Acct 151A
Week 7, Chap 4,5 & 6
Review
Instructor: Michael Booth
Cabrillo College
Assets
=
Liabilities + Owner’s Equity
JT’s Consulting Services
Trial Balance
December 31, 2010
ACCOUNT NAME
DEBIT
Cash
Accounts Receivable
Supplies
Prepaid Rent
Equipment
Accounts Payable
Jason Taylor, Capital
Jason Taylor, Drawing
Fees Income
Salaries Expense
Utilities Expense
Totals
CREDIT
83,500
5,000
3,000
7,000
22,000
7,000
90,000
4,000
35,000
7,000
500
132,000
132,000
Complete the trial balance
in six steps.
1. Enter the trial balance heading showing the company
name, report title, and closing date for the accounting
period.
2. List the account names in the same order as they
appear on the financial statements.

Assets

Liabilities

Owner’s Equity

Revenue

Expenses
Complete the trial balance
in six steps.
3. Enter the ending balance of each account in the
appropriate Debit or Credit column.
4. Total the Debit column.
5. Total the Credit column.
6. Compare the total debits with the total credits.
After the trial balance is prepared, the financial
statements are prepared.

Net income from the income statement is used on
the statement of owner’s equity.

The ending balance of the Owner’s, Capital
account, computed on the statement of owner’s
equity, is used on the balance sheet.
QUESTION:
What is the accounting cycle?
ANSWER:
The accounting cycle is a series of steps
performed during each accounting
period to classify, record, and
summarize data for a business and to
produce needed financial information.
The Accounting Cycle
Step 1
Analyze
transactions
Step 2
Journalize the
data about
transactions
Step 3
Post the
data about
transactions
Step 4
Prepare
a
worksheet
Step 5
Prepare
financial
statements
Step 9
Interpret
the financial
information
Step 8
Prepare a
postclosing
trial balance
Step 7
Record
closing
entries
Step 6
Record
adjusting
entries
Journal

A journal is a diary of business activities.

There are different types of journals.

Transactions are entered in the journal in
chronological order.
QUESTION:
What is chronological order?
ANSWER:
Chronological order is the order in
which events occur.
QUESTION:
What is a general journal?
ANSWER:
A general journal is a financial record for
entering all types of business
transactions.
QUESTION:
What is journalizing?
ANSWER:
Journalizing is the process of recording
transactions in a journal.
GENERAL JOURNAL
DATE
DESCRIPTION
POST.
REF.
1
PAGE
DEBIT
CREDIT
2010
Nov.
6 Cash
Jason Taylor, Capital
90,000.00
90,000.00
Investment by owner, Memo 01
Then enter a complete but concise description of the transaction.
Whenever possible, the journal entry should refer to the source of the
information.
Document numbers are part of the audit trail.
GENERAL JOURNAL
DATE
DESCRIPTION
POST.
REF.
2
PAGE
DEBIT
CREDIT
2010
Dec. 31 Cash
26,000.00
Fees Income
Performed services for cash
26,000.00
Note: Change
in page
number
QUESTION:
What is a compound entry?
ANSWER:
A compound entry is a journal entry that
contains more than one debit or credit.
GENERAL JOURNAL
DATE
Nov.
DESCRIPTION
7
Equipment
POST.
REF.
PAGE
DEBIT
1
CREDIT
10,000.00
Cash
5,000.00
Accounts Payable
5,000.00
Bought equip. from SBM Tech,
Inv. 11, issued Ck. 1001 for
$5,000, bal. due in 30 days
10,000.00

=
10,000.00
No matter how many accounts are affected by a transaction,
total debits must equal total credits.
QUESTION:
What is a ledger?
ANSWER:
A ledger is the record of final entry. It
is the last place that accounting
transactions are recorded.
Ledgers

The ledger contains a separate form for each
account.

The third step of the accounting cycle is posting
to the ledger.
QUESTION:
What is posting?
ANSWER:
Posting is the process of
transferring data from a journal to a
ledger.
QUESTION:
What is a general ledger?
ANSWER:
A general ledger is a permanent,
classified record of all accounts
used in a firm’s operation.
Ledger Account Forms
On the ledger account form shown below, notice the:
 Account
name and number
 Columns for date, description, and posting reference
 Columns for debit, credit, debit balance, and credit
balance
ACCOUNT
DATE
2010
Nov. 6
DESCRIPTION
ACCOUNT NO.
CASH
POST.
REF.
J1
DEBIT
90,000.00
CREDIT
BALANCE
DEBIT
CREDIT
90,000.00
101
Review the Posting Process
GENERAL JOURNAL
DATE
2010
Nov.
DESCRIPTION
7
Equipment
Cash
Purchased equipment
Check 1001
ACCOUNT
DATE
POST.
REF.
DESCRIPTION
141
DEBIT
2010
Nov. 6
J1
Nov. 7
J1
CREDIT
10,000.00
101
10,000.00
ACCOUNT NO.
Cash
POST.
REF.
1
PAGE
DEBIT
CREDIT
90,000.00
BALANCE
DEBIT
CREDIT
90,000.00
10,000.0
101
80,000.00
General Ledger Accounts
In the general ledger accounts, the balance sheet
accounts appear first and are followed by the
income statement accounts. The order is:





Assets
Liabilities
Owner’s equity
Revenue
Expenses
This order of accounts speeds the preparation of the trial
balance and the financial statements.
Correcting Journal and Ledger Errors

If an error is discovered before the entry is
posted, neatly cross out the incorrect item and
write the correct data above it.

To ensure honesty and provide a clear audit trail,
erasures are not made in the journal.
Before Posting
GENERAL JOURNAL
DATE
2010
Sept.
DESCRIPTION
1
Shop Equipment
Office Equipment
Cash
Purchased equipment
Check 2141
POST.
REF.
PAGE
DEBIT
1
CREDIT
9,000.00
9,000.00

The accountant would neatly cross out Office Equipment
and write Shop Equipment above it.

The correct account Shop Equipment would be posted to
the ledger in the usual manner.
Correcting Journal and Ledger Errors

If the error is discovered after posting, a
correcting entry – a journal entry made to correct
the erroneous entry – is journalized and posted.

Do not erase or change the journal entry or the
postings in the ledger accounts.

Note that erasures are never permitted in the
journal or ledger.
QUESTION:
What is a correcting entry?
ANSWER:
A correcting entry is a journal entry
made to correct an erroneous entry.
QUESTION:
What is the worksheet?
ANSWER:
The worksheet is a form used to
gather all data needed at the end of
an accounting period to prepare
financial statements.
The worksheet has
an Account Name column
The worksheet also
has five sections.
Each section has
two columns.
Who?
What(Worksheet)
When? (Month Ended)
TRIAL BALANCE
ACCOUNT NAME
DEBIT
CREDIT
ADJUSTMENTS
DEBIT
CREDIT
ADJ. TRIAL BAL.
INCOME STMT.
DEBIT
DEBIT
CREDIT
CREDIT
BALANCE SHEET
DEBIT
CREDIT
QUESTION:
What are adjustments?
ANSWER:
Adjustments or adjusting entries are
journal entries made to update accounts
for items that were not recorded during
the accounting period.
QUESTION:
What is depreciation?
ANSWER:
Depreciation is the process of allocating
the cost of long-term assets over their
useful lives.
The cost of a long-term asset such as equipment . . .
$ COST
. . . is NOT recorded as an expense at the time of purchase.
$ EXPENSE
Instead the cost is recorded as an asset and charged to
expense over the time the asset is used for the business.
(Note: Land does not depreciate)
$ ASSET
Expense
This expense is called
depreciation.
Expense
Jan.
2008
Expense
There are several methods to calculate depreciation. JT’s
Consulting Services uses the straight-line method.
QUESTION:
What is straight-line depreciation?
ANSWER:
Straight-line depreciation (S/L) allocates
an asset’s cost in equal amounts to each
accounting period of its useful life.
S/L depreciation =
Cost - salvage value
Estimated months of useful life
QUESTION:
What is salvage value?
ANSWER:
Salvage value is an estimate of the
amount that may be received by selling
or disposing of an asset at the end of its
useful life.
Adjustment for Depreciation
Depreciation Expense—
Equipment
Accumulated Depreciation—
Equipment
0
Bal
Bal
0
Adj. 367
367 Adj.
Long-term assets are shown on the financial
statements at their book value.
QUESTION:
What is book value?
ANSWER:
Book value is the portion of an
asset’s original cost that has not
yet been depreciated.
Equipment
22,000
Accumulated Depreciation—
Equipment
367
Original cost of equipment
Record of all depreciation
taken on equipment
Book value = Original cost – Accumulated depreciation
=
22,000 – 367
=
21,633
Complete the Adjusted Trial Balance
section in two steps.
1. Combine
the figures from the Trial Balance section
and the
Adjustments section. Record the results in the
Adjusted
Trial Balance columns.
2. Total the Debit and Credit columns in the Adjusted
Trial Balance section. Confirm that debits equal
credits.
1. For accounts that appear on the balance sheet, enter the amount in the appropriate
column of the Balance Sheet section.
2.For accounts that appear on the income statement, enter the amount in the appropriate
column of the Income Statement section.
TRIAL BALANCE
ADJUSTMENTS
ADJ. TRIAL BAL.
INCOME STMT.
BALANCE SHEET
DEBIT
DEBIT
DEBIT
DEBIT
DEBIT
ACCOUNT NAME
CREDIT
CREDIT
83,500
83,500
Accounts Receivable
5,000
5,000
Supplies
3,000
Cash
Prepaid Rent
Equipment
(a) 1,000
7,000
22,000
(b)
3,500
CREDIT
2,000
3,500
22,000
Accum. Depr.—Equip.
(c)
367
367
Accounts Payable
7,000
7,000
Jason Taylor, Cap.
90,000
90,000
Jason Taylor, Draw.
4,000
Fees Income
Salaries Expense
Utilities Expense
4,000
35,000
35,000
7,000
500
7,000
500
Supplies Expense
(a)
1,000
1,000
Rent Expense
(b)
3,500
3,500
Depr. Exp.—Equip.
(c)
367
4,867
367
4,867 132,367 132,367
Totals
132,000 132,000
CREDIT
CREDIT
Total the Income Statement and the Balance Sheet sections.
ACCOUNT NAME
TRIAL BALANCE
ADJUSTMENTS
ADJ. TRIAL BAL.
INCOME STMT.
BALANCE SHEET
DEBIT
DEBIT
DEBIT
DEBIT
DEBIT
CREDIT
83,500
Cash
5,000
Accounts Receivable
3,000
Supplies
Prepaid Rent
7,000
Equipment
22,000
Accum. Depr.—Equip.
7,000
Accounts Payable
Jason Taylor, Cap.
90,000
4,000
Jason Taylor, Draw.
Fees Income
35,000
Salaries Expense
7,000
Utilities Expense
500
Supplies Expense
Rent Expense
Depr. Exp.—Equip.
Totals
132,000 132,000
Net Income
CREDIT
83,500
5,000
(a) 1,000
2,000
3,500
(b) 3,500
22,000
(c) 367
CREDIT
CREDIT
83,500
5,000
2,000
3,500
22,000
367
7,000
90,000
367
7,000
90,000
4,000
4,000
35,000
(a) 1,000
3,500
(c)
367
4,867
(b)
CREDIT
7,000
500
1,000
3,500
367
4,867 132,367 132,367
35,000
7,000
500
1,000
3,500
367
12,367 35,000 120,000 97,367
22,633
22,633
35,000 35,000 120,000 120,000
JT’s Consulting Services
Worksheet
Month Ended December 31, 2010
ACCOUNT NAME
TRIAL BALANCE
ADJUSTMENTS
ADJ. TRIAL BAL.
INCOME STMT.
BALANCE SHEET
DEBIT
DEBIT
DEBIT
DEBIT
DEBIT
CREDIT
83,500
Cash
5,000
Accounts Receivable
3,000
Supplies
Prepaid Rent
7,000
Equipment
22,000
Accum. Depr.—Equip.
7,000
Accounts Payable
Jason Taylor, Cap.
90,000
4,000
Jason Taylor, Draw.
Fees Income
35,000
Salaries Expense
7,000
Utilities Expense
500
Supplies Expense
Rent Expense
Depr. Exp.—Equip.
Totals
132,000 132,000
Net Income
CREDIT
83,500
5,000
(a) 1,000
2,000
3,500
(b) 3,500
22,000
(c) 367
CREDIT
CREDIT
83,500
5,000
2,000
3,500
22,000
367
7,000
90,000
367
7,000
90,000
4,000
4,000
35,000
(a) 1,000
3,500
(c)
367
4,867
(b)
CREDIT
7,000
500
1,000
3,500
367
4,867 132,367 132,367
35,000
7,000
500
1,000
3,500
367
12,367 35,000 120,000 97,367
22,633
22,633
35,000 35,000 120,000 120,000
JT’s Consulting Services
Income Statement
Month Ended December 31, 2010
Revenue
Fees Income
$35,000
Expenses
Salaries Expense
Utilities
$7,000
500
Supplies Expense
1,000
Rent Expense
3,500
Depreciation Expense - Equipment
Total Expenses
Net Income for the Month
367
$12,367
$22,633
JT’s Consulting Services
Worksheet
Month Ended December 31, 2010
ACCOUNT NAME
TRIAL BALANCE
ADJUSTMENTS
ADJ. TRIAL BAL.
INCOME STMT.
BALANCE SHEET
DEBIT
DEBIT
DEBIT
DEBIT
DEBIT
CREDIT
83,500
Cash
5,000
Accounts Receivable
3,000
Supplies
Prepaid Rent
7,000
Equipment
22,000
Accum. Depr.—Equip.
7,000
Accounts Payable
Jason Taylor, Cap.
90,000
4,000
Jason Taylor, Draw.
Fees Income
35,000
Salaries Expense
7,000
Utilities Expense
500
Supplies Expense
Rent Expense
Depr. Exp.—Equip.
Totals
132,000 132,000
Net Income
CREDIT
83,500
5,000
(a) 1,000
2,000
3,500
(b) 3,500
22,000
(c) 367
CREDIT
CREDIT
83,500
5,000
2,000
3,500
22,000
367
7,000
90,000
367
7,000
90,000
4,000
4,000
35,000
(a) 1,000
3,500
(c)
367
4,867
(b)
CREDIT
7,000
500
1,000
3,500
367
4,867 132,367 132,367
35,000
7,000
500
1,000
3,500
367
12,367 35,000 120,000 97,367
22,633
22,633
35,000 35,000 120,000 120,000
JT’s Consulting Services
Statement of Owner’s Equity
Month Ended December 31, 2010
Jason Taylor, Capital, December 1, 2010
Net Income for December
Less Withdrawals for December
90,000
22,633
4,000
Increase in Capital
18,633
Jason Taylor, Capital, December 31, 2010
108,633
JT’s Consulting Services
Worksheet
Month Ended December 31, 2010
ACCOUNT NAME
TRIAL BALANCE
ADJUSTMENTS
ADJ. TRIAL BAL.
INCOME STMT.
BALANCE SHEET
DEBIT
DEBIT
DEBIT
DEBIT
DEBIT
CREDIT
83,500
Cash
5,000
Accounts Receivable
3,000
Supplies
Prepaid Rent
7,000
Equipment
22,000
Accum. Depr.—Equip.
7,000
Accounts Payable
Jason Taylor, Cap.
90,000
4,000
Jason Taylor, Draw.
Fees Income
35,000
Salaries Expense
7,000
Utilities Expense
500
Supplies Expense
Rent Expense
Depr. Exp.—Equip.
Totals
132,000 132,000
Net Income
CREDIT
83,500
5,000
(a) 1,000
2,000
3,500
(b) 3,500
22,000
(c) 367
CREDIT
CREDIT
83,500
5,000
2,000
3,500
22,000
367
7,000
90,000
367
7,000
90,000
4,000
4,000
35,000
(a) 1,000
3,500
(c)
367
4,867
(b)
CREDIT
7,000
500
1,000
3,500
367
4,867 132,367 132,367
35,000
7,000
500
1,000
3,500
367
12,367 35,000 120,000 97,367
22,633
22,633
35,000 35,000 120,000 120,000
QUESTION:
What is a report form balance sheet?
ANSWER:
A report form balance sheet is a
balance sheet that lists the asset
accounts first, followed by liabilities
and owner’s equity. Note: In actual
practice, the report form balance sheet is used more
often.
JT’s Consulting Services
Balance Sheet
December 31, 2010
Assets
Cash
$83,500
Accounts Receivable
5,000
Supplies
2,000
Prepaid Rent
3,500
Equipment
Less Accumulated Depreciation
Total Assets
22,000
367
21,633
$115,633
Liabilities and Owner’s Equity
Liabilities
Accounts Payable
$ 7,000
Owner’s Equity
Jason Taylor, Capital
Total Liabilities and Owner’s Equity
108,633
$115,633
SECTION
R
E
V
I
E
W
Complete the following sentences:
record of final
The ledger is called the ____________
entry because it is the last place where
_____
accounting transactions are recorded.
Posting is the process of transferring
_______
data from a journal to a ledger.
general ledger is the master reference
The ____________
file for the accounting system.
SECTION
R
E
V
I
E
W
Complete the following sentences:
The first three steps of the accounting
post
journalize and ____
analyze _________,
cycle are to _______,
transactions.
Posting references are an important part
________________
of the audit trail.
correcting entry is a journal entry made
A ______________
to correct an erroneous entry.
SECTION
R
E
V
I
E
W
Complete the following sentences:
journal is a diary of business activities.
A ______
The journal is sometimes called the
record of original entry because it is
____________________
where transactions are first entered in the
accounting records.
general journal is a financial record
The _____________
for entering all types of business
transactions.
SECTION
R
E
V
I
E
W
Complete the following sentences:
Journalizing is the process of recording
___________
transactions in the general journal.
audit trail is a chain of references that
The _________
makes it possible to trace information,
locate errors, and prevent fraud.
A journal entry that contains more than
compound
one debit or credit is called a __________
entry
_____.
SECTION
R
E
V
I
E
W
Complete the following sentences:
A form used to gather all data needed at
the end of an accounting period to prepare
worksheet
financial statements is the___________.
The general ledger account balances are
transferred to the Debit and Credit
Trial _______
Balance section of
columns of the _____
the worksheet.
adjustment
Depreciation is one type of ___________
that is made at the end of an accounting
period to update accounts for items that
were not yet recorded.
SECTION Complete the following sentences with either ―debit‖ or ―credit‖:
R
E
credit
To record expired rent, you ___________
the Prepaid Rent account.
V
I
debit
To record depreciation, you _________
the
Depreciation Expense account.
E
W
credit the
To record depreciation, you _________
Accumulated Depreciation account.
SECTION
R
E
V
I
E
W
Complete the following sentences:
The worksheet is not part of the permanent
accounting record
________________.
On a worksheet, the adjusted balance of
the Supplies account is extended to the
Balance Sheet _____
Debit column.
_____________
A balance sheet that lists the asset
accounts first, followed by liabilities and
report form balance
owner’s equity, is a(n) __________
sheet.
SECTION
R
E
V
I
E
W
Complete the following sentences:
The Drawing account is extended to the
Balance Sheet
Debit column of the _____________
_____
section.
The amount of the capital account from the
Balance Sheet section of the worksheet
statement of owner’s equity
appears in the ________________________.
Income Statement and _____________
Balance Sheet
The ________________
sections of the worksheet are used to
prepare financial statements.
Assignments:
See web: http//www.cabrillo.edu/~mbooth
This will be updated weekly as required
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