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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.

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

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