Question

Respond to the following questions in a Word document. Your responses must be at least 100 words
long and they must be your original thoughts and words based on what you have learned.
1. Explain how an adjustment can affect both the income statement and balance sheet. Please give
an example.
2. Each month Accumulated Depreciation grows while Equipment goes up. Agree or disagree?
Defend your position.
3. Explain how the financial statements are prepared from the worksheet.
4. “Closing slows down the recording of next year’s transactions.” Defend or reject this statement
with supporting evidence.
5. List the four steps of closing. Explain how each one contributes to the preparation of the
financial statements.

Answer 1

Please note that an expert here is allowed to answer one independent question per post and 4 sub parts of 1 question per post. Please repost for the rest. Hope this one helps, thanks !

Balance Sheet and Income statement have transactional effects which affect each other. One such adjustment is of depreciation, accumulated depreciation (ad) and assets. While Depreciation is shown in Income Statement, its effect goes on to assets as well as accumulated depreciation which are assets figures.

Example, company purchased an asset on Jan 1 of $ 100,000 with lif of 10 years to be depreciated on SLM basis. The asset shall be disposed of at nil value after 10 years.

Treatment on Dec 31 would thus be Assets of $ 100,000. Acc. Dep on Asset of $ 10,000 and Dep of $ 10,000.