4h - 1 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

4h - 2 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet The worksheet is not a formal report. Correct heading information is used. It is used to facilitate the preparation of adjusting entries and financial statements.

4h - 3 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet The trial balance The adjustments The adjusted trial balance IncomestatementBalancesheet

4h - 4 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet Cash, Accts. Rec. Office Supplies Prepaid Rent Equipment Accounts Payable B. Clark, Capital B. Clark, Withdrawals Fees Salaries Expense Other Expenses Office Supplies Expense Rent Expense Depreciation Expense Accum. Depreciation Salaries Payable Totals Net income 11, ,200 6,000 3,350 10, ,000 1, ,350 Trial Balance Dr.Cr.Account Titles Adjustments Dr.Cr. Adj. Trial Bal. Dr.Cr.

4h - 5 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet Assets must be adjusted to show amounts used or allocated to periods. Supplies used Prepaid rent expired Depreciation Salaries incurred

4h - 6 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet Expenses incurred must be recorded in the correct period before the period closes. What are examples? Supplies used Prepaid rent expired

4h - 7 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet Accountingperiod Depreciation is a unique adjustment.

4h - 8 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet Historical cost of the asset remains in the financial statements. This cost remains in the records as a balance in the asset account. This cost is allocated to expense over the life of the asset. What is the accompanying account?

4h - 9 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet The accompanying (contra-asset) account is called Accumulated Depreciation. This account is used for the yearly credited amounts. The normal balance is a credit balance.

4h - 10 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet Cost of equipment $6,000 Less: Estimated residual value –1,200 Depreciable base $4,800 Estimated useful life 5 years (Cost – Residual value) ÷ Estimated useful life ($6,000 – $1,200) ÷ 5 = $960 $960 ÷ 12 = $80 per month

4h - 11 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet Clark’s Word Processing Services Balance Sheet May 31, 200x Word processing equipment$6,000 Less: Accumulated depreciation 80 $5,920 Book value

4h - 12 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet Clark’s Word Processing Services paid $1,300 in office salaries. The last salary checks for the month were paid on May 27. John Murray worked for Clark on May 28, 29, 30, and 31, but his next pay check is not due until June 3.

4h - 13 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet Is John Murray’s earnings of $350 an expense for May? Office Salary Expense 1,

4h - 14 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Worksheet Cash, Accts. Rec. Office Supplies Prepaid Rent Equipment Accounts Payable B. Clark, Capital B. Clark, Withdrawals Fees Salaries Expense Other Expenses Office Supplies Expense Rent Expense Depreciation Expense Accum. Depreciation Salaries Payable Totals Net income 11, ,200 6,000 3,350 10, ,000 1, ,350 (a) 500 (b) 400 (d) 350 (a) 500 (b) 400 (c) 80 (d) 350 Trial Balance Dr.Cr.Account Titles Adjustments Dr.Cr. Adj. Trial Bal. Dr.Cr.