3 26 fastforward balance sheet assets cash 3950

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3-26
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FastForward Balance Sheet December 31, 2011 Assets Cash 3,950 $ Accounts receivable 1,800 Supplies 8,670 Prepaid insurance 2,300 Equipment 26,000 Less: accum. depr. (375) 25,625 Total assets 42,345 $ Liabilities Accounts payable 6,200 $ Salaries payable 210 Unearned revenue 2,750 Total liabilities 9,160 $ Equity Common stock 30,000 Retained earnings 3,185 Total liabilities and equity 42,345 $ Dr. Cr. Cash 3,950 $ Accounts receivable 1,800 Supplies 8,670 Prepaid insurance 2,300 Equipment 26,000 Accum. depr. - Equip. 375 $ Accounts payable 6,200 Salaries payable 210 Unearned revenue 2,750 Chuck Taylor, Capital 30,000 Chuck Taylor, Withd'l. 600 Consulting revenue 7,850 Rental revenue 300 Depr. expense 375 Salaries expense 1,610 Insurance expense 100 Rent expense 1,000 Supplies expense 1,050 Utilities expense 230 Totals 47,685 $ 47,685 $ Adjusted Trial Balance FastForward Statement of Retained Earnings For the Month Ended December 31, 2011 Retained earnings, 12/1/11 $ -0- Add: Net income 3,785 Less: Dividends 600 Retained earnings 12/31/11 3,185 $ 3. Prepare Balance Sheet 3-27
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The Closing Process: Temporary and Permanent Accounts Temporary (nominal) accounts accumulate data related to one accounting period. They include all income statement accounts, the dividends account, and the Income Summary account. These accounts are “closed” at the end of the period to get ready for the next accounting period. Permanent (real) accounts report activities related to one or more future accounting periods. They carry ending balances to the next accounting period and are not “closed.” 3-28
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Recording Closing Entries 1. Close revenue accounts. 2. Close expense accounts. 3. Close income summary account. 4. Close dividends account . 3-29
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Recording Closing Entries Income Summary Salaries Expenses Consulting Revenues $ 18,100 $ 25,000 Retained Earnings $ 7,000 Examine the accounts presented. 3-30
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$ 25,000 Close revenues with a debit to the revenue account and a credit to Income Summary. Recording Closing Entries $ 18,100 Salaries Expenses Consulting Revenues Income Summary $ 25,000 $ 25,000 3-31
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$ 25,000 $ 25,000 Close expense accounts with a credit to expenses and a debit to Income Summary. $ 25,000 Recording Closing Entries $ 18,100 Salaries Expenses Consulting Revenues Income Summary $ 18,100 $ 18,100 3-32
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$ 18,100 $ 25,000 $ 18,100 $ 25,000 $ 25,000 $ 18,100 Determine the balance in the Income Summary account. Recording Closing Entries Salaries Expenses Consulting Revenues Income Summary $ 6,900 3-33
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$ 18,100 $ 25,000 $ 18,100 $ 18,100 $ 7,000 Close the Income Summary to Retained Earnings. Recording Closing Entries $ 6,900 Salaries Expenses Income Summary Retained Earnings $ 6,900 $ 6,900 3-34
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Recording Closing Entries Dividends $ 2,000 $ 7,000 6,900 Retained Earnings The dividends account is closed to Retained Earnings. $ 2,000 $ 2,000 3-35
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Recording Closing Entries Dividends $ 2,000 $ 2,000 $ 2,000 Determine the ending balance in Retained Earnings. $ 11,900 $ 7,000 6,900 Retained Earnings The dividends account is closed to Retained Earnings. 3-36
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Post Closing Trial Balance n Trial Balance prepared after the closing entries have been posted. n The purpose is to insure that all nominal or temporary accounts have been closed.
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