Professional Documents
Culture Documents
FABM1
Quarter 4 – Module 10:
Completing the Accounting
Cycle
Writer:
ROSEMARIE A. ABENOJAR
T-II
Editors:
JANE P. VALENCIA, EdD – Math/ABM Supervisor
CHAIRMAN
MARIZ JEAN C. SANGCAP – T-III
ANGELINEA B. CAWIGAN – MT-II
What I Need to Know
This module was designed and written with you in mind. It is here to help you
master on how to complete the accounting cycle. The scope of this module permits
it to be used in many different learning situations. The language used recognizes
the diverse vocabulary level of students. The lessons are arranged to follow the
standard sequence of the course. But the order in which you read them can be
changed to correspond with the textbook you are now using.
What I Know
Read and understand each item carefully. Choose the correct answer and write the
corresponding letter of your choice on a separate sheet of paper.
1. These are journal entries where revenues, expenses and drawing accounts
are closed to income summary account.
a. Adjusting entries c. Journal entries
b. Closing entries d. Reversing entries
2. This statement shows the company’s revenues and expenses for the period.
a. Balance Sheet c. Income Statement
b. Cash Flows Statement d. Statement of Changes in Equity
3. It refers to listing of all accounts after journalizing and posting the adjusting
entries.
a. Trial balance c. Post-closing trial balance
b. Adjusted trial balance d. None of these
4. This statement shows the balances of assets, liabilities and owner’s equity.
a. Balance Sheet c. Income Statement
b. Cash Flows Statement d. Statement of Changes in Equity
5. A tool shows the adjustments and position of all accounts in the financial
statements.
a. Ledger c. Trial balance
b. Work Sheet d. Chart of accounts
6. The Supplies account has a debit balance under the Trial balance column
and debit balance under the Adjustment column, the amount of Supplies
under the adjusted trial balance will
a. Increase c. Retain
b. Decrease d. Closed or zero out
7. This statement shows the ending capital balance of the business for the
period.
a. Balance Sheet c. Income Statement
b. Cash Flows Statement d. Statement of Changes in Equity
8. To close income summary account, a debit to income summary account and
credit to what account?
a. Asset c. Liability
b. Capital d. Revenue
9. It refers to the listing of real accounts after preparing closing entries
a. Trial balance c. Post-closing trial balance
b. Adjusted trial balance d. None of these
10. What do you call to the journal entries opposite of the adjusting entries?
a. Adjusting entries c. Journal entries
b. Closing entries d. Reversing entries
11. The company has initial investment of P100,000. During the period, the
owner invested additional capital of P50,000, earned with net income of
P125,000 and withdrawals of P20,000. How much is the ending capital of the
business?
a. P250,000 c. P260,000
b. P255,000 d. P265,000
12. ABC Company shows the following balances: Service Revenue P180,000;
Interest Income P6,200; Insurance Expense P3,000; and Salaries Expense
P20,000. How much is the net income for the period?
a. P170,800 c. P160,000
b. P163,200 d. P 157,000
13. In Trial Balance, Rent Expense has a balance of P10,000. During the
year, a credit Rent Expense for P2,000 as adjusting entry was made. How
much should be the Rent Expense balance after adjustment?
a. P12,000 c. P8,000
b. P10,000 d. P2,000
This lesson is prepared to continue the remaining five steps of the accounting cycle.
It gives you the skills on how to prepare various statements required in making
economic decisions.
What’s In
What is It
You are now in the sixth to tenth steps of accounting cycle. The five steps to make
the accounting cycle complete are: Preparing adjusted trial balance, preparing
financial statements, preparing closing entries, preparing post-closing trial balance
and Preparing reversing journal entries.
Before adjusted trial balance is made, the adjustments made for the period must be
recorded in the adjustment column of the worksheet.
Now let’s go to the next step, preparing the financial statements. What are financial
statements? What are the different types of financial statements?
Financial statements are statement that shows the information about the assets,
liabilities, capital, revenue and expenses of the business. These statements may
help the users to make economic decision.
We can illustrate the income statement directly from the adjusted trial balance and
the income statement itself. The income statement directly from the adjusted trial
balance is done by transferring the amount of revenues and expenses to seventh
and eighth column of the worksheet.
Figure 1
ABM ACCOUNTING FIRM
Work Sheet
December 31, 2020
Trial Balance Adjustments Adjusted Trial Balance Income Statement
Account Title Debit Credit Debit Credit Debit Credit Debit Credit
Cash 259,000 259,000
Accounts Receivable 90,000 90,000
Supplies 8,000 a. 5,500 2,500
Equipment 55,000 55,000
Accounts Payable 65,000 65,000
Ms. Co, Capital 300,000 300,000
Ms. Co, Drawings 10,000 10,000
Professional Fees 118,000 118,000 118,000
Rent Expense 40,000 b. 10,000 30,000 30,000
Salaries Expense 16,000 16,000 16,000
Taxes and Licenses 2,000 2,000 2,000
Utilities Expense 3,000 _______ 3,000 3,000
483,000 483,000
A. Supplies Expense a. 5,500 5,500 5,500
b. Prepaid Rent b. 10,000 10,000
depreciation Expense c. 3,750 3,750 3,750
c .Accum. Dep - Equipment ________ c. 3,750 _______ 3,750 ______ ______
Totals P 19,250 P 19,250 P486,750 P486,750 P60,250 P118,000
Net Income 57,750 _______
Totals P118,000 P118,000
A closing entry are journal entries where nominal accounts (revenues and
expenses) and drawing account are closed and transferred their amount in Income
Summary account and closed Income Summary to Capital account.
The following are the four steps in preparing closing entries: (Refer to the adjusted
trial balance)
A post-closing trial balance is the listing of real accounts after preparing closing
entries.
Post-closing trial balance is prepared by transferring the balances of assets,
liabilities and capital to the trial balance.
A reversing journal entry are journal entries that are opposite of the adjusting
entries made for prepayment under the expense method, precollections under the
revenue method, accrued expenses and accrued income. They are made at the
beginning of the next accounting period.
To illustrate, let’s go back to the adjusting entries of ABM ACCOUNTING FIRM and
we will find out which of the adjusting entries need to prepare reversing entry.
What’s More
Assessment
Activity 10-4
Required: