 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 going to 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 going to 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. It 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 liabilities are added, so 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. 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. By doing this, we can allow ourselves to have less columns in some of the worksheets. 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 ledgers is this long kind of intimidating looking item of ledgers, but it's basically just the backup for the accounts on the trial balance. We've got the same list of accounts, same order of the assets, and then the liabilities, then the equity. So we've got cash, then accounts disabled and supplies, then prepaid rent, then prepaid insurance, office equipment, accumulated depreciation, and then we're into the liabilities, accounts payable, salaries payable, under 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 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 going to do a lot of entries, a lot of repetitions, so this will become familiar as we go. First thing I want to do is actually hide some sales. 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 sales here, and I would like to hide these sales 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, the space we're going to put and the trial balance all in one area. All right, so the first date is 5.3, so I'm going to put that in the date area, and it says we received cash from clients for advanced payment for services that will be prepared in the future, record as under and revenue. So first thing I'll 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 cash a debit or credit balance? It's a debit, how do we know? Because it does not have brackets around it, unlike 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 that goes on top. Debits go on top. So I'm going to right-click, and I'm going to paste it one, two, three, just the values only. If I paste it this way, then I change the format of the cell. I just want to paint the values. Now you could just type it in there, obviously, as well. So if you just typed in cash, that works as well. But copying and pasting might be easier as we go later on. I'm in the debit column, the debit side, and we're going to put the 4,000 there. And I'm just typing the 4,000 and note that I'm not putting a comma or anything. I'm typing 4,000. I'm in the cell instead of on the cell, and then we've got to hit Enter or something in order to be off the cell. So I'm going to hit Enter, and now you can see that I'm not in the cell. Now I'm on the cell. 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 4,000. Now, credits don't mean negative. They're not bad. Negative is not a negative term in this case. Negative is just how the credits are going to be represented in the worksheet 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 sign to brackets. That's the formatting of the cell that is doing that. The worksheet is formatted to do that. If you want to know what that formatting 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. All right, 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 being 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 going to 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 owe in the future? Our service. So I'm going to go ahead and copy that. I'm going to right click and copy. I'm going to go over to C6, right click, and paste it 123. All right. Now we're going to go ahead and post this. Now 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 O. There's O nine. And I'm going to say equals. And I do highly recommend putting formulas instead of just typing the number in here. Because if you do, then if there's a mistake, it's a lot easier to go back and find that mistake. So I'm going to say equals. I'm going to point to that 4000. When we hit enter, the debit is going to go up from 2212. Enter 261. 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 going to have to find unearned revenue. We could make the whole sheet a little bit smaller here if we went down to the task bar. If we want to see it smaller, it's about as small as I want to go. But if we go down 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 in E six. And then if I go back over here when I hit enter, it's going to go up in the credit direction. So notice it went up. Excel sees 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 can see that 65 here is also the 65 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 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, it 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 in C8. It's C8. And I'm going to right click going to 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. And then in the credit column, if there's only two accounts affected, we have to have an equal number of debits in credit. So we're going to put the same negative. I'm going to represent with a negative three one zero zero. And once again, when we hit enter, then it'll put those brackets around. So I'm going to hit enter. And because of the format of the cell, put bracket around it. Now if you wanted to change that cell, then you'd have to go in there and double click on it. Or you can go in there and you can go up 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 the cell and it's going to act differently than if you're just on the cell. All right, 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 a accounts receivable up here. So this is where the work should be coming out of 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 debited cash that 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 receivable is going to go down and the better asset of cash will go up going to right click going to copy that going to go to sell C nine right click and paste it 123 just the values only. Then we're going to 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 task bar down here. And then we'll go to the cash here. So we're going to post this cash line to the general ledger to the cash section. And it's on the debit side. So I'm in cell 010 cell 010. 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 three thousand one. And that three four should go down by the three one two 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 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 know 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 task bar 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. I'm going to 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 paid 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 and 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 credit's just traditionally go on the bottom. We could have an exception to that rule. It doesn't really matter as long as it's in the right column. But you know if it's an easy thing for us to have that convention of 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 tree 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 tree has to have the same amount of debits and credits. So we're going to 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.