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ACC 113 Lecture Notes - Lecture 21: General Ledger, Trial Balance, Financial Statement

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tealmammoth179
24 Sep 2020
School
Tunxis Community College
Department
Accounting
Course
ACC 113
Professor
Muccino

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Document Summary

The source documents are the basis for journal entries, Which in turn are posted to the general ledger accounts as a means of summarising the transactions. A trial balance is then taken out to ensure that the total of the debits equals the total of the credits. End-of-period accruals, corrections and other adjustments are then incorporated via additional journal entries. A post-adjustment trial balance is taken out to ensure the total of the debits still equals the total of the credits. A business event is first recorded by the accounting system in the journal entries, based on the source documents. The simplest form of journal entries is the general journal. A journal entry can list as many accounts as are needed to record transaction, but each journal entry must be recorded, so sum of debits equals sum of credits. Every journal entry must be dated and is usually numbered.

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Related Questions

Please build the answer based on following text:

Expense accounts include expenses incurred by an organization inthe process of earning revenue during a given time period. Thesalary expense account details the debits (for example, employeesalaries and wages) and credits (for example, accrual reversals,recalls and cancelled pays) posted on the journal entries for theperiod. Entries are posted to the General Ledger at theorganization or department total level, rather than with theindividual employee details.
Since expense accounts continue to build over time and are notcleared until the end of the fiscal period, the most commonreconciliation methods used for these accounts are:
- reasonableness
- year-over-year comparison

A reasonableness test requires anindividual to examine the General Ledger account in detail and toensure that all the postings are in balance and seem valid.

By examining the payroll register or other reports providingdetails of the total amount posted to an account, it should beanalyzed whether the amount shown in the account is correct.Recalled pays, cancelled cheques and manual cheques should berecorded as they occur so that accounts reflect the most currentdata.

Cost accounting plays a significant role in expense accountreconciliation as well. An organization that uses cost accountingwill charge expenses to a department, a project or a contract,according to their internal requirements. If an employee istransferred from one department or branch to another, and thepaperwork is not processed when the change is effective, theemployee’s salary, and any associated employer expenses, will beexpensed incorrectly. A journal entry will be required to move theexpenses to the correct accounts.

As expense accounts normally have a debit balance, to reduce theexpense you credit the account and to increase the expense youdebit the account.

A year-over-year comparison wouldcompare each expense account for a certain time frame to determineif there have been material changes.

Question :

List three expense accounts related to payroll.Describe when you would expect the account to be cleared to zero.Explain the methods you could use to reconcile theseaccounts.

Please build the answer based on following text from studyingbook:

Expense Accounts. Expenses are costs incurredby an organization in the process of earning revenue during a givenperiod of time. Typical expense accounts related to payroll wouldinclude such items as wages, salaries, employer payroll expenses,and group insurance benefit expenses. Payroll expenses have adirect impact on the profitability of an organization.

In an expense account, debit entries increase the expensebalance and credit entries decrease the expense balance. Amounts inthe expense accounts are cleared to zero (or restarted at zero) atthe fiscal year-end. This is the same way the employees’ totals inthe payroll register are cleared to zero at the taxationyear-end.

Expense accounts include expenses incurred by an organization inthe process of earning revenue during a given time period. Thesalary expense account details the debits (for example, employeesalaries and wages) and credits (for example, accrual reversals,recalls and cancelled pays) posted on the journal entries for theperiod. Entries are posted to the General Ledger at theorganization or department total level, rather than with theindividual employee details.

Since expense accounts continue to build over time and are notcleared until the end of the fiscal period, the most commonreconciliation methods used for theseaccounts are:
- reasonableness
- year-over-year comparison

A reasonableness test requires anindividual to examine the General Ledger account in detail and toensure that all the postings are in balance and seem valid.

By examining the payroll register or other reports providingdetails of the total amount posted to an account, it should beanalyzed whether the amount shown in the account is correct.Recalled pays, cancelled cheques and manual cheques should berecorded as they occur so that accounts reflect the most currentdata.

Cost accounting plays a significant role in expense accountreconciliation as well. An organization that uses cost accountingwill charge expenses to a department, a project or a contract,according to their internal requirements. If an employee istransferred from one department or branch to another, and thepaperwork is not processed when the change is effective, theemployee’s salary, and any associated employer expenses, will beexpensed incorrectly. A journal entry will be required to move theexpenses to the correct accounts.

As expense accounts normally have a debit balance, to reduce theexpense you credit the account and to increase the expense youdebit the account.

A year-over-year comparison wouldcompare each expense account for a certain time frame to determineif there have been material changes.

Question :

List three expense accounts related to payroll.Describe when you would expect the account to be cleared to zero.Explain the methods you could use to reconcile theseaccounts.

On November 1, 2012 the following were the account balances ofSolo Sales and Service, Inc. The perpetual inventory method isused.

Debits Credits
Cash $4,795 Accumulated depreciation $1,000
Accounts Receivable 2,320 Accounts Payable 6,800
Supplies 1,000 Unearned Service Revenue 400
Equipment 40,000 Salaries Payable 550
Common Stock 11,000
Retained Earnings 28,365
$48,115 $48,115

During November the followingsummary transactions were completed.

Nov. 8

Paid $1,150 for salaries due employees, of which $550 is forOctober salaries payable and $600 is for November.

10

Received $1,400 cash from customers in payment of account.

11

Purchased merchandise on account from Midwest Wholesale Supplyfor $6,000, terms 2/10, n/30.

12

Sold merchandise on account for $4,500, terms 2/10, n/30. Thecost of the merchandise sold was $3,000.

15

Received credit from Midwest Wholesale Supply for merchandisereturned $200.

19

Received collections in full, less discounts, from customersbilled on sales of $4,500 on November 12.

20

Paid Midwest Wholesale Supply in full, less discount. (Don’tforget the return on the 15th.)

22

Received $1,300 cash for services performed in November.

25

Purchased equipment on account $3,000.

27

Purchased supplies on account $1,300.

28

Paid creditors $2,500 of accounts payable due.

29

Paid November rent $300.

29

Paid salaries $1,100.

29

Performed services on account and billed customers for servicesprovided $1,900.

29

Received $550 from customers for services to be provided in thefuture.

Adjustment data:

1.

Supplies on hand are valued at $1,600.

2.

Accrued salaries payable as of 11/30 are $500.

3.

Depreciation for the month is $750.

4.

$650 of the unearned service revenue has not been earned bymonth end.

Instructions

Print out the solution pages for thegeneral ledger, journal and worksheet that follow and enter thefollowing transactions (might be a good idea to use pencil):

Enter the November 1 balances in ledger accounts. Use T accountsprovided on the next page.

Enter the November transactions (not adjusting entries untilrequirement “e”) in the general journal provided on the nextpage.

Post to the ledger accounts. You will need to add someaccounts.

Prepare an unadjusted trial balance at November 30 and enter onthe worksheet. Then complete the other worksheet columns. (Seebelow.)

Worksheetrequirement: Using your unadjusted trial balance fromabove instructions and the data for adjusting entries, prepare a 10column worksheet similar to the one in the chapter 4 appendix ofyour text.

Journalize and post adjusting entries.

Prepare a multi-step income statement and aretained earnings statement for November and aclassified balance sheet at November 30. Use yourown paper. (No formatted sheets are supplied as we did for theother items.) These statements must be properlytitled/formatted.

Journalize and post closing entries.