Acct 207 Project: Adjusting Journal Entries And Financial St

Acct 207 Project Adjusting Journal Entries And Financial Statementsp

Improve your understanding of the relationships between the financial statements; increase your confidence in preparing and recording accounting entries; increase your ability to understand the preparation of formal financial statements.

Included are the unadjusted trial balance for Sinfully Sweet Desserts at December 31, 2018, and a list of adjusting journal entries required at year-end. First, enter the December 31, 2018, beginning balances from the unadjusted trial balance into your accounting “system” by recording them into the provided T-accounts. Second, record each adjusting entry from the provided list onto the specified page, ensuring you post them to the correct T-accounts to properly update the accounts. After all entries are journalized and posted, tally the ending balances in the T-accounts, then use these balances to complete the Adjusted Trial Balance. From this, prepare the Multi-Step Income Statement, Statement of Retained Earnings, and Classified Balance Sheet as of December 31, 2018. Note that one asset account will have a zero balance.

Paper For Above instruction

The process of preparing adjusted financial statements is essential for accurate representation of a company's financial position at year-end. It involves systematic journalizing of adjusting entries, posting to T-accounts, and deriving the adjusted trial balance, which serves as the foundation for the financial statements.

Initially, the unadjusted trial balance provides the beginning balances for all accounts. After entering these into the T-accounts, the next crucial step is recording the adjusting journal entries. These adjustments account for accrued revenues, accrued expenses, deferrals, estimates, and corrections that have not yet appeared in the unadjusted balances but are necessary for adherence to the matching principle and accurate financial reporting.

In this context, Sinfully Sweet Desserts’ adjustments include recognizing earned but unbilled revenue, accrued interest income, sales revenue from sweets paid in advance, supply usage, unpaid utilities, unrecorded bad debts, interest on a long-term note, and income taxes. Each adjustment impacts specific accounts; for example, accruing interest income involves debiting interest receivable and crediting interest revenue. The sale of sweets paid in advance requires crediting unearned revenue and debiting cash upon receipt, then adjusting for revenue earned and recognizing the related cost of goods sold.

Posting these adjustments accurately to the T-accounts ensures that at the end of the period, the balances reflect the true financial condition. These balances are then used to prepare the adjusted trial balance, ensuring credits and debits are balanced after all adjustments.

Using the adjusted trial balance, the financial statements are developed. The multi-step income statement separates operating revenues and expenses from non-operating revenues, providing a clear view of operations. Interest revenue and expense are disclosed separately, along with gross profit, operating income, and net income before taxes.

The statement of retained earnings begins with the opening balance, adds net income from the income statement, and subtracts any dividends to determine the closing balance of retained earnings. This figure is then reflected on the balance sheet, which outlines assets, liabilities, and stockholders’ equity. Proper classification of assets (current and non-current) and liabilities (current and non-current) is vital for the clarity of financial condition.

Overall, this project emphasizes the importance of accurate journalizing, posting, and adjusting processes in accounting, demonstrating their impact on the reliability of financial reporting. It reinforces the integrity of financial statements, supporting informed decision-making by stakeholders.

References

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  • Principles of Accounting. (2020). Study.com. Retrieved from https://study.com
  • Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2019). Financial Statement Analysis (12th ed.). McGraw-Hill Education.
  • Horngren, C. T., Sundem, G. L., Elliott, J. A., & Philbrick, D. R. (2021). Introduction to Financial Accounting. Pearson.
  • Larson, E. J., & Gray, C. F. (2018). Financial Accounting: The Impact on Decision Makers. McGraw-Hill.
  • AccountingTools. (2023). Adjusting Entries. Retrieved from https://accountingtools.com
  • Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial Accounting (16th ed.). McGraw-Hill Education.
  • Heisinger, K. E., & Hoyle, J. B. (2020). Contemporary Accounting (10th ed.). South-Western.
  • US Securities and Exchange Commission (SEC). (2018). Financial Reporting Manual. Retrieved from https://sec.gov
  • International Financial Reporting Standards (IFRS). (2022). IFRS Foundation. Retrieved from https://ifrs.org

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