Completing the Accounting Cycle - nosneb - 78305

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  • From: Business, Accounting
  • Due on: Sun 31 Jan, 2016 (03:00pm)
  • Asked on: Fri 29 Jan, 2016
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Respond to the following questions or problems using grammatically correct language and appropriate APA citations. To achieve a proficient grade in this assignment, answer the proficient-level queries for each question. To achieve a distinguished grade, answer both sets of queries for each question.

  1. Question 1:
    • Proficient:
      • You have taken over a set of accounting books for a small business as a part-time job. At the end of the first accounting period, you have partially completed the work sheet by entering the proper ledger accounts and balances in the Trial Balance columns. You turn to the manager and ask, "Where is the list of additional information I can use in entering the adjusting entries?" The manager indicates there is no such list. In all the text problems you have done, you have always been given this information. How would you obtain the information for this real-life situation?
    • Distinguished:
      • What are the consequences of not making all of the required adjustments at the end of the accounting period?

  2. Question 2:
    • Proficient:
      • After the Adjusted Trial Balance columns of a work sheet have been totaled, which account balances are extended to the Income Statement columns, the Statement of Retained Earnings columns, and the Balance Sheet columns?
    • Distinguished:
      • Describe how is the statement of retained earnings prepared.

  3. Question 3:
    • Proficient:
      • Describe, in order, the four basic steps in the closing process performed at the end of each accounting period.
      • Explain why the closing process is so important.
    • Distinguished:
      • After the closing process has been completed, what account types remain open?

  4. Question 4:
    • Proficient:
      • Describe how a classified balance sheet is different from a basic unclassified balance sheet.
      • List the major categories of accounts that would appear under assets, liabilities, and stockholder's equity on a classified balance sheet.
    • Distinguished:
      • Rearrange the following steps in the accounting cycle in proper order:
        • Financial statements are prepared.
        • An adjusted trial balance is prepared.
        • Adjustment data are assembled and analyzed.
        • Adjusting entries are journalized.
        • Closing entries are journalized and posted to the ledger.
        • An unadjusted trial balance is prepared.
        • Transactions are posted to the ledger.
        • Transactions are analyzed and recorded in the general journal.
        • An optional end-of-period work sheet is prepared.
        • A post-closing trial balance is prepared.

  5. Question 5:
    • Proficient:
      • Describe how the current ratio is used to analyze financial results?
      • What are the components of the ratio and how is the ratio calculated?
      • What does the ratio indicate regarding a company's financial position?
    • Distinguished:
      • Current assets and current liabilities for the Fortson Company are:
        • Current assets: 2013—$262,500; 2014—$310,500.
        • Current liabilities: 2013—$150,000; 2014—$172,500.
      • Determine the current ratio for 2013 and 2014. Does the change in the current ratio from 2013 to 2014 indicate a favorable or unfavorable trend?



Assignment Hints/Suggestions: The assignment relates to completing the accounting cycle and will familiarize you with the remaining steps in the accounting cycle. Here are some hints and suggestions for certain questions in this assignment: 

Question 1: You might find the information listed on page 194 of the text useful in responding to this question.  

Question 2: Here is the correct response to the first of three parts of this question, that serves as an example of an acceptable response (feel free to use this response):"Extend adjusted balances of revenue and expense accounts from the Adjusted Trial Balance columns to the Income Statement columns."  Respond to the questions relating to which accounts are extended to the Statement of Retained Earnings columns and the Balance Sheet columns, similarly.

Also, be advised of an error in the text and pdf file; wherein the Credit Column of the Balance Sheet is MISSING in Ex. 20, p. 195. The missing balance sheet credit accounts and amounts can be observed in the Adjusted Trial Balance Credit column.

Question 3: Here is the correct response to the first of the four basic steps performed at the end of each accounting period (feel free to use this response and then list the remaining three steps): "1) Closing the Revenue accounts"

In the next part of u03a2 proficient-level question, you are asked to explain why the closing process is so important. Respond to question by addressing nominal (temporary) accounts.

Question 4: The following relates to the Distinguished-level question. On page 86-87 of the text, the accounting cycle steps are listed, but not necessarily in the actual order of completion. On page 88, Exhibit 7 (and on page 193, Exhibit 19) the steps are listed with loops, wherein the certain items in this exhibit (numbers 6, 7, & 8) loop around and can be completed prior to the final output step (listed as number5.) Accordingly, because of the possibly confusing presentation of this material, the following is the correct order of the accounting cycle steps and should be used to correctly respond to this distinguished-level question:

1) Transactions are analyzed & recorded in the general journal

2) Transactions are posted to the ledger

3) An unadjusted trail balance is prepared

4) An optional  end-of-period work sheet is prepared

5) Adjustment data is assembled & analyzed

6) Adjusting entries are journalized

7) An adjusted trial  balance is prepared               

8) Financial statements are prepared

9) Closing entries are journalized & posted to the ledger

10) A post-closing trial balance is prepared          

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