Chapter 3, Problem 3.6AP

(a)

To determine

Adjusting entries: Adjusting entries are those entries which are recorded to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle

Accounting rules for journal entries:

1. a) To Increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
2. b) To Decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

Adjusted Trial Balance: Adjusted Trial balance is that statement which contains complete list of accounts with their adjusted balances after all relevant adjustments have been made. This statement is prepared at the end of every financial period.

Income Statement: The income statement is that financial statement which shows the net income (or loss) of the Company. In the income statement, to calculate the net income, all expenses incurred by the Company are deducted from the total revenue of the Company.

Retained earnings: The retained earnings statement is that financial statement which shows the amount of net income which is actually retained by the Company on a particular date. These earnings can be utilized by the Company for the reinvestment and to pay its debts.

Balance sheet: The balance sheet of a Company is the one of the most important financial statements because it shows the financial position of the Company.

Main components of balance sheet are assets, liabilities and stockholder’s equity are as expressed as in the following equation:

$\text{Assets }=\text{ Liabilities}+\text{Stockholders' equity}$

To indicate: Adjusting entries of the SG Company on June. 30, 2019.

(b)

To determine

To prepare: adjusted trial balance of the SG Company on June. 30, 2019.

To determine

To prepare: Income statement, Retained earnings statements and Balance sheet of the SG Company on June. 30, 2019.