1. Prepare the work sheet
2. Prepare financial statements from a work sheet .
3. Prepare the adjusting and closing entries from a work sheet .
4. Review the seven basic steps of the accounting cycle .
5. Explain what is meant by the fiscal year and the natural business year .
6. Analyze and interpret the frinancial solvency of a business by computing working capital and current ratio .
1. Prepare the work sheet.
Accountant often use working papers for collecting and summarizing data they need for preparing various analyses and reports. Now the work sheet is a working paper that accountants can use to summarize adjusting entries and the account balances for the financial statements.
Undadjusted trial balance columns
To begin the work sheet You must list :
1. Top the name of the business
2. The type of working paper (Work sheet)
3. The period of time
that is the example of trialbalance .
Adjustments Columns
To review , the entries in the adjustments columns of the work sheet are :
a) Supplies : The supplies account has debit balance of 2000 , the cost of supplies on hand at the end of period is 760. So here we should write 1240 in the adjustments debit column . because (2000-760 = 1240)
b) Prepaid insurance : The prepaid insurance account has a debit balance of 2400, which represents the prepayment of insurance for 24 month beginning december 1. So because we recorded only for 1 month in adjustment insurance account must be debited as 2400/24 = 100 . And also write same amount at the credit side as prepaid insurance .
c) Unearned rent : Unearned rent account has debit 360 (that represent 3 month rent) because we only recorded it in 1 month we must write in the debit side as 360/3 = 120. Write it 120 in adjustment debit columns and as the same amount write it at the Rent Revenue in the credit side.
d) Wages : Wages accrued but not paid at the end of december total 250. You must create the wages expense at the debit columns and as the same amount in credit of wages payable.
e.) Accrued Fees : Fees accrued at the end of december but not recorded total 500. Write the 500 at the debit side of Account receivable and at the credit side as the same amount as fees earned.
f) Depreciation : Depreciation of the office equipment is 50 . Write the depreciation expense as 50 in debit and 50 in credit as the accumulated depreciation .
Adjusted Trial Balance Columns
Recreate the trial balance columns , change the value from the adjustments columns .
Income statement and balance sheet columns
Create the income statement and balance sheet columns based on the adjusted trial balance columns .
2. Financial statement.
here we will learn about the financial statement, therefore you need to know about this things :
Income statement
Actually this prepared directly from the work sheet, we start from the larger item to the small one , and usually the last item that you should write is Miscellaneous expense.
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