Understanding the Learning Objectives

Chapter 4

Understanding The Learning Objectives

Objective 1

Summarize the steps in * Analyze transactions by examining source documents.

the accounting cycle. * Journalize transactions in the journal.

* Post journal entries to the accounts in the ledger.

* Prepare a trial balance of the accounts and complete the

work sheet.

* Prepare financial statements.

* Journalize and post adjusting entries.

* Journalize and post closing entries.

* Prepare a post-closing trial balance.

Objective 2

Prepare a work sheet for * The work sheet is a columnar sheet of paper on which

a service company. * Accountants summarize information needed to make

the adjusting and closing entries and to prepare the

financial statements.

* Worksheets may vary in format. The work sheet

illustrated in the chapter has 12 columns-two each for

trial balance, adjustments, adjusted trial balance,

income statement, statement of retained earnings, and

balance sheet.

Objective 3

Prepare and income state- * The information needed to prepare the income state-

ment, statement of retained * ment is in the Income Statement columns of the work

earnings, and balance sheet. Net income for the period is the amount needed

sheet using information to balance the two Income Statement columns in the

contained in the work work sheet.

sheet. * The information needed to prepare the statement of

retained earnings is in the Statement of Retained Earn-

ings columns of the work sheet. The ending Retained

Earnings balance is carried forward to the balance

sheet.

* The information needed to prepare the balance sheet

is in the Balance Sheet columns of the work sheet.

Objective 4

Paul Hindelang

Section #0180

Acct 230 9/13/00

Prepare adjusting and * As explained in Chapter 3, adjusting entries are

closing entries using necessary to bring the accounts to their proper

information contained in balances before preparing the financial statements.

the work sheet. * Closing entries are necessary to reduce the balances

of revenue, expense, and Dividends accounts to

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zero so they are ready to receive data for the next

accounting period.

* Revenue accounts are closed by debiting them and

crediting the Income Summary account.

* Expense accounts are closed by debiting them and

crediting the Income Summary account.

* The balance in the Income Summary account re-

presents the net income or net loss for the period.

* To close the Income Summary account, the balance

is transferred to the Retained Earnings account.

* To close the Dividends account, the balance is transferred to the Retained Earnings account.

Objective 5

Prepare a post-closing * Only the balance sheet accounts have balances and

trial balance. Appear on the post-closing trial balance.

* All revenue, expense, and Dividends accounts have

zero balances and are not included in the post-closing

trial balance.

Objective 6

Describe the evolution of * Manual systems and computerized systems perform

accounting systems. the same accounting functions.

* The ease of accounting with a microcomputer has

encouraged even small companies to convert to

computerized systems.

Objective 7

Prepare a classified * A classified balance sheet subdivides the major

balance sheet. Categories on the balance sheet. For instance,

a classified balance sheet subdivides assets

into current assets; long term investments;

property, plant, and equipment; and intangible assets.

It subdivides liabilities into current l

iabilities and long-

term liabilities. Later chapters