Q4_W6_FundamentalsOfAcconting,Business and Management1.pptx

For FABM 1

1. Accounting Cycle for Merchandising-Type Businesses: Trial Balance Quarter 4 - Week 6 Fundamentals of Accountancy, Business, and Management 1 Accountancy, Business, and Management ‹#›

2. ‹#› At the end of this lesson , you should be able to do the following: Define trial balance. Prepare a trial balance for a merchandising business.

3. ‹#› How can a trial balance affect the financial report of a merchandising business?

4. Purpose and Concept of a Trial Balance The trial balance lists all the debit and credit balances of the accounts from the general ledger. ‹#›

5. Purpose and Concept of a Trial Balance It is a basis for preparing financial statements in the accounting worksheets. ‹#›

6. consists of the name of the business, the type of financial document (Trial Balance) the accounting period covered Type of Financial Document Preparing a Trial Balance of a Merchandising Business ‹#›

7. written in the first line of the heading If information is lacking, the owner's name replaces the business name. Type of Financial Document Preparing a Trial Balance of a Merchandising Business ‹#›

8. listed on the last line of the heading following the format: month, date, and year Heading (Accounting Period) Preparing a Trial Balance of a Merchandising Business ‹#›

9. Preparing a Trial Balance of a Merchandising Business ‹#› J and R General Merchandise Trial Balance December 31, 202X Heading

10. consists of account titles debit and credit balances taken from the ledger Body Preparing a Trial Balance of a Merchandising Business ‹#›

11. accounts that have outstanding balances must be organized in the trial balance in the following order: assets, liabilities, capital, income, and expense Body (Account Titles) Preparing a Trial Balance of a Merchandising Business ‹#›

12. Preparing a Trial Balance of a Merchandising Business ‹#› Body J and R General Merchandise Trial Balance ’December 31, 202X Account Titles Debit Credit Cash xxx Accounts Payable xxx J and R, Capital xxx Sales xxx Salaries Expense xxx Total xxx xxx The totals s hould be equal

13. Trial Balance Preparation ‹#› Washington Streetwear Co. is a boutique that provides different clothing that is comfortable and trendy. Below are the T-accounts of the business for the month of May 202x. Washington Street Co. T-Accounts and Trial Balance

14. Trial Balance Preparation ‹#›

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19. Errors in the Preparation of a Trial Balance Erroneous journalizing incorrect account title recorded may result in an error and poor analysis of transactions Erroneous posting all entries in the general journal should be transferred to the ledger Ex. if there are 50 entries in the general journal, there should also be 50 postings ‹#›

20. On June 15 202x, Manila Clothing received a check amounting to ₱500,000.00 from a customer for merchandise to be delivered on July 15. The transaction was journalized as follows. 6/15 Cash 500,000 Unearned Revenue 400,000 Error: The entry shows an incorrect amount in the credit side. Erroneous Journalizing ‹#›

21. Henry used 15 different accounts in the general journal. However, upon posting the transactions in the general ledger, he only created 14 T-accounts. Error: The number of accounts used in the general journal should also reflect the number ledgers created when posting transactions. Erroneous Posting ‹#›

22. Errors in the Preparation of a Trial Balance Mathematical m istakes footing errors that could be made during ledger postings and trial balance preparations Omissions when a transaction was not recorded in the journal o r when the entries were not posted in the ledger ‹#›

23. The ending balance of Mary’s cash accounts shows a balance of ₱525,000. In the trial balance, the cash account is amounting to ₱552,000. Error: The amount plotted in the trial balance is different from what is posted in the ledger. Mathematical Mistakes ‹#›

24. Kelly Merchandise did not record the bill received from the electric provider since the business will settle the payment next month. Error: The business disregards the bill received even though it should be recorded in the journal. Omissions ‹#›

25. Rocky Mountain Chocolate Factory, Inc. is a manufacturer and retailer of chocolate products. The business regularly prepares financial statements to be filed with the Securities and Exchange Commission. Accounting Cycle: Rocky Mountain Chocolate Factory Inc. ‹#› Shannon, Kellie A., "A Compilation of Analyses of Financial Reporting" (2018). Honors Theses. 535. https://egrove.olemiss.edu/hon_thesis/535 last accessed on May 16, 2022.

26. Preparing financial statements requires a long process referred to as the accounting cycle, which consists of identifying and analyzing financial transactions, recording journal entries, posting the entries to the general ledger, preparing an unadjusted trial balance, recording adjusting journal entries, preparing an adjusted trial balance, creating the financial statements, and recording closing entries. Accounting Cycle: Rocky Mountain Chocolate Factory Inc. ‹#› Shannon, Kellie A., "A Compilation of Analyses of Financial Reporting" (2018). Honors Theses. 535. https://egrove.olemiss.edu/hon_thesis/535 last accessed on May 16, 2022.

27. Rocky Mountain Chocolate Factory's transactions were recorded in journal entries, and changes in each account were accumulated in the unadjusted trial balance. After the company recorded adjusting entries, an adjusted trial balance was prepared to show the balance of each account at year-end. Then, from the adjusted trial balance, Rocky Mountain prepared an income statement, revealing the company's revenues and expenses. Accounting Cycle: Rocky Mountain Chocolate Factory Inc. ‹#› Shannon, Kellie A., "A Compilation of Analyses of Financial Reporting" (2018). Honors Theses. 535. https://egrove.olemiss.edu/hon_thesis/535 last accessed on May 16, 2022.

28. The net income item on the income statement is converted into retained earnings, a component of equity. Thus, the amount of retained earnings is included in the balance sheet as well as the business's assets and liabilities. A statement of cash flows is the last financial statement prepared by businesses, and it classifies transactions into the categories of operating, investing, and financing activities. Accounting Cycle: Rocky Mountain Chocolate Factory Inc. ‹#› Shannon, Kellie A., "A Compilation of Analyses of Financial Reporting" (2018). Honors Theses. 535. https://egrove.olemiss.edu/hon_thesis/535 last accessed on May 16, 2022.

29. Rocky Mountain Chocolate Factory's financial data highlights the connections between each step of the accounting cycle and the different financial statements. Rocky Mountain prepares closing entries to close all temporary accounts, like revenues and expenses, as the final step in the financial reporting process. With closing entries complete, Rocky Mountain Chocolate Factory is prepared to begin the financial reporting process. Accounting Cycle: Rocky Mountain Chocolate Factory Inc. ‹#› Shannon, Kellie A., "A Compilation of Analyses of Financial Reporting" (2018). Honors Theses. 535. https://egrove.olemiss.edu/hon_thesis/535 last accessed on May 16, 2022.

30. ‹#› A trial balance is a listing of the ledger accounts along with their respective debit or credit balances. A trial balance is composed of a heading which includes the trade name of the business, the type of worksheet created and the date. Another composition of trial balance is the body which includes all the accounts extracted from the general ledger and its ending balances.

31. ‹#› In preparing a trial balance, there are some errors that can be encountered such as erroneous journalizing or posting, omissions or mathematical errors.

32. ‹#›

33. True or False. A trial balance lists all ledger accounts and their respective debit or credit balances. ‹#› True False

34. True or False. When creating a trial balance, the accounting period covered is listed on the first line of the heading. ‹#› True False

35. True or False. The accounts must be plotted in the trial balance in any order. ‹#› True False

36. True or False. Account titles listed in the trial balance are accounts that have outstanding balances. ‹#› True False

37. True or False. Trial balance allows businesses to check errors before creating adjustments. ‹#› True False

38. Below are the ending balances of accounts as reflected in Tokyo Merchandise’s general ledger. Prepare a trial balance for Tokyo Merchandise for the month of December 202x. ‹#› Accounts Payable - ₱ 20,000.00 Purchases - ₱ 40,000.00 Accounts Receivable - ₱ 10,000.00 Rent Expense - ₱ 15,000.00 Tokyo, Capital - ₱ 500,000.00 Salaries Expense - ₱ 102,000.00 Cash - ₱ 326,000.00 Sales - ₱ 19,000.00 Equipment - ₱ 35,000.00 Utilities Expense - ₱ 11,000.00

39. Preparing a Trial Balance What should the body of the trial balance look like? ‹#› Answer area

40. Preparing a Trial Balance Suppose that a ₱10,000 collection from a customer was not recorded by the accountant. Thus, it is not included in the trial balance. Which accounts shall be affected by this transaction? ‹#› Answer area

41. Answer the following questions: What will be the business’s economic outcome if it disregards the importance of trial balance? ‹#› Answer area

42. Answer the following questions: How do errors in preparing a trial balance affect the result of the trial balance? ‹#› Answer area