Not sure how to prepare closing entries, reversing entries, and a post-closing trial balance; prepare a financial statement worksheet; and prepare a classified income statement, retained earnings statement, and balance sheet for the below problem.

Ruiz Advertising Company, Inc.
Adjusted Trial Balance
31-Jan-12


Account Title Dr. Cr.
Cash $201,771.00
Office Supplies $500.00
Office Equipment $9,943.00
Prepaid Insurance $10,416.00
Common Stock $100,000.00
Bonds Payable $88,000.00
Advertising Revenue $70,421.00
Accounts Payable $9,543.00
Utilities Payable $700.00
Salaries Payable $16,900.00
Interest Payable $880.00
Dividends $2,700.00
Rent Expense $5,600.00
Salaries Expense $50,700.00
Meals Expense $350.00
Utilities Expense $700.00
Insurance Expense $2,084.00
Supplies Expense $800.00
Interest Expense $880.00

Total $286,444.00 $286,444.00


Reversing Entries
1. Management has found that one payment was not actually received on the 21st. Reverse the entry where $43,721 was recorded as received from the client.

Closing Entries & Post-Closing Trial Balance
1. Prepare a post-closing trial balance which will help management prepare financial statements for the month of January.

First thing to do is set-up a worksheet starting with you adjusted trial balance, hint: Use Excel.

Now do your reversing entry. Think about what the original journal entry to record the payment was, then reverse it.

Now do your closing entries. This means you are closing out your temporary accounts, I. e. you are putting your temporary accounts to a zero balance. Your temporary accounts are income statement accounts and your dividends. To do this take an expense and credit it for the amount of the account, then debit your income summary account for the same amount. You will do this for all of your expense accounts. Now you will debit your revenue accounts for the amount in the account and credit your income summary account for the same amount. Now you close out your income summary account to retained earnings. This means getting a balance between your debit and credits and then zero out your balance by either debiting or crediting your income summary account and crediting or debiting retained earnings.

Next you close out your dividends account to retained earnings. This means crediting your dividends account for the amount in the account and debiting your retained earnings account for the same amount.

Now finally you will do your post-closing trial balance and your financial statements.