Completing The Accounting Cycle From Adjusted Trial B 507867

Completing the accounting cycle from adjusted trial balance to post-closing trial balance with an optional worksheet

All Work Must Be On A Excel Filecompleting The Accounting Cy

P4-40 (ALL WORK MUST BE ON A EXCEL FILE) Completing the accounting cycle from adjusted trial balance to post-closing trial balance with an optional worksheet Start from the posted T-accounts and the adjusted trial balance that Daniels Consulting prepared for the company at December 31. Requirements: 1. Prepare an income statement for the month ended December 31. 2. Prepare a statement of owner’s equity for the month ended December 31. 3. Prepare a classified balance sheet (report form) at December 31. 4. Journalize and post the closing entries at December 31. Denote each closing amount as Clo. and each account balance as Balance. 5. Prepare a post-closing trial balance.

Paper For Above instruction

Completing the accounting cycle from adjusted trial balance to post-closing trial balance with an optional worksheet

This paper meticulously details the comprehensive process of completing the accounting cycle for Daniels Consulting, beginning with the adjusted trial balance and culminating in the preparation of a post-closing trial balance. The process involves preparing key financial statements—the income statement, statement of owner’s equity, and classified balance sheet—and recording the necessary closing entries. This step-by-step approach ensures accurate financial reporting and adherence to accounting principles, utilizing Excel as the primary platform for all computations and documentation.

Introduction

The accounting cycle is an essential process that ensures the accurate recording, classification, and reporting of a company's financial information. Starting with the adjusted trial balance, accountants perform a series of steps—preparing financial statements, closing temporary accounts, and producing a post-closing trial balance—to provide meaningful insights into a company's financial health. This analysis focuses on Daniels Consulting's financial data as of December 31, emphasizing the importance of accuracy and clarity in financial reporting.

Preparation of Financial Statements

1. Income Statement for December

The income statement summarizes revenues and expenses to determine net income or loss for the month. Using the adjusted trial balance, revenues such as service income, and expenses like salaries, rent, utilities, depreciation, and supplies are organized systematically.

For Daniels Consulting, assume the adjusted trial balance includes revenues of $8,000 and expenses totaling $5,500. The calculation for net income is straightforward:

Net Income = Total Revenues - Total Expenses = $8,000 - $5,500 = $2,500.

2. Statement of Owner’s Equity for December

The statement of owner’s equity reflects the changes in the owner's capital account over the period. Starting with the beginning balance (if provided), add the net income and subtract any withdrawals or owner’s draws.

Assuming an initial owner’s equity of $10,000 and owner withdrawals of $1,000, the calculation is:

Ending Owner’s Equity = Beginning Equity + Net Income - Owner Withdrawals = $10,000 + $2,500 - $1,000 = $11,500.

3. Classified Balance Sheet at December 31

The balance sheet categorizes assets and liabilities into current and long-term sections, providing a clear picture of financial position. Assets include cash, accounts receivable, supplies, and equipment. Liabilities include accounts payable, wages payable, and loans.

Using the adjusted trial balance, list current assets, long-term assets, current liabilities, and long-term liabilities. Calculate total assets and liabilities, and derive owner’s equity to balance the sheet.

Closing Entries

Closing entries serve to reset temporary accounts, ensuring they start fresh in the next period. The process involves:

• Closing revenue accounts to Income Summary
• Closing expenses to Income Summary
• Closing Income Summary to Owner’s Capital
• Closing owner’s withdrawals to Owner’s Capital

Each closing amount is denoted as "Clo." and each account balance as "Balance". For instance, the Service Income account will be closed with a credit balance shown as "Balance", and the closing entry reflects transferring this to Income Summary "Clo.".

Post-Closing Trial Balance

The final step consolidates all permanent accounts—assets, liabilities, and owner’s equity—listing their balances to verify that debits equal credits after closing. This ensures the accounting equation remains balanced and forms the basis for the next accounting period.

Conclusion

The completion of the accounting cycle as outlined ensures accurate financial reporting for Daniels Consulting up to December 31. By preparing detailed financial statements, executing proper closing entries, and verifying balances through the post-closing trial balance, we uphold the integrity of financial data and facilitate informed decision-making. All procedures are documented and computed in an Excel workbook, aligning with the requirement for comprehensive and transparent record-keeping.

References

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• Investopedia. (2023). Closing Entries. Investopedia.com
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