FAR

Completing the Cycle

 We started of our prelims with the analysis of

transactions. Which is the basis of preparing the journal entries either in the General Journal or in the Special
Journals be it in the Cash Receipt Journal, Cash Payment Journal, Sales Journal, and Purchases Journal. Now all of
this entries now have to be posted in the General Ledger and at certain locations Subsidiary Ledgers and after
which, we prepare the trial balance to check whether the total debits is equal to the total credits. Using the
General Journal, we prepare the adjusting journal entries to ensure that the account balances of all the accounts
that are used in the company are updated, for us to be able to prepare and be part in the financial statements.

Steps in Preparing a Worksheet

 We prepare adjusting entries using the General Journal. All of this are posted in the General Ledger

 After which we can prepare (it’s an option) a working paper, a worksheet. In the Module it’s 8 columns. I
decided to use 10 columns to include adjusted trial balance.
 If you have these worksheets it is now easy to make financial statements like:
Income Statements

Statement in Changes of
Equity
 Statement of Financial Position

Preparing Closing Entries

 Prepare Closing Entries in the General Journal to be posted on General Ledger.

 The purpose of closing entries is to close; to bring this nominal account balances to zero.
 Nominal Accounts refers to revenues, expenses and drawings
 Revenue and Expenses are close in the Income Summary. If you are to compute for the Income Summary, you
will realize that you will be getting the Net Income or Net Loss of the company for the period. Such Income
Summary Balance will have to be closed to your capital. The Owner’s Drawings will also be closed to your
capital.
Example: