985 Supplies Expense Bal.2,040 Insurance Expense Bal.100 Miscellaneous Expense Bal.455 Retained Earnings Dividends Bal.4,000 Income Summary Fees Earned Bal.16,840 Rent Revenue Bal.120 16,480 120 16,9609,775 445 100 2,040 985 50 1,600 4,525 7,205 4,000 Close Revenues Close Revenues Close Expenses Close Expenses Close Income Summary Close Income Summary Close Dividends Close Dividends 16,840 16,840 120 120 16,960 16,960 4,525 4,525 1,600 1,600 50 50 985 985 2,040 2,040 100 100 455 455 9,775 9,775 7,205 7,205 4,000 4,000

69. Opportunities Inc. Post-Closing Trial Balance December 31, 2010 Cash2 065 00 Accounts Receivable2 720 00 Supplies760 00 Prepaid Insurance2 300 00 Land20 000 00 Office Equipment1 800 00 Accumulated Depreciation50 00 Accounts Payable900 00 Wages Payable250 00 Unearned Rent240 00 Capital Stock25 000 00 Retained Earnings3 205 0029 645 00 Post Closing Trial Balance

70. Working Capital = 7,845 –1,390 Working Capital = Current Assets – Current Liabilities Working Capital = 6,455

71. Current Ratio = Current Assets ÷ Current Liabilities Current Ratio = 7,845 ÷ 1,390 Current Ratio = 5.6

73. Current ratio = 7,845 ÷1,390 Current ratio = Current Assets ÷ Current Liabilities Current ratio = 5.6

74. The End