1. The Accounting Cycle: Step 4
Professor Eric Carstensen
MiraCosta College

2. 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

3. 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

4. Summarize Activity in Ledgers – Part 2
supplies
equipment
A/P f.
1,300 d.
14,200
9,200 j.
3,600
5,600

5. Summarize Activity in Ledgers – Part 3
notes payable
common stock
dividends e.
10,000 a.
35,000 k.
1,000

6. 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

7. 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

8. Preliminary Financial Statements
1. Income Statement
2. Statement of Retained Earnings
Revenues
$ ,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
$ ,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
$ ,600
Supplies
1,300
Total Current Assets
$ ,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

9. 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.