Chapter 5, Problem 5.1CACR

(a)

To determine

Journal: Journal is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts.

T-Account: T-Account is a form of ledger account in which the debit entries are shown at the left side of the account and credit entries are shown at the right side of the account.

Adjusting Entries: Adjusting entries are those entries which are recorded in the books at the end of an accounting period in order to recognize the incomes and expenses in the period in which they were earned or incurred.

Adjusted Trial Balance: An adjusted trial balance refers to the final trial balance resulting after posting the adjusting entries at the end of the period.

Income Statement: Income Statement is prepared by all the companies by enumerating all the expenses and revenues in the statement to calculate the resulting difference of Net Profit or Net Loss.

Retained Earnings Statement: Retained Earnings Statement is the statement showing the balance of retained earnings left at the end of the period after including the net profit for the period and distributing the dividend to the stockholders.

Classified Balance Sheet: A classified Balance Sheet represents the financial information under different heads of classification in order to make it easy for the users of financial statements to understand the financial position of the company.

Classification Heads

• Current Assets
• Long-Term Investments
• Property Plant and Equipment
• Intangible Assets
• Current Liabilities
• Long-Term Liabilities
• Stockholder’s Equity

To Prepare: (a) Journal entries for December, (b) T-Accounts of ledgers, (c) Adjusting entries, (d) Adjusted Trial Balance and (e) Income Statement, Retained Earnings Statement and Balance Sheet.

(b)

To determine

To prepare: Prepare T-Accounts.

(c)

To determine

Journalize and post adjusting entries.

(d)

To determine

Prepare an adjusted trial balance.

(e)

To determine

To prepare: Income Statement, Retained Earnings Statement and Classified Balance Sheet.