Accounting Unit 4

Question 1

The worksheet

Answer 1

An informal business paper used to organize and plan for the financial statements

Question 2

Steps of worksheet

Answer 2

1 The worksheet starts with three columns to hold the acc titles and trial balance amounts
2 The next two columns are used for adjustments to account balances
3 Income statement data in the trial; balance columns are copied to the income statement columns. IF ACC IS AFFECTED BY AN ENTRY IN THE ADJUSTMENTS COLUMN, then a new amount is calcualted before copied.
4 Balance sheet data in the trial balance columns r copied to the balance sheet columns. If acc is affected by entry in the adj columns, then a new amount is calculated before it is copied.
5 columns r totaled, net income is revealed and the worksheet is balanced and ruled to prove the equality of the ledger.

Question 3

Balancing the worksheet step by step

Question 4

Preparing the financial statements

Answer 4

you will have all the acc that you require already totaled

Question 5

Journalising and posting the adjusting entries

Answer 5

once the worksheet is completed, the adjusting entries must be recorded in the books of acc, only then will the ledger acc balances match the numbers reported on the finanacial statements

Question 6

Real accounts

Answer 6

have balances that continue into the next fiscal period

Question 7

Nominal accounts

Answer 7

have balances that don’t continue into the next fiscal period

Question 8

Closing entry 1- revenue

Answer 8

-u need to reset this normal acc to zero
-instead of directly crediting the capital acc, many accountants use a temporary acc called income summary

Question 9

Income summary

Answer 9

will summarize revenues and expense amounts in one ledger acc. This ledger acc will then reveal the amount of net income/loss

Question 10

Closing Entry #2- Expenses

Answer 10

Since expense acc has Dr balance, cr entries r needed to bring expenses to balance to zero

total expense acc will be dr to income

Question 11

Closing Entry #3- Income

Answer 11

Temporary acc and must also be closed at end of fiscal period

If cr balance needs dr entry to clear it

Question 12

Closing Entry #4- drawings

Answer 12

transfers balance of drawings to capital acc

has a dr balance, a cr entry is needed to balance

Question 13

Closing Entry #4- drawings

Answer 13

transfers balance of drawings to capital acc.
has a dr balance, a cr entry is needed to balance

Question 14

RED

Answer 14

red acc have all been balanced to zero and the net effects of theu balances have been returned to capital acc at yeat-end

Question 15

Complete acc cycle

Answer 15

1 transactions occur
2 Acc entries recorded in the journal
3 Journal entries posted to the ledger acc
4 Ledger balanced by means of trial balance
5 work sheet prepared
6 formal income statement/balance sheet prepared
7 adjusting entries/closing entries journalized and posted
8 post closing trial balance

Question 16

depreciation

Answer 16

a way to allocate the cost of a long term asset over its useful productive life

Question 17

Two methods of calculating depreciation

Answer 17

Straight line - divides the net cost of the asset equally over the years of the assets life

Declining balance- calculated the annual depreciation by multiplying the underpreciated cost of the asset by a fixed percentage

Question 18

Straight-line depreciation formula

Answer 18

go cost of asset - estimated salvage val/ estimated # of periods in the life of the asset

Question 19

Half year rule

Answer 19

in the year a buisness buys a long-term asset, the CRA is unconcerned abt the number of months the asset was owed. The CRA allows only %50 of an asset cost