This week its Accounting and Beyond Morning SessionAfternoon Session Monday Financial Statements/Expenses/Revenues Accounting Cycle & Accounts / Quiz Tuesday The Balance Sheet The Income Statement / Quiz Wednesday The Cash Flow Statement Tools & Techniques / Quiz Thursday Presentations Career Discussion / Open Questions 1-1

2 Accounting Cycle

 Identify Transactions  A company uses cash to purchase a vehicle  Analyze Transactions  What happened? An amount of cash was replaced by a vehicle, both affecting the asset account but no change overall  Journalize Transactions  A journal entry will record the transaction 3 Journal Entries

 Separate into assigned groups  Use handout to prepared 15 journal entries 4 Journal Entry Example

 Use projector or board.. 5 Journal Entry Solution

 Each journal entry is transferred to its T-Account  Debits are transferred to the left side  Credits are transferred to the right side 6 Trial Balance

7 Cash T-Account

 InventorySupplies  Accounts ReceivableUtilities Expense  Accounts PayableWage Expense  Leasehold ImprovementsInterest Expense  Long-Term Liabilities Rent Expense  Common Stock  Dividends  Revenues  Cost of Goods Sold 8 Complete Remaining T-Accounts

 3 Columns (Account, Debit, Credit)  Standard Title (Company Name, Name of Trial Balance, Date of Reporting Period)  Accounts are entered following the balance sheet order: Assets, Liabilities, Equity Accounts, Income, Expense Accounts 9 Unadjusted Trial Balance

 Used to record 3 different types of activities  Prepaid expenses or Unearned revenue (Insurance)  Accrued expenses or accrued revenue (Utility Bills)  Non-cash expenses (Depreciation) 10 Adjusting Entries

1) Paul pays his $1,000 January rent in December 2) Paul's December electric bill was $200 and is due January 15 th 3) Paul's leasehold improvement depreciation is $2,000 for the year 4) On December 31, a customer prepays Paul for guitar lessons for the next 6 months 5) Paul's employee works half a pay period, so Paul accrues $500 of wages 11 Adjusting Entries to Make

 Same Process as Unadjusted Trial Balance  If an account has a zero balance it does not have to be recorded 12 Adjusted Trial Balance

13 Adjusted Trial Balance

Essential part of Accounting Cycle process  Balance Sheet  Income Statement  Statement of Retained Earnings  Statement of Cash Flows 14 Financial Statement Preparation

 Made at the end of the accounting period  Closes accounts by transferring temporary account balances to permanent accounts (Closing the books)  2 different methods to close accounts, income summary method and retained earnings method 15 Record Closing Entries

16 Recording Closing Entry  Income Summary Method  Close all revenue and gains accounts as seen below

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall17 Record Closing Entry  Income Summary Method  Close all expense and loss accounts, fill in the credits below

18 Record Closing Entry  Income Summary Method  Close all dividend or withdrawal accounts

19 Income Summary Account  Can be completed 2 ways, close to income summary account or directly to the retained earnings account  After this entry, all temporary accounts and income summary should have a zero balance

 The post closing trial balance is a list of all accounts and their balances after the closing entries have been journalized and posted to the ledger 20 Post Closing Trial Balance

 Final step in Accounting Cycle  $250 of wages payable for the half of his employee's pay period that was in December but wasn't paid until January 21 Record Reversing Entries

 Jan 7 th Paul pays $500 in wages, it is recorded as follows… 22 Record Reversing Entries

 30 Minutes to Complete  No cheating unless you have to  Do not leave out any questions! 23 Quiz #1