Chap 4 Outline[1]

Chap 4 Outline[1] - Chapter Outline I. C. 1. 2. 3. 4. D....

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Chapter Outline Notes I. Work Sheet as a Tool A. The work sheet is an internal document that serves as a useful tool for organizing accounting information. It is not a required report. B. Benefits include: aids the preparation of financial statements, reduces possibility of errors, links accounts and adjustments to their impacts in financial statements, assists in planning and organizing an audit of financial statements, helps in preparing interim (monthly and quarterly) financial statements, and shows the effect of proposed or “what if” transactions. C. Steps to prepare a work sheet: 1. Enter the unadjusted trial balance in the first two columns. 2. Enter the adjustments in the third and fourth columns. Total columns to verify debit adjustments equal credit adjustments. 3. Prepare the Adjusted Trial Balance. This is done by combining the unadjusted trial balance and adjustment columns. Total Adjusted Trial Balance columns to verify debits equal credits. 4. Sort the adjusted trial balance amounts to the appropriate financial statement columns. 5. Total statement columns, compute net income or loss and balance the columns by adding net income or loss. D. Work Sheet Applications and Analysis—it does not substitute for financial statements. The financial statement columns yield pro forma financial statements because they show the statements as if the proposed transactions occurred. II. Closing Process—The closing process is an important step at end of the accounting period after financial statements have been completed. A Steps in closing process: 1. Identify accounts for closing. 2. Record and post closing entries. 3. Prepare a post-closing trial balance. B.
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Chap 4 Outline[1] - Chapter Outline I. C. 1. 2. 3. 4. D....

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