Questions and Answers
What are accounted for in a worksheet?
What are the steps to do a worksheet?
Always balance at the end of each step.
True
Where does net income go into?
Signup and view all the answers
Is owner's equity statement included in the worksheet?
Signup and view all the answers
What happens after you're done with the worksheet?
Signup and view all the answers
What is owner's capital?
Signup and view all the answers
Can the worksheet be distributed to the company?
Signup and view all the answers
To adjust the accounts, the company must do what?
Signup and view all the answers
From where are the adjusting entries prepared?
Signup and view all the answers
What is making the accounts ready for the next period called?
Signup and view all the answers
What distinguishes temporary accounts?
Signup and view all the answers
What do permanent accounts consist of?
Signup and view all the answers
What do closing entries formally recognize?
Signup and view all the answers
What do closing entries produce?
Signup and view all the answers
Instead of closing revenues and expenses to owner's capital, companies transfer them to?
Signup and view all the answers
Where are closing entries recorded?
Signup and view all the answers
What does the first closing entry involve?
Signup and view all the answers
What does the second closing entry entail?
Signup and view all the answers
What does the third closing entry do?
Signup and view all the answers
What does the fourth closing entry involve?
Signup and view all the answers
If there is a net loss, what should be done?
Signup and view all the answers
Post all the closing entries in the?
Signup and view all the answers
What is the post-closing trial balance composed of?
Signup and view all the answers
What is the summary of the accounting cycle?
Signup and view all the answers
What are reversing entries?
Signup and view all the answers
What are correcting entries?
Signup and view all the answers
What consists of a classified balance sheet?
Signup and view all the answers
What constitutes current assets?
Signup and view all the answers
What are long-term investments?
Signup and view all the answers
What does property, plant, and equipment consist of?
Signup and view all the answers
What are intangible assets?
Signup and view all the answers
What are considered current liabilities?
Signup and view all the answers
What constitutes long-term liabilities?
Signup and view all the answers
What does owner's equity represent?
Signup and view all the answers
Study Notes
Worksheet Fundamentals
- A worksheet includes account titles, trial balance, adjusting entries, adjusted trial balance, net income, and balance sheet.
- Steps in creating a worksheet: account titles, trial balance, adjusting entries, adjusted trial balance, net income, and balance sheet.
- Each step must balance to ensure accuracy.
Financial Statement Preparation
- Net income is calculated by subtracting total expenses from total revenues, then recorded before new totals.
- Net income affects the balance sheet as it is included in owner's equity.
- After completing the worksheet, prepare the income statement, owner's equity statement, and balance sheet.
Owner's Capital and Worksheet Limitations
- Owner's capital is calculated as investments minus drawings minus net income.
- The worksheet is a working tool for accountants and is not distributed company-wide, nor is it a journal.
Adjusting Accounts and Entries
- Adjusting accounts require journalizing adjustments and posting them to the ledger; clarifications on adjusting entries are provided at the bottom of the worksheet.
- Adjusting entries are based on the adjustment columns within the worksheet.
Closing the Books
- "Closing the books" refers to preparing accounts for the next period by distinguishing between temporary and permanent accounts.
- Temporary accounts, including owner’s drawings, revenues, and expenses, are closed at period-end.
- Permanent accounts, such as assets, liabilities, and owner's capital, remain open across periods.
Closing Entries and Their Effects
- Closing entries officially transfer net income and dividends to owner's capital, as reflected in the owner's equity statement and are necessary at the end of the accounting period.
- Closing entries result in zero balances for each temporary account.
Income Summary and Closing Procedures
- Companies may choose to transfer revenues and expenses to an income summary instead of directly to owner's capital.
- Closing entries are recorded in the general journal and posted to the ledger, forming the post-closing trial balance consisting solely of permanent accounts.
Accounting Cycle Summary
- The accounting cycle includes analyzing transactions, journalizing, posting to the ledger, preparing trial balances, adjusting entries, preparing financial statements, and closing entries.
Optional and Necessary Entries
- Reversing entries are optional and undo specific adjusting entries made, while correcting entries—made whenever necessary—should precede closing entries.
Classified Balance Sheet
- A classified balance sheet organizes assets and liabilities into current and long-term categories.
- Current assets encompass cash, receivables, inventory, and supplies, expected to be utilized within one year.
- Long-term investments include stocks and real estate, while property, plant, and equipment represent long-lived assets subject to depreciation.
Liability and Equity Components
- Current liabilities consist of short-term obligations like accounts payable and interest payable.
- Long-term liabilities include mortgages and notes payable due beyond one year.
- Owner's equity reflects capital invested by the owner, adjusted for withdrawals and net income.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on accounting worksheets with these flashcards. Each card covers key terms such as account titles, trial balance, adjusting entries, and more. Perfect for students looking to master the essentials of worksheet preparation.