Chapter 3, Problem 6PSA

To determine

Adjusting Entries:

Adjusting entries are made at the end of the year to adjust the financial position of the enterprise according to the accrual basis of accounting.

Accounting rules regarding journal entries:

• Balance increases when: Assets, losses, and expenses get debited and liabilities, gains, and revenue get credited.
• Balance decrease when: Assets, losses, and expenses get credited and liabilities, gains, and revenue get debited.

Journal Entries:

It is a book of original entries. It records and summarizes the financial transaction of an entity chronologically, generally according to the dual aspect of accounting.

Adjusted Trial Balance:

It is a statement that contains balances of all account after all the adjusting entries has been made.

Income Statement:

It is a financial statement that shows the profit and loss made by the firm in a particular accounting period.

Retained Earnings:

It is a financial statement that shows the amount of profit retained by the company for future unforeseen events.

Closing Entries:

These entries are made for those items whose balance needs to be zero for the next accounting period otherwise data from two accounting periods will get mixed.

Balance Sheet:

Balance sheet shows the financial position of a firm. It consists of assets, liabilities, and the stockholder’s equity of the company.

1.

To prepare: Ledger account, according to balance column format.

2.

To determine

To prepare: Journal entry and post them to ledger account.

3.

To determine

To prepare: An unadjusted trial balance.

4.

a.

To determine

To prepare: Adjusting entry.

b.

To determine

To prepare: Adjusting entry.

c.

To determine

To prepare: Adjusting entry.

d.

To determine

To prepare: Adjusting entry.

e.

To determine

To prepare: Adjusting entry.

5.

To determine

To prepare: An adjusted trial balance, income statement, statement of retained earnings and balance sheet.

6.

To determine

To prepare: Closing entries.

7.

To determine

To prepare: A post closing trial balance.