Download Post-Closing Trial Balance

Accounting:
Notes 8/29/14
Ch. 3
THE ACCOUNTING EQUATION:
(A)SSETS
Accts. Rec.
($ owed to co.)
=
(L)IABILITIES +
Accts. Pay.
($ owed by the co.)
(O)WNER’S (E)QUITY
Capital
($ or assets the owner has put into the co.)
Cash
Equipment
Supplies
9/10/14
THE EXPANDED ACCOUNTING EQUATION:
(A)SSETS = (L)IABILITIES + (O)WNER’S (E)QUITY ((C)APITAL) + (R)EVENUE (FEES) - (E)XPENSES - (W)ITHDRAWALS
MEANS THE SAME THING AS
ASSETS + EXPENSES + WITHDRAWALS = LIABILITIES + OWNER’S EQUITY (CAPITAL) + REVENUES (FEES)
(3) TEMPORARY CAPITAL ACCOUNTS ARE:
1
REVENUES
2
EXPENSES
3
WITHDRAWALS
Ch. 4
9/26
Debit means “Left”
Credit means “Right”
“T” Account:
Debit (Dr) Credit (Cr)
9/29
Assets
Dr
=
Liabilities
Cr
Dr
NB
+
Cr
NB
Owner’s Equity
Dr
Cr
NB
Normal Balance (NB) is on the increasing side.
(Begin Sec. 2)
TOTAL DEBITS
ALWAYS EQUAL TOTAL CREDITS FOR EVERY TRANSACTION!!!!!!!!!!!
Ch. 5
10/16
Temporary Capital Accounts:
1)
2)
3)
Revenues/Fees
Expenses
Withdrawals
Permanent Accounts:
EVERYTHING ELSE:
1) ALL ASSETS
2) ALL LIABILITIES
3) CAPITAL
Expanded Accounting Equation:
A = L + Cap. + Rev. - Exp. - W/D
A + Exp. + W/D
=
=
L + Cap. + Rev.
Ch. 6
11/4/14
Accounting Cycle:
1) Gather source documents
2) Analyze transaction
3) Journalize transactions
4) Post to the ledger
5) Prepare a trial balance
6) Prepare a work sheet
7) Prepare the financial statements
8) Journalize and post the closing entries
9) Prepare a post-closing trial balance
Four types of source documents:
1)
2)
3)
4)
Invoice—things happening “on account”
Receipts—cash transactions
Momorandum (Memo)—anything that does not involve
An invoice, a receipt or a check stub
Check stub—record of a cash payment
Ch. 7
Posting from the General Journal to the General Ledger:
1)
2)
3)
4)
5)
Set up ALL ledger accounts with name and account number. (For previously existing accounts, write “balance” in the description
column and the balance in the appropriate column under the “Balance” heading.)
Post each transaction in the General Journal to its ledger account line by line.
In the Post Ref (Posting Reference) column of the General Ledger, insert the location of the original transaction.
(i.e., G1 for General Journal Page 1)
In the Post Ref (Posting Reference) column of the General Journal, insert the ledger account number.
In the General Ledger calculate the new balance of each account after each transaction is posted.
Trial Balance (Proving the Ledger):
1) Write the title:
a. Name of company
b. Name of report
c.
Date of report
2) List the account numbers and names in numerical order.
3) Write the debit or credit ending balance for each account in the appropriate column.
4) Draw a single rule at the bottom of each column.
5) After the last account indent and write “Totals”.
6) Write in the debit and credit column totals.
7) Draw a double rule under the totals.
Errors:
1)
2)
3)
4)
Before assuming there is an error, re-add columns several times.
Compare the account balances on the Trial Balance with the account balances in the General Ledger.
If the difference between the two totals is divisible by 10, it is probably an addition error.
If the difference between the two totals is a number not divisible by 10, look for an account balance which equals that number—
it may have been omitted from the list of account.
5)
6)
If the difference is evenly divisible by 9, it is probably a Transposition Error: reversing numbers
Slide Error: moving numbers right or left in the column.
Correcting Entries:
1)
2)
3)
4)
Occur when the incorrect transaction has already been posted.
A memorandum will be issued describing the error.
A transaction correcting the error will be written in the General Journal.
The General Journal transaction will be posted to the General Ledger which includes writing “correcting entry” in the description
column of the General Ledger.
Ch. 8
1/9/15
6-Column Worksheet
1)
Heading:
a. Name of the Company
b. Worksheet
c. The last day of the current month
2) List all accounts in numerical order with their account numbers
3) List all account balances in the “Trial Balance” section of the worksheet. (Draw a single
Rule under the last account and all the way across the page.)
4) Add the debit column and the credit column at the bottom of the worksheet
(both columns should equal)
5) In the “Income Statement” section of the worksheet, transfer all the accounts beginning
with “Income Summary” and ending with the last expense account. (That is, all revenue
accounts and all expense accounts.)
6) In the “Balance Sheet” section of the worksheet, transfer the rest of the account. (That is,
From “Cash in the Bank” down to “Withdrawals”.)
7) Add both columns in the “Income Statement” and “Balance Sheet” sections of the worksheet.
8) For both sections, subtract the larger number from the smaller number and place the result
UNDER the smaller number. This resulting number represents either “Net Income” or
“Net Loss”. (Write “Net Income” or “Net Loss” on the same line as this number in the far
left column.)
9) Draw a single rule under this line.
10) Total all four columns down.
11) Draw a double rule under this line.
Ch. 9
1/21/15
*Income Statement:
See page 223 of textbook chapter.
*Statement of Changes in Owner’s Equity:
See page 226 of textbook chapter.
*Balance Sheet:
See page 233.
After preparing the worksheet, prepare the following reports in this order:
1) Income Statement (revenue and expenses)
2) Statement of Changes in Owner’s Equity (beginning capital, additions (“add”), subtraction (“less”), ending capital)
3) Balance Sheet (assets, liabilities and ENDING CAPITAL)
Statement of Cash Flows:
 Cash coming in
 Source of cash
 Cash going out
 Use of cash
Ratio Analysis:
Profitability Ratio:
 Return on Sales:
Prob. 8-5
net income = %
sales (total of revenue accounts)
$4,917
($7,957) + ($5,329) + ($2,970)
=
$4,917 = .3024
$16,256
30 cents of every dollar of revenue is profit.
(70 cents of every dollar is used to pay expenses.)
= 30%
Liquidity Ratios (the ability to turn assets into cash):
 Current ratio:
current assets (accts. rec., cash, supplies)
current liabilities (accts. payables)
Prob. 8-5
($429 + $372) + ($9,400) + ($694 + $418) =
($4,346 + $2,730)
$11,313
$7,076
 Quick Ratio:
Prob. 8-5
=
1.5987 = 1.6:1 (2:1 or higher is VERY good)
cash and receivables
current liabilities (payables)
($429 + $372) + $9,400
($4,346 + $2, 730)
=
= $10,201 = 1.44:1
$7,076
(1:1 is considered
good)
Ch. 10
1/11/14
CLOSING TEMPORARY CAPITAL ACCOUNTS
Income Summary
Tot. Exp. Balance
NL
Withdrawals
NB
Expenses
Revenue
Tot. Rev. Balance
NI
=
NB
Capital
NB
NB
STEPS TO JOURANLIZE CLOSING ENTRIES:
1)
2)
3)
4)
Close Revenue accounts to Income Summary.
Close Expense accounts to Income Summary.
Close Income Summary to Capital.
Close Withdrawals to Capital.
FINALLY: Post-Closing Trial Balance
(Includes all accounts that still have a balance after closing.)
Ch. 12
5/1/15
Computing Gross Pay:
 Salary
 Hourly wage (hours)
 Commission (sales)
 Overtime pay (regular rate x 1.5 x overtime hours)
o Overtime hours are any hours over 40 in 7 days
 Bonus
Deductions:
 Social Security Tax
 Medicare
 Union dues
 Federal Income Tax
 State Income Tax (OR Sales Tax which is NOT a deduction)
 Health Insurance
 Garnishment of Wages (for child support)
 401K (retirement investment account)
 Charitable contributions (UNICEF, church, Color Run, etc.)
Gross Pay – All deductions = Net Pay (Take-home pay)
Payroll Register – form that shows ALL of the employees and their pay.
Employee Earnings Record- form that show each employees pay record.
Accumulated Earnings = Year-to-date Earnings
The payroll calendar is Jan. 1 to Dec. 31 and federal income tax filing is
April 15 every year.