1. Unadjusted Trial Balance
Mega Stores
Unadjusted Trial Balance
December 31, 2002
11 Cash 2,065
12 Accounts Receivable 2,220
14 Supplies 2,000
15 Prepaid Insurance 2,400
17 Land 20,000
18 Office Equipment 1,800
Assets

2. Unadjusted Trial Balance
Mega Stores
Unadjusted Trial Balance
December 31, 2002
11 Cash 2,065
12 Accounts Receivable 2,220
14 Supplies 2,000
15 Prepaid Insurance 2,400
17 Land 20,000
18 Office Equipment 1,800
21 Accounts Payable 900
23 Unearned Rent 360
Liabilities

3. Unadjusted Trial Balance
Mega Stores
Unadjusted Trial Balance
December 31, 2002
11 Cash 2,065
12 Accounts Receivable 2,220
14 Supplies 2,000
15 Prepaid Insurance 2,400
17 Land 20,000
18 Office Equipment 1,800
21 Accounts Payable 900
23 Unearned Rent 360
31 Capital Stock 25,000
33 Dividends 4,000
Stockholders’
Equity

4. Unadjusted Trial Balance
Mega Stores
Unadjusted Trial Balance
December 31, 2002
11 Cash 2,065
12 Accounts Receivable 2,220
14 Supplies 2,000
15 Prepaid Insurance 2,400
17 Land 20,000
18 Office Equipment 1,800
21 Accounts Payable 900
23 Unearned Rent 360
31 Capital Stock 25,000
33 Dividends 4,000
41 Fees Earned 16,340
Revenue

5. Unadjusted Trial Balance
Mega Stores
Unadjusted Trial Balance
December 31, 2002
11 Cash 2,065
12 Accounts Receivable 2,220
14 Supplies 2,000
15 Prepaid Insurance 2,400
17 Land 20,000
18 Office Equipment 1,800
21 Accounts Payable 900
23 Unearned Rent 360
31 Pat King, Capital 25,000
32 Pat King, Drawing 4,000
41 Fees Earned 16,340
51 Wages Expense 4,275
52 Rent Expense 1,600
54 Utilities Expense 985
55 Supplies Expense 800
59 Miscellaneous Expense 455
42,600 42,600
Expenses

6. Unadjusted Trial Balance
Mega Stores
Unadjusted Trial Balance
December 31, 2002
11 Cash 2,065
12 Accounts Receivable 2,220
14 Supplies 2,000
15 Prepaid Insurance 2,400
17 Land 20,000
18 Office Equipment 1,800
21 Accounts Payable 900
23 Unearned Rent 360
31 Capital Stock 25,000
33 Dividends 4,000
41 Fees Earned 16,340
51 Wages Expense 4,275
52 Rent Expense 1,600
54 Utilities Expense 985
55 Supplies Expense 800
59 Miscellaneous Expense 455
42,600 42,600

7. Expanded Chart of Accounts
Mega Stores
Expanded Chart of Accounts
Balance Sheet
Income Statement
1. Assets
11 Cash
12 Accounts Receivable
14 Supplies
15 Prepaid Insurance
17 Land
18 Office Equipment
19 Accumulated Depreciation
2. Liabilities
21 Accounts Payable
22 Wages Payable
23 Unearned Rent
3. Stockholders’ Equity
31 Capital Stock
32 Retained Earnings
33 Dividends
4. Revenue
41 Fees Earned
42 Rent Revenue
5. Expenses
51 Wages Expense
52 Rent Expense
53 Depreciation Expense
54 Utilities Expense
55 Supplies Expense
56 Insurance Expense
59 Miscellaneous Expense

8. Expanded Chart of Accounts
Mega Stores
Expanded Chart of Accounts
Balance Sheet
Income Statement
1. Assets
11 Cash
12 Accounts Receivable
14 Supplies
15 Prepaid Insurance
17 Land
18 Office Equipment
19 Accumulated Depreciation
2. Liabilities
21 Accounts Payable
22 Wages Payable
23 Unearned Rent
3. Stockholders’ Equity
31 Capital Stock
32 Retained Earnings
33 Dividends
4. Revenue
41 Fees Earned
42 Rent Revenue
5. Expenses
51 Wages Expense
52 Rent Expense
53 Depreciation Expense
54 Utilities Expense
55 Supplies Expense
56 Insurance Expense
59 Miscellaneous Expense

9. Expanded Chart of Accounts
Mega Stores
Expanded Chart of Accounts
Balance Sheet
Income Statement
1. Assets
11 Cash
12 Accounts Receivable
14 Supplies
15 Prepaid Insurance
17 Land
18 Office Equipment
19 Accumulated Depreciation
2. Liabilities
21 Accounts Payable
22 Wages Payable
23 Unearned Rent
3. Stockholders’ Equity
31 Capital Stock
32 Retained Earnings
33 Dividends
4. Revenue
41 Fees Earned
42 Rent Revenue
5. Expenses
51 Wages Expense
52 Rent Expense
53 Depreciation Expense
54 Utilities Expense
55 Supplies Expense
56 Insurance Expense
59 Miscellaneous Expense

10. Expanded Chart of Accounts
Mega Stores
Expanded Chart of Accounts
Balance Sheet
Income Statement
1. Assets
11 Cash
12 Accounts Receivable
14 Supplies
15 Prepaid Insurance
17 Land
18 Office Equipment
19 Accumulated Depreciation
2. Liabilities
21 Accounts Payable
22 Wages Payable
23 Unearned Rent
3. Stockholders’ Equity
31 Capital Stock
32 Retained Earnings
33 Dividends
4. Revenue
41 Fees Earned
42 Rent Revenue
5. Expenses
51 Wages Expense
52 Rent Expense
53 Depreciation Expense
54 Utilities Expense
55 Supplies Expense
56 Insurance Expense
59 Miscellaneous Expense

11. Expanded Chart of Accounts
Mega Stores
Expanded Chart of Accounts
Balance Sheet
Income Statement
1. Assets
11 Cash
12 Accounts Receivable
14 Supplies
15 Prepaid Insurance
17 Land
18 Office Equipment
19 Accumulated Depreciation
2. Liabilities
21 Accounts Payable
22 Wages Payable
23 Unearned Rent
3. Stockholders’ Equity
31 Capital Stock
32 Retained Earnings
33 Dividends
4. Revenue
41 Fees Earned
42 Rent Revenue
5. Expenses
51 Wages Expense
52 Rent Expense
53 Depreciation Expense
54 Utilities Expense
55 Supplies Expense
56 Insurance Expense
59 Miscellaneous Expense

12. Business Transactions
Entry C.
Supplier (seller)
Mega Stores buys supplies for $1,350, agreeing to pay in the near future.
Supplies
A promise
to pay later
receive
Debit
Mega Stores
(buyer)
give
Credit
give
Credit
General Journal
Date Description Debit Credit
11/10 Supplies 1,350
Accounts Payable 1,350

13. Business Transactions
Entry G.
Internal Transaction
(no external entity)
At the end of the month, the cost of supplies on hand is $550.
Use of supplies
Supplies
receive
Debit
Mega Stores
(user)
give
Credit
give
Credit
General Journal
Date Description Debit Credit
11/30 Supplies Expense 800
Supplies
Balance of Supplies account $1,350 less $550 on hand = $800 used

14. Adjustments – Deferred Expense
On December 1, Mega Stores purchased insurance
for 24 months at a cost of $2,400.
Example P1 – Purchase initially recorded as an asset.
Adjustment A1 – Record insurance used for December, $100.
Cash
P ,400
Prepaid Insurance
Assets
P ,400
Insurance Expense
Expenses

15. Adjustments – Deferred Expense
On December 1, Mega Stores purchased insurance
for 24 months at a cost of $2,400.
Example P1 – Purchase initially recorded as an asset.
Adjustment A1 – Record insurance used for December, $100.
Cash
P ,400
Prepaid Insurance
Assets
P ,400 A A1
Insurance Expense A1 A
Expenses

16. Adjustments – Deferred Expense
On December 1, Mega Stores purchased insurance
for 24 months at a cost of $2,400.
Example P2 – Purchase initially recorded as an expense.
Adjustment A2 – Record insurance unused as of
December 31.
Cash
P ,400
Prepaid Insurance
Assets
Insurance Expense
P ,400
Expenses

17. Adjustments – Deferred Expense
On December 1, Mega Stores purchased insurance
for 24 months at a cost of $2,400.
Example P2 – Purchase initially recorded as an expense.
Adjustment A2 – Record insurance unused as of
December 31.
Cash
P ,400
Prepaid Insurance
Assets
A ,300 A2 A2
Insurance Expense
P ,400
A ,300
Expenses

18. Adjustments – Deferred Revenue
On December 1, Mega Stores received cash of $360 for three months’ rent beginning December 1.
Example S1 – Sale initially recorded as a liability.
Adjustment A3 – Record rent earned for December.
Cash S
Unearned Rent
Liabilities S
Rent Revenue
Revenues

19. Adjustments – Deferred Revenue
On December 1, Mega Stores received cash of $360 for three months’ rent beginning December 1.
Example S1 – Sale initially recorded as a liability.
Adjustment A3 – Record rent earned for December.
Cash S
Unearned Rent
Liabilities A S A3 A3
Rent Revenue A
Revenues

20. Adjustments – Deferred Revenue
On December 1, Mega Stores received cash of $360 for three months’ rent beginning December 1.
Example S2 – Sale initially recorded as revenue.
Adjustment A4 – Record rent unearned as of December 31.
Cash S
Unearned Rent
Liabilities
Rent Revenue S
Revenues

21. Adjustments – Deferred Revenue
On December 1, Mega Stores received cash of $360 for three months’ rent beginning December 1.
Example S2 – Sale initially recorded as revenue.
Adjustment A4 – Record rent unearned as of December 31.
Cash S
Unearned Rent
Liabilities A A4 A4
Rent Revenue A S
Revenues

22. Adjustments – Accrued Expense
Mega Stores received employee services for the last two days of December amounting to $250, to be paid later.
Adjustment A5 – Record accrued wages of $250.
Wages Payable
Liabilities
Wages Expense
Bal.....4,275
Expenses

23. Adjustments – Accrued Expense
Mega Stores received employee services for the last two days of December amounting to $250, to be paid later.
Adjustment A5 – Record accrued wages of $250.
Wages Payable
Liabilities A A5
Wages Expense A5
Bal.....4,275
Expenses A

24. Adjustments – Accrued Revenue
As of December 31, Mega Stores provided 25 hours of services at $20 per hour to be billed next month.
Adjustment A6 – Record accrued fees earned of $500.
Accounts Receivable
Assets
Bal.....2,220
Fees Earned
Bal....16,340
Revenues

25. Adjustments – Accrued Revenue
As of December 31, Mega Stores provided 25 hours of services at $20 per hour to be billed next month.
Adjustment A6 – Record accrued fees earned of $500.
Accounts Receivable
Assets
Bal.....2,220 A A6
Fees Earned A6
Bal....16,340
Revenues A

26. Mega Stores - Work Sheet - Two Months Ended 12/31/02
Trial Balance Adjustments Adj. Trial Balance
Mega Stores - Work Sheet - Two Months Ended 12/31/02
Account Debit Credit Debit Credit Debit Credit
11 Cash , ,065
12 Accounts Receivable 2, (e) ,720
14 Supplies 2, (a) 1,
15 Prepaid Insurance 2, (b) ,300
17 Land 20, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr (f)
21 Accounts Payable
22 Wages Payable (d)
23 Unearned Rent (c)
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16, (e) ,840
42 Rent Revenue (c)
51 Wages Expense 4, (d) ,525
52 Rent Expense 1, ,600
53 Depreciation Expense (f)
54 Utilities Expense
55 Supplies Expense (a) 1, ,040
56 Insurance Expense (b)
59 Misc. Expense
42,600 42, , ,260 43,400 43,400

27. Mega Stores - Work Sheet - Two Months Ended 12/31/02
Trial Balance Adjustments Adj. Trial Balance
Mega Stores - Work Sheet - Two Months Ended 12/31/02
Account Debit Credit Debit Credit Debit Credit
11 Cash 2, ,065
12 Accounts Receivable 2,220 (e) ,720
14 Supplies 2,000 (a) 1,
15 Prepaid Insurance 2,400 (b) 100 2,300
17 Land 20, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr. 0 (f)
21 Accounts Payable
22 Wages Payable 0 (d)
23 Unearned Rent 360 (c)
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16,340 (e) ,840
42 Rent Revenue 0 (c)
51 Wages Expense 4,275 (d) ,525
52 Rent Expense 1, ,600
53 Depreciation Expense 0 (f)
54 Utilities Expense
55 Supplies Expense 800 (a) 1,240 2,040
56 Insurance Expense 0 (b)
59 Misc. Expense
42,600 42,600 2,260 2,260 43,400 43,400

28. Mega Stores - Work Sheet - Two Months Ended 12/31/02
Trial Balance Adjustments Adj. Trial Balance
Account Debit Credit Debit Credit Debit Credit
Mega Stores - Work Sheet - Two Months Ended 12/31/02
11 Cash 2, ,065
12 Accounts Receivable 2,220 (e) ,720
14 Supplies 2,000 (a) 1,
15 Prepaid Insurance 2,400 (b) 100 2,300
17 Land 20, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr. 0 (f)
21 Accounts Payable
22 Wages Payable 0 (d)
23 Unearned Rent 360 (c)
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16,340 (e) ,840
42 Rent Revenue 0 (c)
51 Wages Expense 4,275 (d) ,525
52 Rent Expense 1, ,600
53 Depreciation Expense 0 (f)
54 Utilities Expense
55 Supplies Expense 800 (a) 1,240 2,040
56 Insurance Expense 0 (b)
59 Misc. Expense
42,600 42,600 2,260 2,260 43,400 43,400

29. Mega Stores - Work Sheet - Two Months Ended 12/31/02
Trial Balance Adjustments Adj. Trial Balance
Account Debit Credit Debit Credit Debit Credit
11 Cash 2, ,065
12 Accounts Receivable 2,220 (e) ,720
14 Supplies 2,000 (a) 1,
15 Prepaid Insurance 2,400 (b) 100 2,300
17 Land 20, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr. 0 (f)
21 Accounts Payable
22 Wages Payable 0 (d)
23 Unearned Rent 360 (c)
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16,340 (e) ,840
42 Rent Revenue 0 (c)
51 Wages Expense 4,275 (d) ,525
52 Rent Expense 1, ,600
53 Depreciation Expense 0 (f)
54 Utilities Expense
55 Supplies Expense 800 (a) 1,240 2,040
56 Insurance Expense 0 (b)
59 Misc. Expense
42,600 42,600 2,260 2,260 43,400 43,400
Mega Stores - Work Sheet - Two Months Ended 12/31/02

30. Mega Stores - Work Sheet - Two Months Ended 12/31/02
Trial Balance Adjustments Adj. Trial Balance
Account Debit Credit Debit Credit Debit Credit
11 Cash 2, ,065
12 Accounts Receivable 2,220 (e) ,720
14 Supplies 2,000 (a) 1,
15 Prepaid Insurance 2,400 (b) 100 2,300
17 Land 20, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr. 0 (f)
21 Accounts Payable
22 Wages Payable 0 (d)
23 Unearned Rent 360 (c)
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16,340 (e) ,840
42 Rent Revenue 0 (c)
51 Wages Expense 4,275 (d) ,525
52 Rent Expense 1, ,600
53 Depreciation Expense 0 (f)
54 Utilities Expense
55 Supplies Expense 800 (a) 1,240 2,040
56 Insurance Expense 0 (b)
59 Misc. Expense
42,600 32,600 2,260 2,260 43,400 43,400
Mega Stores - Work Sheet - Two Months Ended 12/31/02

31. Mega Stores - Work Sheet - Two Months Ended 12/31/02
Trial Balance Adjustments Adj. Trial Balance
Account Debit Credit Debit Credit Debit Credit
11 Cash 2, ,065
12 Accounts Receivable 2,220 (e) ,720
14 Supplies 2,000 (a) 1,
15 Prepaid Insurance 2,400 (b) 100 2,300
17 Land 20, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr. 0 (f)
21 Accounts Payable
22 Wages Payable 0 (d)
23 Unearned Rent 360 (c)
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16,340 (e) ,840
42 Rent Revenue 0 (c)
51 Wages Expense 4,275 (d) ,525
52 Rent Expense 1, ,600
53 Depreciation Expense 0 (f)
54 Utilities Expense
55 Supplies Expense 800 (a) 1,240 2,040
56 Insurance Expense 0 (b)
59 Misc. Expense
42,600 42,600 2,260 2,260 43,400 43,400
Mega Stores - Work Sheet - Two Months Ended 12/31/02

32. Mega Stores - Work Sheet - Two Months Ended 12/31/99
Trial Balance Adjustments Adj. Trial Balance
Account Debit Credit Debit Credit Debit Credit
11 Cash 2, ,065
12 Accounts Receivable 2,220 (e) ,720
14 Supplies 2,000 (a) 1,
15 Prepaid Insurance 2,400 (b) 100 2,300
17 Land 10, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr. 0 (f)
21 Accounts Payable
22 Wages Payable 0 (d)
23 Unearned Rent 360 (c)
31 Capital Stock 15, ,000
33 Dividends 4, ,000
41 Fees Earned 16,340 (e) ,840
42 Rent Revenue 0 (c)
51 Wages Expense 4,275 (d) ,525
52 Rent Expense 1, ,600
53 Depreciation Expense 0 (f)
54 Utilities Expense
55 Supplies Expense 800 (a) 1,240 2,040
56 Insurance Expense 0 (b)
59 Misc. Expense
32,600 32,600 2,260 2,260 33,400 33,400
Mega Stores - Work Sheet - Two Months Ended 12/31/99

33. Mega Stores - Work Sheet - Two Months Ended 12/31/02
11 Cash 2, ,065
12 Accounts Receivable 2,220 (e) ,720
14 Supplies 2,000 (a) 1,
15 Prepaid Insurance 2,400 (b) 100 2,300
17 Land 20, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr. 0 (f)
21 Accounts Payable
22 Wages Payable 0 (d)
23 Unearned Rent 360 (c)
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16,340 (e) ,840
42 Rent Revenue 0 (c)
51 Wages Expense 4,275 (d) ,525
52 Rent Expense 1, ,600
53 Depreciation Expense 0 (f)
54 Utilities Expense
55 Supplies Expense 800 (a) 1,240 2,040
56 Insurance Expense 0 (b)
59 Misc. Expense
42,600 42,600 2,260 2,260 43,400 43,400
Trial Balance Adjustments Adj. Trial Balance
Account Debit Credit Debit Credit Debit Credit
Mega Stores - Work Sheet - Two Months Ended 12/31/02

34. Mega Stores - Work Sheet - Two Months Ended 12/31/02
11 Cash 2, ,065
12 Accounts Receivable 2, (e) ,720
14 Supplies 2,000 (a) 1,
15 Prepaid Insurance 2, (b) ,300
17 Land 20, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr (f)
21 Accounts Payable
22 Wages Payable (d)
23 Unearned Rent (c)
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16, (e) ,840
42 Rent Revenue (c)
51 Wages Expense 4, (d) ,525
52 Rent Expense 1, ,600
53 Depreciation Expense (f)
54 Utilities Expense
55 Supplies Expense (a)1, ,040
56 Insurance Expense (b)
59 Misc. Expense
42,600 42, , ,260 43,400 43,400
Trial Balance Adjustments Adj. Trial Balance
Account Debit Credit Debit Credit Debit Credit
Mega Stores - Work Sheet - Two Months Ended 12/31/02

35. Mega Stores - Work Sheet - Two Months Ended 12/31/02
Adj. Trial Balance Income Statement Balance Sheet
Account Debit Credit Debit Credit Debit Credit
11 Cash 2, ,065
12 Accounts Receivable 2, ,720
14 Supplies
15 Prepaid Insurance 2, ,300
17 Land 20, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr
21 Accounts Payable
22 Wages Payable
23 Unearned Rent
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16, ,840
42 Rent Revenue
51 Wages Expense 4,525 4,525
52 Rent Expense 1,600 1,600
53 Depreciation Expense
54 Utilities Expense
55 Supplies Expense 2,040 2,040
56 Insurance Expense
59 Misc. Expense
43,400 43,400 9,755 16,960 33,645 26,440
Net Income 7, ,205
16,960 16,960 33,645 33,645

36. Mega Stores - Work Sheet - Two Months Ended 12/31/02
Adj. Trial Balance Income Statement Balance Sheet
Account Debit Credit Debit Credit Debit Credit
11 Cash 2, ,065
12 Accounts Receivable 2, ,720
14 Supplies
15 Prepaid Insurance 2, ,300
17 Land 20, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr
21 Accounts Payable
22 Wages Payable
23 Unearned Rent
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16, ,840
42 Rent Revenue
51 Wages Expense 4,525 4,525
52 Rent Expense 1,600 1,600
53 Depreciation Expense
54 Utilities Expense
55 Supplies Expense 2,040 2,040
56 Insurance Expense
59 Misc. Expense
43,400 43,400 9,755 16,960 33,645 26,440
Net Income 7, ,205
16,960 16,960 33,645 33,645

37. Mega Stores - Work Sheet - Two Months Ended 12/31/02
Adj. Trial Balance Income Statement Balance Sheet
Account Debit Credit Debit Credit Debit Credit
11 Cash 2, ,065
12 Accounts Receivable 2, ,720
14 Supplies
15 Prepaid Insurance 2, ,300
17 Land 10, ,000
18 Office Equipment 1, ,800
19 Accumulated Depr
21 Accounts Payable
22 Wages Payable
23 Unearned Rent
31 Capital Stock 25, ,000
33 Dividends 4, ,000
41 Fees Earned 16, ,840
42 Rent Revenue
51 Wages Expense 4,525 4,525
52 Rent Expense 1,600 1,600
53 Depreciation Expense
54 Utilities Expense
55 Supplies Expense 2,040 2,040
56 Insurance Expense
59 Misc. Expense
43,400 43,400 9,755 16,960 33,645 26,440
Net Income 7, ,205
16,960 16,960 33,645 33,645

38. Mega Stores Income Statement For Two Months Ended December 31, 2002
Fees earned $16,840
Rent revenue Total revenues $16,960
Expenses:
Wages expense $ 4,525
Supplies expense 2,040
Rent expense 1,600
Utilities expense 985
Insurance expense 100
Depreciation expense 50
Miscellaneous expense 455
Total expenses 9,755
Net income $ 7,205

39. Mega Stores Retained Earnings Statement For Two Months Ended December 31, 2002
Net income for November and December $7,205
Less dividends 4,000
Retained earnings, December 31, 2002 $3,205

40. Mega Stores Balance Sheet December 31, 2002
ASSETS
Current assets:
Cash $ 2,065
Accounts receivable 2,720
Supplies 760
Prepaid insurance 2,300
Total current assets $ 7,845
Property, plant, and equipment:
Land $20,000
Office equipment 1,800
Less accum. depr. (50) Total property, plant,
and equipment 21,750
Total assets $29,595

41. Mega Stores Balance Sheet December 31, 2002
LIABILITIES
Current liabilities:
Accounts payable $
Wages payable
Unearned rent
Total liabilities $ 1,390
STOCKHOLDERS’ EQUITY
Capital stock $25,000
Retained earnings ,205
Total stockholders’ equity ,205
Total liabilities and
stockholders’ equity $29,595

42. Miscellaneous Expense
The Closing Process
Wages Expense
Bal ,525
Rent Expense
Bal ,600
Depreciation Expense
Bal
Utilities Expense
Bal
Supplies Expense
Bal ,040
Insurance Expense
Bal
Miscellaneous Expense
Bal
Fees Earned
Bal. 16,840
Income Summary
Rent Revenue
Bal
Note: The balances shown are adjusted balances before closing. The following sequence demonstrates the closing process.
Retained Earnings
Bal
Dividends
Bal. 4,000

43. Miscellaneous Expense
The Closing Process
Wages Expense
Bal ,525
Rent Expense
Bal ,600
Depreciation Expense
Bal
Utilities Expense
Bal
Supplies Expense
Bal ,040
Insurance Expense
Bal
Miscellaneous Expense
Bal
Fees Earned
Bal. 16,840
Income Summary
16,840
16,960
Rent Revenue
Total
Revenues
120
Bal
Close Revenues
Retained Earnings
Bal
Dividends
Bal. 4,000

44. Miscellaneous Expense
The Closing Process
Wages Expense
Fees Earned
Bal. 16,840
Bal. 4,525
4,525
1,600 50
985
2,040
100
455
Income Summary
16,840
Rent Expense
9,755
16,960
Rent Revenue
Bal. 1,600
Total
Expenses
Total
Revenues
120
Bal
Depreciation Expense
Bal
Utilities Expense
Close Revenues
Retained Earnings
Bal
Bal
Close Expenses
Supplies Expense
Bal. 2,040
Insurance Expense
Bal
Dividends
Miscellaneous Expense
Bal
Bal. 4,000

45. Miscellaneous Expense
The Closing Process
Wages Expense
Fees Earned
Bal. 16,840
Bal. 4,525
4,525
1,600 50
985
2,040
100
455
Income Summary
16,840
Rent Expense
9,755
16,960
Rent Revenue
Bal. 1,600
7,205
120
Bal
Depreciation Expense
Closed
Bal
Utilities Expense
Close Revenues
Retained Earnings
Bal
Bal. 0
Close Expenses
Supplies Expense
7,205
Bal. 2,040
Close Income Summary
Net Income
Insurance Expense
Bal
Dividends
Miscellaneous Expense
Bal
Bal. 4,000

46. Miscellaneous Expense
The Closing Process
Wages Expense
Fees Earned
Bal. 16,840
Bal. 4,525
4,525
1,600 50
985
2,040
100
455
Income Summary
16,840
Rent Expense
9,755
16,960
Rent Revenue
Bal. 1,600
7,205
120
Bal
Depreciation Expense
Closed
Bal
Utilities Expense
Close Revenues
Retained Earnings
Bal
4,000
Bal. 0
Close Expenses
Supplies Expense
Dividends
7,205
Bal. 2,040
Close Income Summary
Net Income
Insurance Expense
Bal
Close Dividends
Dividends
Miscellaneous Expense
Bal
Bal. 4,000
4,000
Closed

47. Miscellaneous Expense
The Closing Process
Wages Expense
Fees Earned
Income Summary
Rent Expense
Rent Revenue
Depreciation Expense
Utilities Expense
Retained Earnings
Dividends
4,000
Bal. 0
Supplies Expense
7,205
Net Income
Insurance Expense
Bal. 3,205
All temporary accounts now have zero balances and are ready for the next accounting period.
Dividends
Miscellaneous Expense

48. Post-Closing Trial Balance
Mega Stores
Post-Closing Trial Balance
December 31, 2002
11 Cash 2,065
12 Accounts Receivable 2,720
14 Supplies 760
15 Prepaid Insurance 2,300
17 Land 20,000
18 Office Equipment 1,800
19 Accum. Depreciation 50
21 Accounts Payable 900
22 Wages Payable 250
23 Unearned Rent 240
31 Capital Stock 25,000
32 Retained Earnings 3,205
29,645 29,645
Assets

49. Post-Closing Trial Balance
Mega Stores
Post-Closing Trial Balance
December 31, 2002
11 Cash 2,065
12 Accounts Receivable 2,720
14 Supplies 760
15 Prepaid Insurance 2,300
17 Land 20,000
18 Office Equipment 1,800
19 Accum. Depreciation 50
21 Accounts Payable 900
22 Wages Payable 250
23 Unearned Rent 240
31 Capital Stock 25,000
32 Retained Earnings 3,205
29,645 29,645
Liabilities

50. Post-Closing Trial Balance
Mega Stores
Post-Closing Trial Balance
December 31, 2002
11 Cash 2,065
12 Accounts Receivable 2,720
14 Supplies 760
15 Prepaid Insurance 2,300
17 Land 20,000
18 Office Equipment 1,800
19 Accum. Depreciation 50
21 Accounts Payable 900
22 Wages Payable 250
23 Unearned Rent 240
31 Capital Stock 25,000
32 Retained Earnings 3,205
29,645 29,645
Stockholders’
Equity

51. Manual Accounting Cycle
1. Transactions are analyzed
and recorded in journal.
Documents
Journal

52. Manual Accounting Cycle
1. Transactions are analyzed
and recorded in journal.
Documents
Journal
2. Transactions are posted
from journal to ledger.
Journal
Ledger

53. Manual Accounting Cycle
1. Transactions are analyzed
and recorded in journal.
Documents
Journal
2. Transactions are posted
from journal to ledger.
Journal
Ledger
3. Trial balance is prepared,
adjustment data is organized,
work sheet is completed.
Work Sheet

54. Manual Accounting Cycle
1. Transactions are analyzed
and recorded in journal.
Documents
Journal
2. Transactions are posted
from journal to ledger.
Journal
Ledger
3. Trial balance is prepared,
adjustment data is organized,
work sheet is completed.
Work Sheet
4. Financial statements are
prepared and distributed. IS
SOE BS
SCF
Financial Statements

55. Manual Accounting Cycle
5. Adjusting entries are
journalized and posted
to ledger.
Ledger
Journal

56. Manual Accounting Cycle
5. Adjusting entries are
journalized and posted
to ledger.
Ledger
Journal
6. Closing entries are
journalized and posted
to ledger.
Ledger
Journal

57. Manual Accounting Cycle
5. Adjusting entries are
journalized and posted
to ledger.
Ledger
Journal
6. Closing entries are
journalized and posted
to ledger.
Ledger
Journal
Assets
Liabilities
Owner’s Equity
7. Post-closing trial balance
is prepared.
Post-closing
Trial Balance

58. Manual Accounting Cycle
5. Adjusting entries are
journalized and posted
to ledger.
Ledger
Journal
6. Closing entries are
journalized and posted
to ledger.
Ledger
Journal
Assets
Liabilities
Owner’s Equity
7. Post-closing trial balance
is prepared.
Post-closing
Trial Balance
8. Reports are analyzed and
interpreted for decision-
making purposes. ?

59. Computer Accounting Cycle
1. Transactions are analyzed
and entered in the computer.
Documents
Computer

60. Computer Accounting Cycle
1. Transactions are analyzed
and entered in the computer.
Documents
Computer
2. Preliminary reports are
analyzed, adjustments are
prepared and entered in the
computer.
Computer
Reports
Computer

61. Computer Accounting Cycle
1. Transactions are analyzed
and entered in the computer.
Documents
Computer
2. Preliminary reports are
analyzed, adjustments are
prepared and entered in the
computer.
Computer
Reports
Computer
3. Financial statements are
printed and distributed.
Financial Statements IS
SOE BS
SCF

62. Computer Accounting Cycle
1. Transactions are analyzed
and entered in the computer.
Documents
Computer
2. Preliminary reports are
analyzed, adjustments are
prepared and entered in the
computer.
Computer
Reports
Computer
3. Financial statements are
printed and distributed.
Financial Statements IS
SOE BS
SCF
4. Reports are analyzed and
interpreted for decision-
making purposes. ?

63. Solvency Analysis
Solvency is the ability of a business to meet its financial obligations (debts) as they are due.
Solvency analysis focuses on the ability of a business to pay or otherwise satisfy its current and non-current liabilities.
This ability is normally assessed by examining balance sheet relationships.

64. Solvency Measures — The Short-Term Creditor
Working Capital and Current Ratio
Current assets $550,000 $533,000
Current liabilities 210, ,000

65. Solvency Measures — The Short-Term Creditor
Working Capital and Current Ratio
Current assets $550,000 $533,000
Current liabilities 210, ,000
Working capital $340,000 $290,000
Use: To indicate the ability to meet currently maturing obligations.

66. Solvency Measures — The Short-Term Creditor
Working Capital and Current Ratio
Current assets $550,000 $533,000
Current liabilities , ,000
Working capital $340,000 $290,000
Current ratio 2.6 to to 1
Divide current assets by current liabilities
Use: To indicate the ability to meet currently maturing obligations.

67. Working Capital and Current Ratio
Objective: Analyze and interpret the financial solvency of a business by computing the working capital and the current ratio.
Working Capital (WC)
Current Ratio (CR)
Current Assets minus
Current Liabilities
Current Assets
Current Liabilities
Example
Mega Stores
WC = $7,845 - $1,390 = $6,455
CR = $7,845 / $1,390 = 5.6