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19 terms

Accounting Cycle for a Merchandising Company

This is a comprehensive example of the accounting cycle. Assume a merchandise company experienced the following events during the first month. Identify the accounts that are debited and credited. Journalize, post, and create a trial balance, make adjusting entries, prepare an adjusted trial balance, complete the financial statements, journalize and post closing entries, and create a post-closing trial balance.
STUDY
PLAY
Step 1 - Analyze and Journalize
Analyze and Journalize each of the following Transactions using a General Journal Page 1
(journal will be provided by the teacher or you can download from the Advanced Accounting LiveBinder - Accounting documents tab.)
01-1 Issued $500,000 of capital stock to owners.
Debit: Cash
Credit: Capital Stock
01-2 Obtained a loan for $200,000 from the bank.
Debit: Cash
Credit: Bank Loan Payable
01-3 Equipment was purchased for $400,000 cash.
Debit: Equipment
Credit: Cash
01-4 Merchandise Inventory was purchased for $250,000 on account
Debit: Inventory
Credit: Accounts Payable
01-15 Employees who earned $5,000 this period were paid.
Debit: Salary Expense
Credit: Cash
01-16 A utility bill for $1,500 was received, but not paid.
Debit: Utility Expense - $1,500
Credit: Utilities Payable - $1,500
01-17 Merchandising inventory costing $100,000 was sold to customers for $175,000 on account.
Debit: Accounts Receivable - $175,000
Credit: Sales - $175,000
Debit: Cost of Goods Sold - $100,000
Credit: Inventory - $100,000
01-26 Customers paid $80,000 on their accounts
Debit: Cash - $80,000
Credit: Accounts Receivable - $80,000
01-29 Dividends of $5,000 were paid
Debit: Retained Earnings - $5,000
Credit: Cash - $5,000
Step 2 - Post General Journal Entries to the General Ledger and/or subsidiary ledgers
Stop and Post Journal Entries to the Individual Ledger Accounts using the General Ledger sheets provided by the teacher or you can download from the Advanced Accounting LiveBinder - Accounting documents tab.
Step 3 - Prepare a Trial Balance
Prepare a Trial Balance
(Trial Balance sheets will be provided by the teacher or you can download from the Advanced Accounting LiveBinder - Accounting documents tab.)
Step 4 - Enter Adjusting Entries & then post to the ledger
Enter the following adjustments for depreciation and accrued interest.
01-31 Depreciation on the equipment is estimated at $4,000.
Debit: Depreciation Expense - $4,000
Credit: Accumulated Depreciation - $4,000
01-31 Accrued interest on the loan is $1,875.
Debit: Interest Expense - $1,875
Credit: Interest Payable - $1,875
Step 5 - Prepare an adjusted trial balance
Use the forms provided to prepare an adjusted trial balance.
Step 6 - Prepare the financial statements using the information in the adjusted trial balance or the Ledger
Prepare an
- Income Statement
- Statement of Retained Earnings
- Balance Sheet
Step 7 - Closing Entries
Record the closing entries in the general journal and post to the ledgers.
Step 8 - Prepare a Post-Closing Trial Balance
Prepare a Post-Closing Trial Balance