After studying this chapter you will be able to understand: Describe a merchandiser’s cost of goods sold, how do we compute gross profit for a merchandising company? Explain why use of the perpetual inventory system has dramatically increased; identify which items are subtracted from the list amount and not recorded when computing purchase price: freight-in, trade discount, purchase discount, purchase return;. | Completing the Accounting Cycle Chapter 4 PowerPoint Editor: Beth Kane, MBA, CPA 1 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 4: Completing the Accounting Cycle 04-P1: Benefits of a Work Sheet 2 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 3 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. Reduces the possibility of errors when working with many accounts and adjustments. Links accounts and adjustments to their impacts in financial statements. 4. Assists in planning and organizing an audit of financial statements—as it can be used to reflect any adjustments necessary. 5. Helps in preparing interim (monthly and quarterly) financial statements when the journalizing and posting of adjusting entries are postponed until year-end. Shows the effects of proposed or “what-if” transactions. Review what you have learned in the following NEED-TO-KNOW Slides. NEED-TO-KNOW The following 10-column work sheet contains the year-end unadjusted trial balance for Magic Company as of December 31, 20X2. Complete the work sheet by entering the necessary adjustments, computing the adjusted account balances, extending the adjusted balances into the appropriate financial statement columns, and entering the amount of net income for the period. Note: The Magic, Capital account balance was $75,000 at December 31, 20X1. No. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. 101 Cash 13,000 106 Accounts receivable 8,000 183 Land 85,000 201 Accounts payable 10,000 251 Long-term notes payable | Completing the Accounting Cycle Chapter 4 PowerPoint Editor: Beth Kane, MBA, CPA 1 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 4: Completing the Accounting Cycle 04-P1: Benefits of a Work Sheet 2 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 3 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. Reduces the possibility of errors when working with many accounts and adjustments. Links accounts and adjustments to their impacts in financial statements. 4. Assists in planning and
