1. EMBA: Session 3 (B)
EMBA: Session 3 (B)
Completion of the Accounting
Cycle: Service Company
By
Prof. Dr. Md. Mohiuddin
2. • Work Sheet
– multiple-column form used for the
adjustment process and preparing financial
statements
– a working tool for the accountant
– not a permanent accounting record
• Work Sheet
– makes preparation of adjusting entries and
financial statements easier
WORK SHEET
4. • Work sheet
– is not a permanent accounting record
• When used
– financial statements are prepared
from the work sheet
– adjustments are journalized and
posted from the work sheet after
financial statements
WORK SHEET
5. STEPS IN PREPARING
A WORK SHEET
1 prepare trial balance
2 enter adjustments in the adjustments columns
3 enter adjusted balances in adjusted trial balance
columns
4 extend adjusted trial balance amounts
to appropriate financial statement
columns
5 total the statement columns, compute net
income (loss), and complete the work sheet
6. PREPARING A WORK SHEET
1 PREPARING A TRIAL BALANCE
PIONEER ADVERTISING AGENCY
Work Sheet
For the Month Ended October 31, 2024
Adjusted
Trial Balance Adjustments Trial Balance
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
Cash
Advertising Supplies
Prepaid Insurance
Office Equipment quipment
Notes Payable
Accounts Payable
Unearned Revenue
C.R. Byrd, Capital
C.R. Byrd, Drawing
Service Revenue
Salaries Expense
Rent Expense
Totals
.
0015,200
0002,500
0000600
0005,000
5,000
2,500
1,200
000010,000
0000500
10,000
0004,000
0000900
0028,700
28,700
7. PREPARING A WORK SHEET
2 ENTER THE ADJUSTMENTS
PIONEER ADVERTISING AGENCY
Work Sheet
For the Month Ended October 31, 2024
Adjusted
Trial Balance Adjustments Trial Balance
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200
Advertising Supplies 2,500
Prepaid Insurance 600
Office Equipment 5,000
Notes Payable 5,000
Accounts Payable 2,500
Unearned Revenue 1,200
C.R. Byrd, Capital 10,000
C.R. Byrd, Drawing 500
Service Revenue 10,000
Salaries Expense 4,000
Rent Expense 900
Totals 28,700 28,700
Advertising Supplies Expense
Insurance Expense
Accum. Depr – Off Equip
—
Depreciation Expense
Accounts Receivable
Interest Expense
Interest Payable
Salaries Payable
Totals 3,440 3,440
a 1,500
b 50
d 400
d 400
e 200
g 1,200
a 1,500
b 50
c 40
c 40
e 200
f 50
f
50
g 1,200
8. PREPARING A WORK SHEET
3 ENTER ADJUSTED BALANCES
PIONEER ADVERTISING AGENCY
Work Sheet
For the Month Ended October 31, 2024
Adjusted
Trial Balance Adjustments Trial Balance
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200
1,000
550
5,000
500
5,200
900
1,500
50
40
50
200
5,000
2,500
800
10,000
10,600
40
50
1,200
Advertising Supplies 2,500 a 1,500
Prepaid Insurance 600 b 50
Office Equipment 5,000
Notes Payable 5,000
Accounts Payable 2,500
Unearned Revenue 1,200 d 400
C.R. Byrd, Capital 10,000
C.R. Byrd, Drawing 500
Service Revenue 10,000 d 400
e 200
Salaries Expense 4,000 g 1,200
Rent Expense 900
Totals 28,700 28,700
Advertising Supplies Expense a 1,500
Insurance Expense b 50
Accum. Depr – Off Equip
— c 40
Depreciation Expense c 40
Interest Expense f 50
Accounts Receivable e 200
Interest Payable f 50
Salaries Payable g 1,200
Totals 3,440 3,440 30,190 30,190
9. PREPARING A WORK SHEET
4 EXTEND ADJUSTED BALANCES
PIONEER ADVERTISING AGENCY
Work Sheet
For the Month Ended October 31, 2024
Adjusted Income
Trial Balance Statement Balance Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200
Advertising Supplies 1,000
Prepaid Insurance 550
Office Equipment 5,000
Notes Payable 5,000
Accounts Payable 2,500
Unearned Revenue 800
C.R. Byrd, Capital 10,000
C.R. Byrd, Drawing 500
Service Revenue 10,600
Salaries Expense 5,200
Rent Expense 900
Advertising Supplies Expense 1,500
Insurance Expense 50
Accum. Depr. — Office Equip. 40
Depreciation Expense 40
Interest Expense 50
Accounts Receivable 200
Interest Payable 50
Salaries Payable 1,200
Totals 30,190 30,190 7,740 10,600
Net Income 2,860
Totals 10,600 10,600
10,600.0
5,200.0 0000000
900.00000000
1,500.000000000
50.0000000
40
5 50
10. PREPARING A WORK SHEET
4 EXTEND ADJUSTED BALANCES
PIONEER ADVERTISING AGENCY
Work Sheet
For the Month Ended October 31, 2024
Adjusted Income
Trial Balance Statement Balance Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200
Advertising Supplies 1,000
Prepaid Insurance 550
Office Equipment 5,000
Notes Payable 5,000
Accounts Payable 2,500
Unearned Revenue 800
C.R. Byrd, Capital 10,000
C.R. Byrd, Drawing 500
Service Revenue 10,600 10,600
Salaries Expense 5,200 5,200
Rent Expense 900 900
Advertising Supplies Expense 1,500 1,500
Insurance Expense 50 50
Accum. Depr. — Office Equip. 40
Depreciation Expense 40 40
Interest Expense 50 50
Accounts Receivable 200
Interest Payable 50
Salaries Payable 1,200
Totals 30,190 30,190 7,740 10,600 22,450 19,590
Net Income 2,860 2,860
Totals 10,600 10,600 22,450 22,450
1
5,200
1,000
5 550
5,000
5,000
2,500
800
10,000
5500
40
200
50
1,200
11. ADJUSTING ENTRIES
JOURNALIZED
GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
2024 a
Oct. 31
b
31
c
31
d
31
e
31
f
31
g
31
Advertising Supplies Expense 1,500
Advertising Supplies 1,500
Insurance Expense 50
Prepaid Insurance 50
Depreciation Expense 40
Accumulated Expense 40
Unearned Fees 400
Fees Earned 400
Accounts Receivable 200
Fees Earned 200
Interest Expense 50
Interest Payable 50
Salaries Expense 1,200
Salaries Payable 1,200
12. PREPARATION OF FINANCIAL STATEMENTS
INCOME STATEMENT
PIONEER ADVERTISING AGENCY
Income Statement
For the Month Ended October 31, 2024
Revenues
Service revenue
Expenses
Salaries expense
Advertising supplies expense
Rent expense
Insurance expense
Interest expense
Depreciation expense
Total expenses
Net income
The income statement is
prepared from the income
statement columns of the
work sheet.
$10,600
$5,200
1,500
900
50
50
40
7,740
$ 2,860
13. PREPARATION OF FINANCIAL STATEMENTS
OWNER’S EQUITY STATEMENT
PIONEER ADVERTISING AGENCY
Owner’s Equity Statement
For the Month Ended October 31, 2024
C.R. Byrd, Capital, October 1
Add: Investments
Net income
Less: Drawings
C.R. Byrd, Capital, October 31
The owner’s equity
statement is prepared from
the balance sheet columns
of the work sheet.
$ -0-
$10,000
2,860 12,860
12,860
500
$12,360
14. PREPARATION OF FINANCIAL STATEMENTS
BALANCE SHEET
The balance sheet is prepared from the
balance sheet columns of the work sheet.
PIONEER ADVERTISING AGENCY
Balance Sheet
October 31, 2024
Assets Liabilities and Owner’s Equity
Cash Liabilities
Accounts receivable Notes payable
Advertising supplies Accounts payable
Prepaid insurance Interest payable
Office equipment Unearned revenue
Less: Accumulated Salaries payable
depreciation Total liabilities
Owner’s equity
C.R. Byrd, Capital
Total liabilities and owner’s
Total assets equity
$ 15,200
200
1,000
550
$5,000
40 4,960
$21,910
$ 5,000
2,500
50
800
1,200
9,550
12,360
$21,910
15. Chapter 4
A work sheet can be thought of as a(n)
a. permanent accounting record
b. optional device used by accountants
c. part of the general ledger
d. part of the journal
16. TEMPORARY VERSUS
PERMANENT ACCOUNTS
TEMPORARY (NOMINAL) PERMANENT (REAL)
These accounts are closed
These accounts are not closed
All revenue accounts All asset accounts
All expense accounts All liability accounts
Owner’s drawing Owner’s capital account
17. 1 Analyze business transactions
2 Journalize the transactions
3 Post to ledger accounts
4 Prepare a trial balance
STEPS IN THE ACCOUNTING
CYCLE
18. 5 Journalize and post adjusting
entries
6 Prepare an adjusted trial balance
7 Prepare financial statements:
Income Statement, Owner’s
Equity Statement, Balance Sheet
STEPS IN THE
ACCOUNTING CYCLE
19. STANDARD BALANCE
SHEET CLASSIFICATIONS
Assets Liabilities and Owner’s Equity
• Financial statements become more useful when the
elements are classified into significant subgroups.
• A classified balance sheet generally has the
following standard classifications:
Current Assets
Current Liabilities
Long-Term Investments Long-Term Liabilities
Property, Plant and Owner’s (Stockholders’) Equity
Equipment
Intangible Assets
20. • Current assets
– Cash and other resources that are reasonably expected to
be realized in cash or sold or consumed in the business
within one year of the balance sheet date or the company’s
operating cycle, whichever is longer
– Current assets are listed in the order of their liquidity
• Operating cycle of a company
– This is the average time required to go from cash to cash in
producing revenues
• Examples
– Inventory, accounts receivable and cash
CURRENT ASSETS
21. • Long-term investments
– Resources which can be realized in cash
– Their conversion into cash is not expected within
one year or the operating cycle, whichever is
longer
• Examples
– Investments in bonds of another company or
investment in land held for resale
LONG-TERM
INVESTMENTS
22. • Property, plant, and equipment
– Tangible resources, relatively permanent
nature, used in the business, and not intended
for sale
• Examples
– Land, buildings, and machinery
PROPERTY, PLANT,
AND EQUIPMENT
23. • Intangible Assets
– Non-current resources that do not have
physical substance
• Examples
– Includes patents, copyrights, trademarks, or
trade names, gives the holder exclusive right
of use for a specified period of time
INTANGIBLE ASSETS
24. • Current Liabilities
– Obligations reasonably expected to be paid
from existing current assets or through the
creation of other current liabilities within
one year or the operating cycle, whichever
is longer
• Examples
– Accounts payable, wages payable, interest
payable and current maturities of long-
term debt
CURRENT LIABILITIES
25. CURRENT LIABILITIES
Liquidity is the ability of a company to pay obligations
that are expected to become due within the next year or
operating cycle.
26. • Long-term Liabilities
Obligations expected to be
paid after one year
• Examples
–Long-term notes payable, bonds
payable, mortgages payable,
and lease liabilities
LONG-TERM LIABILITIES
27. • The content of the owner’s equity section
– Varies with the form of business organization
• Proprietorship
– A single owner’s equity account called
(Owner’s Name), Capital
• Partnership
– Separate capital accounts for each partner
• Corporation
– Called stockholders’ equity, and it consists of two
accounts: Capital Stock and Retained Earnings
OWNER’S EQUITY
28. CLASSIFIED BALANCE
SHEET IN ACCOUNT FORM
A classified balance sheet
1 availability of assets to meet debts
2 claims of short- and long-term creditors on total assets
$ 15,200
200
1,000
550
16,950
$5,000
40 4,960
$21,910
29. CLASSIFIED BALANCE
SHEET IN REPORT FORM
The balance sheet is most often presented in the report form,
with the assets above liabilities and owner’s equity.
$ 1,000
2,500
50
800
1,200
5,550
4,000
9,550
12,360
$21,910
Liabilities and Owner’s Equity
Current liabilities
Notes payable
Accounts payable
Interest payable
Unearned revenue
Salaries payable
Total current liabilities
Long-term liabilities
Notes payable
Total liabilities
Owner’s equity
C. R. Byrd, Capital
Total liabilities and owner’s equity
Editor's Notes
#7:The numbers in this adjustments are off.***********************
