BUS103 Study Guide

Unit 4: Completing the Accounting Cycle

4a. Discuss and demonstrate the use of the accounting worksheet as a means of preparing the financial statements

The accounting worksheet starts with a column for the trial balance. The second column records debits and credits to the accounts in the trial balance that require adjustments.

Name the accounts that generally require adjustments.

Following the adjusting entries, the column titled Adjusted Trial Balance includes all of the accounts from the Trial Balance column plus any changes or additions in the Adjustment column. The Adjusted Trial Balance column provides the account balances for the final columns which report balances for the financial statements.

Know where to carry each of the balances in the Adjusted Trial Balance when preparing the columns for the financial statements.

The accounting worksheet is explained in greater detail in The Work Sheet on pages 191-198. Specific guidance for preparing financial statements from the worksheet is provided in Preparing Financial Statements from the Worksheet on pages 199-200.


4b. Explain and execute the closing process for a specified accounting cycle

 The closing process has four steps.

  1. Debit the revenue accounts and credit Income Summary.
  2. Credit the expense accounts and debit Income Summary.
  3. Close the balance in Income Summary to the capital account.
  4. Credit dividends (or owner's draw) and debit the capital account.

Before you attempt the final exam, practice journalizing the four steps to the closing process when revenues exceed expenses.

The third step of the closing process will debit Income Summary and credit the capital account when a company's revenues exceed expenses. In the event of a net loss, the third step of the closing process will credit Income Summary and debit the capital account. Practice journalizing the four steps to the closing process when expenses exceed revenues. 

Review the closing process in The Closing Process on pages 201-209.


Unit 4 Vocabulary

Be sure you understand these terms as you study for the final exam. Try to think of the reason why each term is included.

  • Accounting cycle
  • Bonds payable
  • Closing process
  • Copyright
  • Current assets
  • Current liabilities
  • Current ratio
  • Dividends payable
  • Goodwill
  • Income Summary account
  • Intangible assets
  • Long-term assets
  • Long-term liabilities
  • Merchandise inventory
  • Notes payable
  • Patent
  • Post-closing trial balance
  • Prepaid expenses
  • Property, plant, and equipment
  • Retained earnings
  • Stockholders' equity
  • Unearned revenues
  • Worksheet