Chapter 4, Problem 5PSA

(a)

To determine

Journal Entries: Entries to record the financial transactions during each accounting period are called journal entries. Income, liabilities and the giver are credited if the balance is increased and debited if the balance is reduced Expenses, assets and the receiver are debited if the balance is increased and credited if the balance is reduced in a journal entry.

To record: The July transactions in the journal entries and ledger accounts.

(b)

To determine

To prepare: The trial balance of Company A at July 31 on the worksheet.

(c)

To determine

Worksheet: A worksheet is the summary of accounting information that is prepared to ensure that the accounts are recorded correctly for financial statements preparation. It reflects the temporary and permanent account both.

To prepare: The complete worksheet of Company A at July 31.

(d)

To determine

Income Statement: Income statement is a part of financial statements. It depicts the profit or loss, a company has, in a financial year. The balances of revenues and expense accounts from trial balance are recorded in this statement.

Owners’ Equity Statement: Statement of retained earnings is a part of financial statements. It records the part of the profit or loss that was transferred to shareholders’ capital and it also represents the change in equity. It is a major source of information for the shareholders and the potential investors.

Classified Balance Sheet: A balance sheet is a statement showing position of all assets, liabilities and equity of the company at a specific time. When assets, liabilities and shareholders’ equity are further sub-categorized to make it more readable and understandable then it is called classified balance sheet.

To prepare: The income statement, owners’ equity statement and a classified balance sheet for Company A.

(e)

To determine

Adjusting Journal Entries: Companies need to record the journal entries at the end of accounting period to apply the matching and revenue recognition principles. These journal entries are adjusting entries.

To record: The adjusting journal entries and post those to ledger accounts.

(f)

To determine

Closing Entries: Journal entries, which transfer the balances from temporary accounts to income summary or retained earnings account, are called closing entries. The revenues accounts are debited and the expenses are credited in these entries because their balances are transferred.

To record: The closing entries and post those to ledger accounts.

(g).

To determine

To prepare: The post-closing trial balance for Company A.