1. Completing the Accounting Cycle4
Completing the Accounting Cycle

2. After studying this chapter, you should be able to:
Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements.
Prepare financial statements from adjusted account balances.
Prepare closing entries.

3. After studying this chapter, you should be able to:
After studying this chapter, you should be able to:
Describe the accounting cycle.
Illustrate the accounting cycle for one period.
Explain what is meant by the fiscal year and the natural business year. 3

4. 4-1
Objective 1
Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements.

5. 4-1 5

6. Spreadsheet (Work Sheet)
4-1
Spreadsheet (Work Sheet)
Trial Balance
Adjustments
Adjusted TB
Accounts Dr Cr Dr Cr Dr Cr
Accounts are listed in the Trial Balance column using the ending balance found in the general ledger. 6

7. Spreadsheet (Work Sheet)
4-1
Spreadsheet (Work Sheet)
Trial Balance
Adjustments
Adjusted TB
Accounts Dr Cr Dr Cr Dr Cr
Adjustments are entered here. Two possibilities:
1. Deferrals – Existing balances are changed.
2. Accruals – New information is entered. 7

8. Spreadsheet (Work Sheet)
4-1
Spreadsheet (Work Sheet)
Trial Balance
Adjustments
Adjusted TB
Accounts Dr Cr Dr Cr Dr Cr
Adjustments are combined with the trial balance. Account balances are now adjusted. 8

9. Spreadsheet (Work Sheet)
4-1
Spreadsheet (Work Sheet)
Adjusted TB
Income State.
Balance Sheet
Accounts Dr Cr Dr Cr Dr Cr
Revenue and expense balances in the Adjusted Trial Balance column are extended to the Income Statement column. 9

10. Spreadsheet (Work Sheet)
4-1
Spreadsheet (Work Sheet)
Adjusted TB
Income State.
Balance Sheet
Accounts Dr Cr Dr Cr Dr Cr
Asset, liability, owner’s equity, and drawing balances in the Adjusted Trial Balance column are extended to the Balance Sheet column. 10

11. 4-1
Example Exercise 4-1
The balances for the accounts listed below appear in the Adjusted Trial Balance columns of the end-of-period spreadsheet (work sheet). Indicate whether each balance should be extended to (a) an Income Statement column or (b) a Balance Sheet column.
Amber Bablock, Drawing
Utilities Expense
Accumulated Depreciation—Equipment
Unearned Rent
Fees Earned
Accounts Payable
Rent Revenue
Supplies 11

12. Income Statement column
4-1
Follow My Example 4-1
Balance Sheet column
Income Statement column
For Practice: PE 4-1A, PE 4-1B 12

13. Prepare financial statements from adjusted account balances.
4-2
Objective 2
Prepare financial statements from adjusted account balances.

14. 4-2
To balance sheet 14

15. From statement of owner’ equity
4-2
(Concluded)
From statement of owner’ equity 15

16. 4-2
Example Exercise 4-2
In the Balance Sheet columns of the end-of-period spreadsheet (work sheet) for Dimple Consulting Co. for the current year, the Debit column total is $678,450, and the Credit column total is $599,750 before the amount of net income or net loss has been included. In preparing the income statement from the end-of-period spreadsheet (work sheet), what is the amount of net income or net loss? 16

17. For Practice: PE 4-2A, PE 4-2B
4-2
Follow My Example 4-2
A net income of $78,700 ($678,450 – $599,750) would be reported. When the Debit column of the Balance Sheet columns is more than the Credit column, net income is reported. If the Credit column exceeds the Debit column, a net loss is reported.
For Practice: PE 4-2A, PE 4-2B 17

18. 4-2
Example Exercise 4-3
Zack Gaddis owns and operates Gaddis Employment Services. On January 1, 2007, Zack Gaddis, Capital had a balance of $186,000. During the year, Zack invested an additional $40,000 and withdrew $25,000. For the year ended December 31, 2007, Gaddis Employment Services reported a net income of $18,750. Prepare a statement of owner’s equity for the year ended December 31, 2007. 18

19. For Practice: PE 4-3A, PE 4-3B
4-2
Follow My Example 4-3
Gaddis Employment Services
Statement of Owner’s Equity
For the Year Ended December 31, 2007
Zack Gaddis, capital, January 1, 2007 $186,000
Additional investment during ,000
Total $226,000
Withdrawals $ 25,000
Less net income ,750
Decrease in owner’s equity ,250
Zack Gaddis, capital, December 31, $219,750
For Practice: PE 4-3A, PE 4-3B 19

20. 4-2
A classified balance sheet is a balance sheet that was expanded by adding subsections for current assets; property, plant, and equipment; and current liabilities.

21. 4-2
Cash and other assets that are expected to be converted into cash, sold or used up usually within a year or less, through the normal operations of the business are called current assets.
Cash
Accounts Receivable
Supplies

22. 4-2
Notes receivable are written promises by the customer to pay the amount of the note and possibly interest at an agreed rate.

23. 4-2
Property, plant, and equipment (also called fixed assets) include assets that depreciate over a period of time. Land is an exception as it is not subject to depreciation.
Equipment
Machinery
Buildings
Land

24. 4-2
Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called current liabilities.
Accounts payable
Wages payable
Interest payable
Unearned fees

25. 4-2
Liabilities not due for a long time (usually more than one year) are long-term liabilities.
Notes payable
Mortgage payable
Bond payable

26. 4-2
Owner’s equity is the owner’s right to the assets of the business. Owner’s equity is added to the total liabilities, and the total must be equal to the total assets.

27. Jason Corbin, Capital 5. Cash Notes Receivable (due 6. Unearned Rent
4-2
Example Exercise 4-4
The following accounts appear in the adjusted trial balance of Hindsight Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability, (d) long-term liability; or (e) owner’s equity section of the December 31, 2007 balance sheet of Hindsight Consulting.
Jason Corbin, Capital 5. Cash
Notes Receivable (due 6. Unearned Rent
in 6 months) months)
Notes Payable (due in 7. Accumulated Depr.—
2009) Equipment
4. Land 8. Accounts Payable 27

28. For Practice: PE 4-4A, PE 4-4B
4-2
Follow My Example 4-4
Owner’s equity 5. Current asset
Current asset 6. Current liability
Long-term liability 7. Property, plant, and equipment
Property, plant, and equip. 8. Current liability
For Practice: PE 4-4A, PE 4-4B 28

29. Prepare closing entries.
4-3
Objective 3
Prepare closing entries.

30. 4-3
Accounts that are relatively permanent from year to year are called real accounts. Accounts that report amounts for only one period are called temporary accounts or nominal accounts.

31. 4-3
To report amounts for only one period, temporary accounts should have zero balances at the beginning of the period. At the end of the period the revenue and expense account balances are transferred to Income Summary.

32. 4-3
The balance of Income Summary is then transferred to the owner’s capital account. The balance of the owner’s drawing account is also transferred to the owner’s capital account. The entries that transfer these balances are called closing entries.

33. 4-3 33

34. 4-3
Debit each revenue account for the amount of its balance, and credit Income Summary for the total revenue.
Step 1:
Fees Earned
Bal. 16,840
Income Summary
16,840
Step 1
16,960
Rent Revenue
120
Bal. 120 34

35. Miscellaneous Expense
4-3
Wages Expense
Bal. 4,525
Bal. 1,600
Bal. 50
Bal. 985
Bal. 2,040
455
200
2,040
985 50
1,600
4,525
Income Summary
Rent Expense
9,855
16,960
Depreciation Expense
Utilities Expense
Step 2
Supplies Expense
Debit Income Summary for the total expenses and credit each expense account for its balance.
Insurance Expense
Bal. 200
Miscellaneous Expense
Bal. 455 35

36. 4-3
Income Summary
9,855
16,960
7,105
Debit Income Summary for the amount of its balance (in this case, the net income) and credit the capital account.
Step 3
Chris Clark, Capital
Bal. 25,000
Chris Clark, Drawing
Bal. 4,000
7,105 36

37. 4-3
Chris Clark, Capital
Bal. 25,000
7,105
Chris Clark, Drawing
Bal. 4,000
Debit the capital account for the balance of the drawing account, and credit drawing for the same amount.
Step 4
4,000
4,000 37

38. 4-3
Step 1
Step 2
Step 3
Step 4 38

39. 4-3
After the closing entries are posted, all of the temporary accounts have zero balances.

40. Journalize the four entries required to close the accounts.
4-3
Example Exercise 4-4
Example Exercise 4-5
The following accounts appear in the adjusted trial balance of Hindsight Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability, (d) long-term liability; or (e) owner’s equity section of the December 31, 2007, balance sheet of Hindsight Consulting.
After the accounts have been adjusted at July 31, the end of the fiscal year, the following balances are taken from the ledger of Cabriolet Services Co.
Terry Lambert, Capital $615,850
Terry Lambert, Drawing 25,000
Fees Earned 380,450
Wages Expense 250,000
Rent Expense 65,000
Supplies Expense 18,250
Miscellaneous Expense 6,200
Journalize the four entries required to close the accounts. 40

41. 4-3 Follow My Example 4-5 31 Income Summary 41,000
4-3
Follow My Example 4-5
July 31 Fees Earned 380,450
Income Summary 380,450
31 Income Summary 339,450
Wages Expense 250,000
Rent Expense 65,000
Supplies Expense 18,250
Miscellaneous Expense 6,200
31 Income Summary 41,000
Terry Lambert, Capital 41,000
31 Terry Lambert, Capital 25,000
Terry Lambert, Drawing 25,000 41
For Practice: PE 4-5A, PE 4-5B

42. Post-Closing Trial Balance
Exhibit 7 Post-Closing Trial Balance
4-3
NetSolutions
Post-Closing Trial Balance
December 31, 2007
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Land
Office Equipment
Accumulated Depreciation
Accounts Payable
Wages Payable
Unearned Rent
Chris Clark, Capital 42

43. Describe the accounting cycle.
4-4
Objective 4
Describe the accounting cycle.

44. 4-4
The accounting process that begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period’s transactions is called the accounting cycle. There are ten steps in the accounting cycle.

45. Transactions are analyzed and recorded in the journal.
The Accounting Cycle
4-4
Transactions are analyzed and recorded in the journal.
Transactions are posted to the ledger.
An unadjusted trial balance is prepared.
Adjustment data are assembled and analyzed.
An optional end-of-period spreadsheet (work sheet) is prepared.
Continued

46. Adjusting entries are journalized and posted to the ledger.
4-4
Adjusting entries are journalized and posted to the ledger.
An adjusted trial balance is prepared.
Financial statements are prepared.
Closing entries are journalized and posted to the ledger.
A post-closing trial balance is prepared.

47. Transactions are analyzed and recorded in the journal.
4-4
Example Exercise 4-6
Example Exercise 4-4
From the following list of steps in the accounting cycle, identify what two steps are missing.
The following accounts appear in the adjusted trial balance of Hindsight Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and equipment; (c) current liability, (d) long-term liability; or (e) owner’s equity section of the December 31, 2007, balance sheet of Hindsight Consulting.
Transactions are analyzed and recorded in the journal.
Transactions are posted to the ledger.
Adjustment data are assembled and analyzed.
An optional end-of-period spreadsheet (work sheet) is prepared.
Adjusting entries are journalized and posted to the ledger.
Financial statements are prepared.
Closing entries are journalized and posted to the ledger.
A post-closing trial balance is prepared. 21 47

48. For Practice: PE 4-6A, PE 4-6B
4-4
Follow My Example 4-6
The following two steps are missing: (1) the preparation of an unadjusted trial balance and (2) the preparation of the adjusted trial balance. The unadjusted trial balance should be prepared after step (b). The adjusted trial balance should be prepared after step (e). 48
For Practice: PE 4-6A, PE 4-6B

49. Objective 5 Illustrate the accounting cycle for one period.
4-5
Objective 5
Illustrate the accounting cycle for one period.
Refer to the textbook for this extended illustration.

50. 4-6
Objective 6
Explain what is meant by the fiscal year and the natural business year.

51. 4-6
The annual accounting period adopted by a business is known as its fiscal year. When a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation, such a fiscal year is also called the natural year.

52. Financial History of a Business
4-6
The financial history of a business may be shown by a series of balance sheets and income statements, as displayed below. 52

53. End-of-Period Spreadsheet (Work Sheet)
Appendix
End-of-Period Spreadsheet (Work Sheet)

54. The end-of-period spreadsheet (work sheet) shown in the following slides does not have the usual spreadsheet headings due to space constraints.

55. The unadjusted trial balance is checked for equality.
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Cash 2,065
Accounts Receivable 2,220
Supplies 2,000
Prepaid Insurance 2,400
Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 360
Chris Clark, Capital 25,000
Chris Clark, Drawing 4,000
Fees Earned 16,340
Wages Expense 4,275
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 800
Miscellaneous Expense 455
42,600 42,600
The unadjusted trial balance is checked for equality. 55

56. Cost of supplies on hand at end of period is $760.
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Cash 2,065
Accounts Receivable 2,220
Supplies 2,000
Prepaid Insurance 2,400
Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 360
Chris Clark, Capital 25,000
Chris Clark, Drawing 4,000
Fees Earned 16,340
Wages Expense 4,275
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 800
Miscellaneous Expense 455
42,600 42,600
(a) 1,240
Cost of supplies on hand at end of period is $760.
(a) 1,240 56

57. The insurance expense for December is $200 ($2,400/12)
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Cash 2,065
Accounts Receivable 2,220
Supplies 2,000 (a) 1,240
Prepaid Insurance 2,400
Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 360
Chris Clark, Capital 25,000
Chris Clark, Drawing 4,000
Fees Earned 16,340
Wages Expense 4,275
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 800 (a) 1,240
Miscellaneous Expense 455
42,600 42,600
(b)
The insurance expense for December is $200 ($2,400/12)
Insurance Expense (b) 200 57
Accounts are added as needed.

58. Rent revenue earned during December was $120.
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Cash 2,065
Accounts Receivable 2,220
Supplies 2,000 (a) 1,240
Prepaid Insurance 2,400 (b) Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 360
Chris Clark, Capital 25,000
Chris Clark, Drawing 4,000
Fees Earned 16,340
Wages Expense 4,275
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 800 (a) 1,240
Miscellaneous Expense 455
42,600 42,600
Rent revenue earned during December was $120.
(c)
Insurance Expense (b) 200 58
Rent Revenue (c) 120

59. Wages accrued but not paid at the end of December totaled $250.
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Cash 2,065
Accounts Receivable 2,220
Supplies 2,000 (a) 1,240
Prepaid Insurance 2,400 (b) Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 360 (c)
Chris Clark, Capital 25,000
Chris Clark, Drawing 4,000
Fees Earned 16,340
Wages Expense 4,275
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 800 (a) 1,240
Miscellaneous Expense 455
42,600 42,600
Wages accrued but not paid at the end of December totaled $250.
(d)
Insurance Expense (b) 200
Rent Revenue (c) 59
Wages Payable (d)

60. Fees accrued at the end of December but not recorded total $500.
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Cash 2,065
Accounts Receivable 2,220
Supplies 2,000 (a) 1,240
Prepaid Insurance 2,400 (b) Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 360 (c)
Chris Clark, Capital 25,000
Chris Clark, Drawing 4,000
Fees Earned 16,340
Wages Expense 4,275 (d)
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 800 (a) 1,240
Miscellaneous Expense 455
42,600 42,600
(e)
Fees accrued at the end of December but not recorded total $500.
(e)
Insurance Expense (b) 200
Rent Revenue (c)
Wages Payable (d) 60

61. Depreciation of office equipment is $50 for December.
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Cash 2,065
Accounts Receivable 2,220 (e)
Supplies 2,000 (a) 1,240
Prepaid Insurance 2,400 (b) Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 360 (c)
Chris Clark, Capital 25,000
Chris Clark, Drawing 4,000
Fees Earned 16,340 (e) 500
Wages Expense 4,275 (d)
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 800 (a) 1,240
Miscellaneous Expense 455
42,600 42,600
Depreciation of office equipment is $50 for December.
Insurance Expense (b) 200
Rent Revenue (c)
Wages Payable (d) 61
Depreciation Expense (f)
Accum. Depreciation (f)

62. To make more space, let’s remove the heading.
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Cash 2,065
Accounts Receivable 2,220 (e)
Supplies 2,000 (a) 1,240
Prepaid Insurance 2,400 (b) Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 360 (c)
Chris Clark, Capital 25,000
Chris Clark, Drawing 4,000
Fees Earned 16,340 (e) 500
Wages Expense 4,275 (d)
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 800 (a) 1,240
Miscellaneous Expense 455
42,600 42,600
To make more space, let’s remove the heading.
Insurance Expense (b) 200
Rent Revenue (c)
Wages Payable (d)
Depreciation Expense (f)
Accum. Depreciation (f) 62

63. Summed and ruled 31 63 Cash 2,065 Accounts Receivable 2,220 (e) 500
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance 31
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash 2,065
Accounts Receivable 2,220 (e)
Supplies 2,000 (a) 1,240
Prepaid Insurance 2,400 (b) Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 360 (c)
Chris Clark, Capital 25,000
Chris Clark, Drawing 4,000
Fees Earned 16,340 (e) 500
Wages Expense 4,275 (d)
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 800 (a) 1,240
Miscellaneous Expense 455
42,600 42,600
Insurance Expense (b) 200
Rent Revenue (c)
Wages Payable (d)
Depreciation Expense (f)
Accum. Depreciation (f)
2,360 2,360
Summed and ruled 63

64. The next step is to add or subtract the adjustments from (to) the amounts found in the Unadjusted Trial Balance columns and enter the results in the Adjusted Trial Balance columns.

65. 34 65 Cash 2,065 Accounts Receivable 2,220 (e) 500
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance 34
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash 2,065
Accounts Receivable 2,220 (e)
Supplies 2,000 (a) 1,240
Prepaid Insurance 2,400 (b) Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 360 (c)
Chris Clark, Capital 25,000
Chris Clark, Drawing 4,000
Fees Earned 16,340 (e) 500
Wages Expense 4,275 (d)
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 800 (a) 1,240
Miscellaneous Expense 455
42,600 42,600
Insurance Expense (b) 200
Rent Revenue (c)
Wages Payable (d)
Depreciation Expense (f)
Accum. Depreciation (f)
2,360 2,360 65

66. 34 66 Cash 2,065 2,065 Accounts Receivable 2,220 (e) 500 2,720
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance 34
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash 2, ,065
Accounts Receivable 2,220 (e) ,720
Supplies 2,000 (a) 1,
Prepaid Insurance 2,400 (b) ,200 Land 20, ,000
Office Equipment 1, ,800
Accounts Payable
Unearned Rent 360 (c)
Chris Clark, Capital 25, ,000
Chris Clark, Drawing 4, ,000
Fees Earned 16,340 (e) ,840
Wages Expense 4,275 (d) ,525
Rent Expense 1, ,600
Utilities Expense
Supplies Expense 800 (a) 1,240 2,040
Miscellaneous Expense
42,600 42,600
Insurance Expense (b)
Rent Revenue (c)
Wages Payable (d)
Depreciation Expense (f)
Accum. Depreciation (f)
2,360 2,360 43,400 43,400 66

67. Because of space constraints, the Unadjusted Trial Balance and the Adjustments columns will not be shown in the following slides.

68. 38 68 Cash 2,065 Accounts Receivable 2,720 Supplies 760
Adjusted
Trial Balance Income Statement Balance Sheet 38
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash 2,065
Accounts Receivable 2,720
Supplies 760
Prepaid Insurance 2,200
Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 240
Chris Clark, Capital 25, Chris Clark, Drawing 4,000
Fees Earned 16,840
Wages Expense 4,525
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 2,040
Miscellaneous Expense 455
Insurance Expense 200
Rent Revenue 120
Wages Payable 250
Depreciation Expense 50
Accum. Depreciation ,400 43,400 68

69. The next step is to extend amounts in the Adjusted Trial Balance columns to the Income Statement and Balance Sheet columns.

70. 38 70 Cash 2,065 Accounts Receivable 2,720 Supplies 760
Adjusted
Trial Balance Income Statement Balance Sheet 38
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash 2,065
Accounts Receivable 2,720
Supplies 760
Prepaid Insurance 2,200
Land 20,000
Office Equipment 1,800
Accounts Payable 900
Unearned Rent 240
Chris Clark, Capital 25, Chris Clark, Drawing 4,000
Fees Earned 16,840
Wages Expense 4,525
Rent Expense 1,600
Utilities Expense 985
Supplies Expense 2,040
Miscellaneous Expense 455
Insurance Expense 200
Rent Revenue 120
Wages Payable 250
Depreciation Expense 50
Accum. Depreciation ,400 43,400 70

71. 40 71 Cash 2,065 2,065 Accounts Receivable 2,720 2,720
Adjusted
Trial Balance Income Statement Balance Sheet 40
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash 2, ,065
Accounts Receivable 2, ,720
Supplies
Prepaid Insurance 2, ,200
Land 20, ,000
Office Equipment 1, ,800
Accounts Payable
Unearned Rent
Chris Clark, Capital 25, ,000 Chris Clark, Drawing 4, ,000
Fees Earned 16, ,840
Wages Expense 4,525 4,525
Rent Expense 1,600 1,600
Utilities Expense
Supplies Expense 2,040 2,040
Miscellaneous Expense
Insurance Expense
Rent Revenue
Wages Payable
Depreciation Expense
Accum. Depreciation ,400 43,400 71

72. The Income Statement and Balance Sheet columns are totaled.
The Income Statement and Balance Sheet columns are totaled.

73. 42 73 Cash 2,065 2,065 Accounts Receivable 2,720 2,720
Adjusted
Trial Balance Income Statement Balance Sheet 42
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash 2, ,065
Accounts Receivable 2, ,720
Supplies
Prepaid Insurance 2, ,200
Land 20, ,000
Office Equipment 1, ,800
Accounts Payable
Unearned Rent
Chris Clark, Capital 25, ,000 Chris Clark, Drawing 4, ,000
Fees Earned 16, ,840
Wages Expense 4,525 4,525
Rent Expense 1,600 1,600
Utilities Expense
Supplies Expense 2,040 2,040
Miscellaneous Expense
Insurance Expense
Rent Revenue
Wages Payable
Depreciation Expense
Accum. Depreciation ,400 43,400 73

74. 42 74 Cash 2,065 2,065 Accounts Receivable 2,720 2,720
Adjusted
Trial Balance Income Statement Balance Sheet 42
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash 2, ,065
Accounts Receivable 2, ,720
Supplies
Prepaid Insurance 2, ,200
Land 20, ,000
Office Equipment 1, ,800
Accounts Payable
Unearned Rent
Chris Clark, Capital 25, ,000 Chris Clark, Drawing 4, ,000
Fees Earned 16, ,840
Wages Expense 4,525 4,525
Rent Expense 1,600 1,600
Utilities Expense
Supplies Expense 2,040 2,040
Miscellaneous Expense
Insurance Expense
Rent Revenue
Wages Payable
Depreciation Expense
Accum. Depreciation ,400 43,400 9,855 16,960 33,545 26,440 74

75. The net income or net loss is determined. Then the Income Statement and Balance Sheet columns are totaled and double-ruled.

76. 76 Cash 2,065 2,065 Accounts Receivable 2,720 2,720 Supplies 760 760
Adjusted
Trial Balance Income Statement Balance Sheet
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash 2, ,065
Accounts Receivable 2, ,720
Supplies
Prepaid Insurance 2, ,200
Land 20, ,000
Office Equipment 1, ,800
Accounts Payable
Unearned Rent
Chris Clark, Capital 25, ,000 Chris Clark, Drawing 4, ,000
Fees Earned 16, ,840
Wages Expense 4,525 4,525
Rent Expense 1,600 1,600
Utilities Expense
Supplies Expense 2,040 2,040
Miscellaneous Expense
Insurance Expense
Rent Revenue
Wages Payable
Depreciation Expense
Accum. Depreciation ,400 43,400 9,855 16,960 33,545 26,440 76

77. 77 Cash 2,065 2,065 Accounts Receivable 2,720 2,720 Supplies 760 760
Adjusted
Trial Balance Income Statement Balance Sheet 77
Account Title Debit Credit Debit Credit Debit Credit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Cash 2, ,065
Accounts Receivable 2, ,720
Supplies
Prepaid Insurance 2, ,200
Land 20, ,000
Office Equipment 1, ,800
Accounts Payable
Unearned Rent
Chris Clark, Capital 25, ,000 Chris Clark, Drawing 4, ,000
Fees Earned 16, ,840
Wages Expense 4,525 4,525
Rent Expense 1,600 1,600
Utilities Expense
Supplies Expense 2,040 2,040
Miscellaneous Expense
Insurance Expense
Rent Revenue
Wages Payable
Depreciation Expense
Accum. Depreciation ,400 43,400 9,855 16,960 33,545 26,440
Net income 7, ,105
16,960 16,960 33,545 33,545

78. 9,855 16,960 33,545 26,440
7, ,105
16,960 16,960 33,545 33,545
Income Statement Balance Sheet
Net Income
Net Income
The difference between the Income Statement column totals is the net income (or net loss) for the period. 78