T4 notes

T4 notes - 1 Chapter 4: Completing the accounting cycle...

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Unformatted text preview: 1 Chapter 4: Completing the accounting cycle Accounting cycle (Exhibit 4.7) (TB144) Preparing closing entries Closing of nominal account (temporary account) (all expense + revenue) to the income summary account [income statement] and then the capital account. [statement of change in equity] (NOTE: This is the same as the profit and loss account horizontal form) Drawings will POST TO THE CAPITAL ACCOUNT DIRECTLY! [statement of change in equity] (TB142 for illustration) Balancing of real account (permanent account) (all other accounts) (balance sheet) Preparing of post(or after) closing trial balance: For expense account: Dr. Income summary Cr. Expense For revenue account: Dr. Revenue Cr. Income summary For Net income: Dr. Income summary Cr. Capital (For sole trader / partnership) / Cr. Retained earnings (for limited company) Reverse for net loss For drawings: Dr. Capital Cr. Drawings [IMPORTANT: You still need to prepare a stament of change in equity after the double entry!] Exhibit 4.1 (TB138) to see the worksheet approach Format of an income statement (non merchandising business) (Exhibit 4.2) (TB139) (Details refer to Exhibit 4.9) (TB146) Read and Attempt Demonstration Problem (TB148) especially QUESTION 5 Additional demonstration P4-5A (TB 165) You only need to do the q2 (journal ONLY) and q3. Q4 is meant to be a challenge to your mind. (a) Supplies Expense ............................................................................... 4,480 Supplies .................................................................................. 4,480 To record consumption of supplies. (b) Insurance Expense ............................................................................. 3,465 Prepaid Insurance .................................................................... 3,465 To record expiration of insurance. (c) Depreciation Expense—Equipment ................................................... 8,300 Accumulated Depreciation—Equipment.................................. 8,300 2 To record depreciation. (d) Utilities Expense ................................................................................ 560 Accounts Payable .................................................................... 560 To record accrued utilities costs. (e) Wages Expense.................................................................................. 1,900 Wages Payable ........................................................................ 1,900 To record accrued wages....
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This note was uploaded on 11/22/2011 for the course BUSI 1002 taught by Professor Liu during the Fall '10 term at HKU.

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T4 notes - 1 Chapter 4: Completing the accounting cycle...

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