The main section of this reading presented a basic accounting system represented as a spreadsheet. An alternative system that underlies most manual and electronic accounting systems uses debits and credits. Both a spreadsheet and a debit/credit system are based on the basic accounting equation:

Assets = Liabilities + Owners’ equity

Early generations of accountants desired a system for recording transactions that maintained the balance of the accounting equation and avoided the use of negative numbers (which could lead to errors in recording). The system can be illustrated with T-accounts for every account involved in recording transactions. The T-account is so named for its shape:

T-Account
Debit	Credit

The left-hand side of the T-account is called a “debit,” and the right-hand side is termed a “credit.” The names should not be construed as denoting value. A debit is not better than a credit and vice versa. Debit simply means the left side of the T-account, and credit simply means the right side. Traditionally, debit is abbreviated as “DR,” whereas credit is abbreviated “CR.” The T-account is also related to the balance sheet and accounting equation as follows:

Balance Sheet
Assets	Liabilities
	Owners’ Equity

Assets are referred to as the left side of the balance sheet (and accounting equation) and hence are on the left side of the T-account. Assets are, therefore, recorded with a debit balance. In other words, to record an increase in an asset, an entry is made to the left-hand side of a T-account. A decrease to an asset is recorded on the right side of a T-account. Liabilities and owners’ equity are referred to as the right side of the balance sheet (and accounting equation). Increases to liabilities and owners’ equity are recorded on the right side of a T-account; decreases to liabilities and owners’ equity are recorded on the left side.

At any point in time, the balance in an account is determined by summing all the amounts on the left side of the account, summing all the amounts on the right side of the account, and calculating the difference. If the sum of amounts on the left side of the account is greater than the sum of amounts on the right side of the account, the account has a debit balance equal to the difference. If the sum of amounts on the right side of the account is greater than the sum of amounts on the left side of the account, the account has a credit balance.

A T-account is created for each asset account, liability account, and owners’ equity account. The collection of these T-accounts at the beginning of the year for a fictitious company, Investment Advisers, Ltd. (IAL), is presented in Exhibit 1. Each balance sheet T-account is termed a “permanent” or “real” account because the balance in the account carries over from year-to-year.

Exhibit 1. Balance Sheet T-Accounts for Investment Advisers, Ltd.

Cash			Accounts Receivable			Inventory
Investments			Office Equipment			Accumulated Depreciation
Deposits			Prepaid Rent			Accounts Payable
Accrued Wages			Unearned Fees			Bank Debt
Accrued Interest			Contributed Capital			Retained Earnings

T-accounts are also set up for each income statement account. These T-accounts are referred to as “temporary” or “nominal” accounts because they are transferred at the end of each fiscal year by transferring any net income or loss to the balance sheet account, Retained Earnings. Income statement T-accounts for IAL are presented in Exhibit 2.

Exhibit 2. Income Statement T-Accounts for Investment Advisers, Ltd.

Fee Revenue			Book Sales Revenue			Investment Income
Cost of Goods Sold			Advertising Expense			Rent Expense
Depreciation Expense			Wage Expense			Interest Expense

The collection of all business transactions sorted by account, real and temporary, for a company comprise the general ledger. The general ledger is the core of every accounting system, where all transactions are ultimately entered. To illustrate the use of T-accounts, we will use the transactions for IAL summarized in Exhibit 3. We will first enter each transaction into the general ledger T-accounts, then use the information to prepare financial statements.

Exhibit 3. Business Transactions for Investment Advisers, Ltd.

#	Date	Business Activity
1	31 December 2005	File documents with regulatory authorities to establish a separate legal entity. Initially capitalize the company through deposit of $150,000 from the three owners.
2	2 January 2006	Set up a $100,000 investment account and purchase a portfolio of equities and fixed-income securities.
3	2 January 2006	Pay $3,000 to landlord for office/warehouse. $2,000 represents a refundable deposit, and $1,000 represents the first month’s rent.
4	3 January 200	Purchase office equipment for $6,000. The equipment has an estimated life of two years with no salvage value.
5	3 January 2006	Receive $1,200 cash for a one-year subscription to the monthly newsletter.
6	10 January 2006	Purchase and receive 500 books at a cost of $20 per book for a total of $10,000. Invoice terms are that payment from IAL is due in 30 days. No cash changes hands. These books are intended for resale.
7	10 January 2006	Spend $600 on newspaper and trade magazine advertising for the month.
8	15 January 2006	Borrow $12,000 from a bank for working capital. Interest is payable annually at 10 percent. The principal is due in two years.
9	15 January 2006	Ship first order to a customer consisting of five books at $25 per book. Invoice terms are that payment is due in 30 days. No cash changes hands.
10	15 January 2006	Sell for cash 10 books at $25 per book at an investment conference.
11	30 January 2006	Hire a part-time clerk. The clerk is hired through an agency that also handles all payroll taxes. The company is to pay $15 per hour to the agency. The clerk works six hours prior to 31 January, but no cash will be paid until February.
12	31 January 2006	Mail out the first month’s newsletter to customer. This subscription had been sold on 3 January. See item 5.
13	31 January 2006	Review of the investment portfolio shows that $100 of interest income was earned and the market value of the portfolio has increased by $2,000. The balance in the investment account is now $102,100. Securities are classified as “trading” securities.

Because this is a new business, the company’s general ledger T-accounts initially have a zero balance.

31 December 2005 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
1	File documents with regulatory authorities to establish a separate legal entity. Initially capitalize the company through deposit of $150,000 from the three owners.	Cash [A] is increased by $150,000, and contributed capital [E] is increased by $150,000.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

This transaction affects two accounts: cash and contributed capital. (Cash is an asset, and contributed capital is part of equity.) The transaction is entered into the T-accounts as shown below. The number in parenthesis references the transaction number.

Cash			Contributed Capital
150,000 (1)				150,000 (1)

Cash is an asset account, and assets are on the left-hand side of the balance sheet (and basic accounting equation); therefore, cash is increased by recording the $150,000 on the debit (left) side of the T-account. Contributed capital is an equity account, and equity accounts are on the right-hand side of the balance sheet; therefore, contributed capital is increased by recording $150,000 on the credit (right) side of the T-account. Note that the sum of the debits for this transaction equals the sum of the credits:

DR = $150,000

CR = $150,000

DR = CR

Each transaction must always maintain this equality. This ensures that the accounting system (and accounting equation) is kept in balance. At this point in time, the company has assets (resources) of $150,000, and the owners’ claim on the resources equals $150,000 (their contributed capital) because there are no liabilities at this point.

Transactions are recorded in a journal, which is then “posted to” (recorded in) the general ledger. When a transaction is recorded in a journal, it takes the form:

Date	Account		DR	CR
13 Dec 2005	Cash		150,000
		Contributed Capital		150,000

This kind of entry is referred to as a “journal entry,” and it is a summary of the information that will be posted in the general ledger T-accounts.

2 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
2	Set up a $100,000 investment account and purchase a portfolio of equities and fixed-income securities.	Investments [A] were increased by $100,000, and cash [A] was decreased by $100,000.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

This transaction affects two accounts but only one side of the accounting equation. Cash is reduced when the investments are purchased. Another type of asset, investments, increases. The T-account entries are shown below:

Cash			Investment
150,000 (1)	100,000 (2)		100,000 (2)

The cash account started with a $150,000 debit balance from the previous transaction. Assets are reduced by credit entries, so the reduction in cash is recorded by entering the $100,000 on the credit (right) side of the cash T-account. The investment account is also an asset, and the increase in investments is recorded by entering $100,000 on the debit side of the investments T-account. Transaction 2 balances because Transaction 2 debits equal Transaction 2 credits.

Going forward, we will use the traditional accounting terms of debit (debiting, debited) to indicate the action of entering a number in the debit side of an account, and credit (crediting, credited) to indicate the action of entering an amount on the credit side of an account.

2 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
3	Pay $3,000 to landlord for office/warehouse. $2,000 represents a refundable deposit, and $1,000 represents the first month’s rent.	Cash [A] was decreased by $3,000, deposits [A] were increased by $2,000, and prepaid rent [A] was increased by $1,000.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

Cash is reduced once again by crediting the account by $3,000. On the other side of the transaction, two asset accounts increase. Deposits are increased by debiting the account for $2,000, while prepaid rent is increased by debiting that account for $1,000:

Cash			Deposits			Prepaid Rent
150,000 (1)	100,000 (2)		2,000 (3)			1,000 (3)
	3,000 (3)

The sum of the debits for Transaction 3 equals the sum of the credits (i.e., $3,000).

3 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
4	Purchase office equipment for $6,000 in cash. The equipment has an estimated life of two years with no salvage value.	Cash [A] was decreased by $6,000, and office equipment [A] was increased by $6,000.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

Cash is credited for $6,000, while office equipment is debited for $6,000. Both are asset accounts, so these entries reflect a reduction in cash and an increase in office equipment.

Cash			Office Equipment
150,000 (1)	100,000 (2)		6,000 (4)
	3,000 (3)
	6,000 (4)

3 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
5	Receive $1,200 cash for a one-year subscription to the monthly newsletter.	Cash [A] was increased by $1,200, and unearned fees [L] was increased by $1,200.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

In this transaction, the company has received cash related to the sale of subscriptions. However, the company has not yet actually earned the subscription fees because it has an obligation to deliver newsletters in the future. So, this amount is recorded as a liability called “unearned fees” (or “unearned revenue”). In the future, as the company delivers the newsletters and thus fulfills its obligation, this amount will be transferred to revenue. If they fail to deliver the newsletters, the fees will need to be returned to the customer. To record the transaction, cash is debited (increased), while a liability account, unearned fees, is credited. Liabilities are on the right-hand side of the balance sheet and are, therefore, increased by crediting the T-account.

Cash			Unearned Fees
150,000 (1)	100,000 (2)			1,200 (5)
1,200 (5)	3,000 (3)
	6,000 (4)

The sum of Transaction 5 debits and credits each equal $1,200.

10 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
6	Purchase and receive 500 books at a cost of $20 per book for a total of $10,000. Invoice terms are that payment from IAL is due in 30 days. No cash changes hands. These books are intended for resale.	Inventory [A] is increased by $10,000, and accounts payable [L] is increased by $10,000.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

The company has obtained an asset, inventory, which can be sold to customers at a later date. Rather than paying cash to the supplier currently, the company has an obligation to do so in 30 days. This represents a liability (“accounts payable”) to the supplier. Inventory is debited for $10,000, while the liability, accounts payable, is credited for $10,000. Note that there is no impact on the cash account.

Inventory			Accounts Payable
10,000 (6)				10,000 (6)

10 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
7	Spend $600 on newspaper and trade magazine advertising for the month	Cash [A] was decreased by $600, and advertising expense [X] was increased by $600.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

Unlike the previous expenditures, advertising is not an asset. Its future economic benefits are unclear, unlike equipment, which is expected to be useful over multiple periods. Expenditures such as advertising are recorded as an expense when they are incurred. To record the advertising expense, cash is credited for $600, and advertising expense is debited for $600. Expenses reduce net income, and thus reduce retained earnings. Decreases in retained earnings, as with any equity account, are recorded as debits. The entries with respect to retained earnings will be presented later in this section after the income statement.

Cash			Advertising Expense
150,000 (1)	100,000 (2)		600 (7)
1,200 (5)	3,000 (3)
	6,000 (4)
	600 (7)

15 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
8	Borrow $12,000 from a bank for working capital. Interest is payable annually at 10 percent. The principal is due in two years.	Cash [A] is increased by $12,000, and Bank debt [L] is increased by $12,000.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

Cash is debited, and a corresponding liability is credited. Initially, no entry is made for interest that is expected to be paid on the loan. Interest will be recorded in the future as time passes and interest accrues (accumulates) on the loan.

Cash			Bank Debt
150,000 (1)	100,000 (2)			12,000 (8)
1,200 (5)	3,000 (3)
12,000 (8)	6,000 (4)
	600 (7)

The debits and credits of Transaction 8 each total $12,000.

15 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
9	Ship first order to a customer consisting of five books at $25 per book. Invoice terms are that payment is due in 30 days. No cash changes hands.	Accounts receivable [A] increased by $125, and book sales revenue [R] increased by $125. Additionally, inventory [A] decreased by $100, and cost of goods sold [X] increased by $100.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

The company has now made a sale. Sale transaction records have two parts. One part records the $125 revenue to be received from the customer, and the other part records the $100 cost of the goods that have been sold. For the first part, accounts receivable is debited (increased) for $125, and a revenue account is credited for $125.

Accounts Receivable			Book Sales Revenue
125 (9)				125 (9)

For the second part, inventory is credited (reduced) for $100, and an expense, cost of goods sold, is debited (increased) to reflect the cost of inventory sold.

Inventory			Cost of Goods Sold
10,000 (6)	100 (9)		100 (9)

Note that the sum of debits and the sum of credits for Transaction 9 both equal $225. The $225 is not meaningful by itself. What is important is that the debits and credits balance.

15 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
10	Sell for cash 10 books at $25 per book at an investment conference.	Cash [A] is increased by $250, and book sales revenue [R] is increased by $250. Additionally, inventory [A] is decreased by $200, and cost of goods sold [X] is increased by $200.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

Similar to the previous transaction, both the sales proceeds and cost of the goods sold must be recorded. In this case, however, the sales proceeds are received in cash. To record the sale proceeds, the entries include a debit to cash for $250 and a corresponding credit to book sales revenue for $250. To record cost of goods sold, the entries include a debit to cost of goods sold and a credit to inventory.

Cash			Book Sales Revenue
150,000 (1)	100,000 (2)			125 (9)
1,200 (5)	3,000 (3)			250 (10)
12,000 (8)	6,000 (4)
250 (10)	600 (7)

Inventory			Cost of Goods Sold
10,000 (6)	100 (9)		100 (9)
	200 (10)		200 (10)

Transaction 10’s debits and credits are equal, maintaining the accounting system’s balance.

30 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
11	Hire a part-time clerk. The clerk is hired through an agency that also handles all payroll taxes. The company is to pay $15 per hour to the agency. The clerk works six hours prior to 31 January, but no cash will be paid until February.	The company owes $90 for wages at month-end. Under accrual accounting, expenses are recorded when incurred, not when paid. Accrued wages [L] is increased by $90, and wage expense [X] is increased by $90. The accrued wage liability will be eliminated when the wages are paid.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

Accrued wages is a liability that is increased by crediting that account, whereas payroll is an expense account that is increased with a debit.

Accrued Wages			Wage Expense
	90 (11)		90 (11)

31 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
12	Mail out the first month’s newsletter to customer. This subscription had been sold on 3 January.	One month (or 1/12) of the $1,200 subscription has been satisfied, and thus $100 can be recognized as revenue. Unearned fees [L] is decreased by $100, and fee revenue [R] is increased by $100.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

To record the recognition of one month of the subscription fee, the account fee revenue is credited (increased) by $100, and the related liability is debited (decreased) by $100.

Fee Revenue			Unearned Fees
	100 (12)		100 (12)	1,200 (5)

31 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
13	Review of the investment portfolio shows that $100 of interest income was earned and the market value of the portfolio has increased by $2,000. The balance in the investment account is now $102,100. The securities are classified as “trading” securities.	Investment income [R] is increased by $100, and the investments account [A] is increased by $100. The $2,000 increase in the value of the portfolio represents unrealized gains that are part of income for traded securities. The investments account [A] is increased by $2,000, and investment income [R] is increased by $2,000.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

The investments account is an asset account that is debited (increased) for $2,100, and investment income is a revenue account that is credited (increased) by $2,100.

Investments			Investment Income
100,000 (2)				2,100 (13)
2,100 (13)

These entries complete the recording of the first 13 transactions. In this illustration, there are three adjustments. An adjustment must be made related to Transaction 3 to account for the fact that a month has passed and rent expense has been incurred. We refer to this as Transaction 3a. Adjustments must also be made for an estimate of the depreciation of the office equipment (Transaction 4a) and for interest that has accrued on the loan (Transaction 8a).

31 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
3a	In item 3, $3,000 was paid to the landlord for office/warehouse, including a $2,000 refundable deposit and $1,000 for the first month’s rent. Now, the first month has ended, so this rent has become a cost of doing business.	To reflect the full amount of the first month’s rent as a cost of doing business, prepaid rent [A] is decreased by $1,000, and rent expense [X] is increased by $1,000.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

Prepaid rent (an asset) is credited for $1,000 to reduce the balance, and rent expense is debited for the same amount to record the fact that the expense has now been incurred. After this entry, the balance of the prepaid rent asset account is $0.

Prepaid Rent			Rent Expense
1,000 (3)	1,000 (3a)		1,000 (3a)

31 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
4a	In item 4, office equipment was purchased for $6,000 in cash. The equipment has an estimated life of two years with no salvage value. Now, one month (or 1/24) of the useful life of the equipment has ended so a portion of the equipment cost has become a cost of doing business.	A portion (1/24) of the total $6,000 cost of the office equipment is allocated to the current period’s cost of doing business. Depreciation expense [X] is increased by $250, and accumulated depreciation is increased by $250. Accumulated depreciation is a contra asset account to office equipment

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

Because some time has passed, accounting principles require that the estimated depreciation of the equipment be recorded. In this case, one could directly credit office equipment for $250; however, a preferred method is to credit an account called “accumulated depreciation,” which is associated with the office equipment account. This accumulated depreciation account “holds” the cumulative amount of the depreciation related to the office equipment. When financial reports are prepared, a user is able to see both the original cost of the equipment as well as the accumulated depreciation. The user, therefore, has insight into the age of the asset, and perhaps how much time remains before it is likely to be replaced. Accumulated depreciation is termed a “contra” asset account and is credited for $250, while depreciation expense is debited (increased) for $250.

Accumulated Depreciation			Depreciation Expense
	250 (4a)		250 (4a)

31 January 2006 (excerpt from Exhibit 3)

#	Business Activity	Accounting Treatment
8a	The company borrowed $12,000 from a bank on 15 January, with interest payable annually at 10 percent and the principal due in two years. Now, one-half of one month has passed since the borrowing.	One-half of one month of interest expense has become a cost of doing business. $12,000 times 10% equals $1,200 of annual interest, equivalent to $100 per month and $50 for one-half month. Interest expense [X] is increased by $50, and accrued interest [L] is increased by $50.

Accounting elements: Assets (A), Liabilities (L), Equity (E), Revenue (R), and Expenses (X).

Accrued interest is a liability that is credited (increased) for $50, and interest expense is debited (increased) for $50. Accrued interest is also sometimes referred to as “interest payable.”

Accrued Interest			Interest Expense
	50 (8a)		50 (8a)

Exhibit 4 summarizes the general ledger T-accounts for IAL at this point in time. For accounts with multiple entries, a line is drawn and the debit and credit columns are summed and netted to determine the current balance in the account. The balance is entered below the line. These individual account totals are then summarized in a trial balance as depicted in Exhibit 5. A trial balance is a summary of the account balances at a point in time. An accountant can prepare a trial balance at any time to ensure that the system is in balance and to review current amounts in the accounts. Note that the debit and credit columns each total $176,065, confirming that the system is in balance. Any difference in the column totals would indicate an error had been made. The trial balance totals have no particular significance and are not used in preparing financial statements. These totals are simply the sum of debits and credits in the accounting system at that point in time.

Exhibit 4. General Ledger T-Accounts for Investment Advisors, Ltd.

Cash			Accounts Receivable			Inventory
150,000 (1)	100,000 (2)		125 (9)			10,000 (6)	100 (9)
1,200 (5)	3,000 (3)						200 (10)
12,000 (8)	6,000 (4)					9,700
250 (10)	600 (7)
53,850
Investments			Office Equipment			Accumulated Depreciation
100,000 (2)			6,000 (4)				250 (4a)
2,100 (13)
102,100
Deposits			Prepaid Rent			Accounts Payable
2,000 (3)			1,000 (3)	1,000 (3a)			10,000 (6)
			0
Accrued Wages			Unearned Fees			Bank Debt
	90 (11)		100 (12)	1,200 (5)			12,000 (8)
				1,100
Accrued Interest			Contributed Capital			Retained Earnings
	50 (8a)			150,000 (1)
Fee Revenue			Book Sales Revenue			Investment Income
	100 (12)			125 (9)			2,100 (13)
				250 (10)
				375
Cost of Goods Sold			Advertising Expense			Rent Expense
100 (9)			600 (7)			1,000 (3a)
200 (10)
300
Depreciation Expense			Wage Expense			Interest Expense
250 (4a)			90 (11)			50 (8a)

Exhibit 5. Investment Advisers, Ltd., Trial Balance

	DR	CR
Cash	53,850
Accounts receivable	125
Inventory	9,700
Investments	102,100
Office equipment	6,000
Accumulated depreciation		250
Deposits	2,000
Prepaid rent	0
Accounts payable		10,000
Accrued wages		90
Unearned fees		1,100
Bank debt		12,000
Accrued interest		50
Contributed capital		150,000
Retained earnings
Fee revenue		100
Book sales revenue		375
Investment income		2,100
Cost of goods sold	300
Advertising expense	600
Rent expense	1,000
Depreciation expense	250
Wage expense	90
Interest expense	50
Total	176,065	176,065

After ensuring that the balances in the trial balance are correct (if there are errors, they are corrected and an adjusted trial balance is prepared), we prepare the financial statements. The trial balance provides the information necessary to prepare the balance sheet and the income statement. The detail in the general ledger must be reviewed to prepare the statement of cash flows and statement of owners’ equity. After the income statement is prepared, the temporary accounts are closed out (i.e., taken to a zero balance) by transferring each of their balances to retained earnings. This typically occurs at year-end and is termed the “closing process.” Exhibits 6 and 7 show the post-closing general ledger and trial balance, respectively.

Exhibit 6. Post-Closing General Ledger T-Accounts for Investment Advisors, Ltd.

Cash			Accounts Receivable			Inventory
150,000 (1)	100,000 (2)		125 (9)			10,000 (6)	100 (9)
1,200 (5)	3,000 (3)						200 (10)
12,000 (8)	6,000 (4)					9,700
250 (10)	600 (7)
53,850
Investments			Office Equipment			Accumulated Depreciation
100,000 (2)			6,000 (4)				250 (4a)
2,100 (13)
102,100
Deposits			Prepaid Rent			Accounts Payable
2,000 (3)			1,000 (3)	1,000 (3a)			10,000 (6)
			0
Accrued Wages			Unearned Fees			Bank Debt
	90 (11)		100 (12)	1,200 (5)			12,000 (8)
				1,100
Accrued Interest			Contributed Capital			Retained Earnings
	50 (8a)			150,000 (1)			285
Fee Revenue			Book Sales Revenue			Investment Income
	0			0			0
Cost of Goods Sold			Advertising Expense			Rent Expense
0			0			0
Depreciation Expense			Wage Expense			Interest Expense
0			0			0

Exhibit 7. Investment Advisers, Ltd., Post-Closing Trial Balance

	DR	CR
Cash	53,850
Accounts receivable	125
Inventory	9,700
Investments	102,100
Office equipment	6,000
Accumulated depreciation		250
Deposits	2,000
Prepaid rent	0
Accounts payable		10,000
Accrued wages		90
Unearned fees		1,100
Bank debt		12,000
Accrued interest		50
Contributed capital		150,000
Retained earnings		285
Fee revenue		0
Book sales revenue		0
Investment income		0
Cost of goods sold	0
Advertising expense	0
Rent expense	0
Depreciation expense	0
Wage expense	0
Interest expense	0
Total