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Transaction TypeAmountTotalDividends (or Retained Earnings)13,000Cash 13,000Step 4: Posting to the ledger accounts:1.A ledgeris a collection of accounts maintained by a business.2.The transfer of information from the journal to the ledger is referred to as “posting.”Step 4: Posting to the ledger accounts 1: C:\Users\sfurner\Desktop\Accounting Final Needed Materials\Final Exam Study Guide ACCT 701.docx
Step 5: Preparing a trial balance:1.After all transactions for the period have been posted to the general ledger, the balance for each account is determined.2.A trial balanceis a list of all ledger accounts and their respective balances. 3.It provides a means to assure that total debits equal total credits.Step 5: Preparing a trial balance 1:TypeDebitCreditCash83,110-Accounts Receivable106,500-Allowance for Bad Debts-1,610Inventory45,000-Prepaid Insurance8,000-Interest Receivable0-Land114,000-Buildings156,000-Accumulated Depreciation – Buildings-39,000Furniture19,000-Accumulated Depreciation – Furniture & Equipment-3,800Accounts Payable-37,910Unearned Rent Revenue-0Salaries and Wages Payable-0Interest Payable-0C:\Users\sfurner\Desktop\Accounting Final Needed Materials\Final Exam Study Guide ACCT 701.docx
Income Taxes Payable-0Dividends Payable-3,400Bonds Payable-140,000Common Stock, $0.10 par-150,000Retained Earnings-103,900Dividends13,600-Sales-479,500Cost of Goods Sold159,310-Salaries and Wages Expense172,450-Heat, Light, and Power Expense32,480-Payroll Tax Expense18,300-Advertising Expense18,600-Bad Debt Expense0-Depreciation Expense-Buildings0-Depreciation Expense – Furniture and Equipment0-Insurance Expense0-Rent Revenue-2,550Interest Expense16,420-Income Tax Expense0-Totals$962,770$962,770Step 6: Preparing Adjusting Entries:oAlthough the majority of accounts are up to date at the end of the accounting period and their balances can be included in the financial statements, some accounts require adjustment to reflect current circumstances.oAt the end of each accounting period, in order to report all asset, liability, and owners’ equity amounts properly and to recognize all revenues and expenses for the period on an accrual basis, accountants are required to make adjusting entriesprior to preparing financial statements.Step 7: Preparing financial statements:1.Identify all revenues and expenses—these account balances are used to prepare the income statement.2.Compute the net income—subtract expenses from revenues.3.Compute the ending Retained Earnings balance.4.Prepare a balance sheet using the balance sheet accounts from the trial balance and the modified retained earnings balance.Step 7: Preparing financial statements 1:C:\Users\sfurner\Desktop\Accounting Final Needed Materials\Final Exam Study Guide ACCT 701.docx
Step 8: Close nominal accounts:oNominal (ortemporary)accounts:oAll income statement accounts are closed at the end of the period by transferring their net balance to a Real Account. Usually that Real Account is Retained Earnings.