1. 13- 1 Completion of the Accounting Cycle for a Merchandise Company Chapter 13

2. 13- 2 Learning Objective 1 Preparing financial reports for a merchandise company.

3. 13- 3 Learning Unit 13-1 Banks are interested in the revenue producing areas of a merchandising company. Banks are interested in the revenue producing areas of a merchandising company. Expenses are linked to products for a full view of success. Expenses are linked to products for a full view of success.

4. 13- 4 Net Sales Gross ProfitOperating Expenses = Cost of Goods Sold – Net Income from Operations Other Income Other Expenses Net Income + – – = = Learning Unit 13-1 Income Statement

5. 13- 5 Art’s, Capital, January 1, 200x$ 7,905 Net Income for the Year$13,745 Less Withdrawals for the Year 8,600 Increase in Capital 5,145 Art’s, Capital, December 31, 200x$13,050 Art’s, Capital, January 1, 200x$ 7,905 Net Income for the Year$13,745 Less Withdrawals for the Year 8,600 Increase in Capital 5,145 Art’s, Capital, December 31, 200x$13,050 Art’s Wholesale Clothing Company Statement of Owner’s Equity For Year ended December 31, 200x Learning Unit 13-1 Example

6. 13- 6 Assets Liabilities Current Assets: Current Liabilities: Cash$10,920Accounts Payable$17,900 Accounts Receivable 14,500Salary Payable 3,070 Inventory 2,300Tax Payable 1,500 Total Current Assets$27,720 Total Liabilities$22,470 Plant Assets Owner’s Equity Equipment$15,500 Capital$13,050 Less Accum. Dep. 7,700 7,800 Total Liabilities and Total Assets$35,520Owner’s Equity$35,520 Assets Liabilities Current Assets: Current Liabilities: Cash$10,920Accounts Payable$17,900 Accounts Receivable 14,500Salary Payable 3,070 Inventory 2,300Tax Payable 1,500 Total Current Assets$27,720 Total Liabilities$22,470 Plant Assets Owner’s Equity Equipment$15,500 Capital$13,050 Less Accum. Dep. 7,700 7,800 Total Liabilities and Total Assets$35,520Owner’s Equity$35,520 Art’s Wholesale Clothing Company Classified Balance Sheet December 31, 200X Learning Unit 13-1 Example

7. 13- 7 Learning Objective 2 Recording adjusting and closing entries.

8. 13- 8 Learning Unit 13-2 n Adjusting entries shown on the worksheet are journalized. n Adjusting entries are then posted to the proper accounts.

9. 13- 9 Learning Unit 13-2 n All Discount plus Returns and Allowances accounts are temporary accounts that have to be closed. n The account Freight-In is also a temporary account that needs to be closed.

10. 13- 10 Learning Unit 13-2 Close all balances on the income statement credit column of the work-sheet except Income Summary. Close all balances on the income statement credit column of the work-sheet except Income Summary. Close all balances on the income statement debit column of the work-sheet except Income Summary. Close all balances on the income statement debit column of the work-sheet except Income Summary.

11. 13- 11 Learning Unit 13-2 Transfer the balance of the Income Summary account to the Capital account. Transfer the balance of the Income Summary account to the Capital account. Transfer the balance of the Withdrawal account to the Capital account. Transfer the balance of the Withdrawal account to the Capital account.

12. 13- 12 Learning Objective 3 Preparing a post- closing trial balance.

13. 13- 13 Cash$10,920 Accounts Receivable 14,500 Inventory 2,300 Equipment 15,500 Total$43,220 Art’s Wholesale Clothing Company Post-Closing Trial Balance December 31, 200X Learning Unit 13-3 Example

14. 13- 14 Accumulated Depreciation$ 7,700 Accounts Payable 17,900 Salary Payable 3,070 Tax Payable 1,500 Owner’s Capital 13,050 Total$43,220 Art’s Wholesale Clothing Company Post-Closing Trial Balance December 31, 200X Learning Unit 13-3 Example

15. 13- 15 Learning Objective 4 Completing reversing entries.

16. 13- 16 Reversing Entries Example Date Account and Explanation. Debit Credit Adjusting entry Dec. 31 Salaries Expense 600 Salaries Payable 600

17. 13- 17 Reversing Entries Example Date Account and Explanation. Debit Credit Reversing entry Jan. 1 Salaries Payable 600 Salaries Expense 600

18. 13- 18 Reversing Entries Example Date Account and Explanation. Debit Credit Paid salaries Jan. 1 Salaries Expense 2,000 Cash 2,000

19. 13- 19 End of Chapter 13