Kế toán, kiểm toán - Chapter 3: Completing the accounting cycle

International Accounting 1 Chapter 3: Completing the accounting cycle MA.Nguyen Quoc Nhat- nhatnq.faa@gmail.com 1 Chapter 3: Completing the accounting cycle MA. Nguyen Quoc Nhat Learning Objectives 1.Prepare an accounting worksheet 2.Use the worksheet to prepare financial statements 3.Close the revenue, expense, and drawing accounts 4.Prepare the post-closing trial balance 5.Classify assets and liabilities as current or long-term 6.Describe the effect of various transactions on the current ratio and the debt ratio Chapter’s content 3.1 The Worksheet 3.2 Completing the Accounting Cycle 3.3 Closing the Accounts 3.4 Post-Closing Trial Balance 3.5 Classifying Assets and Liabilities 3.6 Accounting Ratios International Accounting 1 Chapter 3: Completing the accounting cycle MA.Nguyen Quoc Nhat- nhatnq.faa@gmail.com 2 3.1 The Worksheet • a document with several columns • to summarize data for the financial statements. 3.1 The Worksheet 3.1 The Worksheet 1. Prepare trial balance on the worksheet. 2. Enter adjustment data. 3. Enter adjusted balances 4. Extend adjusted balance to appropriate columns. 5. Calculate income/loss and complete the worksheet. International Accounting 1 Chapter 3: Completing the accounting cycle MA.Nguyen Quoc Nhat- nhatnq.faa@gmail.com 3 3.1 The Worksheet A step-by-step description of the worksheet follows: 1. Enter the account titles and their unadjusted balances in the Trial Balance columns of the worksheet, and total the amounts. 2. Enter the adjusting entries in the Adjustments columns, and total the amounts. 3. Compute each account’s adjusted balance by combining the trial balance and adjustment figures. Enter each account’s adjusted amount in the Adjusted Trial Balance columns 3.1 The Worksheet A step-by-step description of the worksheet follows: 4. Draw an imaginary line above the first revenue account (in this case, Service revenue). Every account above that line (assets, liabilities, and equity accounts) is copied from the Adjusted Trial Balance to the Balance Sheet columns. Every account below the line (revenues and expenses) is copied from the Adjusted Trial Balance to the Income Statement columns. 3.1 The Worksheet A step-by-step description of the worksheet follows: 5. On the income statement, compute net income or net loss as total revenues minus total expenses. Enter net income (loss) as the balancing amount on the income statement. Also enter net income (loss) as the balancing amount on the balance sheet. Then total the financial statement columns. International Accounting 1 Chapter 3: Completing the accounting cycle MA.Nguyen Quoc Nhat- nhatnq.faa@gmail.com 4 3.1 The Worksheet A step-by-step description of the worksheet follows: 5. On the income statement, compute net income or net loss as total revenues minus total expenses. Enter net income (loss) as the balancing amount on the income statement. Also enter net income (loss) as the balancing amount on the balance sheet. Then total the financial statement columns. 3.2 Completing the Accounting Cycle • Preparing the Financial Statements from a Worksheet • Recording the Adjusting Entries from a Worksheet 3.3 Closing the Accounts International Accounting 1 Chapter 3: Completing the accounting cycle MA.Nguyen Quoc Nhat- nhatnq.faa@gmail.com 5 3.3 Closing the Accounts 3.3 Closing the Accounts 3.3 Closing the Accounts International Accounting 1 Chapter 3: Completing the accounting cycle MA.Nguyen Quoc Nhat- nhatnq.faa@gmail.com 6 3.3 Closing the Accounts 3.4 Post-Closing Trial Balance • This optional step lists the accounts and their adjusted balances after closing. • Only assets, liabilities, and capital accounts appear on the post-closing trial balance. No temporary accounts— revenues, expenses, or drawing—are included because they have been closed (their balances are zero). 3.4 Post-Closing Trial Balance International Accounting 1 Chapter 3: Completing the accounting cycle MA.Nguyen Quoc Nhat- nhatnq.faa@gmail.com 7 3.5 Classifying Assets and Liabilities • classified as either current or long-term to show their relative liquidity. • Liquidity measures how quickly and easily an account can be converted to cash. 3.5 Classifying Assets and Liabilities • Current assets will be converted to cash, sold, or used up during the next 12 months, or within the business’s operating cycle if the cycle is longer than a year. • Long-term assets are all the assets that will not be converted to cash within the business’s operating cycle. 3.5 Classifying Assets and Liabilities • Current liabilities must be paid either with cash or with goods and services within one year, or within the entity’s operating cycle if the cycle is longer than a year • Long-term liabilities do not need to be paid within the entity’s operating cycle. International Accounting 1 Chapter 3: Completing the accounting cycle MA.Nguyen Quoc Nhat- nhatnq.faa@gmail.com 8 3.6 Accounting Ratios • The current ratio measures a company’s ability to pay its current liabilities with its current assets. Current ratio = Total current assets/ Total current liabilities • The debt ratio measures an organization’s overall ability to pay its total liabilities.(debt). Debt ratio = total liabilities / Total assets Thank for your attention!