Accounting Principles Using Excel for Success PowerPoint Presentation by: Douglas Cloud, Professor Emeritus Accounting, Pepperdine University © 2011 Cengage.

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1 Accounting Principles Using Excel for Success PowerPoint Presentation by: Douglas Cloud, Professor Emeritus Accounting, Pepperdine University © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password- protected website for classroom use. 1 4 Completing the Accounting Cycle Student Version

2 1-2 4-2 2 1 Describe the flow of accounting information from the unadjusted trial balance into the adjusted trial balance and financial statements.

3 1-3 4-3 3 1 End-of-Period Spreadsheet (Work Sheet) Exhibit 1

4 1-4 4-4 4 Prepare financial statements from adjusted account balances. 2 4-4

5 1-5 4-5 5 to statement of owner’s equity 2 Financial Statements Prepared from Work Sheet Exhibit 2

6 1-6 4-6 6 from the income statement to the balance sheet 2 Financial Statements Prepared from Work Sheet (continued) Exhibit 2

7 1-7 4-7 7 A classified balance sheet is a balance sheet that was expanded by adding subsections for current assets; property, plant, and equipment; and current liabilities. 2

8 1-8 4-8 8 Cash and other assets that are expected to be converted into cash, sold or used up usually within a year or less, through the normal operations of the business, are called current assets. 2 Property, plant, and equipment (also called fixed assets) include assets that depreciate over a period of time. Land is an exception as it is not subject to depreciation. (continued)

9 1-9 4-9 9 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. 2 Liabilities not due for a long time (usually more than one year) are long-term liabilities. Owner’s equity is the owner’s right to the assets of the business.

10 1-10 4-10 10 from the statement of owner’s equity 2 Financial Statements Prepared from Work Sheet (continued) Exhibit 2

11 1-11 4-11 11 Prepare closing entries. 3 4-11

12 1-12 4-12 12 Accounts that are relatively permanent from year to year are called real accounts. Accounts that report amounts for only one period are called temporary accounts or nominal accounts. 3 Closing Entries

13 1-13 4-13 13 Debit each revenue account for the amount of its balance, and credit Income Summary for the total revenue. Fees Earned Bal.16,840 Rent Revenue Bal.120 Income Summary 16,840 120 16,960 3 Flowchart of Closing Entries for NetSolutions Exhibit 4

14 1-14 4-14 14 Wages Expense Rent Expense Depreciation Expense Utilities Expense Supplies Expense Insurance Expense Bal.200 Miscellaneous Expense Bal.455 Income Summary Debit Income Summary for the total expenses and credit each expense account for its balance. 16,960 Bal.4,525 Bal.1,600 Bal.50 Bal.985 Bal.2,040 9,855 455 200 2,040 985 50 1,600 4,525 3 Flowchart of Closing Entries for NetSolutions (continued) Exhibit 4

15 1-15 4-15 15 Chris Clark, Capital Bal.25,000 Chris Clark, Drawing Bal.4,000 Income Summary 16,9609,855 7,105 Debit Income Summary for the amount of its balance (in this case, the net income) and credit the capital account. 3 Flowchart of Closing Entries for NetSolutions (continued) Exhibit 4

16 1-16 4-16 16 Chris Clark, Capital Bal.25,000 7,105 Chris Clark, Drawing Bal.4,000 4,000 Debit the capital account for the balance of the drawing account, and credit drawing for the same amount. 3 Flowchart of Closing Entries for NetSolutions (continued) Exhibit 4

17 1-17 4-17 17 3 Closing Entries for NetSolutions Step 2 Step 3 Step 1 Step 4 Exhibit 5

18 1-18 4-18 18 After the closing entries are posted, all of the temporary accounts have zero balances. 3

19 1-19 4-19 19 A post-closing trial balance is prepared after the closing entries have been posted. The purpose of the PCTB is to verify that the ledger is in balance at the beginning of the next period. 3

20 1-20 4-20 20 3 Post-Closing Trial Balance Exhibit 7

21 1-21 4-21 21 Describe the accounting cycle. 4 4-21

22 1-22 4-22 22 The accounting process that begins with analyzing and journalizing transactions and ends with preparing the accounting records for the next period’s transactions is called the accounting cycle. There are ten steps in the accounting cycle. 4

23 1-23 4-23 23 2.Transactions are posted to the ledger. 3.An unadjusted trial balance is prepared. 4.Adjustment data are assembled and analyzed. 5.An optional end-of-period spreadsheet (work sheet) is prepared. 1.Transactions are analyzed and recorded in the journal. (continued) Accounting Cycle 4

24 1-24 4-24 24 7.An adjusted trial balance is prepared. 8.Financial statements are prepared. 9.Closing entries are journalized and posted to the ledger. 10.A post-closing trial balance is prepared. 6.Adjusting entries are journalized and posted to the ledger. Accounting Cycle (continued) 4

25 1-25 4-25 25 5 Illustrate the accounting cycle for one period. 4-25

26 1-26 4-26 26 5 Journal entries for April, Kelly Consulting Exhibit 9

27 1-27 4-27 27 5 Journal entries for April, Kelly Consulting (continued) Exhibit 9

28 1-28 4-28 28 5 Unadjusted Trial Balance, Kelly Consulting Exhibit 10

29 1-29 4-29 29 5 End-of-Period Spreadsheet (Work Sheet)Exhibit 11 4-29

30 1-30 4-30 30 5 Adjusting Entries, Kelly Consulting Exhibit 12

31 1-31 4-31 31 5 Adjusted Trial Balance, Kelly ConsultingExhibit 13

32 1-32 4-32 32 5 Financial Statements, Kelly ConsultingExhibit 14

33 1-33 4-33 33 5 Financial Statements, Kelly Consulting (continued) Exhibit 14

34 1-34 4-34 34 Financial Statements, Kelly Consulting (continued) Exhibit 14 5

35 1-35 4-35 35 5 Closing Entries, Kelly ConsultingExhibit 15

36 1-36 4-36 36 5 Post-Closing Trial Balance, Kelly Consulting Exhibit 16

37 1-37 4-37 37 6 Explain what is meant by the fiscal year and the natural business year. 4-37

38 1-38 4-38 38 The annual accounting period adopted by a business is known as its fiscal year. When a business adopts a fiscal year that ends when business activities have reached the lowest point in its annual operation, such a fiscal year is also called the natural year. 6

39 1-39 4-39 39 Financial History of a Business 6

40 1-40 4-40 40 5 Ledger, Kelly Consulting Exhibit 17

41 1-41 4-41 41 5 Ledger, Kelly Consulting (continued) Exhibit 17

42 1-42 4-42 42 5 Ledger, Kelly Consulting (continued) Exhibit 17

43 1-43 4-43 43 5 Ledger, Kelly Consulting (continued) Exhibit 17

44 1-44 4-44 44