Kế toán, kiểm toán - Chapter 4: Completing the accounting cycle

Chapter 4Completing the Accounting CycleBenefits of a Work SheetAids the preparation of financial statements.Reduces possibility of errors.Links accounts and their adjustments.Assists in planning and organizing an audit.Helps in preparing interim financial statements.Shows the effects of proposed transactions.Not a required report.P 1FastForwardWorksheetFor the Month Ended December 31, 2011P 1Unadjusted Trial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance Sheet and Statement of Changes in EquityFastForwardWorksheetFor the Month Ended December 31, 2011P 1Unadjusted Trial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance Sheet and Statement of Changes in EquityFastForwardWorksheetFor the Month Ended December 31, 2011P 1Unadjusted Trial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance Sheet and Statement of Changes in EquityFastForwardWorksheetFor the Month Ended December 31, 2011P 1Unadjusted Trial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance Sheet and Statement of Changes in EquityFastForwardWorksheetFor the Month Ended December 31, 2011P 1Unadjusted Trial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance Sheet and Statement of Changes in EquityPreparing the Financial StatementsP 1Recording Closing EntriesResets revenue, expense and withdrawal account balances to zero at the end of the period.Helps summarize a period’s revenues and expenses in the Income Summary account.Identify accountsfor closing.Record and postclosing entries. Prepare post-closingtrial balance.C 1Temporary AccountsRevenuesIncome SummaryExpensesWithdrawalsPermanent AccountsAssetsLiabilitiesOwner’s CapitalTemporary andPermanent AccountsThe closing process applies only to temporary accounts.C 1Let’s see how the closing process works!Recording Closing EntriesClose Credit Balances in Revenue Accounts to Income Summary.Close Debit Balances in Expense accounts to Income Summary.Close Income Summary account to Owner’s Capital.Close Withdrawals to Owner’s Capital.P 2Using the adjusted trial balance, let’s prepare the closing entries for FastForward.P 21. Close Credit Balances in Revenue Accounts to Income Summary.P 2 Close Credit Balances inRevenue Accounts to Income SummaryNow, let’s look at the ledger accounts after posting this closing entry.    Dr. Cr. Dec. 31 Consulting revenue 7,850    Rental revenue 300     Income summary   8,150 P 2P 2 Close Credit Balances inRevenue Accounts to Income Summary2. Close Debit Balances in Expense Accounts to Income Summary.P 2Now, let’s look at the ledger accountsafter posting this closing entry. Close Debit Balances in Expense Accounts to Income SummaryP 2Net Income Close Debit Balances in Expense Accounts to Income Summary P 23. Close Income Summary to Owner’s Capital.P 2Now, let’s look at the ledger accountsafter posting this closing entry. CLOSE INCOME SUMMARYTO OWNER’S CAPITALP 2P 2 CLOSE INCOME SUMMARYTO OWNER’S CAPITAL4. Close Withdrawals Account to Owner’s Capital.P 2Now, let’s look at the ledger accountsafter posting this closing entry. CLOSE WITHDRAWALS ACCOUNTTO OWNER’S CAPITALP 2P 2 CLOSE WITHDRAWALS ACCOUNTTO OWNER’S CAPITALSummary of the Closing ProcessClose Credit Balances in Revenue Accounts to Income Summary.Close Debit Balances in Expense Accounts to Income Summary.Close Income Summary to Owner’s Capital.Close Withdrawals Account to Owner’s Capital.Post-Closing Trial BalanceList of permanent accounts and their balances after posting closing entries.Total debits and credits must be equal.P 3Post-Closing Trial BalanceP 3Accounting CycleC 2Current items are those expected to come due (both collected and owed) within the longer of one year or the company’s normal operating cycle.Classified Balance SheetC 3Current assets are expected to be sold, collected, or used within one year or the company’s operating cycle. C 3Long-term financial assets or investments are expected to be held for more than one year or the operating cycle.C 3Property, plant and equipment are tangible long-term assets used to produce or sell products and services.C 3Intangible assets are long-term resources used to produce or sell products and services and that lack physical form.C 3Current liabilities are obligations due within the longer of one year or the company’s operating cycle.C 3Long-term liabilities are obligations not due within the longer of one year or the company’s operating cycle.C 3Equity is the owner’s claim on the assets. C 3Current RatioHelps assess the company’s ability to pay its debts in the near future      Current Ratio =Current Assets Current Liabilities      $ in millions2009200820072006Current assets $ 2,867 $ 2,919 $ 2,771 $ 2,784 Current liabilities 1,225 1,374 1,709 1,575 Current ratio 2.3 2.1 1.6 1.8 Industry current ratlo 2.0 2.1 2.3 2.4Limited Brands, Inc.A 1P 44A – REVERSING ENTRIESReversing entries are optional. They are recorded in response to accrued assets and accrued liabilities that were created by adjusting entries at the end of a reporting period. The purpose of reversing entries is to simplify a company’s recordkeeping.Let’s see how the accounting for our payroll accrual will be handled with and without reversing entries.P 4P 4Without Reversing EntriesWith Reversing EntriesEND OF CHAPTER 4