as opening balance because revenue and expense accounts are closed (balance set to zero) at the end of the period when the financial statements are prepared irst period, then set up in one or two blank pages the T accounts for all accounts listed in the chart of accounts with open balances in zero: Chart of Accounts Assets Accounts Receivables Accumulated Depreciation-Tools Accumulated Depreciation - Van Cash Equipment - Tools Expenses Accountant Fee Expense Bank Service Expense Bank Overdraft Fees Cost of Goods Sold Depreciation Expense - Tools But if it is not the first period, and the case provides financial statements, then set up the T accounts for all accounts listed in the chart of accounts. For accounts included in the balance sheet, use those amounts as the opening balance while for the other accounts just place a zero as opening balance because revenue and expense accounts are closed (balance set to zero) at the end of the period when the financial statements are prepared How do you determine if the case is about the first period or not? Assume that after reading the set up you notice the business starts operation on April 1,2021, and you are asked to prepare the financial statements for the company only for the month August, 2021 (not the first period in the life of the company), this reflects the company has been operating for a while and still carries on (it is a going concern). When the case is not about the first period of operations, you have to pay attention to the details of all documents submitted by the owner. For instance, you may see an invoice indicating the company's spending in the past (April 1, 2021) and this spending had been recorded/joumalized in the month of April, it is not a purchase in August (should not be recorded as purchase in August), however, any adjusting journal entry (to account for depreciation which is calculated based on the onginal invoice because of the historical cost principle as shown in this example) shall be properly accounted for in the month of August 2021 1) Determine if the case is about the first period in the life of a company or not. If it is the first period, then set up in one or two blank pages the T accounts for all accounts listed in the chart of accounts with open balances in zero: as opening balance because revenue and expense accounts are closed (balance set to zero) at the end of the period when the financial statements are prepared irst period, then set up in one or two blank pages the T accounts for all accounts listed in the chart of accounts with open balances in zero: Chart of Accounts Assets Accounts Receivables Accumulated Depreciation-Tools Accumulated Depreciation - Van Cash Equipment - Tools Expenses Accountant Fee Expense Bank Service Expense Bank Overdraft Fees Cost of Goods Sold Depreciation Expense - Tools But if it is not the first period, and the case provides financial statements, then set up the T accounts for all accounts listed in the chart of accounts. For accounts included in the balance sheet, use those amounts as the opening balance while for the other accounts just place a zero as opening balance because revenue and expense accounts are closed (balance set to zero) at the end of the period when the financial statements are prepared How do you determine if the case is about the first period or not? Assume that after reading the set up you notice the business starts operation on April 1,2021, and you are asked to prepare the financial statements for the company only for the month August, 2021 (not the first period in the life of the company), this reflects the company has been operating for a while and still carries on (it is a going concern). When the case is not about the first period of operations, you have to pay attention to the details of all documents submitted by the owner. For instance, you may see an invoice indicating the company's spending in the past (April 1, 2021) and this spending had been recorded/joumalized in the month of April, it is not a purchase in August (should not be recorded as purchase in August), however, any adjusting journal entry (to account for depreciation which is calculated based on the onginal invoice because of the historical cost principle as shown in this example) shall be properly accounted for in the month of August 2021 1) Determine if the case is about the first period in the life of a company or not. If it is the first period, then set up in one or two blank pages the T accounts for all accounts listed in the chart of accounts with open balances in zero
