t 6 acct cycle l14

8/8/2019 T 6 Acct Cycle L14

1/30

ACC3101ACC3101 Department of Accounting & FinanceDepartment of Accounting & FinanceFaculty of Management & EconomicFaculty of Management & Economic 11

Lecture 14

PreparingWorksheet and

Financial Statements

Topic

66


2/30


ObjectiveObjective

After studying this topic, you should be ableAfter studying this topic, you should be ableto:to:

1.1. Preparing WorksheetPreparing Worksheet

2.2. State the required step in the accountingState the required step in the accountingcyclecycle

3.3. Prepare financial statement fromPrepare financial statement from

adjusted trial balanceadjusted trial balance4.4. Identify the sections of classified balanceIdentify the sections of classified balance

sheetsheet


3/30


Adjustment Items

a)a) Fast Forward paid RM2,400 for 24Fast Forward paid RM2,400 for 24months of insurance benefits beginning 1months of insurance benefits beginning 1December 2007.December 2007.

b)b) Fast Forward purchase RM9,720 ofFast Forward purchase RM9,720 ofsupplies and as of 31 Decembersupplies and as of 31 DecemberRM8,670 remain unused.RM8,670 remain unused.

c)c) Equipment costing RM26,000 wasEquipment costing RM26,000 was

purchased in early December. Thepurchased in early December. Theequipment can be used for four yearsequipment can be used for four yearsafter which it will have a scrap value ofafter which it will have a scrap value ofRM8,000. (use straight line depreciation)RM8,000. (use straight line depreciation)


4/30


Adjustment Items

d)d) A client paid RM3,000 on 26 December to FastA client paid RM3,000 on 26 December to FastForward in payment of consultation fee for 60Forward in payment of consultation fee for 60days.days.

e)e) Fast Forward employee earns RM70 a day orFast Forward employee earns RM70 a day orRM350 a fiveRM350 a five--day workweek beginningday workweek beginningMonday ending Friday. This employee is paidMonday ending Friday. This employee is paidevery 2 weeks on Friday.every 2 weeks on Friday.

f)f) Fast Forward agreed to provide consultingFast Forward agreed to provide consultingservices to a sport club for RM2,700 beginningservices to a sport club for RM2,700 beginning12 December 2007 for 30 days.12 December 2007 for 30 days.


5/30

ACC3101ACC3101Department of Accounting & FinanceDepartment of Accounting & FinanceFaculty of Management & EconomicFaculty of Management & Economic 55

Adjusting EntriesAdjusting Entries

Record the adjusting entries now:Record the adjusting entries now:

a)a)

b)b)


6/30



c)c)

d)d)


7/30



e)e)

f)f)


8/30


9/30



Enter the adjusting entries in the adjustmentEnter the adjusting entries in the adjustmentcolumn of the worksheet.column of the worksheet.


10/30


Dr. Cr. Dr. Cr. Dr. Cr.

Cash 3 0

ccounts receivable 0 f 1 00

Supplies 0 1 0 0

Prepaid insurance 00 a 100

Equipment 000

ccum. depr. - Equip. 0 c 3

ccounts payable 00

Salaries payable 0 e 10

Unearned revenue 3 000 0

Chuck Taylor, Capital 30 000

Chuck Taylor, Withdrawals 00

Consulting revenue 00 0

f 1 00

Rental revenue 300

Depr. expense 0 c 3

Salaries expense 1 00 e 10

Insurance expense 0 a 100

Rent expense 1 000

Supplies expense 0 1 0 0

Utilities expense 30

Totals 300 300 3 3

djusted

Trial Balancedjustments

Unadjusted

Trial Balance Next,

FastForwardsadjustments

are added.

FastForwardTrial Balance

December31, 2007


11/30


12/30


Preparing Financial StatementsPreparing Financial Statements

Lets use FastForwards adjusted trialLets use FastForwards adjusted trialbalance to prepare the companysbalance to prepare the companys

financial statements.financial statements.


13/30


FastForward

Income Statement

For the Month Ended December 31, 2007

Revenues:

Consulting revenue RM 7,850

Rental revenue 300

Total revenue 8,150

Operating expenses:

Depr. expense - Equip RM 375

Salaries expense 1,610Insurance expense 100

Rent expense 1,000

Supplies expense 1,050


Total expenses 4,365

Net income RM3,785

Prepare the Income

Statement.

Dr r

Cash RM 4,350

Accounts receivable 1,800

Supplies 8,670

Prepaid insurance 2,300

Equipment 26,000

Accum. depr. - Equip. RM 375

Accounts payable 6,200

Salaries payable 210

Unearned revenue 2,750

Chuck Taylor, Capital 30,000

Chuck Taylor, Withd'l. 200

Consulting revenue 7,850

Rental revenue 300

Depr. expense 375Salaries expense 1,610

Insurance expense 100

Rent expense 1,000



Totals RM 47,685 RM 47,685

December 31 2007

r ce


14/30


Prepare the Statement ofChanges in Owners Equity.Note: Net Income from the IncomeStatement carries to the Statement ofChanges in Owners Equity.

FastForward

Income Statement


Revenues:Consulting revenue RM 7850

Rental revenue 300

Operating expenses:

Depr. expense - Equip RM 375

Salaries expense 1,610


Rent expense 1,000



Total expenses RM4,365

Net income RM3,785

FastForward

Statement of Changes in Owner's Equity


C. Taylor, Capital 12/1/07 RM -0-

dd: Net income RM 3,785Investment by owner 30,000 33,785

Total RM33,785

Less: Withdrawal by owner 200

C. Taylor, Capital 12/31/07 33,525$


15/30


Prepare theBalance Sheet.

FastForward

Balance Sheet

December 31, 2007

AssetsCash 4350


Supplies 8,670


Equipment 26,000

Less: accum. depr. (375) 25,625

Total assets RM42,745Liabilities

Accounts payable RM6,200


Unearned consulting revenue 2,750

Total liabilities RM 9,160

Owner's Equity

Chuck Taylor, Capital 33,585Total liabilities and equity RM42,745

Dr. Cr.

Cash RM 3950


Supplies 8,670


Equipment 26,000

Accum. depr. - Equip. RM 375

Accounts payable 6,200


Unearned revenue 2,750

Chuck Taylor, Capital 30,000

Chuck Taylor, Withd'l. 600

Consulting revenue 7,850

Rental revenue 300

Depr. expense 375

Salaries expense 1,610


Rent expense 1,000



Totals RM47,685 RM47,685

Adjusted

Trial Balance

FastForward

Statement of Changes in Owner's Equity


C. Taylor, Capital 12/1/07 RM -0-

Add: Net income RM 3,785 Investment by ow ner 30,000 33,785

Total 33,785

Less: Withdrawal by owner 200

C. Taylor, Capital 12/31/07 RM33,585


16/30


The Classified Balance SheetThe Classified Balance Sheet

Presents a snapshot at a point in time.

To improve understanding, companies group

similar assets and similar liabilities together.

Assets Liabilities and Owners Equity

Current assets Current liabilities

Long-term investments Long-term liabilities

Property, plant, and equipment Owners (Stockholders) equity

Intangible assets

Standard ClassificationsStandard Classifications


17/30



Assets that a company expects to convert to

cash or use up within one year or the

operating cycle, whichever is longer.

Operating cycle is the average time it takes

from the purchase of inventory to the

collection of cash from customers.

Current AssetsCurrent Assets


18/30



Companies usually list current asset accounts in the orderthey expect to convert them into cash.

Current AssetsCurrent Assets


19/30


Cash, and other resources that are reasonablyexpected to be realized in cash or sold or

consumed in the business within one year or theoperating cycle, are called:

a. Current assets.

b. Intangible assets.

c. Long-term investments.

d. Property, plant, and equipment.

Review QuestionReview Question



20/30



Investments in stocks and bonds of other companies.

Investments in long-term assets such as land or

buildings that a company is not currently using in its

operating activities.

LongLong--Term InvestmentsTerm Investments


21/30



Long useful lives.

Currently used in operations.

Depreciation - allocating the cost of assets to a

number of years.

Accumulated depreciation - total amount of

depreciation expensed thus far in the assets

life.

Property, Plant, andProperty, Plant, andEquipmentEquipment


22/30



Property, Plant, andProperty, Plant, andEquipmentEquipment


23/30



Assets that do not have physical substance.

Intangible AssetsIntangible Assets


24/30


Patents and copyrights are

a. Current assets.

b. Intangible assets.

c. Long-term investments.

d. Property, plant, and equipment.




25/30



Obligations the company is to pay within the

coming year.

Usually list notes payable first, followed by

accounts payable. Other items follow in order

of magnitude.

Liquidity - ability to pay obligations expectedto be due within the next year.

Current LiabilitiesCurrent Liabilities


26/30

ACC3101ACC3101

Department of Accounting & FinanceDepartment of Accounting & Finance

Faculty of Management & EconomicFaculty of Management & Economic 2626


Current LiabilitiesCurrent Liabilities


27/30

ACC3101ACC3101




Obligations a company expects to pay after one year.

LongLong--Term LiabilitiesTerm Liabilities


28/30

ACC3101ACC3101



Which of the following is not a long-term liability?

a. Bonds payable

b.Current maturities of long-termobligations

c. Long-term notes payable

d.Mortgages payable




29/30

ACC3101ACC3101




Proprietorship - one capital account.

Partnership - capital account for each partner.

Corporation Share Capital and Retained Earnings.

Owners EquityOwners Equity


30/30

ACC3101ACC3101



End of Topic 6End of Topic 6

t 6 acct cycle l14

Documents