Ch04

Equipment Machinery Buildings Land
LO 2
Current Liabilities
Liabilities that will be due within a short time (usually one year or less) and that are to be paid out of current assets are called current liabilities.
LOce Sheet
A classified balance sheet is a balance sheet that was expanded by adding subsections for current assets; property, plant, and equipment; current liabilities; and long-term liabilities.
(concluded)
LO 1
Flow of Accounting Information
LO 1
Flow of Accounting Information
4-1
TRUE/FALSE A net loss is shown on the work sheet in the credit columns of both the Income Statement columns and the Balance Sheet columns.
ANSWER D
4-1
MULTIPLE CHOICE
A net loss appears on the work sheet in the
A debit column of the Balance Sheet columns B credit column of the Balance Sheet columns C debit column of the Income Statement columns D credit column of the Adjustments columns
Learning Objective 3
LO 2
Fixed Assets
Property, plant, and equipment (also called fixed assets or plant assets) include assets that depreciate over a period of time. Land is an exception, as it is not subject to depreciation.
Accounts payable Wages payable Interest payable Unearned fees
LO 2
Long-Term Liabilities
Liabilities not due for a long time (usually more than one year) are called long-term liabilities.
LO 2
Statement of Owner’s Equity
The first item presented on the statement of owner’s equity is the balance of the owner’s capital account at the beginning of the period.
Completing the Accounting Cycle
ACCOUNTING Chapter 4
Warren Reeve Fess
Learning Objective 1
1. Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements.
(continued)
LO 1
Flow of Accounting Information
End-of-Period Spreadsheet (Work Sheet)
Unadjusted TB Adjustments Adjusted TB
Accounts
Dr
Cr
Dr
Cr
Dr
Cr
Adjustments are combined with the trial balance amounts. Account balances are now adjusted. (continued)
LO 1
Flow of Accounting Information
LO 1
Flow of Accounting Information
End-of-Period Spreadsheet (Work Sheet)
Unadjusted TB Adjustments Adjusted TB
Accounts
Cash Accounts Receivable Notes Receivable Supplies
LO 2
Notes Receivable
Notes receivable are written promises by the customer to pay the amount of the note and possibly interest at an agreed rate.
LO 2
Balance Sheet
The balance sheet is prepared directly from the Balance Sheet or Adjusted Trial Balance columns of the end-of-period spreadsheet (or work sheet), beginning with Cash of $2,065.
ANSWER True.
4-1
MULTIPLE CHOICE
The worksheet
A is an integral part of the accounting cycle B eliminates the need to rewrite the financial statements C is a working paper that is required D is used to summarize account balances and adjustments for the financial statements
End-of-Period Spreadsheet (Work Sheet)
Unadjusted TB Adjustments Adjusted TB
Accounts
Dr
Cr
Dr
Cr
Dr
Cr
Adjustments are entered here. Two possibilities:
Deferrals – Existing balances are changed Accruals – New information is entered
LO 2
Income Statement
The income statement is prepared directly from the Income Statement or Adjusted Trial Balance columns of the end-of-period spreadsheet (work sheet) beginning with fees earned of $16,840.
LO 1
Flow of Accounting Information
End-of-Period Spreadsheet (Work Sheet)
Adjusted TB Income State. Balance Sheet
Accounts
Dr
Cr
Dr
Cr
Dr
Cr
Revenue and expense balances in the Adjusted Trial Balance column are extended to the Income Statement column.
Dr
Cr
Dr
Cr
Dr
Cr
Account balances are listed in the Trial Balance column using the ending balances found in the general ledger. (continued)
LO 1
Flow of Accounting Information
(continued)
LO 1
Flow of Accounting Information
End-of-Period Spreadsheet (Work Sheet)
Adjusted TB Income State. Balance Sheet
Accounts
Dr
Cr
Dr
Cr
Dr
Cr
Asset, liability, owner’s equity, and drawing balances in the Adjusted Trial Balance column are extended to the Balance Sheet column.
ANSWER A
Learning Objective 2
1. Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements. 2. Prepare financial statements from adjusted account balances.