Completing the Accounting Cycle

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4
Completing the Accounting Cycle
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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.

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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.

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4-1
Objective 1
Describe the flow of accounting information from
the unadjusted trial balance into the adjusted
trial balance and financial statements.
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4-1
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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.
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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.
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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.
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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.
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4-1
Spreadsheet (Work Sheet)
Adjusted TB
Income State.
Balance Sheet
Accounts Dr Cr Dr Cr Dr Cr
Asset, liability, owners equity, and drawing
balances in the Adjusted Trial Balance column are
extended to the Balance Sheet column.
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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.

• Fees Earned
• Accounts Payable
• Rent Revenue
• Supplies

• Amber Bablock, Drawing
• Utilities Expense
• Accumulated DepreciationEquipment
• Unearned Rent

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4-1

• Balance Sheet column
• Income Statement column
• Balance Sheet column
• Balance Sheet column
• Income Statement column
• Balance Sheet column
• Income Statement column
• Balance Sheet column

For Practice PE 4-1A, PE 4-1B
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4-2
Objective 2
Prepare financial statements from adjusted
account balances.
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4-2
To balance sheet
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4-2
(Concluded)
From statement of owner equity
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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?
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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
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4-2
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
owners equity for the year ended December 31,
2007.
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4-2
Follow My Example 4-3
GADDIS EMPLOYMENT SERVICES STATEMENT OF OWNERS
EQUITY For the Year Ended December 31, 2007
Zack Gaddis, capital, January 1,
2007 186,000 Additional investment during 2007
40,000 Total 226,000 Withdrawals
25,000 Less net income 18,750 Decrease in
owners equity 6,250 Zack Gaddis, capital,
December 31, 2007 219,750
For Practice PE 4-3A, PE 4-3B
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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.
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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

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

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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

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

• Notes payable
• Mortgage payable
• Bond payable

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4-2
Owners equity is the owners right to the assets
of the business. Owners equity is added to the
total liabilities, and the total must be equal to
the total assets.
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4-2
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) owners 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

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4-2
Follow My Example 4-4

• Owners 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
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4-3
Objective 3
Prepare closing entries.
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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.
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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.
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4-3
The balance of Income Summary is then transferred
to the owners capital account. The balance of
the owners drawing account is also transferred
to the owners capital account. The entries that
transfer these balances are called closing
entries.
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4-3
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4-3
Debit each revenue account for the amount of its
balance, and credit Income Summary for the total
revenue.
Step 1
16,840
Income Summary
Step 1
16,960
Rent Revenue
Bal. 120
120
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4-3
Wages Expense
Income Summary
Rent Expense
16,960
9,855
Depreciation Expense
Utilities Expense
Step 2
Debit Income Summary for the total expenses and
credit each expense account for its balance.
Supplies Expense
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4-3
Income Summary
16,960
9,855
7,105
7,105
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4-3
4,000
4,000
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4-3
Step 1
Step 2
Step 3
Step 4
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4-3
After the closing entries are posted, all of the
temporary accounts have zero balances.
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4-3
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) owners 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.
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4-3
July 31 Fees Earned 380,450 Income
Summary 380,450 31 Income Summary 339,450 Wa
ges Expense 250,000 Rent Expense 65,000 Su
pplies 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
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For Practice PE 4-5A, PE 4-5B
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4-3
Exhibit 7 Post-Closing Trial Balance
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4-4
Objective 4
Describe the accounting cycle.
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4-4
The accounting process that begins with analyzing
and journalizing transactions and ends with
preparing the accounting records for the next
periods transactions is called the accounting
cycle. There are ten steps in the accounting
cycle.
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4-4
The Accounting Cycle

• 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
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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.

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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) owners equity section of the
December 31, 2007, balance sheet of Hindsight
Consulting.
From the following list of steps in the
accounting cycle, identify what two steps are
missing.

• 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.

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4-4
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).
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For Practice PE 4-6A, PE 4-6B
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4-5
Objective 5
Illustrate the accounting cycle for one period.
Refer to the textbook for this extended
illustration.
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4-6
Objective 6
Explain what is meant by the fiscal year and the
natural business year.
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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.
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4-6
Financial History of a Business
The financial history of a business may be shown
by a series of balance sheets and income
statements, as displayed below.
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Appendix
End-of-Period Spreadsheet (Work Sheet)
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The end-of-period spreadsheet (work sheet) shown
in the following slides does not have the usual
spreadsheet headings due to space constraints.
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Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,220 Supp
lies 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 Miscel
laneous Expense 455 42,600 42,600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
21 22
The unadjusted trial balance is checked for
equality.
55
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Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,220 Supp
lies 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 Miscella
neous Expense 455 42,600 42,600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
21 22
(a) 1,240
Cost of supplies on hand at end of period is 760.
(a) 1,240
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57
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Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,220 Supp
lies 2,000 (a) 1,240 Prepaid
Insurance 2,400 Land 20,000 Office
Equipment 1,800 Accounts Payable 900 Unearn
ed Rent 360 Chris Clark, Capital 25,000 C
hris Clark, Drawing 4,000 Fees
Earned 16,340 Wages Expense 4,275 Rent
Expense 1,600 Utilities Expense 985 Supp
lies Expense 800 (a) 1,240 Miscellaneous
Expense 455 42,600 42,600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
21 22
(b) 200
The insurance expense for December is 200
(2,400/12)
Insurance Expense (b) 200
57
58
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Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,220 Supp
lies 2,000 (a) 1,240 Prepaid
Insurance 2,400 (b) 200 Land 20,000 Of
fice 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
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
21 22
Rent revenue earned during December was 120.
(c) 120
Insurance Expense (b) 200
58
Rent Revenue (c) 120
59
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Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,220 Supp
lies 2,000 (a) 1,240 Prepaid
Insurance 2,400 (b) 200 Land 20,000 Of
fice Equipment 1,800 Accounts
Payable 900 Unearned Rent 360 (c)
120 Chris Clark, Capital 25,000 Chris
Clark, Drawing 4,000 Fees Earned 16,340 W
ages Expense 4,275 Rent Expense 1,600 Util
ities Expense 985 Supplies Expense 800 (a)
1,240 Miscellaneous Expense 455 42,600 42
,600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
21 22
Wages accrued but not paid at the end of December
totaled 250.
(d) 250
Insurance Expense (b) 200 Rent Revenue (c)
120
59
Wages Payable (d) 250
60
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Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,220 Su
pplies 2,000 (a) 1,240 Prepaid
Insurance 2,400 (b) 200 Land 20,000 Of
fice Equipment 1,800 Accounts
Payable 900 Unearned Rent 360 (c)
120 Chris Clark, Capital 25,000 Chris
Clark, Drawing 4,000 Fees Earned 16,340
Wages Expense 4,275 (d) 250 Rent
Expense 1,600 Utilities Expense 985 Supp
lies Expense 800 (a) 1,240 Miscellaneous
Expense 455 42,600 42,600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
21 22
(e) 500
Fees accrued at the end of December but not
recorded total 500.
(e) 500
Insurance Expense (b) 200 Rent Revenue (c)
120 Wages Payable (d) 250
60
61
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Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,220 (e)
500 Supplies 2,000 (a) 1,240 Prepaid
Insurance 2,400 (b) 200 Land 20,000 Of
fice Equipment 1,800 Accounts
Payable 900 Unearned Rent 360 (c)
120 Chris Clark, Capital 25,000 Chris
Clark, Drawing 4,000 Fees Earned 16,340 (e)
500 Wages Expense 4,275 (d) 250 Rent
Expense 1,600 Utilities Expense 985 Supp
lies Expense 800 (a) 1,240 Miscellaneous
Expense 455 42,600 42,600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
21 22
Depreciation of office equipment is 50 for
December.
Insurance Expense (b) 200 Rent Revenue (c)
120 Wages Payable (d) 250
61
Depreciation Expense (f) 50
Accum. Depreciation (f) 50
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Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,220 (e)
500 Supplies 2,000 (a) 1,240 Prepaid
Insurance 2,400 (b) 200 Land 20,000 Of
fice Equipment 1,800 Accounts
Payable 900 Unearned Rent 360 (c)
120 Chris Clark, Capital 25,000 Chris
Clark, Drawing 4,000 Fees Earned 16,340 (e)
500 Wages Expense 4,275 (d) 250 Rent
Expense 1,600 Utilities Expense 985 Supp
lies Expense 800 (a) 1,240 Miscellaneous
Expense 455 42,600 42,600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
21 22
To make more space, lets remove the heading.
Insurance Expense (b) 200 Rent Revenue (c)
120 Wages Payable (d) 250 Depreciation
Expense (f) 50 Accum. Depreciation (f)
50
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63

Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
0
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,220 (e)
500 Supplies 2,000 (a) 1,240 Prepaid
Insurance 2,400 (b) 200 Land 20,000 Of
fice Equipment 1,800 Accounts
Payable 900 Unearned Rent 360 (c)
120 Chris Clark, Capital 25,000 Chris
Clark, Drawing 4,000 Fees Earned 16,340 (e)
500 Wages Expense 4,275 (d) 250 Rent
Expense 1,600 Utilities Expense 985 Supp
lies Expense 800 (a) 1,240 Miscellaneous
Expense 455 42,600 42,600
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
Insurance Expense (b) 200 Rent Revenue (c)
120 Wages Payable (d) 250 Depreciation
Expense (f) 50 Accum. Depreciation (f)
50 2,360 2,360
Summed and ruled
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64
0
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

Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
0
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,220 (e)
500 Supplies 2,000 (a) 1,240 Prepaid
Insurance 2,400 (b) 200 Land 20,000 Of
fice Equipment 1,800 Accounts
Payable 900 Unearned Rent 360 (c)
120 Chris Clark, Capital 25,000 Chris
Clark, Drawing 4,000 Fees Earned 16,340 (e)
500 Wages Expense 4,275 (d) 250 Rent
Expense 1,600 Utilities Expense 985 Supp
lies Expense 800 (a) 1,240 Miscellaneous
Expense 455 42,600 42,600
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
Insurance Expense (b) 200 Rent Revenue
(c) 120 Wages Payable (d) 250
Depreciation Expense (f) 50 Accum.
Depreciation (f) 50 2,360 2,360
65
66

Unadjusted Adjusted
Trial Balance
Adjustments
Trial Balance
0
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 2,065 Accounts
Receivable 2,220 (e) 500 2,720 Supplies 2,0
00 (a) 1,240 760 Prepaid Insurance 2,400 (b)
200 2,200 Land 20,000 20,000 Office
Equipment 1,800 1,800 Accounts
Payable 900 900 Unearned Rent 360 (c)
120 240 Chris Clark, Capital 25,000 25,000
Chris Clark, Drawing 4,000 4,000 Fees
Earned 16,340 (e) 500 16,840 Wages
Expense 4,275 (d) 250 4,525 Rent
Expense 1,600 1,600 Utilities
Expense 985 985 Supplies Expense 800 (a)
1,240 2,040 Miscellaneous Expense 455 455 4
2,600 42,600
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
Insurance Expense (b) 200 200 Rent Revenue
(c) 120 120 Wages Payable (d) 250 250
Depreciation Expense (f) 50 50 Accum.
Depreciation (f) 50 50 2,360 2,360 43,400
43,400
66
67
0
Because of space constraints, the Unadjusted
Trial Balance and the Adjustments columns will
not be shown in the following slides.
68

Adjusted
Trial Balance
Income Statement Balance Sheet
0
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,720 Su
pplies 760 Prepaid Insurance 2,200 Land 20,0
00 Office Equipment 1,800 Accounts
Payable 900 Unearned Rent 240 Chris
Clark, Capital 25,000 Chris Clark,
Drawing 4,000 Fees Earned 16,840 Wages
Expense 4,525 Rent Expense 1,600 Utilities
Expense 985 Supplies Expense 2,040 Miscel
laneous Expense 455
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
Insurance Expense 200 Rent Revenue 120
Wages Payable 250 Depreciation Expense 50
Accum. Depreciation 50 43,400 43,400
68
69
0
The next step is to extend amounts in the
Adjusted Trial Balance columns to the Income
Statement and Balance Sheet columns.
70

Adjusted
Trial Balance
Income Statement Balance Sheet
0
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 Accounts Receivable 2,720 Su
pplies 760 Prepaid Insurance 2,200 Land 20,0
00 Office Equipment 1,800 Accounts
Payable 900 Unearned Rent 240 Chris
Clark, Capital 25,000 Chris Clark,
Drawing 4,000 Fees Earned 16,840 Wages
Expense 4,525 Rent Expense 1,600 Utilities
Expense 985 Supplies Expense 2,040 Miscel
laneous Expense 455
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
Insurance Expense 200 Rent Revenue 120
Wages Payable 250 Depreciation Expense 50
Accum. Depreciation 50 43,400 43,400
70
71

Adjusted
Trial Balance
Income Statement Balance Sheet
0
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 2,065 Accounts
Receivable 2,720 2,720 Supplies 760 760 Pr
epaid Insurance 2,200 2,200 Land 20,000 20,
000 Office Equipment 1,800 1,800 Accounts
Payable 900 900 Unearned Rent 240 240 Ch
ris Clark, Capital 25,000 25,000 Chris Clark,
Drawing 4,000 4,000 Fees Earned 16,840 16,84
0 Wages Expense 4,525 4,525 Rent
Expense 1,600 1,600 Utilities
Expense 985 985 Supplies Expense 2,040 2,040
Miscellaneous Expense 455 455
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
Insurance Expense 200 200 Rent Revenue
120 120 Wages Payable 250 250
Depreciation Expense 50 50 Accum.
Depreciation 50 50 43,400 43,400
71
72
0
The Income Statement and Balance Sheet columns
are totaled.
73

Adjusted
Trial Balance
Income Statement Balance Sheet
0
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 2,065 Accounts
Receivable 2,720 2,720 Supplies 760 760 Pr
epaid Insurance 2,200 2,200 Land 20,000 20,
000 Office Equipment 1,800 1,800 Accounts
Payable 900 900 Unearned Rent 240 240 Ch
ris Clark, Capital 25,000 25,000 Chris Clark,
Drawing 4,000 4,000 Fees Earned 16,840 16,84
0 Wages Expense 4,525 4,525 Rent
Expense 1,600 1,600 Utilities
Expense 985 985 Supplies Expense 2,040 2,040
Miscellaneous Expense 455 455
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
Insurance Expense 200 200 Rent Revenue
120 120 Wages Payable 250 250
Depreciation Expense 50 50 Accum.
Depreciation 50 50 43,400 43,400
73
74

Adjusted
Trial Balance
Income Statement Balance Sheet
0
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 2,065 Accounts
Receivable 2,720 2,720 Supplies 760 760 Pr
epaid Insurance 2,200 2,200 Land 20,000 20,
000 Office Equipment 1,800 1,800 Accounts
Payable 900 900 Unearned Rent 240 240 Ch
ris Clark, Capital 25,000 25,000 Chris Clark,
Drawing 4,000 4,000 Fees Earned 16,840 16,84
0 Wages Expense 4,525 4,525 Rent
Expense 1,600 1,600 Utilities
Expense 985 985 Supplies Expense 2,040 2,040
Miscellaneous Expense 455 455
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
Insurance Expense 200 200 Rent Revenue
120 120 Wages Payable 250 250
Depreciation Expense 50 50 Accum.
Depreciation 50 50 43,400 43,400 9,855 16,960
33,545 26,440
74
75
0
The net income or net loss is determined. Then
the Income Statement and Balance Sheet columns
are totaled and double-ruled.
76

Adjusted
Trial Balance
Income Statement Balance Sheet
0
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 2,065 Accounts
Receivable 2,720 2,720 Supplies 760 760 Pr
epaid Insurance 2,200 2,200 Land 20,000 20,
000 Office Equipment 1,800 1,800 Accounts
Payable 900 900 Unearned Rent 240 240 Ch
ris Clark, Capital 25,000 25,000 Chris Clark,
Drawing 4,000 4,000 Fees Earned 16,840 16,84
0 Wages Expense 4,525 4,525 Rent
Expense 1,600 1,600 Utilities
Expense 985 985 Supplies Expense 2,040 2,040
Miscellaneous Expense 455 455
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
Insurance Expense 200 200 Rent Revenue
120 120 Wages Payable 250 250
Depreciation Expense 50 50 Accum.
Depreciation 50 50 43,400 43,400 9,855 16,960
33,545 26,440
76
77

Adjusted
Trial Balance
Income Statement Balance Sheet
77
0
Account Title Debit Credit Debit Credit Debit Cre
dit
Cash 2,065 2,065 Accounts
Receivable 2,720 2,720 Supplies 760 760 Pr
epaid Insurance 2,200 2,200 Land 20,000 20,
000 Office Equipment 1,800 1,800 Accounts
Payable 900 900 Unearned Rent 240 240 Ch
ris Clark, Capital 25,000 25,000 Chris Clark,
Drawing 4,000 4,000 Fees Earned 16,840 16,84
0 Wages Expense 4,525 4,525 Rent
Expense 1,600 1,600 Utilities
Expense 985 985 Supplies Expense 2,040 2,040
Miscellaneous Expense 455 455
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
Insurance Expense 200 200 Rent Revenue
120 120 Wages Payable 250 250
Depreciation Expense 50 50 Accum.
Depreciation 50 50 43,400 43,400 9,855 16,960
33,545 26,440
Net income 7,105 7,105 16,960 16,960 33,545 33,
545
78
0
The difference between the Income Statement
column totals is the net income (or net loss) for
the period.
78