3-1

The Accounting CHAPTER 3

Information System
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1. Describe the basic accounting 4. Prepare financial statements
information system. from the adjusted trial
balance and prepare closing
2. Record and summarize basic
entries.
transactions.
5. Prepare financial statements
3. Identify and prepare adjusting
for a merchandising
entries.
company.

3-2
 PREVIEW OF CHAPTER 3

3-3
 Accounting LEARNING OBJECTIVE 1
Describe the basic accounting
Information System information system.

Accounting Information System

 Collects and processes transaction data.
 Disseminates financial information to interested parties.
 Varies widely from business to business.
► Nature of business
► Type of transactions
► Size of business
► Volume of data to be handled
► Informational demands
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 Accounting Information System

Helps management answer such questions as:

 How much and what kind of debt is outstanding?
 Were our sales higher this period than last?
 What assets do we have?
 What were our cash inflows and outflows?
 Did we make a profit last period?
 Are any of our product lines or divisions operating at a loss?
 Can we safely increase our dividends to shareholders?
 Is our rate of return on net assets increasing?

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 Accounting Information System

Basic Terminology
 Event  Journal

 Transaction  Posting

 Account  Trial Balance

 Real Account  Adjusting Entries

 Nominal Account  Financial Statements

 Ledger  Closing Entries

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 Accounting Information System

Debits and Credits

 An account shows the effect of transactions on a given
asset, liability, equity, revenue, or expense account.

 Double-entry accounting system (two-sided effect).

 Recording done by debiting at least one account and

crediting another.

 DEBITS must equal CREDITS.

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 Debits and Credits

 An arrangement that shows the

Account
effect of transactions on an
account.
 Debit = “Left”
 Credit = “Right”

An Account can Account Name

be illustrated in a Debit / Dr. Credit / Cr.
T-Account form.

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 Debits and Credits

If the sum of Debit entries are greater than the sum of

Credit entries, the account will have a debit balance.

Account Name
Debit / Dr. Credit / Cr.

Transaction #1 $10,000 $3,000 Transaction #2

Transaction #3 8,000

Balance $15,000

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 Debits and Credits

If the sum of Debit entries are less than the sum of

Credit entries, the account will have a credit balance.

Account Name
Debit / Dr. Credit / Cr.

Transaction #1 $10,000 $3,000 Transaction #2

8,000 Transaction #3

Balance $1,000

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 Debits and Credits Summary

Normal Normal
Balance Balance
Debit Credit

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 Debits and Credits Summary
Statement of Financial
Position Income Statement

Asset = Liability + Equity Revenue - Expense

Debit

Credit

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 The Accounting Equation

Relationship among the assets, liabilities and equity of a

business: ILLUSTRATION 3.3
Expanded Equation and
Debit/Credit Rules and Effects

The equation must be in balance after every transaction. For

every Debit there must be a Credit.

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 Double-Entry System

1. Owners invest $40,000 in exchange for ordinary

shares.

Assets = Liabilities + Equity

+ 40,000 + 40,000

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 Double-Entry System

2. Disburse $600 cash for secretarial wages.

Assets = Liabilities + Equity

- 600 - 600
(expense)

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 Double-Entry System

3. Purchase office equipment priced at $5,200, giving a

6 percent promissory note in exchange.

Assets = Liabilities + Equity

+ 5,200 + 5,200

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 Double-Entry System

4. Received $4,000 cash for services performed.

Assets = Liabilities + Equity

+ 4,000 + 4,000
(revenue)

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 Double-Entry System

5. Pay off a short-term liability of $7,000.

Assets = Liabilities + Equity

- 7,000 - 7,000

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 Double-Entry System

6. Declared a cash dividend of $5,000.

Assets = Liabilities + Equity

+ 5,000 - 5,000

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 Double-Entry System

7. Convert a non-current liability of $80,000 into ordinary

shares.

Assets = Liabilities + Equity

- 80,000 + 80,000

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 Double-Entry System

8. Pay cash of $16,000 for a delivery van.

Assets = Liabilities + Equity

- 16,000
+ 16,000

Note that the accounting equation equality is

maintained after recording each transaction.

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Financial Statements and Ownership Structure

Ownership structure dictates the types of accounts that are

part of the equity section.

Proprietorship or
Corporation
Partnership

 Owner’s Capital  Share capital

 Owner’s Drawing  Share premium
 Dividends
 Retained Earnings

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 ILLUSTRATION 3.4
Income Statement and
Equity Relationships

Financial
Statements
and Ownership
Structure

Investments by shareholders
Net income retained in the
business
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Financial Statements and Ownership Structure

ILLUSTRATION 3.5
Effects of Transactions on Equity Accounts

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 THE ACCOUNTING CYCLE
ILLUSTRATION 3.6
Transactions

Reversing entries Journalization

Post-closing trail balance Posting

Closing Trial balance

Work
Statement preparation Sheet
Adjustments

Adjusted trial balance

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 THE ACCOUNTING CYCLE

Identifying and Recording Transactions and

Other Events
An item should be recognized in the financial statements if
such recognition provides users of financial statements with

(a) relevant information about the asset or the liability

and about any income, expenses, or changes in
equity and

(b) a faithful representation of the asset or the liability

and of any income, expenses, or changes in equity.

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 Record and Summarize LEARNING OBJECTIVE 2
Record and summarize basic
Basic Transactions transactions.

Journalizing
Recording transactions and events that effect particular asset,
liability, equity, revenue, and expense accounts.

September 1: Shareholders invested ₺15,000 cash in the

corporation in exchange for ordinary shares.

ILLUSTRATION 3.7
3-27 Technique of Journalizing LO 2
 Posting
Posting – The process of transferring amounts from the
journal to the ledger accounts.
ILLUSTRATION 3.7

ILLUSTRATION 3.8
3-28 Posting a Journal Entry LO 2
 ILLUSTRATION 3.8
Posting a Journal
Entry

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 Chart of Accounts

Chart of accounts lists the accounts and the account

numbers that identify their location in the ledger.

The numbering system that identifies the accounts

usually starts with the statement of financial position
accounts and follows with the income statement accounts.

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 Chart of Accounts ILLUSTRATION 3.9
Chart of Accounts for
Yazici Advertising A.Ş.

Chart of accounts lists the accounts and the account

numbers that identify their location in the ledger.

The numbering system that identifies the accounts

usually starts with the statement of financial position
accounts and follows with the income statement accounts.

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 The Recording Process Illustrated

ILLUSTRATIONS 3.10 through 3.19 show the basic steps

in the recording process, using the October transactions of
Yazici Advertising A.Ş. Yazici’s accounting period is a
month.

A basic analysis and a debit-credit analysis precede the

journalizing and posting of each transaction.

For simplicity, we use the T-account form in the illustrations

instead of the standard account form.

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 ILLUSTRATION 3.10

3-33 LO 2
 ILLUSTRATION 3.11

3-34 LO 2
 ILLUSTRATION 3.12

3-35 LO 2
 ILLUSTRATION 3.13

3-36 LO 2
 ILLUSTRATION 3.14

3-37 LO 2
 ILLUSTRATION 3.15

3-38 LO 2
 ILLUSTRATION 3.17

3-39 LO 2
 ILLUSTRATION 3.18

3-40 LO 2
 ILLUSTRATION 3.19

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 Trial Balance

A Trial Balance
 List of each account and its balance in the order in
which they appear in the ledger.

 Debit balances listed in the left column and credit

balance in the right column.

 Used to prove the mathematical equality of debit and

credit balances.

 Uncovers errors in journalizing and posting.

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 ILLUSTRATION 3.20
Trial Balance (Unadjusted)
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 Identify and Prepare LEARNING OBJECTIVE 3
Identify and prepare adjusting
Adjusting Entries entries.

Makes it possible to:

 Report on the statement of financial position the
appropriate assets, liabilities, and equity at the statement
date.
 Report on the income statement the proper revenues
and expenses for the period.
 Adjusting entries are required every time a company,
prepares financial statements.
 Companies date the entries as of the statement of
financial position date.
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 Identify and Prepare Adjusting Entries

Types of Adjusting Entries

Deferrals Accruals

1. Prepaid Expenses. 3. Accrued Revenues.

Expenses paid in cash Revenues for services
before they are used or performed but not yet
consumed. received in cash or recorded.

2. Unearned Revenues. 4. Accrued Expenses.

Cash received before Expenses incurred but not
services are performed. yet paid in cash or recorded.

ILLUSTRATION 3.21
Categories of Adjusting Entries
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 Adjusting Entries for Deferrals

Deferrals are expenses or revenues that are recognized at a

date later than the point when cash was originally exchanged.

Two types of deferrals

 Prepaid expenses

 Unearned revenues

If a company does not make an adjustment for these deferrals,

 the asset and liability are overstated, and

 the related expense and revenue are understated.

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 ILLUSTRATION 3.22 Adjusting Entries for Deferrals
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 Adjusting Entries for Deferrals

Prepaid Expenses. Assets paid for and recorded before a

company uses them.

Cash Payment BEFORE Expense Recorded

Prepayments often occur in regard to:

 Insurance  Rent
 Supplies  Buildings and equipment
 Advertising

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 Adjusting Entries for Deferrals

Supplies. Yazici Advertising purchased advertising supplies

costing ₺25,000 on October 5. Prepare the journal entry to
record the purchase of the supplies.

Oct. 5 Supplies 25,000

Cash 25,000

Supplies Cash
Debit Credit Debit Credit
25,000 25,000

3-49 LO 3
 Adjusting Entries for Deferrals

Supplies. An inventory count at the close of business on

October 31 reveals that ₺10,000 of supplies are still on hand.

Oct. 31 Supplies Expense 15,000

Supplies 15,000

Supplies Supplies Expense

Debit Credit Debit Credit
25,000 15,000 15,000

10,000
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 ILLUSTRATION 3.23
Adjustment for Supplies

3-51 LO 3
 Adjusting Entries
for Deferrals

Statement
Presentation:
Supplies identifies that
portion of the asset’s
cost that will provide
future economic benefit.

ILLUSTRATION 3.37
3-52
 Adjusting Entries for Deferrals

Statement
Presentation:
Supplies expense
shows a balance of
₺15,000, which
equals the cost of
supplies used in
October.

ILLUSTRATION 3.36
3-53 LO 3
 Adjusting Entries for Deferrals

Insurance. On Oct. 4th, Yazici Advertising paid ₺6,000 for a

one-year fire insurance policy, beginning October 1. Show the
entry to record the purchase of the insurance.

Oct. 4 Prepaid Insurance 6,000

Cash 6,000

Prepaid Insurance Cash

Debit Credit Debit Credit
6,000 6,000

3-54 LO 3
 Adjusting Entries for Deferrals

Insurance. An analysis of the policy reveals that ₺500 (₺6,000

÷ 12) of insurance expires each month. Thus, Yazici makes the
following adjusting entry.

Oct. 31 Insurance Expense 500

Prepaid Insurance 500

Prepaid Insurance Insurance Expense

Debit Credit Debit Credit
6,000 500 500

5,500
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 ILLUSTRATION 3.24
Adjustment for Insurance

3-56 LO 3
 Adjusting Entries
for Deferrals

Statement
Presentation:
Prepaid Insurance
represents the
unexpired cost for the
remaining 11 months
of coverage.

ILLUSTRATION 3.37
3-57
 Adjusting Entries for Deferrals

Statement
Presentation:
Insurance
expense identifies
that portion of the
asset’s cost that
expired in
October.

ILLUSTRATION 3.36
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 Adjusting Entries for Deferrals

Depreciation. Yazici Advertising estimates depreciation on its

office equipment to be ₺400 per month. Yazici recognizes
depreciation for October by the following adjusting entry.

Oct. 31 Depreciation Expense 400

Accumulated Depreciation 400

Depreciation Expense Accumulated Depreciation

Debit Credit Debit Credit
400 400

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 ILLUSTRATION 3.25 Adjustment for Depreciation
3-60 LO 3
 Adjusting Entries
for Deferrals

Statement
Presentation:
Accumulated
Depreciation—is a
contra asset account.

ILLUSTRATION 3.37
3-61
 Adjusting Entries for Deferrals

Statement
Presentation:
Depreciation
expense identifies
that portion of the
asset’s cost that
expired in October.

ILLUSTRATION 3.35
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 Adjusting Entries for Deferrals

Receipt of cash before the services are performed is recorded

as a liability called unearned revenues.

Cash Receipt BEFORE Revenue Recorded

Unearned revenues often occur in regard to:

 Rent  Magazine subscriptions

 Airline tickets  Customer deposits
 Tuition

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 Adjusting Entries for Deferrals

Unearned Revenue. Yazici Advertising received ₺12,000 on

October 2 from KC for advertising services expected to be
completed by December 31. Show the journal entry to record
the receipt on Oct. 2nd.

Oct. 2 Cash 12,000

Unearned Service Revenue 12,000

Cash Unearned Service Revenue

Debit Credit Debit Credit
12,000 12,000

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 Adjusting Entries for Deferrals

Unearned Revenues. An evaluation of the service Yazici

performed for KC during October, the company determines that
it should recognize ₺4,000 of revenue in October.

Oct. 31 Unearned Service Revenue 4,000

Service Revenue 4,000

Service Revenue Unearned Service Revenue

Debit Credit Debit Credit
100,000 4,000 12,000
4,000
104,000 8,000
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 ILLUSTRATION 3.27
Adjustment for Unearned Service Revenue

3-66 LO 3
 Adjusting Entries
for Deferrals

Statement
Presentation:
Unearned service
revenue represents the
remaining advertising
services expected to be
performed in the future.

ILLUSTRATION 3.37
3-67
 Adjusting Entries for Deferrals

Statement
Presentation:
Service revenue
shows total revenue
recognized in
October.

ILLUSTRATION 3.36
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 Adjusting Entries for Accruals

Accruals are made to record

 revenues for services performed and

 expenses incurred in the current accounting period.

Without an accrual adjustment, the

 revenue account (and the related asset account) or the

 expense account (and the related liability account) are

understated.

3-69 LO 3
3-70 ILLUSTRATION 3.28 Adjusting Entries for Accruals LO 3
 Adjusting Entries for Accruals

Revenues recorded for services performed for which cash has

yet to be received at statement date are accrued revenues.

Adjusting entry results in:

Revenue Recorded BEFORE Cash Receipt

Accrued revenues often occur in regard to:

 Rent
 Interest
 Services performed

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 Adjusting Entries for Accruals

Accrued Revenues. In October Yazici Advertising performed

services worth ₺2,000 that were not billed to clients on or
before October 31. Yazici makes the following adjusting entry.
Oct. 31 Accounts Receivable 2,000
Service Revenue 2,000

Accounts Receivable Service Revenue

Debit Credit Debit Credit
72,000 100,000
2,000 4,000
2,000
74,000 106,000
3-72 LO 3
 ILLUSTRATION 3.29
Accrual Adjustment for Receivable and Revenue Accounts LO 3
3-73
 Adjusting Entries
for Accruals

ILLUSTRATION 3.36

ILLUSTRATION 3.37
3-74 LO 3
 Adjusting Entries for Accruals

Expenses incurred but not yet paid in cash or recorded.

Adjusting entry results in:

Expense Recorded BEFORE Cash Payment

Accrued expenses often occur in regard to:

 Rent  Taxes
 Interest  Salaries

3-75 LO 3
 Adjusting Entries for Accruals

Accrued Interest. Yazici Advertising signed a three-month note

payable in the amount of ₺50,000 on October 1. The note
requires interest at an annual rate of 12 percent. Three factors
determine the amount of the interest accumulation:

1 2 3

ILLUSTRATION 3.30
Formula for Computing Interest for One Month

3-76 LO 3
 Adjusting Entries for Accruals

Accrued Interest. Yazici Advertising signed a three-month,

12%, note payable in the amount of ₺50,000 on October 1.
Prepare the adjusting entry on Oct. 31 to record the accrual of
interest.
Oct. 31 Interest Expense 500
Interest Payable 500

Interest Expense Interest Payable

Debit Credit Debit Credit
500 500

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 ILLUSTRATION 3.31
Adjustment for Interest

3-78 LO 3
 Adjusting Entries
for Accruals

ILLUSTRATION 3.36

ILLUSTRATION 3.37
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 Adjusting Entries for Accruals

Accrued Salaries. At October 31, the salaries and wages for

these days represent an accrued expense and a related liability to
Yazici. The employees receive total salaries of ₺10,000 for a five-
day work week, or ₺2,000 per day.

ILLUSTRATION 3.32
Accrued Salaries and Wages
3-80 LO 3
 Adjusting Entries for Accruals

Accrued Salaries. Employees receive total salaries of ₺10,000

for a five-day work week, or ₺2,000 per day. Prepare the
adjusting entry on Oct. 31 to record accrual for salaries.

Oct. 31 Salaries and Wages Expense 6,000

Salaries and Wages Payable 6,000

Salaries and Wages Expense Salaries and Wages Payable

Debit Credit Debit Credit
40,000 6,000
6,000

46,000
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 ILLUSTRATION 3.33
Adjustment for Salaries and Wages Expense

3-82 LO 3
 Adjusting Entries
for Accruals

ILLUSTRATION 3.36

ILLUSTRATION 3.37
3-83 LO 3
 Adjusting Entries for Accruals

Accrued Salaries. On November 23, Yazici Advertising will again

pay total salaries of ₺40,000. Prepare the entry to record the
payment of salaries on November 23.

Nov. 23 Salaries and Wages Payable 6,000

Salaries and Wages Expense 34,000
Cash 40,000

Salaries and Wages Expense Salaries and Wages Payable

Debit Credit Debit Credit
34,000 6,000 6,000

3-84 LO 3
 Adjusting Entries for Accruals

Bad Debts. Assume Yazici Advertising reasonably estimates a

bad debt expense for the month of ₺1,600. It makes the
adjusting entry for bad debts as follows.

Oct. 31 Bad Debt Expense 1,600

Allowance for Doubtful Accounts 1,600

ILLUSTRATION 3.34
Adjustment for Bad Debt
Expense

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 Adjusting Entries
for Accruals

ILLUSTRATION 3.36

ILLUSTRATION 3.37
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 Adjusted
Trial
Balance
Shows the
balance of all
accounts, after
adjusting entries,
at the end of the
accounting period.
Proves the
equality of the
total debit and
credit balances

ILLUSTRATION 3.35
3-87
 Preparing Financial LEARNING OBJECTIVE 4
Prepare financial statements
Statements from the adjusted trial balance
and prepare closing entries.

Financial Statements are prepared directly from the

Adjusted Trial Balance.

Retained Statement
Income
Earnings of Financial
Statement
Statement Position

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 ILLUSTRATION 3.36 Preparation of the Income
Statement and Retained Earnings Statement from
the Adjusted Trial Balance
3-89
 ILLUSTRATION 3.37
Preparation of the Statement of Financial Position from the Adjusted Trial Balance
3-90 LO 4
 Closing

Closing Process
 Reduce the balance of nominal (temporary) accounts to zero
in preparation for the next period’s transactions.

 Transfer all revenue and expense account balances (income

statement accounts) to an account called Income Summary.

 Income Summary balance is then transferred Retained

Earnings.

 Statement of financial position (asset, liability, and equity)

accounts are not closed.

 Dividends are closed directly to Retained Earnings.

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 Closing Journal Entries
Closing Entries
Service Revenue 106,000
Income Summary 106,000

Income Summary 73,000

Salaries & Wages Expense 46,000
Supplies Expense 15,000
Rent Expense 9,000
Insurance Expense 500
Interest Expense 500
Depreciation Expense 400
Bad Debt Expense 1,600

Income Summary 33,000

Retained Earnings 33,000

Retained Earnings 5,000

Dividends 5,000
ILLUSTRATION 3.35

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 ILLUSTRATION 3.39
Posting of Closing Entries

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 ILLUSTRATION 3.40
3-94 LO 4
 The Accounting Cycle Summarized

1. Enter the transactions of the period in appropriate journals.

2. Post from the journals to the ledger (or ledgers).
3. Prepare an unadjusted trial balance (trial balance).
4. Prepare adjusting journal entries and post to the ledger(s).
5. Prepare a trial balance after adjusting (adjusted trial balance).
6. Prepare the financial statements from the adjusted trial balance.
7. Prepare closing journal entries and post to the ledger(s).
8. Prepare a trial balance after closing (post-closing trial balance).
9. Prepare reversing entries (optional) and post to the ledger(s).

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 Financial Statements for a LEARNING OBJECTIVE 5
Prepare financial
Merchandising Company statements for a
merchandising company.

The income statement for Ciner is shown in Illustration 3.41.

The income statement classifies amounts into such categories

as gross profit on sales, income from operations, income
before income taxes, and net income.

Earnings per share information is required to be shown on the

face of the income statement for a company, although we omit
this item here.

3-96 LO 5
 ILLUSTRATION 3.41

Merchandising
Company

3-97 LO 5
 Retained Earnings Statement

ILLUSTRATION 3.42

3-98 LO 5
Statement
of Financial
Position

ILLUSTRATION 3.43

3-99
 Cash-Basis Accounting Versus Accrual-Basis
APPENDIX 3A
Accounting

LEARNING OBJECTIVE 6
Differentiate the cash basis of accounting from the accrual basis of accounting.

Most companies use accrual-basis accounting. They

 recognize revenue when the performance obligation is satisfied
and
 expenses in the period incurred,
without regard to the time of receipt or payment of cash.
Cash basis
Under the strict cash-basis, companies financial
statements are
 record revenue only when they receive cash, and
not in conformity
 record expenses only when they disperse cash. with IFRS.

3-100 LO 6
 Cash-Basis Accounting Versus Accrual-Basis
APPENDIX 3A
Accounting

Illustration: Eser Contractor signs an agreement to construct a

garage for ₺22,000. In January, Eser begins construction, incurs
costs of ₺18,000 on credit, and by the end of January delivers a
finished garage to the buyer. In February, Eser collects ₺22,000 cash
from the customer. In March, Eser pays the ₺18,000 due the
creditors.
ILLUSTRATION 3A.1

3-101 LO 6
 Cash-Basis Accounting Versus Accrual-Basis
APPENDIX 3A
Accounting

Illustration: Eser Contractor signs an agreement to construct a

garage for ₺22,000. In January, Eser begins construction, incurs
costs of ₺18,000 on credit, and by the end of January delivers a
finished garage to the buyer. In February, Eser collects ₺22,000 cash
from the customer. In March, Eser pays the ₺18,000 due the
creditors.
ILLUSTRATION 3A.2

3-102 LO 6
 Cash-Basis Accounting Versus Accrual-Basis
APPENDIX 3A
Accounting

Conversion from Cash to Accrual Basis

Illustration: Dr. L. Liwan, like many small business owners, keeps her
accounting records on a cash basis. In the year 2019, Dr. Liwan
received ₺300,000 from her patients and paid ₺170,000 for operating
expenses, resulting in an excess of cash receipts over disbursements of
₺130,000 (₺300,000 - ₺170,000). At January 1 and December 31, 2019,
she has accounts receivable, unearned service revenue, accrued
liabilities, and prepaid expenses as shown below.
ILLUSTRATION 3A.5

3-103 LO 6
 APPENDIX 3A Service Revenue Computation
To convert the amount of cash received from patients to service
revenue on an accrual basis, we must consider changes in accounts
receivable and unearned service revenue during the year.
ILLUSTRATION 3A.8

ILLUSTRATION 3A.5
3-104 LO 6
 APPENDIX 3A Operating Expense Computation
To convert cash paid for operating expenses during the year to
operating expenses on an accrual basis, we must consider changes in
prepaid expenses and accrued liabilities.
ILLUSTRATION 3A.11

ILLUSTRATION 3A.5
3-105 LO 6
 ILLUSTRATION 3A.12

3-106 LO 6
 Cash-Basis Accounting Versus Accrual-Basis
APPENDIX 3A
Accounting

Theoretical Weaknesses of the Cash Basis

 Today’s economy is considerably more lubricated by
credit than by cash.
 The accrual basis, not the cash basis, recognizes all
aspects of the credit phenomenon.
 Investors, creditors, and other decision makers seek
timely information about a company’s future cash flows.

3-107 LO 6
 APPENDIX 3B Using Reversing Entries

LEARNING OBJECTIVE 7
Identify adjusting entries that may be reversed.

A company most often uses reversing entries to reverse two

types of adjusting entries:
1. accrued revenues and
2. accrued expenses.

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 APPENDIX 3B Using Reversing Entries

Illustration of Reversing Entries—Accruals

ILLUSTRATION 3B.1

3-109 LO 7
 APPENDIX 3B Using Reversing Entries

Illustration of Reversing Entries—Deferrals

ILLUSTRATION 3B.2

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 APPENDIX 3B Using Reversing Entries

Summary of Reversing Entries

1. All accruals should be reversed.

2. All deferrals for which a company debited or credited the original

cash transaction to an expense or revenue account should be
reversed.

3. Adjusting entries for depreciation and bad debts are not

reversed.

Reversing entries do not have to be used.

3-111 LO 7
 Using A Worksheet: The Accounting
APPENDIX 3C
Cycle Revisited

LEARNING OBJECTIVE 8
Prepare a 10-column worksheet.

A company prepares a worksheet either on

 columnar paper or
 within a computer spreadsheet.

A company uses the worksheet to adjust

 account balances and
 to prepare financial statements.

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 Using A Worksheet: The Accounting
APPENDIX 3C
Cycle Revisited

Worksheet Columns
 Trial Balance Columns

 Adjustment Columns

 Adjustments Entered on the Worksheet

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 Using A Worksheet: The Accounting
APPENDIX 3C
Cycle Revisited

ILLUSTRATION 3C.1 (Partial)

Use of a Worksheet

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 APPENDIX 3C

Using A
Worksheet: The
Accounting
Cycle Revisited

ILLUSTRATION 3C.1
Use of a Worksheet
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 Using A Worksheet: The Accounting
APPENDIX 3C
Cycle Revisited

Preparing Financial Statements from a Worksheet

The Worksheet:
 provides information needed for preparation of the
financial statements.

 Sorts data into appropriate columns, which facilitates the

preparation of the statements.

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