Sandwich Center

Presentation
by :
Sandwich Centre
June 1 : Mr. Donald invested Rs 40,000 cash in Sandwich shop.
June 2 : Supplies 10 Parcel sandwich for cash Rs 2000.
June 3 : Paid rent Rs 1500.
June 4 : Bought equipments from Lotus for Rs 9000 with a down payment of Rs
3000 and agreed to pay the balance in six equal installments on the last day
of the month beginning June.
June 5 : Signed an agreement with Daisy(Birthday party) for making 5 sandwich
parcel . The agreement provide for payment of a Fee of Rs 12000 by Daisy
on completion of the work.
June 6 : Paid for a one – year fire insurance policy that will expire next May 31, Rs
720.
June 5 : Received fee for Sandwich Parcel supplied Rs 2000.
June 8 : Collected from a customer , for services to be provide later, Rs 1500.
June 9: Bought Raw material supplies on credit from Reliance Fresh, Rs 3500.
June10 : Gummy bear co. for Sandwich parcel completed, Rs 9000.
June 12: loan from family member of Rs 10000.
June 14: Paid Reliance Fresh on account Rs 1000.
June 18: Collected from bear co. Rs 4000.
 Trial Balance
The trial balance is the list of ledger balances on a specified data. It is a basic check on the
bookkeeping process.

Sandwich Centre : Trial Balance , June 30,20XX

Account Debit Credit
Equipments and tools 9000
Supplies 5500
Debtors 5000
Cash 45080
Prepaid Insurance 720
Creditors 7500
Unearned Revenue 1500
Electricity Expenses Payable 150
Capital 40000
Loan 10000
Furniture 2200
Revenue from Services 11000
 Trial Balance
The trial balance is the list of ledger balances on a specified data. It is a basic check on the
bookkeeping process.
Account Sandwich Centre : Trial Balance , June
Debit Credit30,20XX
Salaries Expenses 800
Electricity Expenses 150
Telephone
Rent
TOTALExpenses
Expenses 200
1500
70,150 70,150
 What is a Worksheet?
• Multiple-column form used
for the adjustment process
and preparing financial
statements
• Working tool for the
accountant
• Not a permanent accounting
record
• Eases preparation of
adjusting entries and
financial statements
Example of a Wor k Sheet
 To Prepare A Work Sheet:

1 Prepare the trial balance

2 Enter adjustments in the adjustments
columns
3 Enter adjusted balances in adjusted trial

balance columns

4 Extend adjusted trial balance amounts to
the appropriate financial statement
columns
5 Total the statement columns, compute net

income (loss), and complete the work

sheet Now , let ’ s see how this works !
Account Trial Balance Adjusted
Adj.
Trial
P& L AccountBalance
Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Equipmen 9000
ts and
Acc.
tools Dep. First
First,, enter
enter
Supplies 5500 the
the
Debtors 5000 unadjusted
unadjusted
Cash 45080 trial
trial
Pre. Ins. 720 balance
balance
Creditors 7500 amounts
amounts to
to
Electricity 150 the
the
Exp. worksheet
worksheet!!
payable
Unearned 1500
Revenue
Capital 40000
Account Trial Balance Adjusted
Adj.
Trial
P& L AccountBalance
Balance Sheet

Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Loan 10000
Revenue 11000
from
Service First
First,, enter
enter
Salary 800 the
the
exp. unadjusted
unadjusted
Electricity 150
trial
trial
Expenses
balance
balance
Telephone200
Expenses
amounts
amounts to
to
the
the
Rent 1500
Exp.
worksheet
worksheet!!
Furniture 2200
Total 70,150 70,15
Account Trial Balance Adjusted
Adj.Trial
P& L AccountBalance
Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Next
Cr. ,, enter
Next enter the
the
Dr. Cr.
adjustments
adjustments!!
Equipmen 9000
ts and
Dep.
tools 150
Supplies 5500 2100 (a) Depreciation expenses, Rs 150.
Debtors 5000 (b)Consumption of supplies, Rs 2100
CashIns. 720
Pre. 45080 60
Creditors 7500
Electricity 150 (c)Expiration of prepaid Insurance, Rs 60.
Exp.
payable
Unearned 1500 900
Revenue
Capital 40000 (d)Revenue earned out of
unearned revenue, Rs 900
Account Trial Balance Adjusted
Adj.
Trial
P& L AccountBalance
Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Next Cr. ,, enter
Next Dr. Cr.
enter the
the
adjustments
adjustments!!
Loan 10000
Revenue 11000 900
from (d)Revenue earned out of
Service 700 unearned revenue, Rs 900
Salary 800 500
(e)Unbilled Revenue, Rs 700
exp.
Electricity 150 (f)Salary payable, Rs 500
Expenses
Telephone200
Expenses
Rent 1500
Exp.
Furniture 2200
Total 70,150 70,15
Insurance 0 60
expense
Account Trial Balance Adjusted
Adj.Trial
P& L AccountBalance
Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. NextCr. ,, enter
Next Dr. Cr.
enter the
the
adjustments
adjustments!!
Supplies 2100
Expenses
Acc. 150
Deprecati
on
Salary 500
Payable
Unbilled 700
Revenue
Total 4410 4410
Account Trial Balance Adjusted
Adj. TrialP& L Account
Balance
Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Equipmen 9000 9000

ts and
Dep.
tools 150(a) 150
Supplies 5500 2100(b 3400
Debtors 5000 ) 5000
CashIns. 720
Pre. 45080 45080
60(c) 660
Creditors 7500 7500
Prepare
Prepare
Electricity 150 150 the
the
Exp. adjusted
adjusted
payable
Unearned 1500 900 600 trial
trial
Revenue (d) balance
balance!!
Capital 40000 40000
Account Trial Balance Adjusted
Adj.
TrialP& L Account
Balance
Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Loan 10000 10000

Revenue 11000 900 12600
from (d)
Service 700
Salary 800 500 (e) 1300
exp.
Electricity 150 (f) 150
Expenses
Telephone200 200 Prepare
Prepare
Rent 1500 1500 the
the
Exp. adjusted
adjusted
Furniture 2200 2200 trial
trial
Total 70,150 70,15 balance
balance!!
Insurance 0 60 60
expense
 Balance Sheet
Loan 10000 10000
Revenue 11000 900 12600
from (d)
Service 700
Salary 800 500 (e) 1300
exp. (f)
Electricity 150 150
Expenses
Telephone200 200
Expenses
Rent 1500 1500 Prepare
Prepare
Exp.
Furniture 2200 2200 the
the
Total 70,150 70,15 adjusted
adjusted
trial
trial
Insurance 0 60 60 balance
expense balance!!
Account Trial Balance Adjusted
Adj.TrialP& L Account
Balance
Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Supplies 2100 2100

Expenses
Acc. 150 150
Deprecati Prepare
Prepare
on the
the
Salary 500 500 adjusted
adjusted
Payable
Unbilled 700 700 trial
trial
Revenue balance
balance!!
Total 4410 4410 71500 71500
Account Trial Balance Adjusted
Adj. TrialP& L Account
Balance
Balance Sheet
ThenDr.,, extend
Then Cr.
extend the
theCr.adjusted
Dr. Dr. Cr.
adjusted trial
trialDr.balance
Cr. Dr. Cr.
balance
amounts
amounts to to the
the financial
financial statements
statements!!
Equipmen 9000 9000
ts and
Dep.
tools 150(a) 150
Supplies 5500 2100(b 3400
Debtors 5000 ) 5000
CashIns. 720
Pre. 45080 45080
60(c) 660
Creditors 7500 7500
Electricity 150 150
Exp.
payable
Unearned 1500 900 600
Revenue (d)
Capital 40000 40000
Account Trial Balance Adjusted
Adj.
TrialP& L Account
Balance
Balance Sheet
Dr.,, extend
Then
Then Cr.
extend Dr.
theCr.adjusted
the Dr. Cr. trial
adjusted Dr. balance
trial Cr. Dr. Cr.
balance
amounts
amounts to to the
the financial
financial statements
statements!!
Loan 10000 10000
Revenue 11000 900 12600 12600
from (d)
Service 700
Salary 800 500 (e) 1300 1300
exp.
Electricity 150 (f) 150 150
Expenses
Telephone200 200 200
Expenses
Rent 1500 1500 1500
Exp.
Furniture 2200 2200
Total 70,150 70,15
Insurance 0 60 60 60
expense
Account Trial Balance Adjusted
Adj.TrialP& L Account
Balance
Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Supplies 2100 2100 2100

Expenses
Acc. 150 150 150
Deprecati
on
Salary 500 500
Payable
Unbilled 700 700
Revenue
Total 4410 4410 71500 71500

Then
Then,, extend
extend the
the adjusted
adjusted trial
trial balance
balance
amounts
amounts toto the
the financial
financial statements
statements!!
Account Trial Balance Adjusted
Adj. TrialP& L Account
Balance
Balance Sheet
ThenDr.,, extend
Then Cr.
extend the
theCr.adjusted
Dr. Dr. Cr.
adjusted trial
trialDr.balance
Cr. Dr. Cr.
balance
amounts
amounts to to the
the financial
financial statements
statements!!
Equipmen 9000 9000 9000
ts and
Dep.
tools 150(a) 150 150
Supplies 5500 2100(b 3400 3400
Debtors 5000 ) 5000 5000
CashIns. 720
Pre. 45080 45080
60(c) 660 45080
660
Creditors 7500 7500 7500
Electricity 150 150 150
Exp.
payable
Unearned 1500 900 600 600
Revenue (d)
Capital 40000 40000 40000
Account Trial Balance Adjusted
Adj.
TrialP& L Account
Balance
Balance Sheet
Then
Then,, extend
extend the
the adjusted
adjusted trial
trial balance
balance
Dr. Cr.
amounts
amounts to Dr.
to theCr. Dr.
the financialCr. Dr.
financial statementsCr. Dr.
statements !! Cr.

Loan 10000 10000 10000

Revenue 11000 900 12600 12600
from (d)
Service 700
Salary 800 500 (e) 1300 1300
exp.
Electricity 150 (f) 150 150
Expenses
Telephone200 200 200
Expenses
Rent 1500 1500 1500
Exp.
Furniture 2200 2200 2200
Total 70,150 70,15
Insurance 0 60 60 60
expense
Account Trial Balance Adjusted
Adj.TrialP& L Account
Balance
Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Supplies 2100 2100 2100

Expenses
Acc. 150 150 150
Deprecati
on
Salary 500 500 500
Payable
Unbilled 700 700 700
Revenue
Total 4410 4410 71500 71500

Then
Then,, extend
extend the
the adjusted
adjusted trial
trial balance
balance
amounts
amounts toto the
the financial
financial statements
statements!!
 Total
Account statement
Total Trial Balance columns
statement compute
columns,,Adjusted income
Adj. Trial
compute or
or loss
P& L Account
income Balance
loss,,
and
and balance
balance columns
Balance
columns.. Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Equipmen 9000 9000 9000

ts and
Dep.
tools 150(a) 150 150
Supplies 5500 2100(b 3400 3400
Debtors 5000 ) 5000 5000
CashIns. 720
Pre. 45080 45080
60(c) 660 45080
660
Creditors 7500 7500 7500
Electricity 150 150 150
Exp.
payable
Unearned 1500 900 600 600
Revenue (d)
Capital 40000 40000 40000
 Total
Account statement
Total Trial Balance columns
statement columns,, compute
Adjusted
Adj. income
TrialP&
compute or
L Account
income loss
Balance
or loss,,
and
and balance columns
Balance
balance columns.. Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Loan 10000 10000 10000

Revenue 11000 900 12600 12600
from (d)
Service 700
Salary 800 500 (e) 1300 1300
exp.
Electricity 150 (f) 150 150
Expenses
Telephone200 200 200
Expenses
Rent 1500 1500 1500
Exp.
Furniture 2200 2200 2200
Total 70,150 70,15
Insurance 0 60 60 60
expense
Account Trial Balance Adjusted
Adj.Trial
P& L AccountBalance
Total
Total statement
statement columns
columns ,, compute
compute income
Balance or
or loss
income Sheet loss,,
and
and balance
balance columns
columns..
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Supplies 2100 2100 2100

Expense
sAcc. 150 150 150
Deprecat
ion
Salary 500 500 500
Payable
Unbilled 700 700 700
Revenue
Total 4410 4410 7150 7150 5460 12600 66040 58900
0 0
Net Profit 714 7140
0
12600 12600 66040 66040
 Sandwich Centre
Balance Sheet ,June 30, 20XX
Amounts are in rupees
Particular
Assets
Equipments and tools 9000
supplies
Less- Acc. Dep. 150 3400
8850
Debtors 5000
Cash 45080
Prepaid Insurance 660
Unbilled Revenue 700
Total Assets 63690
Liabilities
Creditors 7500
Electricity Expenses 150
Payable
 Sandwich Centre
Balance Sheet ,June 30, 20XX

Amounts are in rupees

Particular
Salaries expenses 500
Unearned Revenue 600
Loan 10000
Total liabilities 18750
Equity
Capital 40000
Retained Earning 4940
Total equity 44940
Total liabilities and equity 63690
 CLOSING ENTRIES

• Closing entries
– Transfer net income (loss) and owner’s drawings
to owner’s capital
– Journalizing and posting is a required step in the
accounting cycle
• Income Summary
– A temporary account
– Used in closing revenue and expense accounts
– Minimizes the details in the permanent owner’s
capital account
 Closing Process
• Resets revenue,
expense and Id e n tify a cco u n ts fo r
withdrawal clo sin g .
account balances
to zero at the
end of the R e co rd a n d p o st
period. clo sin g e n trie s .
• Helps summarize a
period’s
revenues and P re p a re p o st- clo sin g
expenses in the tria l b a la n ce .
Income Summary
account.
 Temporary and Permanent
Accounts
Revenues Assets

Liabilitie
Withdrawal

Capital
Expenses

Owner ’ s
Te m p o ra r Permanent
Accounts

s
y s
A cco u n ts

Income
Summary The
The closing
closing
process
process applies
applies
only
only to
to temporary
temporary
accounts.
accounts.
 Recording Closing Entries

ΠClose Revenue
L e t’ s se e h o w
accounts to
Income Summary. th e clo sin g
p ro ce ss w o rk s !

 Close Expense
accounts to
Income Summary.

Ž Close Income
Summary account
to Owner’s Capital.

 Close Withdrawals to
 FLOWCHART of CLOSING PROCESS
( CLOSE INCOME ACCOUNT ) P & L
INCOME ( CLOSE EXPENSE SUMMARY
12 , 000 ACCOUNTS ) 28 , 500
28 , 500 4 , 450
7 , 500 24,050
SALARY 9EXP
, 000 24 , 050
( CLOSE P & L SUMMARY )
1 , 500 CAPITAL ACCOUNT
1 , 8003 , 300
RENT EXP
2 , 500 24 , 050

800 DRAWINGS
800
SUPPLIES EXP 2 , 50 2 , 500
0
350
350
( CLOSE DRAWINGS ACCOUNT )
 Closing Revenue Account
Date Particular Lf Debit Credit
June Revenue from Services 12600
30 To Profit and Loss 12600
account
(Being close the Expenses
Closing Expenses Accounts
accounts)

Date Particular Lf Debit Credit

June Profit and Loss account 5460
30 To Salaries Expenses 1300
To Supplies Expenses 2100
To Electricity 150
Expenses 200
To Telephone 1500
Expenses 60
To Rent Expenses 150
To Insurances
 Closing Profit and Loss
Account
Date Particular Lf Debit Credit
June Profit and Loss account 7140
30 To Retained Earnings 7140
(Being close the Profit & loss
accounts)
 POST-CLOSING TRIAL BALANCE

 After all closing entries have been journalized

the post-closing trial balance is prepared from
the ledger.


The purpose of this trial balance is to



 prove the equality of the permanent account

balances that are carried forward into the

next accounting period.
Post-Closing Trial Balance

L e t’ s lo o k a t
F a stF o rw a rd ’ s
• List of permanent
p o st- clo sin g
accounts and
tria l b a la n ce .
their balances
after posting
closing entries.

• Total debits and

credits must be
equal.
 The Post – closing Trial Balance
The post – closing trial balance the balances in assets ,liability, share capital and retained
earning accounts.
Sandwich Centre : Trial Balance , June 30,20XX
Account Debit Credit
Equipments and tools 9000
Accumulated Depreciation 150
Supplies 3400
Debtors 5000
Cash 45080
Prepaid Insurance 660
Unbilled Revenue 700
Creditors 7500
Unearned Revenue 600
Electricity Expenses Payable 150
Capital 40000
Loan 10000
Retained earning 4940
Salaries payable 500
63840 63840
Total
 Reversing Entries
 Reversal of accrual entries
– Dated the first day of the subsequent
accounting period
– Exactly reverse certain adjusting entries
– An accounting technique used to simplify the
recording of regular transactions in the next
period
– Most often used to reverse two types of
adjusting entries: accrued revenues and
accrued expenses
– Purpose is to simplify the recording of a
subsequent transaction related to an adjusting
entry
 Reversing Entries (cont’d)
Adjusting entry : ( 30 June )
 Dr Salary Expense 500
 Cr Salary Payable 500

Reversing
Reversing entry
entry:: ((11 July
July))
Dr
Dr Salary
Salary Payable
Payable 500
500
Cr
Cr Salary
Salary Expense
Expense 500
500

Earlier , we closed Salaries Expenses and transferred the

balance to Profit and loss account. Salaries Payable is a
balance sheet item and we will carry it to forward to July.
 Reversing Entries (cont’d)

• Not required for all adjusting entries

• Only used where adjustment is
temporary
– Accrued expenses
– Accrued income
– Prepayments originally recorded as
expenses
– Unearned income originally recorded
as income
 Key points to be
Remember
Work sheet
When it is used :
financial statements are prepared from the work
sheet adjustments are journalized and posted
from the work sheet after financial statements,
so management can receive the financial
statements more quickly.
 ABOUT CLOSING ENTRIES
Be Careful!


• Avoid doubling revenue and expense

balances – watch debits and credits
• Remember: owner’s drawing does not move
to the Income Summary account. Owner’s
drawing is not an expense and it is not a
factor in determining net income.
 Reference
1) Financial Accounting by R. Narayanaswamy.
2) Accounting by Hoggett Edwards Medlin.
3) Accounting 211 Instructor: Professor John Ahmad
4)

Thank you
End Show