OBJECTIVES:

a) To close the books
b) Elaborate Financial Statements

MATERIAL AIDS:

Handout Aid 29.

PROCEDURE:

The following is not a lesson plan but a detailed explanation of statement elaboration. Two or three days before month end give a short class on this subject.
Often students will do better if given a step by step approach: squaring the month, completing the Account Book and, then, elaboration of the Statement.
The best students will loam in two months; the rest in 4. If they have not learned by this point, have them drop the Cash Book and only carry the Credit Books for control.

1.

Closing the Books

1.1 Take a month end inventory using the inventory section of the Cash Book. Pass balances to the Account Book.

1.2 Square Cash Book on the last day of month.
a) This effectively squares the month.
b) Leave a margin of knee between months for correctionsand omissions.
c) Start next month with Bank and Cash on Hand balances.

2.

Account Book

2.1 Pass all balances from the Cash Book to the appropriate account.

2.2 Pass the "Amounts" of Credit Sale a and Purchases when indicated.
a) These amount sections are cleared at month's end.
b) Do not merely pass control section balances!

2.3 Figure account balances:
Past Month's Balance
+ Debit Entries
- Credit Entries
This Month's Balance
a) If balances on control accounts to not match those in the Account Book, compare all entries and check all mathematics until the discrepancy is found.
b) Group all variable expenses in "Cost of Sales"
c) Group all fixed expenses in "Other Expenses"
d) Figure accumulated balances for year end purposes.

3.

Trial Balance

3.1 Pass all account balances by filling in the blanks.

3.2 Use last month's inventory figure.

3.3 The sum of Column I must equal Column II

3.4 If the Trial Balance does not square. . .
a) Were all numbers correctly passed?
b) Are the mathematical operations in the Account Book correct?
c) Were the balances from the squared Cash Book and the Amounts of Credit Sales and Purchases correctly passed?
d) Are control account balances and the Account Book squared?

4.

Financial Statement

4.1 The Profit and Loss Statement
a) Pass the appropriate accounts.
b) Pass amount of profit or lose to the Account Book ant the Balance Statement.

4.2 The Balance Statement
a) Pass appropriate accounts - this month's inventory and profits also.
b) Check accuracy by comparing sum of Capital accounts to Assets minus Liabilities.