The Accounting Cycle: Step 4 Professor Eric Carstensen MiraCosta College http://www.miracosta.edu/instruction/accounting/index.html
Summarizing Activity in Ledgers Normal Balance = Debit Normal Balance = Credit Assets, Expenses, Distributions Total Debits and subtract Total Credits Liabilities, Revenues, Equity Total Credits and subtract Total Debits
Summarize Activity in Ledgers – Part 1 cash A/R prepaid insurance a. 35,000 i. 7,900 b. 4,800 l. 4,000 c. 3,000 d. 5,000 e. 10,000 f. 1,300 g. 4,500 h. 2,000 j. 3,600 k. 1,000 32,800 3,900
Summarize Activity in Ledgers – Part 2 supplies equipment A/P f. 1,300 d. 14,200 9,200 j. 3,600 5,600
Summarize Activity in Ledgers – Part 3 notes payable common stock dividends e. 10,000 a. 35,000 k. 1,000
Summarize Activity in Ledgers – Part 4 revenue rent expense wages expense g. 4,500 c. 3,000 h. 2,000 i. 7,900 12,400
Unadjusted Trial Balance Account Debit Credit cash 32,800 A/R 3,900 prepaid insurance 4,800 supplies 1,300 equipment 14,200 A/P 5,600 notes payable 10,000 common stock 35,000 dividends 1,000 revenue 12,400 rent expense 3,000 wages expense 2,000 total 63,000
Preliminary Financial Statements 1. Income Statement 2. Statement of Retained Earnings Revenues $ 12,400 Beginning Balance $ - Rent Expense 3,000 Net Income 7,400 Wages Expense 2,000 Dividends (1,000) Total Expenses 5,000 Increase (Decrease) 6,400 $ 7,400 Ending Balance $ 6,400 3. Balance Sheet Assets Liabilities Cash $ 32,800 Accounts Payable $ 5,600 Accounts Receivable 3,900 Notes Payable 10,000 Prepaid Insurance 4,800 Total Liabilities $ 15,600 Supplies 1,300 Total Current Assets $ 42,800 Owners' Equity Paid in Capital 35,000 Equipment 14,200 Retained Earnings Total Plant Assets Total Owners' Equity 41,400 Total Assets $ 57,000 Total Liabilities & Equity
Step 4 - Conclusion Next time as part of Step 5, we will learn how to adjust accounts in order to make our Financial Statements as accurate as possible. We will adjust this Unadjusted Trial Balance and prepare the final Financial Statements in Steps 6 and 7.