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The

Adjusted Trial Balance reflects totals


after the AJEs are posted to the general
ledger.
The balance sheet accounts reflect the endof-year balances, and the income statement
accounts reflect the proper revenues and
expense to be recognized for the year

The

amounts in the Adjusted Trial Balance


are used to prepare the balance sheet and
the income statement.

Contributed Capital and


Retained Earnings
The

contributed capital in the adjusted trial


balance is an ending balance; the ledger
account must be examined to see if any
activity (like issue of additional stock)
occurred.
The retained earnings on the adjusted trial
balance is a beginning balance; while the
revenues, expenses and dividends are
displayed in the trial balance, they have not
yet been included in (closed to) retained
earnings.
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Financial Statements
The

financials should be prepared in the following


order:
income statement (I/S)
statement of stockholders equity (SSE)
balance sheet (B/S)
Note that the statement of cash flow (SCF) is not
prepared from the adjusted trial balance, but from
a detailed analysis of the cash flow activities of
the company.

Financial Statements
Comments

on the preparation of financial


statements from adjusted trial balance (ATB):
revenue and expense balances carried to the
income statement.
net income is in retained earnings column in
the SSE. Dividends and issue of stock, are
reflected in the SSE.
ending balances in the SSE are carried to the
stockholders equity section of the balance
sheet.
asset and liability balances from the ATB are
carried to the balance sheet.
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Kelly Supply
Balance Sheet
December 31, 2015
Assets:
Cash
Accounts receivable
Interest receivable
Merchandise inventory
Prepaid rent
Machinery
Less: Accumulated depreciation
Patent
Total assets

$ 9,500
22,000
50
13,000
2,000
$26,000
8,000

18,000
4,500
$69,050

Kelly Supply
Balance Sheet
December 31, 2015
Liabilities and stockholders equity:
Accounts payable
Wages payable
Interest payable
Dividends payable
Unearned revenue
Short-term notes payable
Long-term notes payable
Common stock
Retained earnings
Total liabilities and stockholders equity

$ 5,000
1,000
2,000
1,000
1,000
2,500
10,000
40,000
6,550
$69,050
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D. Closing Journal Entries (CJEs)


Close

temporary accounts to retained


earnings, so that the balances in those
accounts at the start of the next accounting
period will be zero.
Temporary accounts include revenues,
expenses and dividends.

Closing Entry for Kelly Supply


Dr. Sales
27,000
Interest Revenue
50
Cr. Cost of Goods Sold
Wages expense
Rent expense
Interest expense
Depreciation expense
Amortization expense
500
Income Summary

9,000
8,000
1,000
3,000
3,000

2,5509

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