T accounts, adjusting entries, financial statements, and closing entries; optional end-of-period spreadsheet
The unadjusted trial balance of Epicenter Laundry at June 30, 2016, the end of the fiscal year, follows:
The data needed to determine year-end adjustments are as follows:
a. Laundry supplies on hand at June 30 are $3,600.
b. Insurance premiums expired during the year are $5,700.
c. Depreciation of laundry equipment during the year is $6,500.
d. Wages accrued but not paid at June 30 are $1,100.
1. For each account listed in the unadjusted trial balance, enter the balance in a T account. Identify the balance as "June 30 Bal." In addition, add T accounts for Wages Payable, Depreciation Expense, Laundry Supplies Expense, Insurance Expense, and Income Summary.
2. (Optional) Enter the unadjusted trial balance on an end-of-period spreadsheet and complete the spreadsheet. Add the accounts listed in part (1) as needed.
3. Journalize and post the adjusting entries. Identify the adjustments by "Adj.” and the new balances as “Adj. Bal.”
4. Prepare an adjusted trial balance.
5. Prepare an income statement, a statement of owner's equity (no additional investments were made during the year), and a balance sheet.
6. Journalize and post the closing entries. Identify the closing entries by “Clos.”
7. Prepare a post-closing trial balance.
1, 3, and 6
Journal is the book of original entry. Journal consists of the day-to-day financial transactions in a chronological order. The journal has two aspects; they are debit aspect and the credit aspect.
T-accounts are referred as T-account because its format represents the letter “T”. The T-accounts consists of the following:
Adjusted trial balance:
The unadjusted trial balance is the summary of all the ledger accounts that appears on the ledger accounts before making adjusting journal entries.
An adjusting entry is prepared when the trial balance is not up-to-date, and complete, and they are usually prepared at the end of the accounting period. This adjusting entry is essential for preparing the financial statements of the business.
A spreadsheet is a worksheet. It is used while preparing a financial statement. It is a type of form having multiple columns and it is used in the adjustment process. The use of a worksheet is optional for any organization. A worksheet can neither be considered as a journal nor a part of the general ledger.
Statement of owners’ equity:
This statement reports the beginning owner’s equity and all the changes, which led to ending owners’ equity. Additional capital, net income from income statement is added to and drawing is deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.
An income statement is one of the financial statements which shows the revenues, and expenses of the company. The income statement is prepared to ascertain the net income/loss of the company, by deducting the expenses from the revenues.
A balance sheet is a financial statement consists of the assets, liabilities, and the owner’s equity of the company. The balance of the assets account must be equal to that of the liabilities and the owner’s equity account.
Closing entries are recorded in order to close the temporary accounts such as incomes and expenses by transferring them to the permanent accounts. It is passed at the end of the accounting period, to transfer the final balance.
Post-Closing Trial Balance:
After passing all the journal entries and the closing entries of the permanent accounts and then further posting them to each of the respective accounts, a post-closing trial balance is prepared which consists of a list of all the permanent accounts. A post-closing trial balance serves as an evidence to prove that the balance of the permanent accounts is equal.
To prepare: The T-accounts.
Record the transactions directly in their respective T-accounts, and determine their balances.
|June 30||Balance||21,500||June 30||Adjusted||17,900|
|June 30||Adjusted balance||3,600|
|June 30||Balance||9,600||June 30||Adjusted||5,700|
|June 30||Adjusted balance||131,900|
|June 30||Closing||10,000||June 30||Balance||105,600|