I am having trouble preparing the balance sheet (classified format). Given was the adjusted trial balance and from that I had to prepare an Income statement, statement of change in equity, and a balance sheet. For some reason I can't seem to get the numbers to add up on the balance sheet. Can someone please look at my example and give their input. I had to .zip the word doc so I could upload.

Thanks

You have two problems here. First, the $10,000 invested must already be in the capital account. When you show your statement of changes in equity it is overstated by $10,000. I think it should read that the beginning balance was $55,000 and then the $10,000 was added.

The other issue is that your "total liabilities and equity" doesn't include the balance for the liabilities of $3,160.

Thanks for pointing that out for me... don't know how the heck I missed that.

Thanks again,

Keith

You're welcome. Your work was set up very nicely. One of my favorite things to do is find where mistakes were made. It comes in handy as they are easy to make. I've posted guidelines before of how to find mistakes. I'll repost them if you are interested. If so, it will be a little later as I'm at work now.

That would be great if you could repost that. I also have another accounting question. Do you think you could help again?

When you have mistakes, there are a couple of quick ways to find them. Look at the amount you are off. Divide that by 2, and the first thing to do is see if you have a balance of that amount that could be a problem. You may have debited instead of credited something, or vice versa.

Another trick is to look at the difference, and see if there is an entry for that amount that got missed entirely.

A third trick is whenever you are off by a multiple of 9 you look for a transposition error - another easy mistake to make. For example, you should have entered 54 and you entered 45 - a difference of 9. It can be any multiple of 9, so if you should have entered 360 and you entered 630, you are off by a difference of 270.

These are important tricks to know because it is so easy to make an error and can take a while to find.

In your case, I saw the mistake of the $10,000. I then knew you were off by the $3,160 so I looked for that number.


Ask the question. I can usually help. Haha - I've been out of school for a few years now, so sometimes I have to refresh my memory.

I have another attachement for you to look at... I can't really seem to figure what the problem is with this one.

I posted the question as an answer. So you should see the question below.

I have to find the errors in the closing entries.

I have another attachement for you to look at.....i can't really seem to figure what the problem is with this one.

Accumulated Depreciation is a contra-asset account. It does not get closed. Prepaid Advertising is an asset, so it doesn't get closed. Interest Payable is a liability and doesn't get closed. You only close Revenue and Expense items to your Income Summary. Withdrawals normally has a debit balance so when you close it to Capital you will debit Capital and credit Withdrawals.

When you correct your entries, you want to close the Income Summary so you will debit or credit the account to zero it out. If your numbers had been right, the $2000 would have been a debit not a credit to Income Summary. If you want to correct the entries and repost, we can check them. Also be sure you aren't missing any income or expense accounts. I didn't have a trial balance to see if anything was missing.

There was no trial balance given. It was just this closing balance and I had to find the errors.

Oops, I thought that was your work. We always ask that you do your own work first for us to check. Do you understand it now?

So I highlighted the errors in blue... I don't have to correct them I just have to identify them. And I just changed the income summary from a 2,000cr to a 2,000 debit and the capital from 2,000 debit to 2,000 cr. Is that correct?

I actually did that. Just forgot to post my answer in the example. Of course you must do it yourself first and then ask questions, if not you will never actually understand what your doing. The first example was all my own work first but then I had a brain fart.

The blue highlights aren't showing when I open the file. Since there were items that should not have been included, the $2,000 amount will change. You didn't say anything about the withdrawals - did you understand that part?

ETA - I just downloaded it again and the blue is showing up. The only issues now are the amounts of the income summary adjustment in the first and second entry, the amount of the third entry, and the 4th entry dr vs cr.

Lets see if I am picking this up or not. The $2000 in the income summary will change because of errors in the revenue account and expense account. Also, I didn't mention withdrawals because I didn't see anything wrong with them. Is there another problem?

From my original answer: Withdrawals normally has a debit balance so when you close it to Capital you will debit Capital and credit Withdrawals. Ask me to explain if that doesn't make sense.

Correct, all the income summary numbers change in the posts due to the corrections that have to be made. I'm not sure how your teacher wants that shown - highlighted in blue possibly?

So in the 3rd entry income summary is 2,000 debit and capital is 2,000 is credit. (and this 2,000 will change due to errors above)
The 4th entry withdrawals is 6,000 credit and capital is 6,000 debit.

And yes highlighting in blue should work. Like I said, I only have to identify errors.

That should cover everything then unless you have any questions.

Thanks again, you're the best.