1:31 AM BRAP Debit in $ Credit in $ ournal Entries Date Particulars Aug-01 Cash a/c To Matt Capital Capital invested) Aug-01 Cash ale To Loan Loan from grandfather) Aug 07 Equipment a/ Dr. To Cash Equipment purchased Aug-15 Advertising Expense a/c Dr. To Accounts Payable Advertising expense accrued Aug-20 Advertising Expense a/c Dr. To Cash Advertising expense paid) Dr. Aug-28 Activity Courses a/c To Cash (Activity courses paid) Sep 01 Prepaid Insurance a/c Dr (3 months insurance paid) Sep-07 Supplies al Dr. To Accounts Payable (Supplies purchased) Sep-10 Cash ale To Sales (Cash sales recorded) Sep-14 Accounts Payable a/c Dr. To Cash (Creditors paid Sep-17 Accounts Receivable a/c Dr. Sales on account Sep-18 Mowing expense ale Dr. To Cash Grass mowed Sep 22 Cash a/c To Sales Cash sales recorded) Sep 24 Cash ac To Accounts Receivable (Cash from debtors) Dr. Sep-25 Wages Expense ale To Cash (Wages paid Sep 28 Mart, withdrawals a/c Dr. To Cash Cash drawn for personal use) Sep 30 345 Cash a/c Dr. To unearned Revenue (Advance from client) ACCOUNTING CYCLE STEP 3: Post each transaction in the general journal to the general ledger. Use the general ledger working papers provided in your packet. Helpful Hints Posting is the process of transferring general journal entry information to the general ledger. Each number you post should be properly cross-referenced by: o recording the general journal page number (ex. GJ1, G2, etc.) in the Posting Reference (Post. Ref.) column of the general ledger (transaction descriptions in the "item" column may be eliminated", AND recording the general ledger account number in the Post. Ref. column of the general journal. ACCOUNTING CYCLE STEP 4: Calculate the ending balance in each general ledger account if you haven't already done so, and prepare an unadjusted trial balance. No working papers have been provided for this step, so you may either handwrite your solution or prepare it electronically. If you prepare your solution electronically, be sure to bring a hardcopy to class. Helpful Hints Determine the balance in each account by subtracting the sum of the debits from the sum of the credits. The resulting difference (the updated account balance) is a debit if the sum of the debits is greater than the sum of the credits. Alternatively, the resulting difference (the updated account balance) is a credit if the sum of the credits is greater than the sum of the debits. Prepare an unadjusted trial balance by listing each general ledger account title with its balance in the order that it appears in the general ledger) according to the format presented in Exhibit 2.14 in your textbook. Note that the debit and credit columns must each be summed, and the sums must be equal. If debits do not equal credits, refer to the "Searching for and Correcting Errors" section in Chapter 2 of your textbook for additional assistance. Check Figure: Debits and credits must each equal $15,340. Chapter 3 (Accounting Cycle Steps 5, 6, & 7) ACCOUNTING CYCLE STEP 5: Adjust the appropriate accounts of BRAP based on the following information. This step involves journalizing the adjusting entries in the general journal and posting them to the general ledger, using the cross-reference procedure described in accounting cycle step 3. (Note: Add these transactions to the general journal and general ledger that you began in the Chapter 2 section of this packet.) september 30 One month of the general liability insurance coverage that began on September 1 has now expired. September 30 Accrue interest on the $7,000,6% loan issued on August 1 even though payment on the principal and interest will not be made until the note matures in two years. (Round to the nearest dollar, if necessary.) September 30 Matt determined that $182 of the supplies purchased on September 7 remained unused. September 30 You consult with a fellow student who has already completed ACTG 2110, and he helps you calculate depreciation as follows: Equipment - $32; Sign: $13, and Activity Courses - $94. (Note: use separate Accumulated Depreciation accounts for each asset, but report the total amount of Depreciation Expense in a single account.) September 30 Accrue wages of $120. The employees earned these wages in September, but will not be paid until October Helpful Hints While there are no source documents to prompt us to record adjusting entries, adjusting entries are an important element of matching revenues and expenses to provide GAAP-compliant financial statements. Each adjusting entry affects an income statement account (revenue or expense) and a balance sheet account (asset or liability), so omitting an adjusting entry or making an error in the amount of the adjusting entry makes the income statement, the statement of owner's equity, and the balance sheet incorrect. Some helpful hints to keep in mind as you write adjusting entries: As previously noted, each adjusting entry affects an income statement account and a balance sheet account. No adjusting entry affects the Cash account. * ACCOUNTING CYCLE STEP 6: Recalculate the general ledger account balances for all accounts affected by the adjusting entries, if you haven't already done so, and then develop another trial balance consistent with the format of your unadjusted trial balance. This new trial balance is identified as an adjusted trial balance to reflect the fact that the account balances now include the effect of all adjusting entries. No working papers have been provided for this step, so you may either handwrite your solution or prepare it electronically. If you prepare your solution electronically, be sure to bring a hardcopy to class. Helpful Hints Remember to list your accounts in financial statement order, just as you did for your unadjusted trial balance. Check Figure: Debits and credits must each equal $15,669. ACCOUNTING CYCLE STEP 7: Use the accounts and balances on the adjusted trial balance to prepare financial statements. Refer to Exhibit 3.14 in your textbook for an illustration of how the numbers from an adjusted trial balance flow to the financial statements. No working papers have been provided for this step, so you may either handwrite your solution or prepare it electronically. If you prepare your solution electronically, be sure to bring a hardcopy to class. Helpful Hints The income statement is always prepared first because we need the output of the income statement (net income) to prepare the second financial statement, the statement of owner's equity. The statement of owner's equity must be prepared second because we need the output of the statement of owner's equity (the ending capital account balance) to prepare the third financial statement, the balance sheet. The fact that all three financial statements tie together in this way is referred to as articulation. Recall that the accounts on the adjusted trial balance are listed in financial statement order (assets, liabilities, owner's equity, revenues, and expenses), so the accounts you need for each statement are effectively grouped together. Each account is reported on only ONE financial statement. Specifically note the difference between the format of a trial balance and a balance sheet. Many beginning accounting students frequently confuse these two due to the naming similarity, but they are two very distinct documents! Check Figures: Net Income = $983 Total Assets = $13,178 Chapter 4 (Accounting Cycle Steps 8 & 9) *** ACCOUNTING CYCLE STEP 8: Prepare lournal entries to close all the temporary accounts. This step includes journalizing the closing entries in the general journal and posting them to the appropriate general ledger accounts, using the cross-reference procedure described in Step 3. Use the same general journal and general ledger that you used in the previous steps. Helpful Hints The temporary accounts to be closed are the revenue accounts, expense accounts, and the owner's withdrawal (a.k.a. drawing) account. Note that the owner's capital account before the closing process does not equal the ending owner's capital we reported on the statement of owner's equity and on the balance sheet. The closing process, when properly completed, will update the owner's capital account balance in the general ledger so that it reconciles with the ending owner's equity balance we reported on the financial statements. The closing process will also reduce all temporary accounts to a zero balance clearing the way for the accumulation of revenues, expenses, and withdrawals for the next accounting period. Revenue accounts must be DEBITED to remove their credit balances and expense accounts and the owner's withdrawal account must be CREDITED to remove their debit balances. ACCOUNTING CYCLE STEP 9: Prepare a post-closing trial balance. Just like the unadjusted trial balance and the adjusted trial balance, this trial balance is simply a listing of the general ledger accounts and their balances in financial statement order with the debit and credit columns summed. See Exhibit 4.6 in your textbook for an example of a post-closing trial balance. No working papers been provided for this step, so you may either handwrite your solution or prepare it electronically, If you prepare your solution electronically, be sure to bring a hardcopy to class Helpful Hints This trial balance confirms that general ledger debits and credits are equal before beginning a new accounting cycle. Given that all the temporary account balances were reduced to zero during the closing process, the temporary accounts may be omitted from this trial balance. Check Figure: Debits and Credits must each equal $13,317. ACCOUNTING CYCLE STEP 10: Preparing reversing entries is an optional step in the accounting cycle that will not be covered in this course