Vũ Quốc Thông (PhD.) 10/10/2020 Vũ Quốc Thông (PhD.) Completing the Accounting Cycle Chapter 4: Objectives Prepare a work sheet Prepare financial statements from a work sheet Vũ Quốc Thông (PhD.) 10/10/2020 Contents Work sheets Steps in completing a work sheet Financial statements Work sheets Collecting and summarising data (adjusting entries and account balances) Not a formal accounting record Prepared by using a spread-sheet program on a computer Helpful tool in preparing financial statements Vũ Quốc Thông (PhD.) 10/10/2020 Work sheets parts: 1st : Account title 2nd : Unadjusted Trial balance 3rd : Adjustments 4th : Adjusted Trial balance 5th :Profit and loss Statement 6th: Balance sheet Steps in completing a work sheet Step 1: Enter unadjusted Trial balance Step 2: Enter adjustments (accounts are added – as needed) Step 3: Determine adjusted Trial balance Step 4: Place adjusted amount to PL or BS Step 5: Determine profit or loss (the difference between Dr and Cr of PL) Vũ Quốc Thông (PhD.) 10/10/2020 Financial statements Profit and loss statement Statement of Owner’s Equity Balance Sheet Profit and loss statement Revenues Expenses Vũ Quốc Thông (PhD.) 10/10/2020 Statement of Owner’s Equity Opening Balance of OE Additional Investment (if any) Net profit/(loss) Withdrawals Closing Balance of OE Balance Sheet Assets Liabilities Current Assets Fixed Assets Current Liabilities Long-term Liabilities Owner’s Equity 10 Vũ Quốc Thông (PhD.) 10/10/2020 Closing Entries Accounts in P&L should have no balances Closing these balances by transferring them to Profit and Loss Summary This is called the Closing Process Transferring entries are called Closing Entries 11