4-2 CHA PT E R 4 Completing the Accounting Cycle

A consultant put Ted’s concerns in perspective when he scorecards—production reports and income statements—that
said, “Imagine you’re playing touch football. You play for
an hour or two, and the whole time I’m sitting there with a
book, keeping score. All of a sudden I blow the whistle, and I
say, ‘OK, that’s it. Everybody go home.’ I close my book and
walk away. How would you feel?” Ted opened his books and
revealed the financial statements to his employees.
The next step was to teach employees the rules and strate-
gies of how to “win” at making food. The first lesson: “Your
opponent at Rhino is expenses. You must cut and control
expenses.” Ted and his staff distilled those lessons into daily
keep Rhino’s employees up-to-date on the game. At noon each
day, Ted posts the previous day’s results at the entrance to
the production room. Everyone checks whether they made or
lost money on what they produced the day before. And it’s
not just an academic exercise: There’s a bonus check for each
employee at the end of every four-week “game” that meets
profitability guidelines.
Rhino has flourished since the first game. Employment
has increased from 20 to 130 people, while both revenues and
profits have grown dramatically.

Chapter Outline
L EARNING OBJECTIVES

LO 1 Prepare a worksheet. • Steps in preparing a worksheet DO IT! 1 Worksheet

• Preparing financial statements from
a worksheet
• Preparing adjusting entries from a
worksheet

LO 2 Prepare closing entries and a • Preparing closing entries DO IT! 2 Closing Entries
post-closing trial balance. • Posting closing entries
• Preparing a post-closing trial
balance

LO 3 Explain the steps in the ac- • Summary of the accounting cycle DO IT! 3 Correcting Entries
counting cycle and how to prepare • Reversing entries
correcting entries.
• Correcting entries

LO 4 Identify the sections of a clas- • Current assets DO IT! 4 Balance Sheet

sified balance sheet. • Long-term investments Classifications
• Property, plant, and equipment
• Intangible assets
• Current liabilities
• Long-term liabilities
• Owner’s equity
Go to the Review and Practice section at the end of the chapter for a review of key concepts
and practice applications with solutions.
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The Worksheet
LEAR NING OBJECTIVE 1
Prepare a worksheet.

A worksheet is a multiple-column form used in the adjustment process and in prepar-

ing financial statements. As its name suggests, the worksheet is a working tool. It is not a