Hello, in this lecture, we will take a look at a comprehensive problem, we'll be working the first part of the comprehensive problem, it's broken out into these sections, we will be doing the journal entries for a month, we're gonna then do the adjusting process, then we'll do the financial statements. And then we'll do the closing process. The type of company is a service company. So we will not be dealing with inventory at this time and we'll go through the accounting cycle for a service company. In this way, we're going to have the data on the left hand side of each tab, we'll enter that data into the blue areas is where we want to indication of where the data should be implemented. And then we have our trial balance over here, and the trial balance will be formatted in order the green accounts are gonna be assets.

And then we have liabilities, then we have equity, and then we have income and expenses. It's always going to be in that order, which is also reflected up here in the accounting equation. So you can see the green are added up. That's the assets and then the liability These are ads liabilities and the owner's equity is added up into the blue, that is the owner's equity. And of course the assets equal the liabilities plus the owner's equity. If it's green, that means we're doing good.

If we have a green zero down here, that means we're doing good good being that we are in balance. Why are we in balance? Well, in this trial balance, we're representing debits with basically positive numbers or non bracketed numbers and credits with bracketed numbers. So we don't have the T account in the trial balance, but we still have the balancing concept. In that we can see that the debits minus the credits are zero, therefore the debits equal the credits. And by doing this, we can kind of allow ourselves to have less columns in some of the worksheets.

So this is a common practice to do many times. So it is good to take a look at and get used to seeing debits and credits in a few different formats. Over here of course, we will have the debits and credits on a debit column and a credit column but I will be representing the credits with brackets in the entire worksheet and see how that works. We then have the general ledger over here and the general ledger is long kind of intimidating looking item of Ledger's, but it's basically just the backup for the accounts on the trial balance. So we've got the same list of accounts same order, the assets being and then the liabilities than the equity. So we've got cash, then accounts table and supplies then prepaid rent, then prepaid insurance office equipment, or cumulated, depreciation and then we're into the liabilities, accounts payable, salaries payable, unearned fees, and then we're going into the equity, owner's equity draws and then we're in the income statement revenue, and then all the expenses list out listed out in this way.

So what we're going to do, of course, is post the journal entries here, and we're going to record the journal entries here, then we will post them to the general ledger that will automatically post to the trial balance. We're gonna do a lot of entries, a lot of repetition. So this will become familiar as we go. First thing I want to do is actually hide some cells. We're going to learn some Excel as we go through this process as well. And basically I want to put my information into these cells here.

And I would like to hide the cells just so they're out of the way and we don't have to see them and deal with them. In order to do that, I'm going to put my cursor right on the F here, so you can see the drop down, click so the whole column is highlighted. And then I'm holding down the left click, and I'm going to drag until I get to column j, I'm letting go of the left click, and then I'm going to right click in the selected area and go down to hide so we'll hide that selected area. So that now we can see the journal entries. We're going to work in space we're going to put it and the trial balance all in one area. Alright, so the first date is five threes.

I'm gonna put that in the date area. And it says it says we received cash from clients for advanced payment for services that will be prepared in the future record as unearned revenue. So first thing is Always ask through these is cash affected. So is cash affected? Because if it is, it's the easiest account that we will get to know because cash is going to be affected more often than most other accounts. In this case it says yeah, cash is affected.

Cash is right here says we received cash, therefore cash must be going up. So the question is, how do we make something go up? Well, the way I'm going to go through this list of questions, and I'm going to go through this list of questions in order to avoid some common pitfalls. So I do suggest going through this kind of list of questions, so that you avoid some common mistakes that will happen. And that will be well is that is cash a debit or credit balance? It's a debit.

How do we know because it does not have brackets around it on like the credits that have brackets around it. How do we make something go up? We do the same thing to it as what it is. So this is a debit. We need to do the same thing to it, which would be another debit in this case. So I'm going to copy this by right clicking the cash and copy it.

I'm going to put the debit on top so here's my date. I'm going to put the debit on top Why just tradition It goes on top debits go on top, so I'm going to right click, and I'm going to paste it 123 just the values only if I paste it this way, then I changed the format of Excel, I just want to paint the value values. Now you could just type it in there, obviously, as well. So if you, you know, if you just typed in cash that works as well, but copy and paste, it might be easier as we go later on. I'm in the debit column, the debit side, and we're going to put the 4000 there, and I'm just typing the 4000. And note that I'm not putting a comma or anything, I'm just typing 4000 I'm in the cell instead of on the cell, and then we're gonna hit enter or something in order to be off the sale.

So I'm gonna hit Enter, and now you can see that I'm not in the sale now on the sale, where if we debit something, then we're also going to have to credit something so I'm going to represent credits on this worksheet with a negative, so I'm going to put a negative 4000. Now credits don't mean negative, they're not bad. Negative not is not a negative term. In this case, negative is just how the credits are going to be represented in the worksheets so that we can use Excel In formulas to help us do some calculations, note, when we hit enter, now it's going to change that negative time to brackets. That's the formatting of the cell that is doing that the worksheet is formatted to do that, do you want to know where that format is, it's in this section here in the formatting section, you can also right click on the item, go to Format Cells.

And if you go to the numbers section, then you can see the different types of formats. And of course, we are in this bracketed format rather than having the negative sign. Alright, so now we just need to know what that other account will be. And you would think that if we did work that we would record the other side usually been revenue, but in this case, in this case, it says that we have not yet done the work so therefore, we haven't yet earned the revenue. So the credit is actually gonna have to go to a liability account in this case being unearned revenue. And unearned revenue we can see right here has a credit balance represented by the fact that it has brackets around it.

We already know that we're going to credit it because we had to debit cash. If we credit a credit balance account, we'll be doing the same thing to it, which will make it go up. So if we credit this account, it will make it go up. That makes sense. Because unearned revenue represents something that we owe in the future for something that happened in the past, what happened in the past what happened right, now we got money, what do we do in the future, our service, so I'm going to go ahead and copy that I'm gonna right click, copy, I'm going to go over to C six, right click and paste it 123. All right, now we're going to go ahead and post this and we're going to have to post this to the general ledger over here.

So we got to find these two accounts on the general ledger. So here's cash, for example. And we see the debit and the credit side, we see that we debited cash, I'm going to go over here in cell Oh, there's oh nine. And I'm going to say equals and I do highly recommend putting formulas instead of just typing a number in here. Because if you do, then if you're there's a mistake, it's a lot easier to go back and find that mistake. So I'm gonna say equals I got points.

4000 When we hit enter, the debits going to go up from 20 to one to enter 26 one, and we'll see we're out of balance here. Now we're out of balance here now by 4000, that 4000 being the credit here, so we're gonna have to find unearned revenue, we could make this the whole sheet a little bit smaller here, if we went down to the taskbar, if we want to see it smaller, it's about as small as I want to go. But if we go down to there, we can see a few more of these general ledger accounts in the same screen. And so if I go down here to unearned revenue, I want to be in the credit side in this case, and we're not going to put any negative signs over here, all we need is an equal sign, and then point to this balance and E six, and then if I go back over here, and when I hit Enter, it's going to go up in the credit direction.

So notice it went up, excels is it going up in a negative direction, but we see it as going up in a credit direction because we're dealing with debits and credits in this case, that of course puts us back in balance, we could see that six five here is also the six five there we can see that the zero is back in balance. Here, and our equation is back in balance up here as well. So let's go back over here and I'll make this a little bit larger once again, and go to the second item, which is going to be on five, five. And it says receive cash from clients for work done in the past and recorded as accounts receivable. So the first question I was going to ask is cash affected and once again says, received cash, therefore cash is affected, then we need to have cash go up because we received it therefore cash must be going up.

We ask how do we make cash go up? Well, cash has a debit balance by the fact that it does not have brackets around it. The way to make something go up is to do the same thing to it, which in this case happens to be another debit. So I'm going to right click on that I'm going to copy it. I'm going to put my cursor over here and see eight, it's c eight. And I'm going to right click and paste it 123 that's just the values only when we paste it to values only like so.

Then we'll put the three one on top in the debit column. Then in the credit column, if the Only two accounts affected, we have to have an equal number of debits and credits. So we're going to put the same negative I'm going to represent with a negative 3100. And once again, when we hit enter, then it'll put those brackets around. So I'm gonna hit Enter, and because of the format of the sale, put brackets around it. Now, if you wanted to change that sale, then you'd have to go in there and double click on it.

Or you can go in there and you can go to the formula bar up here. So this is actually what we typed in the formula bar. This is what has actually been formatted. So if you're inside the cell, just realize that you're inside, so it's gonna act differently than if you're just on the cell. Alright, so then what's going to be the credit, received cash from clients for work done in the past? So once again, we might think, well, we did work we should credit revenue, but the revenue was done in the past and we already received.

We've already done the work and recorded the revenue. Therefore when we did the work, we recorded the revenue in accounts received lievable up here. So this is where the work should be coming out. This represents money that is owed to us at 3400. It has now been paid to us. Therefore this 3400 needs to go down in this case, and how do we make something go down, we do the opposite thing to it as what it is, this is a debit, making it go down wouldn't be necessary to have a credit.

We already knew that because we debit cash, there's the credit, this is the account that we will credit which will reduce the receivable receivable will go down, which is an asset. It's a good thing people owe us money, but we would rather have the cash receivables gonna go down and the better asset of cash will go up. going to right click gonna copy that gonna go to cell C nine, right click and paste it 123 just the values only. Then we're gonna go ahead and post that. So I'm going to scroll over to the general ledger I'm going to go over enough so we see more of the general ledger and make it a little bit smaller in the taskbar down here and then We'll go to the cache here. So we're going to post this cache line to the general ledger to the cash section.

And it's on the debit side. So I'm in cell Oh 10. So Oh 10. And I'm going to just say equals and then point to that three, one. And I do recommend using the formulas here and then saying, enter, cash goes from 26, one up to 29. Two, that puts us out of balance, because that 29 two also carries over to the trial balance.

Now we need to record the other side, we're out of balance by the 3001. That's going to go to accounts receivable on the general ledger. This is called posting. So here's the accounts receivable, it's a credit. So we're going to go on the credit side, we're going to say equals and point out to this 3001. And that three, four should go down by the 312.

In this case, 300. That then 300 is back on our trial balance. That's where this number is coming from. Notice you got these handy little tabs up here you can see well that number is coming in From there, that's one of the reasons formulas are handy. If you want to know where these tabs are, they're in the data group. And now they're in the Formulas tab.

And then they're in the formatting auditing group. And there are these two icons here. So I like to put those in the quick Taskbar by right clicking and putting them in to the quick add to the quick toolbar. So there we have that and we're back in balance, we're gonna make it a little bit bigger again down here and take a look at the next transaction which will be on five, nine. So we paid cash for miscellaneous expense. All right, so miscellaneous expense.

So the question is, once again, is cash affected, and it is we pay cash. So in this case, we paid cash, cash must then be going down in this case. So how do we make something go down, we do the opposite thing to it. Cash is a debit balance represented by the fact that it does not have brackets around it. Therefore the opposite of a debit is a credit. So to make it go down, we're going to credit cash, I'm going to right click on cash Copy it, I'm going to put it on the bottom.

So here's the date, I'm going to put it on the bottom. Why? Because credits just traditionally go on the bottom, we could have an exception to that rule doesn't really matter as long as it's in the right column. But you know, it's an easy thing for us to have that convention have debits on top credits on the bottom, we will adhere to it. If, on the other hand, there's a reason for us not to follow that convention, then I will break with that convention if it makes the journal entry easier to read. So we're going to put the credit represented by the negative 400.

And then I'm going to say enter. So now we're off the cell, and we see the brackets around it. If we credit something, we're also going to have to have a debit of some kind because every journal entry has had the same amount of debits and credits. So we're gonna have a 400 on top as well in the debit section. So we have the debit and the credit, the only question being, what will that debit be? So pay cash for miscellaneous expense So