4-20 CHAPT E R 4 Completing the Accounting Cycle

ILLUSTRATION 4.15
Required steps in the
THE ACCOUNTING CYCLE
accounting cycle
1. ANALYZE BUSINESS TRANSACTIONS

Assets = Liabilities + Owner’s Equity

Accounts Accounts Owner’s
Cash + Receivable + Supplies + Equipment = Payable + Capital + Revenues – Expenses
Equation $9,200 $1,600 $7,000 $1,850 $15,000 $1,200 $250
Analysis Service
(6) +1,500 +$2,000 +3,500
Revenue
$10,700 + $ 2,000 + $1,600 + $7,000 = $1,850 + $15,000 + $4,700 – $250

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$21,300 $21,300

9. PREPARE A POST-CLOSING TRIAL BALANCE 2. JOURNALIZE THE TRANSACTIONS

GENERAL JOURNAL PAGE J1
Pioneer Advertising Date Account Titles and Explanation Ref. Debit Credit
Post-Closing Trial Balance
October 31, 2020 2020
Oct. 1 Cash 101 10,000
Debit Credit Owner’s Capital 301 10,000
Cash $15,200 (Owner’s investment of cash in business)
Accounts Receivable 200
1 Equipment 157 5,000
Supplies 1,000
Notes Payable 200 5,000
Prepaid Insurance 550
(Issued 3-month, 12% note for office
Equipment 5,000
equipment)
Accumulated Depreciation—Equipment $ 40
Notes Payable 5,000 2 Cash 101 1,200
Accounts Payable 2,500 Unearned Service Revenue 209 1,200
Unearned Service Revenue 800 (Received cash from R. Knox for
Salaries and Wages Payable 1,200 future services)

8. JOURNALIZE AND POST CLOSING ENTRIES 3. POST TO THE LEDGER ACCOUNTS

GENERAL JOURNAL J3
GENERAL LEDGER
Date Account Titles and Explanation Ref. Debit Credit Cash No. 101 Accounts Payable No. 201
Closing Entries Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
2020 2020
2020 (1) Oct. 1 J1 10,000 10,000 Oct. 5 J1 2,500 2,500
Oct. 31 Service Revenue 400 10,600 2 J1 1,200 11,200 Unearned Service Revenue No. 209
Income Summary 350 10,600 3 J1 900 10,300
4 J1 600 9,700 Date Explanation Ref. Debit Credit Balance
(To close revenue account)
20 J1 500 9,200 2020
(2) 26 J1 4,000 5,200 Oct. 2 J1 1,200 1,200
31 Income Summary 350 7,740 31 J1 10,000 15,200 Owner’s Capital No. 301
Supplies Expense 631 1,500 Supplies No. 126 Date Explanation Ref. Debit Credit Balance
Depreciation Expense 711 40 Date Explanation Ref. Debit Credit Balance 2020
Insurance Expense 722 50 2020 Oct. 1 J1 10,000 10,000
Salaries and Wages Expense 726 5,200 Oct. 5 J1 2,500 2,500 Owner’s Drawings No. 306
Rent Expense 729 900

7. PREPARE FINANCIAL STATEMENTS 4. PREPARE A TRIAL BALANCE

Pioneer Advertising
Income Statement Pioneer Advertising
For the Month Ended October 31, 2020 Trial Balance
October 31, 2020
Revenues
Service revenue Pioneer Advertising $10,600 Debit Credit
Owner’s Equity Statement Cash $15,200
For the Month Ended October 31, 2020 Supplies 2,500
Prepaid Insurance 600
Pioneer Advertising Equipment 5,000
Balance Sheet
Notes Payable $ 5,000
October 31, 2020
Accounts Payable 2,500
Assets Unearned Service Revenue 1,200
Cash $15,200 Owner’s Capital 10,000
Accounts receivable 200 Owner’s Drawings 500
Supplies 1,000 Service Revenue 10,000
Prepaid insurance 550

6. PREPARE AN ADJUSTED TRIAL BALANCE 5. JOURNALIZE AND POST ADJUSTING

Pioneer Advertising
ENTRIES: DEFERRALS/ACCRUALS
Adjusted Trial Balance
October 31, 2020 GENERAL JOURNAL J2
Debit Credit Date Account Titles and Explanation Ref. Debit Credit
Cash $15,200 2020 Adjusting Entries
Accounts Receivable 200 Oct. 31 Supplies Expense 631 1,500
Supplies 1,000 Supplies 126LEDGER
GENERAL 1,500
Prepaid Insurance 550 (To record supplies used)
Cash No. 101 Interest Payable No. 230
Equipment 5,000 31 Insurance Expense 722 50
Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
Accumulated Depreciation—Equipment $ 40 Prepaid Insurance 130 50
2020 2020
Notes Payable 5,000 (To record insurance expired)
Oct. 1 J1 10,000 10,000 Oct. 31 Adj. entry J2 50 50
Accounts Payable 2,500 31 Depreciation
2 Expense J1 1,200 11,200711 40
3 l t dD Owner’s Capital No. 301
Interest Payable 50 A i ti J1 E i t 900 10,300158 40
4 J1 600 9,700 Date Explanation Ref. Debit Credit Balance
Unearned Service Revenue 800 20 J1 500 9,200 2020
Salaries and Wages Payable 1,200 26 J1 4,000 5,200 Oct. 1 J1 10,000 10,000