STUDENT MANUAL

ACCOUNTING 1111 REVIEW WORKSHOP

Reviewing the basics of Accounting 1A

Copyright Mary J. Collins 2011 Version 1

TABLE OF CONTENTS
ACCOUNTING CYCLE ............................................................................................................ 1 INTRODUCTION AND OUTLINE OF WORKSHOP ............................................................... 2 BASIC EVERYDAY JOURNAL ENTRIES .............................................................................. 7 BOOTH CORPORATION CONTINUING REVIEW PROBLEM-1 .........................................10 ADJUSTING JOURNAL ENTRIES..........................................................................................12 HOW TO CREATE A WORKSHEET FOR A CORPORATION ..............................................13 BOOTH CORPORATION CONTINUING REVIEW PROBLEM-2 .........................................18 MULTIPLE-STEPPED INCOME STATEMENT......................................................................19 BASIC INSTRUCTIONS FOR RETAINED EARNINGS STATEMENT .................................22 BASIC INSTRUCTIONS FOR A CLASSIFIED BALANCE SHEET .......................................23 BOOTH CORPORATION CONTINUING REVIEW PROBLEM-3 .........................................27 CLOSING JOURNAL ENTRIES ..............................................................................................28 BOOTH CORPORATION CONTINUING REVIEW PROBLEM-4 .........................................29 PERPETUAL INVENTORY SYSTEM.....................................................................................31 BOOTH CORPORATION CONTINUING REVIEW PROBLEM-5 .........................................32 BASIC INSTRUCTIONS FOR A BANK RECONCILIATION STATEMENT .........................34 ADJUSTING ENTRIESJOURNAL ENTRIES FROM BANK RECONCILIATION .................39 BOOTH CORPORATION CONTINUING REVIEW PROBLEM-6 .........................................40 ii

PETTY CASH FUND JOURNAL ENTRIES ............................................................................43 BOOTH CORPORATION CONTINUING REVIEW PROBLEM-7 .........................................44

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ACCOUNTING CYCLE

Step 1: Analyze the Transactions

Step 2: Journalize the Transactions

Step 3: Post (copy) The Transactions to the Ledger Accounts (T-Accounts) Step 4: Prepare a Trial Balance

Step 5: Journalize Adjusting Entries

Step 6: Post Adjusting Entries to the Ledger accounts and Prepare an Adjusted Trial Balance Step 7: Prepare the Financial Statements 1. Income Statement 2. Retained Earnings Statement 3. Balance Sheet Step 8: Journalize and Post Closing Entries

Step 9: Prepare a Post-Closing Trial Balance Warning No off Road Travel

ACCOUNTING 1111 REVIEW WORKSHOP

Covering the Basic Accounting Cycle Bonus Material Manufacturing Company Journal Entries and Bank Reconciliations, and Petty Cash Funds

INTRODUCTION AND OUTLINE OF WORKSHOP THE COMPLETE ACCOUNTING CYCLE

4. Acquire from the chart of Analyze the Transactions: 1. Is there an exchange of assets if

not no transaction occurred. 2. If a transaction occurred next determine what accounts are effected 3. Determine if the accounts are increased or decreased

accounts the correct names for the accounts effected 5. Then create a journal entry to record the transaction.

Journalize the Transactions: Place a record of the transaction in the General Journal (Original book of entry) in chronological order with a debit and a credit of accounts that match in amount left to right. The debits have to match the credits. Types of Basic Everyday Journal Entries
1. Sale of stock to owners of

Post (Copy) the transactions to the General Ledger Accounts:

The T-Accounts is the simplest form of a general ledger account. Each account transaction has to be copied into the correct ledger account one at a time. At the end of this process, a total must be run for each individual account with the final balance being placed on the normal balance side of each individual account. Prepare a Trial Balance:which is a list of all accounts in the ledger with each accounts ending balance. This will be prepared in two-column form and each column will be totaled down (footed) with the final totals matching.
Journalize Adjusting Entries:

company 2. Payment of Dividends 3. Purchases and prepayment of large assets for cash 4. Purchases and prepayment of large assets on account (credit) 5. Purchase of items small for cash 6. Purchase of items small on account (credit) 7. Receipt of advance payment for sales or service not yet provided 8. Sales or Service for cash 9. Sales or Service on account (credit) 10. Payment of cash on account (credit) 11. Receipt of cash on account (credit) 12. Payment of monthly expenses with cash 13. Recording of monthly expenses on account (credit) Bills accrued
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These are adjustments made that record the usage of material over time where it would not be practical to record the usage on a daily bases. Example would be supplies where you would not want to record the usage of each and every pencil used during a business day.

Post Adjusting Entries to the Ledger and do an Adjusted Trial Balance. Copy from journal entries each individual account amount into the ledger by account name and then created another listing of these accounts with their new balances.
Prepare the Financial Statements:

14. Income before income taxes minus income taxes 15. Retained Earnings Statement
c) Beginning retained earnings

from the trial balance sheet

a) Income Statement

plus net income taken from the income statements final amount minus dividends equals Ending Retained Earnings
d) Balance Sheet

Revenues minus expenses equal net income.

b) A Multiple-Stepped Income

Assets equal Liabilities plus Stockholders Equity. Assets are place into: Current assets; asset used up in one-year period Long-Term Investments Property, Plant, and Equipment Intangible Assets Liabilities are placed into: Current liabilities in order of highest to lowest. Long-Term Liabilities Stockholders Equity Common Stock Retained Earnings Retained Earnings amount is taking from the Retained Earnings
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Statement is broken up into these sections 1. Net Revenues 2. Gross revenues minus returns and allowances and discounts 3. Gross Profit 4. Net revenues minus cost of goods sold. 5. Operating Expenses 6. Income from Operations 7. Gross profit minus operating expenses 8. Other Revenues and Gains 9. Other Expenses and Losses 10. Income before income taxes 11. Income from operation plus or minus the subtotal of section v and vi 12. Income taxes 13. Net Income

Statements ending Retaining Earnings. Journalize and Post Closing Entries: This is the process of zeroing out all temporary accounts such as revenues, expenses, and dividend to retained earnings through the income summary account.
Prepare a Post-Closing Trial Balance: This is the last list of the

Credit: Accounts Receivable Debit: Merchandise Inventory Credit: Cost of Goods Sold c) Customer pays bill Debit: Cash Debit: Sales Discount Credit: Accounts Receivable
Journal entries for the purchase of inventory

ledger accounts with their final balances. It only includes permanent accounts, which are the only ones with a balance in them at the end of the financial period. Perpetual Inventory System:Basic Journal Entries for a Merchandising Company Journal entries for the sale of inventory a) Sale of Merchandise Debit: Cash or Accounts Receivable Credit: Revenue Account Debit: Cost of goods sold Credit: Merchandise Inventory b) Return of goods by customer Debit: Sales return or allowance
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a) Purchase of merchandise on credit Debit: Merchandise Inventory Credit: Accounts Payable b) Return of merchandise to supplier Debit: Accounts Payable Credit: Merchandise c) InventoryPayment of Freight-in Debit: Merchandise Inventory Credit: Cash d) Payment to supplier Debit Accounts Payable Credit: Cash Credit: Merchandise Inventory

Bank Reconciliations:

Stop payments NSF checks Add or Subtract Book errors Ending balances must match for bank and book side. Adjusting Entries from the bank reconciliation are from the balance per books side only Collections of notes NSF Checks Fees for check printing or service fees Errors in recording of checks Errors in recording of deposits Petty Cash Fund Two basic types of Journal Entries Setup or increase petty cash fund Reimburse money paid out from petty cash box and the recording of related expenses.

Cash balance per Bank Statement Add deposits in transit Subtract outstanding checks Add or Subtract bank errors

Cash balance per Checkbook Add: Collections of notes receivable EFT transfers Interest earned Direct Deposits Subtract: Check redeposit Service Charges Online fees Overdrafts Automatic payments

BASIC EVERYDAY JOURNAL ENTRIES

Journal Entry Account Titles Cash Common Stock

DESCRIPTION ISSUANCE OF STOCK TO INVESTORS (OWNERS) PAYMENT OF A DIVIDEND TO THE COMPANY S OWNERS WHO ARE ALSO KNOWN AS STOCKHOLDERS PURCHASE OF A LONG TERM ASSET. I.E. EQUIPMENT, FURNITURE, OR FIXTURES FOR CASH PAYMENT PURCHASE OF A LONG TERM ASSET. I.E. EQUIPMENT, FURNITURE, OR FIXTURES FOR CASH DOWN PAYMENT AND THE BALANCE ON CREDIT. ADVANCE PAYMENT FROM A CUSTOMER FOR PAYMENT OF SERVICES OR SALES TO BE PERFORMED AT A FUTURE DATE PROVIDING THE SERVICES OR SALES THAT THE COMPANY IS IN THE BUSINESS TO PERFORM FOR CASH. PROVIDING THE SERVICES OR SALES THAT EH COMPANY IS IN THE BUSINESS TO PERFORM ON CREDIT. CUSTOMER WILL PAY AT A LATER DATE IN TIME. PAYMENT OF CASH ON ACCOUNT FOR ITEMS PURCHASES EARLY ON CREDIT.

Dr XXX

CR

XXX

Dividends Cash

XXX XXX

Asset Title Cash Asset Title Cash Notes Payable

XXX XXX XXX XXX XXX

Cash Unearned Sales Revenues

XXX XXX

Cash Service Revenue

XXX XXX

Accounts Receivable Service Revenue

XXX XXX

Accounts Payable Cash

XXX XXX

DESCRIPTION RECEIVED CASH ON ACCOUNT FROM CUSTOMERS WHO OWES MONEY TO THE COMPANY FOR SERVICES OR SALES. PAYMENT OF REGULAR MONTHLY BILLS WITH CASH SUCH AS RENT, UTILITIES, OR SALARIES. RECORDING OF MONTHLY EXPENSES ON ACCOUNT (CREDIT) BILLS ACCRUED AT MONTH S END

Journal Entry Account Titles Cash Accounts Receivable

Dr XXX

Cr

XXX

Rent Expense Cash

XXX XXX

Telephone Expense Accounts Payable Prepaid Insurance Cash

XXX XXX XXX XXX

THE PURCHASE AND PREPAYMENT OF AN ASSET WITH CASH BEFORE THE COMPANY USES IT. I.E. INSURANCE, RENT, OR SUPPLIES.

THE PURCHASE AND PREPAYMENT OF AN ASSET ON CREDIT BEFORE THE COMPANY USES IT. I.E. INSURANCE, RENT, TICKETS, OR SUPPLIES.

Supplies Accounts Payable

XXX XXX

BORROWING MONEY FROM A BANK

Cash Notes Payable

XXX XXX

PURCHASE OF ITEMS FOR RESALE TO CUSTOMERS ON CREDIT

Inventory Accounts Payable

XXX XXX

BOOTH CORPORATION CONTINUING REVIEW PROBLEM1

BCCRP1 In January 2010 after having incorporated Booth Pet Supplies Corporation,

Ivory begins operations. She has decided to pursue a career in supplying custom made collars to high end pet shops around the Duke City. The following events occurred during January Date Jan. Transaction Data 5. Ivory opens a bank account for Booth Corporation. 7. Ivory invest $10,000 in cash and $6,050 in Equipment for a total of 16,050 in Booth Pet Supplies Corporation in return for common stock. 8. Booth Corporation pays $1,800 for a one-year insurance policy. 10. Ivory s husband develops a website for Booth Corporation that the corporation will use for advertising. He charges the corporation $2,400 for his work, payable at the end of February: (Because the website is expected to have a useful life of four years before upgrades are needed, it should be treated as an asset.) 12. Ivory designs a brochure to advertise the company and theproductsavailable. 14. Booth Corporation pays $1350 to purchase dog collar supplies, such asleather, clasps, andrhinestones. 17. The company needs more cash to sustain its operations. Ivory s father-in-law Anse Hatfield lends the corporation $5,400 cash, in exchange for a two-year, 10% note payable. Interest and the principal are repayable at maturity. 18. The corporation pays $1,500 for additional collar making equipment. 19. Ivory signs her first contract with Love Thy Pet Shop Inc. to deliver goodson February 14. She receives $1,000 cash down payment, in advance. 22. Ivory makes five new collars for a private dog owner and collects the $500 cash. 29. Ivory hires an assistant at an hourly wage of $8 to help with making dogcollars and some administrative duties. 30. Booth Corporations pays $250 cash to have the advertising brochures printed.

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Jan.

31. Booth Corporation pays a dividend of $50 to the common shareholder (Ivory). 31. Ivory delivers 10 rhinestones collars to Bright Beginnings Pet Shop, Ivoryleaves an invoice for $1,000 with the storeowner. The owner says he willpass it along to his accounting department and it will be paid sometime inFebruary. 31. Ivory receives a $60 invoice for use of her cell phone. She uses the cell phone exclusively for Booth Pet Supplies Corporations business. The invoice is for services provided in January; and is payable on February 4.

Instructions 1. Prepare journal entries to record the January transactions. 2. Post the journal entries to the general ledger T-accounts. 3. Prepare a trial balance at January 31, 2010 using the worksheet andthen transfer the information to a trial balance sheet.

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ADJUSTING JOURNAL ENTRIES

Journal Entry Account Titles

DESCRIPTION PREPAID EXPENSES: SUPPLIES: BEGINNING SUPPLIES PLUS ANY PURCHASES MINUS SUPPLIES ON HAND. INSURANCE: BASED ON THE AMOUNT THAT EXPIRED DURING FISCAL PERIOD. DEPRECIATION: BASED ON TYPE OF DEPRECIATION METHOD USED. UNEARNED REVENUES: ADVANCE PAYMENTS: ACCOUNTING FOR ANY AMOUNT EARNED DURING FISCAL PERIOD. DESCRIPTION

Dr

Cr

Supplies Expense Supplies Insurance Expense Prepaid Insurance Depreciation Expense Accumulated DepreciationEquipment

XXX XXX XXX XXX XXX XXX

Unearned Service Revenue Service Revenue Journal Entry Account Titles

XXX XXX

Dr

Cr

ACCRUED REVENUES: REVENUES EARNED BUT NOT YET BILLED ACCRUED EXPENSES: ACCRUED INTEREST: EXPENSE INCURRED BUT NOT YET DUE TO BE PAID. ACCRUED SALARIES: SALARIES EARNED BUT NOT DUE TO BE PAID UNTIL NEXT PAYDAY OCCURS. Interest Expense Interest Payable Salaries Expense Salaries Payable XXX XXX XXX XXX Accounts Receivable Service Revenue XXX XXX

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HOW TO CREATE A WORKSHEET FOR A CORPORATION

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STEP BY STEP INSTRUCTIONS

Always start with the name of the company, the title of the statement, and the period for which the statement is being prepared. In the case of a worksheet, it is for the month, year or fiscal period ending and the date in which that period ended.
Trial Balance:

1. From the general ledger, list all accounts even if they do not have a balance because you want them in order. The order is assets, liabilities, stockholders equity, revenues, and expenses. Place the balance before adjustments in the trial balance column. Assets, withdrawal, and expense amounts are placed in the debit column while liabilities, stockholder s equity and revenues amounts are place in the credit column. 2. Make sure to total these two columns and that they balance (end amounts are the same) before you continue with the worksheet. Double underline the totals once they balance. If for any reason, they do not balance, check your math and check for errors in your general ledger.
Adjustments:

3. In the next two columns (debit and credit), place the end of the period adjustments. You may want to journalize these adjustments before placing them on the worksheet. In this example we have adjustments a through g. a. $600 in revenue that has been earned but not yet recognized by the Company

Accrued RevenueSupplies

Accounts Receivable Pet Supplies Revenue

600 600

b. Supplies on hand were $500 therefore $300 in supplies was used during the period.

Prepaid ExpenseSupplies

Supplies Expense Supplies

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300 300

c. Depreciation on the building was $500 for the period.

Prepaid ExpenseDepreciation

Depreciation expense Accumulated Depreciation Building

500 500

d. Depreciation on the equipment was $250 for the period.

Prepaid ExpenseDepreciation

Depreciation expense Accumulated Depreciation Equipment

250 250

e. Prepaid rent that was used up during this fiscal period was $700.

Prepaid ExpenseRent

Rent Expense Prepaid Rent

700 700

f. Salaries and Wages earned but not yet paid for this fiscal period amounted to $600.

Accrued ExpenseSalaries

Salaries and Wages Expense Salaries and Wages Payable

600 600

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g. Revenues received prior to the work being performed that were earned but not yet recognized was $150.

Unearned Revenues-Pet Supplies Revenue

Unearned Pet Supplies Revenue Pet Supplies Revenue

150 150

Adjustments are based on items that experience changes due to the passage of time. These adjustments fall into the categories of: Prepaid Expenses for Short term assets, Prepaid Expenses for long term assets-Depreciation, Prepaid RevenuesUnearned Revenues, and Accrued Revenues-earned but not yet recognized revenues, and Accrued Expenses-expenses incurred but not yet recognized. 4. After you have placed the adjustments in the adjustments columns total these twocolumns to make sure they balance. Don t forget to double underline the totals.
Adjusted Trial Balance:

1. For each line item in the assets, dividends, and expenses, you will take the amount from the trail balance account then add the debit and subtract the credit from the adjustments columns. The other way is to post the adjustments to the general ledger and then list the balances after adjustments. 2. For each line item in the liabilities, stockholder s equity, and revenues, you will take the amount from the trail balance account then subtract the debit and add the credit from the adjustments columns. Again, the other way is to post the adjustments to the general ledger and then list the balances after adjustments. 3. Now total both columns in the adjusted trial balance section of the work sheet these amounts should be the same if not recheck your math and make sure everything was added and subtracted correctly. Double underline the totals at the bottom.
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Income Statement:

1. For this section of the worksheet, you will bring over from the adjusted trial balance columns the revenues to the credit column. 2. Bring over the expenses from the adjusted trial balance columns to the debit column of the income statement section. 3. Total these two columns they will not match. Subtract the smaller amount from the larger amount this will give you the value of either the net income or net loss. 4. If the amount is, net income then place the different between the two totals on the debit side under the total and then on the next line down add the two amounts, which should equal the credit amount. Place the credit balance on the same line as the new debit balance. If the amount is a net loss, place the different in the credit column and then total the amounts. Then double underline both totals.
Balance Sheet:

1. For this section of the worksheet bring over from the adjusted trial balance all of the assets, liabilities and stockholder s equity accounts. You will place the assets and dividend amounts in the debit column and the liabilities, stockholder s equity accounts in the credit column for this section. 2. Total both columns in this section they will not balance. Then bring over the net income and place it in the credit column of this section. If it is a net loss, place it in the debit column then total again, in which case both columns should balance to the same amount. Double underline both columns.

Note:

The final balance in the balance sheet section of the worksheet will not match the balance on your balance sheet due to the lack of a stockholders equity statement.

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BOOTH CORPORATION CONTINUING REVIEW PROBLEM2

BCCRP2 As of January 31, 2010, Booth Pet Supplies Corporation s month-end, the

following adjusting entry data are provided. 1. A count of the advertising brochures reveals that $25 of these items remained at the end of January. 2. Depreciation is recorded on the equipment purchased during the month. The equipment has a useful life of 5 years and is assumed to have not salvage. Booth Pet Supplies Corporation uses straight line depreciation for all equipment and round all depreciation up to whole dollars. 3. Amortization (which is similar to straight line depreciation) is recorded on the website. (Credit the Website account directly for the amount of the amortization.) The website is amortized over a useful life of 4 years and was available for use on January 10 you will take a whole month s amortization on the asset. 4. Interest of $45on the note payable is accrued. 5. One month s worth of insurance has expired. 6. Ivory receives an unexpected order and delivered two special dog collars on January 31. She charges the customer $200 each for 3 collars to be paid in the next 30 days. 7. A count reveals that $80 of the dog collar supplies were used during the month. 8. Ivory will pay her new assistant bi-weekly but he has worked three eight hour days at $8 per hour each during the month of January. 9. A utilities bill is received for $65. The bill is for services provided during the month of January and is due on February 15. 10. An analysis of the unearned sales revenue account reveals that Ivory was able to deliver two of the five collars order by Love thy Pet on January 31 since she hired an assistant. The other three collars will be delivered in early February. Instructions 1. Prepare journal entries to record the January adjusting entries. 2. Post the journal entries to the general ledger T-accounts. 3. Prepare an adjusted trial balance at January 31, 2010 using the worksheetand transferthe information to a single adjusted trial balance sheet.

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MULTIPLE-STEPPED INCOME STAT EMENT

Love Thy Pet Inc. Income Statement For the Year Ended, December 31, 2010 Sales Revenues: Sales Less: Sales returns and allowances Sales discounts Net Sales Cost of good sold Gross Profit Operating expenses: Store salaries expesne Administrative salaries expense Utilities expense Depreciation expense store equipment Freight-out Property tax expense Insurance expense Total operating expenses Income from operations Other revenues and gains: Interest revenue Gain on sale of asset Other expenses and losses: Interest expense Loss on sale of assets or casualty Income before income taxes Income tax expenses Net Income $XXX $XXX XXX XXX XXX XXX XXX

$XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX

XXX XXX XXX $XXX

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STEPS TO PREPARE A MULTIPLE-STEP INCOME STATEMENT

Prepare the header which includes the company name, the title of the statement and the period of the statement. 1. The first line of the body of the statement is a title. The title is Sales revenues: no amount in placed in the amount columns. 2. The second line of the body is the sales. Place the amount in the right hand column. Don t forget your $ sign. 3. The third line of the body is Less: Sales returns and allowances and the forth line of the body is Sales discounts. Place the amounts in the left hand column. Subtotal these two accounts by adding them together. Place the subtotal in the right hand column on the same line as Sales discounts. Don t forget the $ sign. 4. Step 5. The fifth line is titled Net sales. To get the amount you must take sales and subtract the total of sales returns and allowances plus sales discounts. Place this amount in the right hand column on the fifth line. 5. The title of line six is Cost of goods sold if you need to compute this amount use the other handout on this subject. Place the amount in the right hand column. 6. Subtract cost of goods sold from the net sales amount to get gross profit. Place this amount in the right hand column. The title for line seven is Gross Profit. 7. Line eight is just the title Operating expenses. There is no amount in either column. 8. The next few lines are a list of your operating expenses. Place the amounts for those expenses in the left hand column. In a three column statement these amounts should be in the far left hand column. These items should be listed in order of magitude (highest to lowest). 9. Total all of the operating expense and place the amount in the right hand column. Title that line, Total operating expenses. 10. The next line will be titled Other revenues and gains. This is just a title there will be no amount in either column. 11. The next few lines will be a list of other revenues and gains by account name. Add these totals together and place them in the middle or left hand column. The total of these should be kept in the middle or left hand column under the amounts. 12. The next line is titled Other expenses and losses. This again is only a title and has no amount in either column.
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13. List each of the other expenses and losses by account title. Put their amounts in the left column (if a third column is provided use the far left hand column). Total them and keep the total in the same column. 14. Subtract the expense and losses from the gains and revenues. Place the total in the right hand column on the same line as the last total in the left hand column. If the expenses are higher then the revenues then subtract the resulting amount from income from operations. 15. The next line is titled Income before income taxes. You get this amount by eiterh adding or subtracting the total of step 15 from income from operations. 16. The next line is titled Income tax expense. You get this amount from multiplying income before income tax by the income tax rate. Place this amount in the right hand column. 17. The last line is titled, Net Income. You get this amount by subtracting income tax expense from income before income taxes. The amount is placed in the right hand column with $ sing and doubled underlines.

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BASIC INSTRUCTIONS FOR RETAINED EARNINGS STATEMENT

Love Thy Pets, Inc,. Retained Earnings Statement For the Year Ended, December 31, 2010 Retained Earnings, January 1, 2010 Add: Net Income $X XX,XXX XX,XXX Deduct: Dividends Retained Earnings, December 31, 2010 STEP BY STEP DIRECT IONS Start with the three line header for each statement. First the name of the company, second the title of the statement, and last the period of which the statement is being prepared. I.e., month, quarter, or year ended. 1. On the first line in the body of the statement in the single column place the amount of the beginning retained earnings. The amount may be $0 if it is within the first financial period that they company is operating. Title the line Retained Earnings, with beginning of the fiscal period date. 2. On the second line of the body of the statement place the net income from the income statement. In the left hand column place the title Add: Net Income. An income statement must be prepared before you can complete this statement. If the company has experienced a net loss it will be deducted from the beginning retained earnings. 3. On the third line in the body of the statement add the beginning balance and the net income to get a subtotal and place the amount in the right column. The column to the left will have no description. 4. On the fourth line in the body of the statement place the dividends that was paid for the financial period of the statement. 5. On the sixth line in the body of the statement subtract the dividends from the subtotal to get the ending balance for retained earnings. Place that amount in the right column. 6. Don t forget dollar signs and underlines. Dollar signs at the top and bottom of this statement only please. Single underline for adding or subtraction and double underlines for the final total.
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X,XXX $XX,XXX

BASIC INSTRUCTIONS FOR A CLASSIFIED BALANCE SHEET

Love Thy Pet Inc,. Balance Sheet December 31, 2010 Assets Current Assets: Cash Notes Receibable Interest Receivable Pet Supplies Prepaid Insurance Prepaid Rent Total Current Assets Long-Term Investments: Investment in stock of Intel Corp. Investment in real estate Property, Plant, and Equipment: Land Building Accumulated Depreciation-Building Pet Store Equipment Accumulated Depreciation-Pet StoreEquipment Office Equipment Accumulated Depreciation-Office Equipment Intangible Assets: Trademark Total Assets Liabilities and Stockholders Equity Current Liabilities: Notes Payable Current Portion Accounts Payable Salaries Payable Unearned Sales Revenues Total Current Liabilities Long-Term Liabilities: Mortgage Payabel Notes Payable long-term portion Total Long-Term Liabilities Total Liabilities Stockholders Equity: Common Stock Retained Earnings Total Stockholders Equity Total Liabilities and Stockholders Equity $XX,XXX X,XXX XX,XXX X,XXX XX,XXX X,XXX $X,XXX X,XXX X,XXX X,XXX X,XXX X,XXX $XX,XXX X,XXX X,XXX XX,XXX XX,XXX XX,XXX XX,XXX XX,XXX X,XXX $XX,XXX

$XX,XXX XX,XXX XX,XXX X,XXX $XX,XXX XX,XXX XX,XXX XX,XXX XX,XXX XX,XXX XX,XXX XX,XXX $XX,XXX

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STEP BY STEP INSTRUCTIONS

Always start with the name of the company, the title of the statement and the period for which the statement is being prepared. In the case of a balance sheet the period is always the one single date.
Asset Section of the Classified Balance Sheet

1. On the first line of the body of the statement in the center of far left hand columns place the title Assets. No amount is required since this is only a title. 2. On the second line of the body of the statement place the title Current Assets then list all of the current assets, assets that will be used up in one year or less, in order of liquidity (how fast the assets can be changed into cash) on thefollowing lines. Place the amounts in the column second from the right. 3. Add all of the current assets together and place the subtotal in the far right hand column and label it in the far left hand column as Total Current Assets. 4. The next section will be labeled Long-Term Investments. Place this title in the far left hand column of the statement. Then list all investment in other companies stock and any purchase of real estate that the company plans to keep for a long-term investment. Any real estate is property not used to produce revenues for the company. Place the amounts in the column second to the farright hand column and add the amounts and place that subtotal in the column tothe far right hand side on the same line as the last asset. 5. The next section will be labeled, Property, Plant and Equipmet. Place this title in the far left hand column of the statement as before with titles there will be no amount in the amount columns. 6. Start with Land then Buildings, Accumulated Depreication Building, Equipment, then Accumulated Depreciation Equipment. Place the amount of the assets in the left hand column with it corsponding accumulated depreciationcontra account just below it. Land will not have 7. a accumulated depreication contra account because it does not depreciate over time as other physical assets do in a business. Subtract the accumulated depreciation amount from its asset account to get the book value of the asset. Place those totals for each asset into the middle column. Add all three more or less depending on how many of these type of assets the company owns together and place the total in the far right hand column on the last line of those types of assets.

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8. The next sectin will be labeled, Intangible assets. Place this title in the far left hand column of the statement. List any intangibles after it. Plance the amount in the far right hand column if there is only one. If there is more than one intangible asset place the amounts in the scecond to the far right hand column and only place the subtotal in the fare right hand column. 9. The last step for the asset section of the balance sheet is to total (add together) all of the amounts in the far right hand column. The title for this line will be, Total Assets. Make sure to place a double underline under the total for this line. Dollar signs are to be placed at the top of any column of numbers that are added or subtracted and at the end grand total.

Liabilities Section of the Classified Balance Sheet

1. The next section will start with the labeled, Liabilites and Stockholders Equity. Center the title in the left hand column. No amount is required since this is only a title. 2. On the next line place the label, Current Liabilities. These are liabilities that are due to be paid within the next 12 months. List accounts in order of magnitude, highest to lowest, and place the amounts in the second from the right hand column. Place the subtotal for this section in the far right hand column with the title, Total Current Liabilities placed in the far left hand column. 3. The next subsection of this section will be labeled, Long-Term Liabilities. List all of the liabilities that will be paid off in more than one year in this section. Place the amounts in the second to the right hand column. Place the subtotal for this section in the far right hand column. Label the subtotal line, Total Long-Term Liabilites. 4. The last step in this section of the balance sheet is to add up all of the amounts on the far right hand column for this section only. The subtotal for this section will stay in the far right hand column. No double underlines is required for this section because the next section will need to be added to it first. The title for this line will be, Total Liabilites. Place it in the far left hand column.

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Stockholders Equity Section of the Classified Balance Sheet

1. The title, Stockholders Equity is placed in the far left hand column at the beginning of this section. List the two accounts of common stock and retained earnings in this section. Place the amounts in the second to the far right hand column. 2. The next step is to subtotal the two accounts and place the subtotal in the far right hand column. The title for this line will be, Total Stockholders Equity. 3. The last step required for the section, Liabilities and Stockholders Equity is add together total liablities and total stockholders equity and place the amount in the far right hand column with a double underline and dollar sign. The title for this line to be placed in the far left hand column will be, Total Liabilities and Stockholders Equity.

Final Note Not all companies own the same assets or owe the same liabilities. Place only the sections you need for each company in the balance sheet of a company if the company does not have a specitic type of asset or liability feel free to leave out that section of the balance sheet. Do remember that most companies will have current assets and current liabilities. Not all companies will have long-term assets or intangible assets. Not all companies will have long-term liabilites. The Stockholders Equity is a section that all companies will have on their balance sheet.

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BOOTH CORPORATION CONTINUING REVIEW PROBLEM3

BCCRP3On January 31, 2010, Booth Pet Supplies Corporation s month-end, the

corporation will be required to prepare financial statements. Prepare end of the month financial statements (Income Statement, Retained Earnings Statement and a Balance Sheet) for Booth Pet Supplies Corporation from the adjusted trial balance.

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CLOSING JOURNAL ENTRIES

Journal Entry Account Titles

DESCRIPTION REVENUES: CLOSE ALL REVENUES TO INCOME SUMMARY EXPENSES:

Dr

Cr

Service Revenue Income Summary

XXX XXX

CLOSE ALL EXPENSES TO INCOME SUMMARY

Income Summary Salaries Expense Supplies Expense Rent Expense Insurance Expense Interest Expense Depreciation Expense Options 1 and 2 Income Summary Retained Earnings

XXX XXX XXX XXX XXX XXX XXX

INCOME SUMMARY: CLOSE THE BALANCE OF THE INCOME SUMMARY ACCOUNT INTO RETAINED EARNINGS WHEN IT IS A NET INCOME (CREDIT BALANCE) CLOSE THE BALANCE OF THE INCOME SUMMARY ACCOUNT INTO RETAINED EARNINGS WHEN IT IS A NET LOSS (DEBIT BALANCE) DIVIDENDS: CLOSE DIVIDENDS INTO RETAINED EARNINGS ACCOUNT.

XXX XXX

Retained Earnings Income Summary

XXX XXX

Retained Earings Dividends

XXX XXX

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BOOTH CORPORATION CONTINUING REVIEW PROBLEM4

BCCRP4 On January 31, 2010, Booth Pet Supplies Corporation s year-end, the corporation after preparing it financial statements, needs to prepare and post its closing entries and prepare a post-closing trial balance sheet. Booth Pet Supplies Corporation Continuing Review Problem-Closing Entries

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Instructions: From the provided adjusted trial balance prepare closing entries at years ended for Booth Pet Supplies Corporation and then prepare a post-closing trial balance sheet.

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PERPETUAL INVENTORY SYSTEM

Journal Entries for the Purchase of Inventory Journal Entry DESCRIPTION Account Titles
PURCHASE OF MERCHANDISE ON CREDIT FROM A SUPPLIER

Dr XXX

CR

Merchandise Inventory Accounts Payable

XXX

PURCHASE RETURNS AND ALLOWANCES. RETURN OF MERCHANDISE TO SUPPLIER

Accounts Payable Merchandise Inventory

XXX XXX

FREIGHT COSTS ON PURCHASES PAYMENT OF FREIGHT COST PAYMENT ON ACCOUNT TO A SUPPLIER WITH A CASH DISCOUNT. (CHECK WRITTEN TO SUPPLIER.) (USE MERCHANDISE INVENTORY ACCOUNT ONLY IF PAYMENT IS MADE DURING THE DISCOUNT PERIOD AND DISCOUNT IS RECEIVED)

Merchandise Inventory Cash

XXX XXX

Accounts Payable Cash Merchandise Inventory

XXX XXX XXX

Journal Entries for the Sale of Merchandise

SALE OF MERCHANDISE TO A CUSTOMER ON ACCOUNT (CUSTOMER USES CREDIT TO PAY FOR MERCHANDISE.)

Accounts Receivable Sales Revenue Cost of Goods Sold Merchandise Inventory

XXX XXX XXX XXX

RETURN OF MERCHANDISE SOLD. MERCHANDISE RETURNED BY A CUSTOMER FOR A CREDIT OR AN ALLOWANCE GRANTED FOR DAMAGED GOODS. (USE SECOND PART OF JOURNAL ENTRY ONLY IF MERCHANDISE IS RETURNED.) CASH RECEIVED FROM CUSTOMERS ON ACCOUNT WITH A DISCOUNT. (PAYMENT RECEIVED FROM CUSTOMER.) (USE SALES DISCOUNT ACCOUNT ONLY IF CUSTOMER PAYS WITHIN DISCOUNT PERIOD.)

Sales Returns and Allowances Accounts Receivable Merchandise Inventory Cost of Goods Sold

XXX XXX XXX XXX

Cash Sales Discount Accounts Receivable

XXX XXX XXX

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BOOTH CORPORATION CONTINUING REVIEW PROBLEM5

BCCRP5Booth Pet Supplies Corporation Continuing Review Problem-Manufacturing Company using Perpetual Inventory System Booth Pet Supply Corporation completed the following merchandising transactions in the month of June. At the beginning of June, Booths ledger showed Cash of $10,000 and Common Stock of $20,000. Date June. 1. 2. 4. 9. Transaction Data Purchased merchandise on account from Duke City Wholesale Supply for $5,600, terms 2/10, n/30. Sold merchandise on account for $4,500, terms 1/10, n/30. The cost of the merchandise sold was $2,100. Received credit from Duke City Wholesale Supply for merchandise returned $700. Received collections in full, less discounts, from customers billed on sales of $3,900 on June 2.

10. Booth Corporation paid Duke City Wholesale Supply in full, less discount. 12. Purchased merchandise for cash $3,200 and Supplies on account for $400. 15. Booth Corporation received $150 refund for return of poor-quality merchandise fromsupplier on cash purchase. 17. Purchased merchandise on account from Little Blue Dog Supplier for$1,500, terms 3/10, n/30. 19. Paid freight on June 17 purchase $250. 24. Sold merchandise for cash $5,500. The cost of the merchandise sold was $2,500. 25. Purchased merchandise on account from Hills Brothers Supply Inc. for$2,000, terms 2/10, n/30. 27. Booth Corporation paid Little Blue Dog Supplier in full, less discount. 29. Booth Corporationrefunded cash to a customer for returned merchandise with a sale value of $210. Thereturned merchandise had cost of $150. 31. Booth Corporation sold merchandise on account for $1,676, terms 2/10, n/30. The cost of the merchandise sold was $770.
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Booth Corporations Chart of Accounts (Partial) Cash Accounts Payable Accounts Receivable Common Stock MerchandiseInventory Sales Supplies Sales Returns and Allowances Sales Discounts Cost of Goods Sold
Instructions

(a) Journalize the transactions using a perpetual inventory system.

Optional Instruction

(b) Post the transactions to T accounts. Be sure to enter the beginning cash and commonstock balances. (c) Prepare an income statement through gross profit for the month of October 2010. (d) Calculate the profit margin ratio and the gross profit rate. (Assume operating expenseswere $3,200.)

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BASIC INSTRUCTIONS FOR A BANK RECONCILIATION STATEMENT

Love Thy Pet Inc., Bank Reconciliation December 31, 2010 Cash balance per bank statement Add: Deposit in transit Less: Outstanding checks Checks: No. XXX No. XXX No. XXX Adjusted cash balance per bank Cash Balance per Books Add: Collections of note receivable plus interest less service fee for collections. EFT (electronic funds transfer Interest earned Direct Deposit(s) Book errors(s) Less: ATM withdrawals Check redeposit Service charges Online fees Overdrafts Automatic payments Stop payments NSF checks Book errors Adjusted cash balance per books $X, XXX X,XXX X,XXX $X,XXX X,XXX XXX

X,XXX $X,XXX $X,XXX

$X,XXX XXX XXX XXX

X,XXX X,XXX

XXX XXX XXX XXX XXX XXX XXX XXX XXX

X,XXX $X,XXX

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STEP BY STEP INSTRUCTIONS

Always start with the name of the company, the title of the statement, and the period for which the statement is being prepared.
Bank section of a Bank Reconciliation Statement

1. Place the balance from the bank statement on the first line with the amount in the far right hand column. You find this amount in two places on the bank statement. One is Balance This Statement. Two is the balance on the last day of the month for the daily balance. 2. The first item to look for is a deposit in transit. You compare the depositson your bank statement with the deposits recorded in your checkbook register oryour cash receipts journal. Only deposits that are entered in your records and not on the bank statement are in transit. Place any amounts in the far right hand column, If a prior months bank reconciliation statement is provided always start with the deposit in transit from that statement when checking off deposits were recorded for the correct dollar and cent amount (Note: check the amounts carefully to find book errors. It could be as simple as two numbers switched ortransposed.) 3. Add the deposit in transit to the beginning balance per bank statement. 4. Next look for outstanding checks. Outstanding checks are checks that were written but have not yet cleared the bank. Compare the bank statement withyour scheck register or the cash payments journal. Checks that are entered into your records but not on the bank statement are outstanding. If a prior months bank reconciliation statement is provided then first check off the checks that have cleared from the prior month. Any checks that did not clear are still outstanding. 5. Total all of the outstanding checks and place that subtotal in the far right hand column. 6. Subtract the outstanding checks subtotal from the subtotal you got when you added the deposit in transit to your beginning balance this will give you the adjusted cash balance per bank. Title this line, Adjusted cash balance per bank in the left hand column of your statement.

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STEP BY STEP INSTRUCTIONS

Book Section of a Bank Reconciliation Statement

1. The first line of this section will be titled, Cash balance per books. You will find this amount in your checkbook register from your ending balance or by taking the ending balance from the prior month s bank reconciliation statement and adding cash receipts for the cash receipts journal and subtracting cash payments from the cash payment journal for the month to get an ending balance for the current month. Place this amount in the far right hand column. 2. Next go through the list of items below to add to your beginning balance any items that are on your bank statement which might have accoured during thepast month. These are items that the bank has recorded that you have not yetadded into your cash account. Decreption Electronic funds transfer is money transferred into the account from other accounts such as money taken from a checking account and placed into a saving account. These are money owned to your company that was collected by the bank on your behalf. Also included is any interest collected minus any collection fee charged by the bank. Some banks will pay your company interest for keeping a minimum balance in your account This is an amount deposited into your account on a regular basis. People often have their pay checks deposited into their bank accounts using direct deposit. Companies such as newspapers ofthen have their monthly subscription cost direct deposited from their customers account into a business account each month. Another example would be a refund fund from the IRS. This is where an error has been made in recording either a deposit or a check. EFT Item

Notes collected

Interest earned

Direct Deposit

Book errors

3. Total all of the items that were found in step 2 in the and place the subtotal in the far right hand colunmn. Then add that subtotal to your beginning balance.
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4. Next go through that list below for any items that you will need to subtract from your cash account. Below is a list of items that would need to be subtracted from you account so include any that were reported on the bank statement that has not yet been deducted from your cash account. Amounts of money withdrawn from the account using a plastic debit or credit card. Amounts of money that the person or company has set up to be removed from the account on a regular basis. A check(s) may be redeposited into a company account for the following reasons; duplicate payment, Unavailable merchandise, Incorrect amount, Conferense cancelled, Could not attend conference for which you wre registered, Overpayment of shipping charges, and entertainer did not perform. Charges from the bank for services performed for the company. Charges for services provided to the company by the bank online. (Through the internet.) A service provide by the banks where if your company s account goes into the negative the bank will still honor the company s checks ATM withdrawals Automatic withdrawals

Check redeposit

Service Charges Online fees

Overdrafts

A service where the bank will pay monthly expenses without Automatic payments the company having to write a chec This is where the compnay stops the bank from clearing a check that you wrote for some unforseen reason or event that you did not want the company or person to receive the money from that check. When someone writes you a check and the money to pay the check is not in their bank account and their bank will not honor their check. Errors in recording either deposits or checks made at the time of recording by the company.

Stop payment

NSF check

Book error

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5. Total all of the items in step 4 and place the subtotal in the far right hand column. Next subtract that amount from the prior total. The title for this line will be, Adjusted cash balance per books.
Notes: The adjusted cash balance per bank must equal the adjusted cash balance per

books for the bank reconciliation statement to be correct and complete. Don t forget your dollar signs and double underlines. Always check to see that the checks the bank clear on your account are from your company and not another company with a smiliar name or logo.

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ADJUSTING ENTRIES JOURNAL ENTRIES FROM BANK RECONCILIATION

Journal Entry Account Titles Cash Bank Collection Fee Expense Note Receivable Interest Revenue

DESCRIPTION
COLLECTION OF NOTE RECEIVABLE BANK COLLECTS A NOTE FROM A CUSTOMER FOR THE COMPANY. NSF CHECK CUSTOMER BOUNCED A CHECK THAT WAS WRITTEN TO THE COMPANY BANK SERVICE CHARGES CHARGES TO THE COMPANY FOR BANK SERVICES OR CHECK PRINTING CHARGES EMPLOYEE MAKES ERROR IN RECORDING ENTRY ON THE BOOK SIDE. THE CHECK WAS WRITTEN FOR LESS THAN WHAT WAS RECORD IN THE BOOKS WHEN PAYING A BILL. EMPLOYEE MAKES ERROR IN RECORDING ENTRY ON THE BOOK SIDE. THE CHECK WAS WRITTEN FOR MORE THAN WHAT WAS RECORD IN THE BOOKS WHEN PAYING A BILL. EMPLOYEE MAKES ERROR IN RECORDING ENTRY ON THE BOOK SIDE. THE DEPOSIT WAS RECORDED AS HIGHER THAN THE PHYSICAL AMOUNT DEPOSITED IN THE BANK. EMPLOYEE MAKES ERROR IN RECORDING ENTRY ON ENTRY BOOK SIDE. THE DEPOSIT WAS RECORDED AS LOWER THAN THE PHYSICAL AMOUNT DEPOSITED IN THE BANK.

Dr XXX XXX

Cr

XXX XXX

Accounts Receivable Cash Service Charge Expense Cash

XXX XXX XXX XXX

Book Errors in recording payments and cash receipts Cash Accounts Payable XXX XXX

Accounts Payable Cash

XXX XXX

Accounts Receivable Cash

XXX XXX

Cash Accounts Receivable

XXX XXX

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BOOTH CORPORATION CONTINUING REVIEW PROBLEM6

BCCRP6Booth Corporation Continuing Problem

Bank Reconciliation

The following is the bank section for Booth Pet Supplies Corporation Reconciliation Statement at July 31, 2010: Booth Pet Supplies Corporation Bank Reconciliation July 31, 2010 Cash balance per bank Add: Deposits in transit $28,557 856 29,143 Less: Outstanding checks Check Number 1052 1105 1106 1107 1109 Adjusted cash balance per bank Check Amount $ 254 831 1,000 1,543 1,785 5,413 $24,000

Please be aware that the adjusted cash balance per bank agreed with the cash balance per books at July 31.

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The August bank statement showed the following checks and deposits.

The cash journals showed the following information per books during August.

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Three bank memoranda s were contained in the bank statement: 1. A credit of 1,350 for the collection of a 1,300 note for Love thy Pets Inc. plus interest of $80 and less a collection fee of $30. Booth Pet Supplies Corporation has not accrued any interest on the note. 2. A debit for the printing of additional corporate checks $85. 3. A credit of $3 was added for interest due for maintaining a minimum bank balance of $5,000. At August 31, the cash balance per books was $19,208; and the cash balance per bank statement was $26,593. There were no errors made by the bank, but Booth Pet Supplies Corporation made two errors in recording the transactions.

INSTRUCTIONS

(a) Using the steps in the Bank Reconciliation handout, prepare a bank reconciliation statement for August 31, 2010 (b) Prepare the adjusting entries based on the bank reconciliation. (Note: The correction of any errors pertaining to recording checks should be made to Accounts Payable. The correction of any errors relating to recording cash receipts should be made to Accounts Receivable.)

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PETTY CASH FUND JOURNAL ENTRIES

Journal Entry to Either Setup a Petty Cash Fund or Increase the Amount Kept in a Petty Cash Fund Journal Entry DESCRIPTION Account Titles THE FOLLOWING IS THE JOURNAL ENTRY TO Petty Cash EITHER SETUP OR Cash INCREASE A PETTY CASH FUND. WHEN YOU START A PETTY CASH FUND YOU MUST PUT AN AMOUNT OF MONEY INTO A CASH BOX. WHEN YOU INCREASE THE AMOUNT OF CASH KEPT IN THE BOX A JOURNAL ENTRY MUST BE MADE TO THE PETTY CASH ACCOUNT.

Dr XXX

Cr

XXX

Journal Entries to Reinburse the Pretty Cash Fund THE ONLY OTHER TYPE OF JOURNAL ENTRY IS TO REPLACE THE MONEY YOU SPEND ON SMALL BILLS DURING THE MONTH. YOU MUST RECORD AS AN EXPENSE WHAT YOU SPENT THE MONEY ON AND REPLACE THE CASH IN THE BOX. THIS JOURNAL ENTRY IS USED WHEN Postage Expense XXX THE CASH IN THE BOX AND THE Freight-out Expense XXX RECEIPTS ADD UP TO THE EXACT Office Supplies Expense XXX AMOUNT IN THE PETTY CASH FUND Miscellaneous Expense XXX ACCOUNT. Cash XXX THIS JOURNAL ENTRY IS USED WHEN Postage Expense XXX THE CASH IN THE BOX AND THE Freight-out Expense XXX RECEIPTS ADD UP TO LESS THAN WHAT Office Supplies Expense XXX IS IN THE PETTY CASH FUND ACCOUNT. Miscellaneous Expense XXX Cash over or short XXX Cash THIS IS REFERRED TO AS CASH SHORT. XXX THIS JOURNAL ENTRY IS USED WHEN Postage Expense XXX THE CASH IN THE BOX AND THE Freight-out Expense XXX RECEIPTS ADD UP TO MORE THAN Office Supplies Expense XXX WHAT IS IN THE PETTY CASH FUND Miscellaneous Expense XXX ACCOUNT. Cash over or short Cash XXX THIS IS REFERRED TO AS CASH OVER XXX
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BOOTH CORPORATION CONTINUING REVIEW PROBLEM7

BCCRP7 Booth Pet Supplies Corporation Continuing Problem-Petty Cash Fund

During January, Booth Corporation experiences the following transactions in establishing a petty cash fund. Date Jan 1 A petty cash fund is established with a check for $150 issued to the petty cash fund administrator. 31 A count of the petty cash fund at the end of the month by the fund administrator shows the following items: In the cash box was: Currency Coins Total Expenditure receipts (vouchers) were: Voucher No. 101: Voucher No. 102: Voucher No. 103: Voucher No. 104: Voucher No. 105: Office supplies Telephone, Internet, and fax Void Postage Freight-out Total Total cash and receipts 31 A check was written to reimburse the fund and increase the fund to $200. 37.56 13.85 -059.50 30.00 $ 8.00 .16

INSTRUCTIONS
Journalize the entries in January to open a petty cash fund, increase the fund and to reimburse the petty cash box at the end of the month.
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