Page 182 - Accounting Principles (A Business Perspective)

4. Completing the accounting cycle

➢ What is the purpose of a post-closing trial balance?
➢ Describe some of the ways in which the manual accounting system has evolved.
➢ When did computerized accounting systems come into use?
➢ Define an accounting system.
➢ How is a classified balance sheet different than an unclassified balance sheet?
➢ Real world question Refer to "A broader perspective: Skills for the long haul" to answer the
following true-false questions:

➢ The same skills are needed at each level in a CPA firm.
➢ The two most important traits at the staff accountant level are a positive attitude and the ability
to learn quickly while adapting to unfamiliar situations.
➢ The senior accountant needs management skills in addition to technical skills.
➢ Partners become increasingly involved in technical matters and have less and less interaction
with people.
➢ Real world question Referring to the Annual report appendix in your text, identify the
classifications (or categories) of assets used by The Limited in its balance sheet.

➢ Real world question Referring to the Annual report appendix in your text, identify the
classifications (or categories) of liabilities used by The Limited in its balance sheet.

Exercises
Exercise A List the steps in the accounting cycle. Would the system still work if any of the steps were
performed out of order?
Exercise B Three of the major column headings on a work sheet are Trial Balance, Income Statement, and

Balance Sheet. Determine under which major column headings each of the following items would appear and
whether it would be a debit or credit. (For example, Cash would appear on the debit side of the Trial Balance and
Balance Sheet columns.)
Statement of
Trial Income Retained Balance
Balance Statement Earnings Sheet
Account Titles Debit Credit Debit Credit Debit Credit Debit Credit
a. Accounts Receivable
b. Accounts Payable
c. Interest Revenue
d. Advertising Expense
e. Capital Stock
f. Retained Earnings (Beg.)
g. Net income for the month
h. Retained Earnings (End)
Exercise C Assume a beginning balance in Retained Earnings of USD 84,000 and net income for the year of
USD 36,000. Illustrate how these would appear in the Statement of Retained Earnings columns and Balance Sheet

columns in the work sheet.
Exercise D In the previous exercise, if there was a debit balance of USD 216,000 in the Retained Earnings
account as of the beginning of the year and a net loss of USD 192,000 for the year, show how these would be treated
in the work sheet.
Exercise E Damon Davis was preparing the work sheet for Drano Plumbing Company. He calculated the net
income to be USD 50,000. When he totaled the Balance Sheet columns, the column totals were debit, USD

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