© PHI Learning, All rights reserved.1 Financial Accounting: A Managerial Perspective Third Edition Prepared by R. Narayanaswamy Indian Institute of Management Bangalore

© PHI Learning, All rights reserved.2 Completing the Accounting Cycle Chapter 4

© PHI Learning, All rights reserved.3 The Work Sheet  Working papers  Work sheet  How is the work sheet useful to the accountant? Chapter 4

© PHI Learning, All rights reserved.4 Work Sheet Form Chapter 4

© PHI Learning, All rights reserved.5 Preparing the Work Sheet 1.Enter the account balances in the Trial Balance columns 2.Enter the adjustments in the Adjustments columns 3.Enter the account balances as adjusted in the Adjusted Trial Balance columns 4.Extend each account balance in the Adjusted Trial Balance columns into the Profit and Loss Account columns or the Balance Sheet columns 5.Total the Profit and Loss Account columns and the Balance Sheet columns. Enter the net profit or net loss as a balancing figure in both pairs of columns. Compute the four-column totals with the balancing figure included Chapter 4

© PHI Learning, All rights reserved.6 Using the Work Sheet  Preparing the financial statements  from the Profit and Loss account and the Balance Sheet columns  Recording adjusting entries  from the Adjustments columns Chapter 4

© PHI Learning, All rights reserved.7 Closing Entries  What are closing entries?  Steps in preparing closing entries  Transfer balances in revenue accounts to the Profit and Loss account  Transfer balances in expense accounts to the Profit and Loss account  Transfer the balance in the Profit and Loss account to the Retained Earnings account  Transfer the balance in the Dividends account to the Retained Earnings account Chapter 4

© PHI Learning, All rights reserved.8 Post-closing Trial Balance and Reversing Entries  What is a post-closing trial balance?  What are reversing entries?  What kinds of adjusting entries are reversed?  Why are reversing entries prepared?  Reversing entries illustrated  Salaries payable  Professional fees receivable Chapter 4