Problem

(Objective 6-4) The following general ledger accounts are included in the trial balance fo...

(Objective 6-4) The following general ledger accounts are included in the trial balance for an audit client, Jones Wholesale Stationery Store.

Accounts payable

Depreciation expense – furniture and equipment

Prepaid insurance

Accounts receivable

Property tax expense

Accrued interest expense

Furniture and equipment

Property tax payable

Accrued sales salaries

Income tax expense

Purchases

Accumulated depreciation – furniture and equipment

Income tax payable

Rent expense

Insurance expense

Retained earnings

Advertising expense

Interest expense

Salaries, office and general

Allowance for doubtful accounts

Inventory

Sales

Bad debt expense

Loans payable

Sales salaries expense

Cash

Notes payable

Telecommunications expense

Common stock

Notes receivable—trade

a. Identify the accounts in the trial balance that are likely to be included in each transaction cycle. Some accounts will be included in more than one cycle. Use the format that follows.

Cycle

Balance Sheet Accounts

Income Statement Accounts

Sales and collection

 

 

Acquisition and payment

 

 

Payroll and personnel

 

 

Inventory and warehousing

 

 

Capital acquisition and repayment

 

 


b. How will the general ledger accounts in the trial balance most likely differ if the company were a retail store rather than a wholesale company? How will they differ for a hospital or a government unit?

Objective 6-4

Classify transactions and account balances into financial statement cycles and identify benefits of a cycle approach to segmenting the audit.

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