Chapter 6
The Accounting Cycle: Statements and Closing Entries
150
MP Consulting
Post-Closing Trial Balance
January 31, 2016
Account Titles
DR
CR
Cash
$3,800
Accounts Receivable
4,000
Prepaid Insurance
1,100
Equipment
8,300
Accumulated Depreciation
$150
Accounts Payable
1,250
Interest Payable
25
Unearned Revenue
1,800
Bank Loan
2,500
Parish, Capital
11,475
Total
$17,200 $17,200
________________
Figure 6.20
Once the post-closing trial balance is complete, the entire accounting cycle for the period is done.
The company is ready to begin the next accounting cycle for the upcoming accounting period.
Classified Balance Sheet
We have learned that the balance sheet lists assets, liabilities and equity. However, it is useful to
group together similar assets and similar liabilities on the basis of their financial characteristics.
Before we go into the details of a classified balance sheet, we will first discuss the groupings of
assets and liabilities. Figure 6.21 shows the groupings of assets and liabilities on the balance sheet.
Current Assets vs. Long-Term Assets
Assets are divided into two categories
1.
Current assets
are those that are likely to be converted into cash or used up within the next 12
months through the day-to-day operations of the business. Some examples of current assets are
cash, inventory (products sold to customers), accounts receivable and prepaid expenses.
2.
Long-term assets
are used to operate a business and are not expected to turn into cash or be
used up within the next 12 months unless they are sold for reasons other than the day-to-
day operations of the business. Any asset that is not included in the current asset category is
assumed to be long-term.Thus our classified balance sheet will include two sections of assets.
Current assets are presented under a current asset heading. Long-term assets (various types are
discussed below) are presented separately.
Certain types of long-term assets must be presented separately on the classified balance sheet.
Although not all of the long-term assets discussed below will be covered in detail in this textbook,
you may come across these terms if you look at the balance sheet of other companies.
