Cole Designs General Ledger ASSETS REVENUE 11 Cash 41 Fees Earned 12 Accounts Receivable 14 Supplies EXPENSES 15 Prepaid Insurance 51 Wages Expense 18 Equipment 52 Supplies Expense 19 Accumulated Depreciation Equipment 55 Insurance Expense 56 Depreciation Expense LIABILITIES 22 Wages Payable 23 Unearned Fees EQUITY Cole Designs Income Statement For the Year Ended December 31, 2018 1 Fees earned $68,200.00 2 Wages expense 44,300.00 3 Net income $23,900.00 Unadjusted Financial Statements Balance Sheet December 31, 2018 1 Assets 2 Cash $5,000.00 3 Accounts receivable 31,400.00 4 Supplies 3,575.00 5 Prepaid Insurance 4,200.00 6 Equipment 11,000.00 7 Total assets $55,175.00 00 Liabilities adjusted Financial Statements 5 Prepaid Insurance 4,200.00 6 Equipment 11,000.00 7 Total assets $55,175.00 Liabilities 9 Unearned fees $8,600.00 10 Owner's Equity 11 Ann Cole, Capital 46,575.00 12 Total liabilities and owner's equity $55,175.00 Cole Designs Income Statement For the Year Ended December 31, 2018 1 Fees earned $74,050.00 2 Expenses: 3 $46,150.00 Wages expense Supplies expense 4 5 3,465.00 5 Insurance expense 2,700.00 6 Depreciation expense 1,700.00 7 Total expenses 54,015.00 8 Net income $20,035.00 December 31, 2018 1 Assets 2 Cash $5,000.00 3 Accounts receivable 32,000.00 * Supplies 110.00 5 Prepaid Insurance 1,500.00 $11,000.00 6 Equipment Less accumulated depreciation-equipment 7 1,700.00 9,300.00 8 Total assets $47,910.00 9 Liabilities 10 Wages payable $1,850.00 11 Unearned fees 3,350.00 12 Total liabilities $5,200.00 12 warle Fruit 110.00 justed Financial Statements Supplies 5 Prepaid Insurance 1,500.00 $11,000.00 6 Equipment Less accumulated depreciation-equipment 7 1,700.00 9,300.00 8 Total assets $47,910.00 9 Liabilities 10 Wages payable $1,850.00 11 Unearned fees 3,350.00 12 Total Liabilities $5,200.00 13 Owner's Equity 14 Ann Cole, Capital 42,710.00 15 Total liabilities and owner's equity $47.910.00 Adjusted Financial Statements Matching Principle/Revenue Recognition Under the accrual basis of accounting, many of the account balances in the ledger at the end of the accounting period are reported in the financial statements will change. Some accounts require updating, though. When preparing financial statements, the economic life of the business is divided into time periods. The match principle states that 3 A purchase made by a business is matched with the actual cost of the tem. The expenses incurred during a period are matched with the revenue that those expenses generated. The accounting records and reports are matched with objective evidence. The transactions of a business are matched with the transactions of its owner, creditors and other businesses. Under accrual basis of accounting, the revenue recognition principle states that Matching Principle/Revenue Recognition Under accrual basis of accounting, the revenue recognition principle states that Revenues may not be recognized until the company is deemed to be profitable. Revenues are recognized when a contract is signed with the customer. Revenues are recognized when services have been performed or products have been delivered to customers. O Revenues are recognized when the cash is received. Review the following selected transaction data of a business for July. Keeping the matching principle in mind, indicate which of the following would be use Review the following selected transaction data of a business for July. Keeping the matching principle in mind, Indicate which of the following would be used t- net Income for the month of July. Check all that apply. Services provided to customers on account during July, Cash received from cash customers for services performed in July Expenses incurred in July but not paid until August. Cash paid in July for expenses incurred in June. Cash reolved in July from customers for services porformed in June, Cash paid in July for expenses incurred in July state or Overstated, Understated For Tonowing wancial statemennems, maicateur enem was overstateo balance. Overstated Understated Nelther Net income O Owner's equity O Revenues O Total assets Total expenses Total liabilities O 0 DEBIT CREDIT POST. REF LABILITIES ASSETS EQUITY DATE DESCRIPTION Adjusting Entries 2 3 > 1 10 11