Chapter03 Accounting Cycle (II) Adjustments, Work Sheet and Financial Statements基礎(chǔ)會計英文版

1、Chapter 03Accounting Cycle (II): Adjustments, Work Sheet and Financial StatementsThe Work SheetnWork sheet: a chart that provides necessary data for recording adjusting entries and for preparing such financial statements as the income statement and the balance sheet. Guangli ServicesWork SheetFor mo

2、nth ended January 31, 200Trial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance SheetAccount NameDebitCreditDebitCreditDebitCreditDebitCreditDebitCreditThe Work Sheete.g.The title Work SheetThe period of time coveredThe name of the businessPlacement of Accounts in the Work SheetnFirst

3、, enter the balances of the ledger accounts in the first two columns of the work sheet. The updated ledger account balances are entered in the Adjusted Trial Balance columns. nSecond, The revenue and expense accounts are placed in the Income Statement columns. nThird, The Balance Sheet columns will

4、include Assets, Liabilities, and Owners Equity. (Drawing in the Debit side)Placement of Accounts in the Work SheetTrial BalanceAdjustmentsAdjusted Trial BalanceIncome StatementBalance SheetAccount Classification DebitCreditDebitCreditDebitCreditDebitCreditDebitCreditAssets Liabilities Capital Drawin

5、g Revenue Expenses The AdjustmentsnAdjustments: internal transactions that bring the ledger accounts up to date at the end of an accounting period. Only a few accounts require adjusting. nTake Guangli Services as an example (only four accounts need adjusting: Prepaid Insurance, Trucks, Equipment, an

6、d House).Adjustment for Prepaid Insurance nGuangli Services has paid 3 600 yuan in advance for a one-year insurance policy on the trucks and equipment. Now one month has passed, the premium for January has now expired, which amounts to 300 yuan (3 600 yuan divided by 12 months). nT accounts of the a

7、djustments:Adjustments for Depreciation of TrucksnSuppose Guangli Services believes that the trucks will have a useful life of ten years, with an estimated salvage value of 30 000 yuan at the end of the tenth year and the cost of the trucks 240 000 yuan. So the depreciation for one month is:Adjustme

8、nts for Depreciation of TrucksnIn the work sheet, Guangli Services records the depreciation of 1 750 yuan as a debit to Depreciation Expense: Trucks and a credit to Accumulated Depreciation: Trucks nAccumulated Depreciation: the total depreciation of the asset since it was originally purchased. nT a

9、ccounts for adjusting the depreciation of Trucks:Adjustments for Depreciation of Equipment, and HousenEquipment and House are with the same method of computing depreciation as the Trucks.nT accounts for adjusting the depreciation of Equipment:nT accounts for adjusting the depreciation of House:Compl

10、eting the Work Sheet Trial BalanceAdjustmentsAdjusted Trial Balance Income Statement Balance Sheet An example can be seen in p49-50.Preparing Financial Statements nThree major financial statements:nIncome statementnBalance sheet nStatement of cash flowsThe Income statementnAn income statement shows

11、the revenue, expenses, and the difference between them, that is, net income or net loss. It is also called a profit and loss statement. The Income statementGuangli Services Income StatementFor month ended January 31, 200 Revenue: Income from Services 28 300 Expenses: Gas Expense 200 Utilities Expens

12、e 250 Wages Expense 9 000 Insurance Expense 300 Depreciation Expense: Trucks 1 750 Depreciation Expense: Equipment 150 Depreciation Expense: House 1 000 Total Expenses 12 650 Net Income 15 650 The Statement of Owners EquitynThe statement of owners equity shows how and why the owners equity account o

13、f a business has changed over the accounting period. Guangli Services Statement of Owners EquityFor month ended January 31, 200 Li, Capital, January 1, 200 1 000 000 Add: Net Income for January 15 650 Subtotal 1 015 650 Less: Withdrawals 500 Li, Capital, January 31, 200 1 015 150 e.g.The Balance She

14、et nA balance sheet is also called a statement of financial position because it shows the financial position of a business at a given point of time.n Assets = Liabilities + Owners equity The Balance Sheete.g.The relationshipRecording and Posting the Adjusting Entries nJournalize the adjusting entries in the general journal from the work sheet:Adjusting EntriesJan. 31Insurance Expense 300 Prepaid Insurance 30031Depreciation Expense: Trucks 1 750 Accumulated Depreciation: Trucks 1 75031Depreciation Expense: Equipment 150 Accumulated Depr