Lecture Principles of financial accouting, chapter 4 - Completing the accounting cycle. After completing this chapter you should be able to: Explain why temporary accounts are closed each period, identify steps in the accounting cycle, explain and prepare a classified balance sheet. | Chapter 4 Completing the Accounting Cycle Chapter 4: Completing the accounting cycle Benefits of a Work Sheet Aids the preparation of financial statements. Reduces possibility of errors. Links accounts and their adjustments. Assists in planning and organizing an audit. Helps in preparing interim financial statements. Shows the effects of proposed transactions. Not a required report. P 1 A work sheet is not a required report, yet using a manual or electronic work sheet has several potential benefits. Specifically, a work sheet: 1. Aids the preparation of financial statements. 2. Reduces the possibility of errors. 3. Links accounts and adjustments to their impacts in financial statements. 4. Assists in planning and organizing an audit of financial statements. 5. Helps in preparing interim financial statements. 6 Shows the effects of proposed transactions. FastForward Worksheet For the Month Ended December 31, 2011 P 1 Unadjusted Trial Balance Adjustments Adjusted Trial Balance Income . | Chapter 4 Completing the Accounting Cycle Chapter 4: Completing the accounting cycle Benefits of a Work Sheet Aids the preparation of financial statements. Reduces possibility of errors. Links accounts and their adjustments. Assists in planning and organizing an audit. Helps in preparing interim financial statements. Shows the effects of proposed transactions. Not a required report. P 1 A work sheet is not a required report, yet using a manual or electronic work sheet has several potential benefits. Specifically, a work sheet: 1. Aids the preparation of financial statements. 2. Reduces the possibility of errors. 3. Links accounts and adjustments to their impacts in financial statements. 4. Assists in planning and organizing an audit of financial statements. 5. Helps in preparing interim financial statements. 6 Shows the effects of proposed transactions. FastForward Worksheet For the Month Ended December 31, 2011 P 1 Unadjusted Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet and Statement of Changes in Equity The first step in preparing a work sheet is to list the title of every account and its account number that is expected to appear on its financial statements. This includes all accounts in the ledger plus any new ones from adjusting entries. Most adjusting entries — including expenses from salaries, supplies, depreciation, and insurance — are predictable and recurring. The unadjusted balance for each account is then entered in the appropriate Debit or Credit column of the unadjusted trial balance columns. Sometimes blank lines are left on the work sheet based on past experience to indicate where lines will be needed for adjustments to certain accounts. FastForward Worksheet For the Month Ended December 31, 2011 P 1 Unadjusted Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet and Statement of Changes in Equity The second step in preparing a work sheet is to enter adjustments in the Adjustments columns.
