Why I insist on trying to learn this is beyond me. This would be the second time I’ve taken the beginning accounting course through the Institute I’m trying to become qualified with.
And I am stuck. On the same darned thing I got stuck on before. I gave up the last time. Now I’m two weeks behind on the second assignment (got 85% on the first one) and still not close to handing it in. Did I mention it’s $365 each time and HAS to be completed within three months?
My difficulty seems to lie in temporary expense accounts and transferring stuff from the general journal to adjusting entries to adjusted trial balance to trial balance to income statement to balance sheet. Jeez, just typing that makes me queasy. I simply can’t understand what you transfer to where and why.
I am bringing it home to work on during the Christmas holidays for a last ditch effort to learn this. I’m also going to check out assignment 3 - perhaps it’s easier to understand that this one (hopefully).
I don’t want to be an accountant, I like working in credit (it’s different, slightly but different). Oddly enough, I can look at most accounting information on a company and know what’s good and what’s not.
But I have to take (and pass 65%) this darned accounting to get to the credit part.
Anyone interested in being a personal coach for someone who just wants to get through this course with a measly 65% or higher so they can go on to what they want to do? Why do I find this so darned difficult?
I can try to help you, I just got my degree in accounting so I should know this (though financial was a few years ago). I’ll only be around for the next few days though, I’m leaving for a road trip on the 26th.
Congratulations on your accounting…I admire your talent.
Well, we’ve got this hypothetical business…and we have to journalize the transactions and I’ve done that and the on line instructor says what I’ve got done is correct. Now we have to do closing statements; balance sheet, etc…
What I don’t understand is adjusting entries part…I’ve done the expenses for the income statement and closed the expense accounts (I think, anyway). Do I have to go back and post these on the general journal which I did first?
I’m supposed to carry these through the various closing statements…that’s where I’m stuck. Which account do you put on what statement? And if the expense accounts are closed, do I use them for anything else but the income statement? And when I transfer the expenses to the income summary, are the expenses and and income supposed to equal? That doesn’t make sense to me - isn’t the difference supposed to income/loss? And what’s the difference between and a trial balance and balance sheet?
Ok, so you do adjusting entries. Then you prepare the statements, income statement, balance sheet, etc.
After you do the closing entries, yes, you post that to the general ledger.
I’m not entirely sure what you mean by this, but I’ll try for a general explanation. The income statement records all sources of income and all sources of expenses for the year, all temporary accounts. These are all closed out so that at the start of the new year they can be at a zero balance. And no, they should not equal each other. The difference is the profit or loss, you’re correct.
The balance sheet is compromised of permanent accounts, plants and equipment, current liabilities, etc. There might be increases or decreases between the years, but they always exist and are never closed out. Maybe this is where you’re getting confused? Assets = Liabilities + Stockholders’ Equity. Those two always equal each other, if they don’t balance there is a mistake somewhere.
The trial balance checks that debits equal credits. Remember, every accounting entry includes both a debit and a credit. Such as, you buy equipment on account, your entry looks like this:
Equipment 2000
Accounts Payable 2000
So at any point if you stop and add them up, debits should be equal to credits. If they are not, that shows that you made a mistake somewhere in the entering process.
What’s the difference between the accounts you put on the adjusted trial balance; trial balance and balance sheet?
The trial balance and adjusted trial balance are very similar, just one includes adjusting entries.
Basically, think about your general ledger. Say you’re doing all these closing statements after a month. Your trial balances will be adding up all the debits and credits that are in that general ledger for the month. They just insure you didn’t miss anything. If they do not equal each other, you have made an entering mistake somewhere.
The balance sheet is affected by the general ledger but is it’s own separate being. Say you open a company. You have accounts like common stock, plant and equipment, notes payable, etc. Those accounts are always there. The activities in the general ledger just affect them, increase or decrease them. But if you don’t have any increase or decrease to common stock over the year, common stock is still there.
So the trial balance accounts are any accounts that you modified and thus entered into the general ledger over a time period. The balance sheet is all the permanent accounts, just like a quick snap shot of the company at any given moment.
The Trial Balance is simply every account that has a balance, debit or credit. That is a simple check to make sure you have not violated the cardinal rule of bookkeeping - “Debits = Credits”.
The Adjusted Trial Balance is, like MissIntent said, the Trial Balance with your adjutments. Again, one of its’ purposes is to check for the cardinal rule.
The Balance Sheet contains the Assets, Liabilities and Owners Equity. The “accounting equasion” is that: Assets = Liabilities + Owners Equity. You would make out this statement after the closing entries (closing the income and expense accounts to owners equity).
All in all, the “flow” is not terribly difficult but it is a little tedious since double-entry bookkeeping has a number of built-in error checks. It seems to me your confusion stems from those.
Regards,
Bean Counter (CPA, accountant for the last 15 years and currently accounting manager for a manufacturing company)
Bean Counter and MissIntent: thank you…I think you’re right, Bean Counter…it’s all the duplicating entries…the general journal then copying to the ledger accounts then closing temporary accounts, then the trial balance, income statement, adjusted trial balance, balance sheet. …it’s an AWFUL LOT of copying…anyways, tomorrow I’m going back to it. I’ve given myself a couple of days off to see if it makes more sense when I go back to it. Tomorrow, I’ll be trying it again over coffee in the morning…hope one of you is online tomorrow in case I get stuck. Like I said before, I’m behind now…it’s the same place I gave up at last time I took this thing…I’ve got four more assignments due by the 20th of February unless I plead for an extension…I haven’t read assignment three yet but if it’s not easier, it’s going to be a tough go!
One more thing…the “adjustments” - are the temporary accounts “expenses” that you close before doing income summary?