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Lecture Principles of Accounting: A focus on analysis and interpretation (8th edition): Chapter 4 - Hillman, Kochanek, Barsky

Chapter 4 - Completion of the accounting cycle. This chapter presents the following content: Accounting cycle during period, accounting cycle end of period, worksheet, preparing the worksheet, closing entries, steps in closing,. | Completion of the Accounting Cycle Accounting Cycle During Period Collect transaction data from business documents Analyze transactions and journalize Post to ledgers * Accounting Cycle End of Period Prepare unadjusted trial balance Prepare worksheet Prepare financial statements Journalize and post adjustments Journalize and post closing entries Prepare post closing trial balance * Worksheet Working paper that bridges the gap between the accounting records and the financial statements Determines the effect of end-of-period adjustments Determines net income Sets up information for closing entries * Preparing the Worksheet Enter the heading Enter account numbers, titles, and general ledger balances in Trial Balance columns Enter adjustments in Adjustments columns * Preparing the Worksheet Calculate the Adjusted Trial Balance columns Extend amounts from Adjusted Trial Balance columns to the Income Statement or Balance Sheet columns * Preparing the Worksheet Subtotal the four financial . | Completion of the Accounting Cycle Accounting Cycle During Period Collect transaction data from business documents Analyze transactions and journalize Post to ledgers * Accounting Cycle End of Period Prepare unadjusted trial balance Prepare worksheet Prepare financial statements Journalize and post adjustments Journalize and post closing entries Prepare post closing trial balance * Worksheet Working paper that bridges the gap between the accounting records and the financial statements Determines the effect of end-of-period adjustments Determines net income Sets up information for closing entries * Preparing the Worksheet Enter the heading Enter account numbers, titles, and general ledger balances in Trial Balance columns Enter adjustments in Adjustments columns * Preparing the Worksheet Calculate the Adjusted Trial Balance columns Extend amounts from Adjusted Trial Balance columns to the Income Statement or Balance Sheet columns * Preparing the Worksheet Subtotal the four financial statement columns Determine the amount that will balance the Income Statement and Balance Sheet columns Enter this amount below the subtotals to balance the columns * Closing Entries Revenue, expense, and dividend accounts accumulate changes in owners’ equity during an accounting period At the end of the period, we must transfer these changes to Retained Earnings * Steps in Closing Transfer the revenue account balances to Income Summary Transfer the expense account balances to Income Summary Transfer the Income Summary balance to Retained Earnings Transfer the Dividends balance to Retained Earnings * Analyzing Information To study changes in Return on Assets Separate into two components Profit Margin Net income divided by Total revenues Total Asset Turnover Total revenues divided by Average total assets * Analyzing Information Separation shows that a company can generate Return on Assets by either Earning a high profit margin by controlling expenses for a given revenue Earning higher revenues for a given investment in assets * *