month end procedure

year end procedure

procedures ocument No. 1), except month-end WAREN'S MONTH-END PROCEDURES Following are the procedures performed at the end of each month by Waren's employees fter all transactions are recorded in the journals and subsidiary ledgersYou are to me the roles of Ray Kramer, Nancy Ford, and Jim Adams and perform each of these month end procedures for December. The only materials needed are this list of seven month-end procedures, all journals and ledgers, and four items from the documentet bank monthly statement (Doc No. 15), bank reconciliation for November Dec. No 23. December statement (Doc. No 24), and the list of items clearing with the bank statement (Doe No. 293 1. Jim Adams posts the column totals and individual transactions in other columns to the appropriate general ledger account and updates each general ledger account balance He places a posting reference check mark under each column total in the journals and by each of the individual transactions in the "Other columns to show that the numbers have been posted 2. Ray Kramer prepares alunk reconciliation on a separate working paper. Note that the bank reconciliation is found on a separate tab) After receiving the bank statement (Doe No. 24) and list of item clearing with the hell statement (Doc. No 25) from the bank, he performs the following procedures a. Traces and agrees the monthly totals from the cash account columns of the cash receipts and cash disbursements journals and the net pay column of the payroll journal to the posting in the general ledger cash account. He initials the cash account (net pay) column totals in the journals as well as the general ledger lines where the totals are posted b. Compares each entry in the cash receipts preist (Doc. No to the cash receipts journal for name, date, and amount and puts his initials by each entry in the prelist 12 MENTS Prepares a bank reconciliation using the procedures outlined in the Understanding Aid Reference material on pages 62 through 65. You can aisoie November's bank reconciliation (Doc. No. 23) as a model. Any deposits in trans and outstanding checks at November 30 are listed there. Note: Enter service charges/bank fees as negative numbers on the bank reconciliation d. Adjusts the cash general ledger account using the general journal, regardless of materiality for all reconciling items requiring an adjustment e Attaches together and files the bank reconciliation, bank statement, list of items clearing with bank statement, and the cash receipts prelist in the file labeled "Banking." 3. Jim Adams calculates and records the unemployment taxes paid by employers, and Waren's portion of the FICA payroll tax. These payroll taxes are calculated at the end of the month on gross payroll and recorded in the general journal. The taxes are paid the following month. State and federal unemployment taxes are imposed on the first $7,000 of wages paid to covered employees in 2022. Thus, a review of the employee earnings subsidiary ledger on pages 19 through 21 of the Ledgers indicates that only one of Waren's employees remains subject to this tax lie, has not yet exceeded the wage base maximum). The same wage base maximum is used in the project for both state and federal unemployment taxes to simplify the calculations. The state unemployment tax (SUTA) rate is 3.55%. Because employers are allowed credits against the federal unemployment tax (FUTA) rate for participation in state unemployment programs, the net FUTA rate is .6% 4. General Journal: Ray Kramer approves all monthly general journal entries and places his initials in the Approval column. Next, Jim Adams posts transactions from the general journal to the general ledger (and subsidiary if applicable), places a posting reference check mark in the general journal post reference column for each item posted, and updates each general ledger balance. 5. Nancy Ford reviews the balances of each subsidiary for the accounts receivable, accounts payable, employee earnings, and fixed assets subsidiaries, and compares the total to the appropriate general ledger control account (G/L accounts 10200, 20100. 40500, 10800, and 10900, respectively). She initials each general ledger control account to indicate that she has made the comparison 6. Jim Adams prepares a monthly statement (Doc. No. 15) for each customer with a balance. He includes information about each unpaid invoice including its aging status. Aging totals and the total amount due are shown at the bottom. He completes the remittance advice (attached to the monthly statement) in a similar fashion except that no aging is included. Ray Kramer reviews each statement and initials it before it is mailed to the customer. In this project, you are to prepare a December monthly statement for only one customer and file it in the "Mailed to Outsiders" file tab. The name of the selected customer is stated in the transactions list (Doc. No. 1) provided with your document set. After completing all six month-end procedures for December, continue to the next section and perform Waren's year-end procedures. 13 WAREN'S YEAR-END PROCEDURES Below are the procedures followed at the end of each year by Waren Sports Supply employees. You are to assume the roles of Ray Kramer, Nancy Ford, and Jim Adams and perform each of these year-end procedures for 2022. The only materials needed are Waren's list of year-end procedures, general journal, ledgers, year-end worksheet, and post-closing trial balance. All other items can be permanently filed. All December month-end procedures must be completed before the year-end procedures are done 1. Open the General Ledger and verify that you have posted ALL entries from ALL journals. Also verify that Debits - Credits in the General Ledger by consulting the check figures at the top of the General Ledger, An unbalanced General Ledger or failure to post ALL entries -- those from the five special journals, as well as all entries through month-end from the general journal-will result in errors in the year-end worksheet 2. Jim Adams prepares an unadjusted trial balance as of December 31 using the year. end worksheet provided in your document set. To complete the year-end worksheet click the Load button at the top of the year-end worksheet page. ******WARNINGS ***** (a) DO NOT CLICK LOAD UNTIL YOU HAVE VERIFIED ALL OF THE INFORMATION IN STEP 1 ABOVE. READ STEP 1 AGAIN! (b) DO NOT START PREPARING/POSTING ANY OF THE YEAR-END ADJUSTING ENTRIES IN THE GENERAL LEDGER UNTIL AFTER CLICKING LOAD IN THE YEAR-END WORKSHEET. THE LOAD BUTTON LOADS THE CURRENT BALANCES IN THE GENERAL LEDGER, WHICH SHOULD BE ALL BALANCES PRIOR TO THE YEAR-END ADJUSTING ENTRIES 3. Jim Adams prepares year-end adjusting entries and posts each entry to the year-end worksheet. Below are the normal adjusting entries. Refer to your Systems Linderstanding Aid Reference material for further help in preparing appropriate adjusting entries. Hint: Be sure to number each adjusting entry on the year-end worksheet to make it easier to complete year-end procedure 7 later (Example: YE01, YE02, etc.). a. Depreciation Expense. Depreciation expense is calculated once annually at the end of each year and recorded in the general journal as of December 31 The depreciation methods, estimated lives, and salvage values are documented in the fixed asset subsidiary ledger. Depreciation in the year of sale or acquisition is calculated following a half-year convention, which means that six months of depreciation is taken regardless of the amount of time the assets were actually owned during these years b. Interest Expense. Interest on loans is paid annually on the anniversary of the note. Interest accruals are calculated using a 365-day year with the day after the note was made counting as the first day. c. Bad Debt Expense. Bad debt expense is estimated once annually at the end of each year as a percent of net sales and is recorded as of December 31 in the general journal. The percentage estimate for 2022 is stated in the transactions list (Document No. 1). Waren uses the allowance method for recording the estimate of bad debts. 14 d. Ending Inventory. A physical inventory is taken on New Year's Day before business begins for the new year. The December 31, 2022 ending inventory as counted and priced by Waren's employees is stated in the transactions list (Document No. 1). For an illustration of procedures used to record cost of goods sold and adjust the inventory balance for the year-end physical count, see pages 77 through 79 of the Systems Understanding Aid Reference material. e. Federal Income Tax Expense. The adjusting entry for federal income tax expense must be saved until last, after the pre-tax net income has been calculated from the worksheet. This entry will be done later, as year-end procedure 4. The 2022 corporate income tax rates are provided there. 4. Jim Adams completes the year-end worksheet through the income statement and balance sheet columns. See page 18 of the Reference material for an example of a completed year-end worksheet 5. Jim Adams calculates federal income tax expense from the income statement column on the year-end worksheet, enters it in the adjustments column of the worksheet, and extends the expense and liability amounts to their respective income statement and balance sheet columns Corporate income tax rates are subject to change annually, but for 2022. the corporate income tax rate is 21% (most recent as of date of publication) 6. Jim Adams prepares financial statements in good form: statement of income and retained earnings, comparative balance sheet, and statement of cash flows (indirect method). He uses the formats suggested in the Systems Understanding Aid Reference material. 7. Nancy Ford prepares one supplementary report as of December 31, which will serve as valuable information for management and the external auditors: an accounts receivable aging report. (See page 45, of the Systems Understanding Aid Reference material for information to help you prepare this report.) She reconciles this report to the general ledger. She indicates that she has performed the reconciliations by putting her initials to the right of the total on the report. 8. Jim Adams posts the adjusting entries from the general journal to the general ledger. Next, he prepares and records the appropriate closing entries in the general journal and posts them to the general ledger. Finally, he prepares a post-closing trial balance. Kramer compares the account balances on the post-closing trial balance to the year- end worksheet and initials the trial balance on the bottom-right corner to document his control procedure. (See pages 19 through 24 of the Systems Understanding Aid Reference material for guidance.) procedures ocument No. 1), except month-end WAREN'S MONTH-END PROCEDURES Following are the procedures performed at the end of each month by Waren's employees fter all transactions are recorded in the journals and subsidiary ledgersYou are to me the roles of Ray Kramer, Nancy Ford, and Jim Adams and perform each of these month end procedures for December. The only materials needed are this list of seven month-end procedures, all journals and ledgers, and four items from the documentet bank monthly statement (Doc No. 15), bank reconciliation for November Dec. No 23. December statement (Doc. No 24), and the list of items clearing with the bank statement (Doe No. 293 1. Jim Adams posts the column totals and individual transactions in other columns to the appropriate general ledger account and updates each general ledger account balance He places a posting reference check mark under each column total in the journals and by each of the individual transactions in the "Other columns to show that the numbers have been posted 2. Ray Kramer prepares alunk reconciliation on a separate working paper. Note that the bank reconciliation is found on a separate tab) After receiving the bank statement (Doe No. 24) and list of item clearing with the hell statement (Doc. No 25) from the bank, he performs the following procedures a. Traces and agrees the monthly totals from the cash account columns of the cash receipts and cash disbursements journals and the net pay column of the payroll journal to the posting in the general ledger cash account. He initials the cash account (net pay) column totals in the journals as well as the general ledger lines where the totals are posted b. Compares each entry in the cash receipts preist (Doc. No to the cash receipts journal for name, date, and amount and puts his initials by each entry in the prelist 12 MENTS Prepares a bank reconciliation using the procedures outlined in the Understanding Aid Reference material on pages 62 through 65. You can aisoie November's bank reconciliation (Doc. No. 23) as a model. Any deposits in trans and outstanding checks at November 30 are listed there. Note: Enter service charges/bank fees as negative numbers on the bank reconciliation d. Adjusts the cash general ledger account using the general journal, regardless of materiality for all reconciling items requiring an adjustment e Attaches together and files the bank reconciliation, bank statement, list of items clearing with bank statement, and the cash receipts prelist in the file labeled "Banking." 3. Jim Adams calculates and records the unemployment taxes paid by employers, and Waren's portion of the FICA payroll tax. These payroll taxes are calculated at the end of the month on gross payroll and recorded in the general journal. The taxes are paid the following month. State and federal unemployment taxes are imposed on the first $7,000 of wages paid to covered employees in 2022. Thus, a review of the employee earnings subsidiary ledger on pages 19 through 21 of the Ledgers indicates that only one of Waren's employees remains subject to this tax lie, has not yet exceeded the wage base maximum). The same wage base maximum is used in the project for both state and federal unemployment taxes to simplify the calculations. The state unemployment tax (SUTA) rate is 3.55%. Because employers are allowed credits against the federal unemployment tax (FUTA) rate for participation in state unemployment programs, the net FUTA rate is .6% 4. General Journal: Ray Kramer approves all monthly general journal entries and places his initials in the Approval column. Next, Jim Adams posts transactions from the general journal to the general ledger (and subsidiary if applicable), places a posting reference check mark in the general journal post reference column for each item posted, and updates each general ledger balance. 5. Nancy Ford reviews the balances of each subsidiary for the accounts receivable, accounts payable, employee earnings, and fixed assets subsidiaries, and compares the total to the appropriate general ledger control account (G/L accounts 10200, 20100. 40500, 10800, and 10900, respectively). She initials each general ledger control account to indicate that she has made the comparison 6. Jim Adams prepares a monthly statement (Doc. No. 15) for each customer with a balance. He includes information about each unpaid invoice including its aging status. Aging totals and the total amount due are shown at the bottom. He completes the remittance advice (attached to the monthly statement) in a similar fashion except that no aging is included. Ray Kramer reviews each statement and initials it before it is mailed to the customer. In this project, you are to prepare a December monthly statement for only one customer and file it in the "Mailed to Outsiders" file tab. The name of the selected customer is stated in the transactions list (Doc. No. 1) provided with your document set. After completing all six month-end procedures for December, continue to the next section and perform Waren's year-end procedures. 13 WAREN'S YEAR-END PROCEDURES Below are the procedures followed at the end of each year by Waren Sports Supply employees. You are to assume the roles of Ray Kramer, Nancy Ford, and Jim Adams and perform each of these year-end procedures for 2022. The only materials needed are Waren's list of year-end procedures, general journal, ledgers, year-end worksheet, and post-closing trial balance. All other items can be permanently filed. All December month-end procedures must be completed before the year-end procedures are done 1. Open the General Ledger and verify that you have posted ALL entries from ALL journals. Also verify that Debits - Credits in the General Ledger by consulting the check figures at the top of the General Ledger, An unbalanced General Ledger or failure to post ALL entries -- those from the five special journals, as well as all entries through month-end from the general journal-will result in errors in the year-end worksheet 2. Jim Adams prepares an unadjusted trial balance as of December 31 using the year. end worksheet provided in your document set. To complete the year-end worksheet click the Load button at the top of the year-end worksheet page. ******WARNINGS ***** (a) DO NOT CLICK LOAD UNTIL YOU HAVE VERIFIED ALL OF THE INFORMATION IN STEP 1 ABOVE. READ STEP 1 AGAIN! (b) DO NOT START PREPARING/POSTING ANY OF THE YEAR-END ADJUSTING ENTRIES IN THE GENERAL LEDGER UNTIL AFTER CLICKING LOAD IN THE YEAR-END WORKSHEET. THE LOAD BUTTON LOADS THE CURRENT BALANCES IN THE GENERAL LEDGER, WHICH SHOULD BE ALL BALANCES PRIOR TO THE YEAR-END ADJUSTING ENTRIES 3. Jim Adams prepares year-end adjusting entries and posts each entry to the year-end worksheet. Below are the normal adjusting entries. Refer to your Systems Linderstanding Aid Reference material for further help in preparing appropriate adjusting entries. Hint: Be sure to number each adjusting entry on the year-end worksheet to make it easier to complete year-end procedure 7 later (Example: YE01, YE02, etc.). a. Depreciation Expense. Depreciation expense is calculated once annually at the end of each year and recorded in the general journal as of December 31 The depreciation methods, estimated lives, and salvage values are documented in the fixed asset subsidiary ledger. Depreciation in the year of sale or acquisition is calculated following a half-year convention, which means that six months of depreciation is taken regardless of the amount of time the assets were actually owned during these years b. Interest Expense. Interest on loans is paid annually on the anniversary of the note. Interest accruals are calculated using a 365-day year with the day after the note was made counting as the first day. c. Bad Debt Expense. Bad debt expense is estimated once annually at the end of each year as a percent of net sales and is recorded as of December 31 in the general journal. The percentage estimate for 2022 is stated in the transactions list (Document No. 1). Waren uses the allowance method for recording the estimate of bad debts. 14 d. Ending Inventory. A physical inventory is taken on New Year's Day before business begins for the new year. The December 31, 2022 ending inventory as counted and priced by Waren's employees is stated in the transactions list (Document No. 1). For an illustration of procedures used to record cost of goods sold and adjust the inventory balance for the year-end physical count, see pages 77 through 79 of the Systems Understanding Aid Reference material. e. Federal Income Tax Expense. The adjusting entry for federal income tax expense must be saved until last, after the pre-tax net income has been calculated from the worksheet. This entry will be done later, as year-end procedure 4. The 2022 corporate income tax rates are provided there. 4. Jim Adams completes the year-end worksheet through the income statement and balance sheet columns. See page 18 of the Reference material for an example of a completed year-end worksheet 5. Jim Adams calculates federal income tax expense from the income statement column on the year-end worksheet, enters it in the adjustments column of the worksheet, and extends the expense and liability amounts to their respective income statement and balance sheet columns Corporate income tax rates are subject to change annually, but for 2022. the corporate income tax rate is 21% (most recent as of date of publication) 6. Jim Adams prepares financial statements in good form: statement of income and retained earnings, comparative balance sheet, and statement of cash flows (indirect method). He uses the formats suggested in the Systems Understanding Aid Reference material. 7. Nancy Ford prepares one supplementary report as of December 31, which will serve as valuable information for management and the external auditors: an accounts receivable aging report. (See page 45, of the Systems Understanding Aid Reference material for information to help you prepare this report.) She reconciles this report to the general ledger. She indicates that she has performed the reconciliations by putting her initials to the right of the total on the report. 8. Jim Adams posts the adjusting entries from the general journal to the general ledger. Next, he prepares and records the appropriate closing entries in the general journal and posts them to the general ledger. Finally, he prepares a post-closing trial balance. Kramer compares the account balances on the post-closing trial balance to the year- end worksheet and initials the trial balance on the bottom-right corner to document his control procedure. (See pages 19 through 24 of the Systems Understanding Aid Reference material for guidance.)