ACC 179 | Updates in Management Accounting Part 1

Student Activity Sheet Module #6

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Lesson Title: The Preparation of the Financial Statements Materials:

Lesson Objectives:
At the end of this module, the students should be able to:
1. Review closing entries and the post-closing trial balance References:
2. Finalizing the multi-step and single-step income statement,
statement of owner's equity
3. Learn how to establish internal controls to safeguard assets
4. Perform Bank Reconcilliation

Productivity Tip:
“The only thing to do with good advice is to pass it on. It is never of any use to oneself.” - Oscar Wilde

A. LESSON PREVIEW/REVIEW
1) Introduction (2 mins)
Good Day! Hope you are all safe. As we continue our journey on reviewing basic accounting, we will
discuss the processes that happen after the accounting period but prior to the release of the
financial statements.

2) Activity 1: What I Know Chart, part 1 (3 mins)

What I Know Questions: What I Learned (Activity 4)
1. What are adjusting entries?

2. What is the journal entry to record

accrued revenues?

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 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #6

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

B. MAIN LESSON
1) Activity 2: Content Notes (13 mins)
Real and Nominal Accounts
Real accounts refers to accounts with continuous and permanent nature. Real accounts are active from
the first day of business to the last day. (A real account could have a temporary zero balance, in which
case it’s not reported in the balance sheet.) These accounts are reported in the Statement of Financial
Position.
Nominal accounts, on the other hand, refers to accounts that are cumulative over a period of time. Take
the balance in the sales revenue account at the end of the year, for example. This balance is the total
amount of sales over the entire year. These accounts are reported in the Statement of Comprehensive
Income.

Closing Entries
A closing entry is a journal entry made at the end of accounting periods that involves shifting data from
nominal accounts on the Statement of Comprehensive Income to real accounts on the Statement of
Financial Position. Nominal accounts include revenue, expenses, and dividends, and these accounts
must be closed at the end of the accounting period.

Entries:
Close Revenue to the Equity Account (Sole Proprietor/Partnership – Capital Account; Corporation
– Retained Earnings):
Revenue Account XXX
Capital/Retained Earnings XXX

Close Expenses to the Equity Account (close all expenses):

Capital/Retained Earnings XXX
Expense Account 1 XXX
Expense Account 2 XXX
Expense Account 3 XXX

The revenues and expenses can also be closed to the Income Summary account prior to closing to the
necessary equity accounts. This is depending on the company’s reporting policy.

Post Closing Trial Balance

A post-closing trial balance is a listing of all balance sheet accounts containing non-zero balances at the
end of a reporting period. The post-closing trial balance is used to verify that the total of all debit
balances equals the total of all credit balances, which should net to zero. The post-closing trial balance
contains no revenue, expense, gain, loss, or summary account balances, since these temporary

This document is the property of PHINMA EDUCATION

 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #6

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

accounts have already been closed and their balances moved into the retained earnings account as
part of the closing process.

Single-Step Income Statement

A single-step income statement is one of two commonly used formats for the income statement or
profit and loss statement. The single-step format uses only one subtraction to arrive at net income.

Multi-Step Income Statement

The multiple-step profit and loss statement segregates the operating revenues and operating expenses
from the nonoperating revenues, nonoperating expenses, gains, and losses. The multiple-step income
statement also shows the gross profit (net sales minus the cost of goods sold).

Statement of Owner’s Equity

The statement of owner's equity portrays changes in the capital balance of a business over a reporting
period. The concept is usually applied to a sole proprietorship, where income earned during the period
is added to the beginning capital balance and owner draws are subtracted. The result is the ending
balance in the capital account.

Internal Controls
Internal controls are policies and procedures put in place to ensure the continued reliability of
accounting systems. Accuracy and reliability are paramount in the accounting world. Without accurate
accounting records, managers cannot make fully informed financial decisions, and financial reports can
contain errors. Internal control procedures in accounting can be broken into seven categories, each
designed to prevent fraud and identify errors before they become problems.
• Separation of Duties
• Accounting System Access Controls
• Physical Audits of Assets
• Standardized Financial Documentation
• Daily or Weekly Trial Balances
• Periodic Reconciliations in Accounting Systems
• Approval Authority Requirements

Bank Reconciliation
A bank reconciliation is the process of matching the balances in an entity's accounting records for a
cash account to the corresponding information on a bank statement. The goal of this process is to
ascertain the differences between the two, and to book changes to the accounting records as
appropriate. The information on the bank statement is the bank's record of all transactions impacting
the entity's bank account during the past month.

This document is the property of PHINMA EDUCATION

 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #6

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

1. Gather the bank statement and the business records.

2. Compare the deposits
a. Deposit in transit - Cash and/or checks that have been received and recorded by an entity,
but which have not yet been recorded in the records of the bank where the entity
deposits the funds.
b. Outstanding check - A check payment that has been recorded by the issuing entity, but
which has not yet cleared its bank account as a deduction from cash
c. NSF check - A check that was not honored by the bank of the entity issuing the check, on
the grounds that the entity's bank account does not contain sufficient funds. NSF is an
acronym for "not sufficient funds."
3. Adjust the bank statements
4. Adjust the cash account
5. Compare the balances

2) Activity 3: Skill-building Activities (with answer key) (18 mins + 2 mins checking)
Circle the letter of the best answer
1. Some entities adjust their accounts and close their books only on an annual basis. For these firms,
a. worksheets may be prepared on an interim basis
b. worksheets are not needed
c. worksheets are prepared only on an annual basis
d. worksheets are not prepared
2. Closing entries reduce the following type of accounts to a zero balance at the end of the period.
a. income and expenses
b. income summary
c. withdrawals
d. all of the above
3. The closing entry for Salaries Expense, with the balance of P 240,000 is
a. Salaries Expense P 240,000
Income Summary P 240,000
b. Salaries Expense P 240,000
Salaries Payable P 240,000
c. Income Summary P 240,000
Salaries Expense P 240,000
d. Salaries Payable P 240,000
Salaries Expense P 240,000
4. The purpose f the post-closing trial balance is to
a. Provide the account balances for the preparation of the balance sheet.
b. Ensure that the ledger is in balance for completion of the worksheet.

This document is the property of PHINMA EDUCATION

 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #6

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

c. Aid the journalizing and posting of the closing entries.

d. Ensure that the ledger is in balance for the start of the next period.
5. Which of the following accounts will appear on the post-closing trial balance?
a. building
b. depreciation expense - building
c. owner withdrawals
d. service revenues
6. A final check on the adjusting and closing process is provided by the
a. worksheet
b. financial statements
c. post-closing trial balance
d. adjusted trial balance
7. If the last item on a trial balance reads “Owner’s Equity”, this must be the
a. post-closing trial balance.
b. unadjusted trial balance
c. adjusted trial balance
d. reversed trial balance
8. If a trial balance were to be prepared on the first day of the new year, and the account Salaries
Expense had a credit balance, you would know that
a. the trial balance is a post-closing trial balance
b. the adjusting entries have been recorded
c. the trial balance is an adjusted trial balance
d. a reversing entry has been made
9. Reversing entries are
a. optional
b. made to record a change in corporate objectives
c. required by generally accepted accounting principles
d. made prior to preparing a post-closing trial balance
10. Which of the following comes last in the accounting process?
a. preparation of a post-closing trial balance
b. preparation of an adjusted trial balance
c. worksheet preparation
d. journalizing external tranasactions

3) Activity 4: What I Know Chart, part 2 (2 mins)

It’s time to answer the questions in the “What I Know Chart” in Activity 2. Write your answers in the “What I
Learned” column. Let’s see your improvement!

This document is the property of PHINMA EDUCATION

 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #6

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

4) Activity 5: Check for Understanding (5 mins)

Circle the letter of the best answer
1. [Statement 1] There is sufficient information on a post-closing trial balance to prepare a balance
sheet.
[Statement 2] There is sufficient information on a post-closing trial balance to prepare a statement
of changes in equity.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. None of the statements are correct.
2. [Statement 1] If the post-closing trial balance does not balance, then the error(s) definitely occurred
at some point during the closing process.
[Statement 2] The adjusting entries involving Rent Receivable and Salaries Payable could be
reversed.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. None of the statements are correct.
3. [Statement 1] The adjusting entries involving Depreciation Expense – Building and Supplies Expense
could be reversed.
[Statement 2] All nominal accounts must be closed before the Income Summary account can be
closed.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. None of the statements are correct.
4. [Statement 1] The post-closing trial balance will have fewer accounts than the adjusted trial balance.
[Statement 2] The balances of all the accounts that appear on a balance sheet are the same on the
adjusted trial balance as they are on a post-closing trial balance.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. None of the statements are correct.
5. [Statement 1] There is sufficient information on a post-closing trial balance to prepare an income
statement.
[Statement 2] The post-closing trial balance will contain only real accounts.
a. Only the first statement is correct.
b. Only the second statement is correct.

This document is the property of PHINMA EDUCATION

 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #6

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

c. Both statements are correct.

d. None of the statements are correct.
6. [Statement 1] The Income Summary account will appear on the post-closing trial balance.
[Statement 2] The post-closing trial balance contains asset, liability, withdrawal and capital accounts.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. None of the statements are correct.
7. [Statement 1] The final trial balance is called a post-closing trial balance.
[Statement 2] A reversing entry is a journal entry which is the exact opposite of the related adjusting
entry made at the end of the period.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. None of the statements are correct.
8. [Statement 1] To simplify the recording of regular transactions in the next accounting period, all
adjusting journal entries are reversed.
[Statement 2] Post-closing trial balance tests the equality of the accounts after the adjustments and
the closing entries are posted.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. None of the statements are correct.
9. [Statement 1] Supplies expense is a temporary account.
[Statement 2] A revenue account is closed with a credit to the revenue account and a debit to Income
Summary.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. None of the statements are correct.
10. [Statement 1] An expense account is closed with a debit to the expense account and a credit to
Income Summary.
[Statement 2] Income Summary is closed with a debit to Income Summary and a credit to the
owner’s Withdrawals account.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. None of the statements are correct.

This document is the property of PHINMA EDUCATION

 ACC 179 | Updates in Management Accounting Part 1
Student Activity Sheet Module #6

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning (5 mins)
Work tracker. Congratulations! You have finished the module for today! Shade the number of the module
that you finished.
First Period Second Period Third Period
1 2 3 4 5 6 7 8 9 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2
0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6

How do you feel today?

I feel (unsatisfactory/satisfactory/excellent) because
_______________________________________________________________.

What are your challenges in learning the concepts in this module? If you do not have challenges, what is
your best learning for today?
_____________________________________________________________________________________________________________
_____________________________________________________________________________________________________________
__________________

What are the questions/thoughts you want to share to your teacher today?
_____________________________________________________________________________________________________________
_____________________________________________________________________________________________________________
__________________

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