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Chapter App L - Accounting for sole proprietorships. After completing this unit, you should be able to: Identify the differences in equity accounts between a corporation and a sole proprietorship, understand what accounts increase and decrease owner’s equity, describe the differences between a retained earnings statement and an owner’s equity statement. | Accounting for Sole Proprietorships Kimmel ● Weygandt ● Kieso Accounting, Sixth Edition L Understand what accounts increase and decrease owner’s equity. CHAPTER OUTLINE Identify the differences in equity accounts between a corporation and a sole proprietorship. 1 2 LEARNING OBJECTIVES Describe the differences between a retained earnings statement and an owner’s equity statement. 3 Explain the process of closing the books for a sole proprietorship. 4 The primary difference between accounting and reporting for a sole proprietorship and a corporation involves accounting for equity transactions. ILLUSTRATION L-1 Equity section of the balance sheet—corporation vs. proprietorship LEARNING OBJECTIVE Discuss and account for the formation of a partnership. 1 LO 1 OWNER’S EQUITY IN A SOLE PROPRIETORSHIP ILLUSTRATION L-2 Increases and decreases in owner’s equity LEARNING OBJECTIVE Understand what accounts increase and decrease owner’s equity. 2 LO 2 Sierra’s transactions as a sole proprietor. RECORDING TRANSACTIONS ILLUSTRATION L-3 Summary of transactions A sole proprietor makes the same types of adjustments as a corporation. After recording and posting all of the adjustments, an adjusted trial balance is prepared. Illustrations L-4 and L-5 show how the adjusted trial balance is used to prepare a sole proprietor’s financial statements. LEARNING OBJECTIVE Describe the differences between a retained earnings statement and an owner’s equity statement. 3 LO 3 Sole proprietor prepares an owner’s equity statement rather than a retained earnings statement ILLUSTRATION L-4 LO 4 ILLUSTRATION L-5 Preparation of the balance sheet from the adjusted trial balance LEARNING OBJECTIVE Explain the process of closing the books for a sole proprietorship. 4 LO 4 ILLUSTRATION L-6 ILLUSTRATION L-6 Diagram of closing process ILLUSTRATION L-8 Posting of closing entries LO 4 Post-closing trial balance List of all permanent accounts and their balances after closing entries are journalized and posted. | Accounting for Sole Proprietorships Kimmel ● Weygandt ● Kieso Accounting, Sixth Edition L Understand what accounts increase and decrease owner’s equity. CHAPTER OUTLINE Identify the differences in equity accounts between a corporation and a sole proprietorship. 1 2 LEARNING OBJECTIVES Describe the differences between a retained earnings statement and an owner’s equity statement. 3 Explain the process of closing the books for a sole proprietorship. 4 The primary difference between accounting and reporting for a sole proprietorship and a corporation involves accounting for equity transactions. ILLUSTRATION L-1 Equity section of the balance sheet—corporation vs. proprietorship LEARNING OBJECTIVE Discuss and account for the formation of a partnership. 1 LO 1 OWNER’S EQUITY IN A SOLE PROPRIETORSHIP ILLUSTRATION L-2 Increases and decreases in owner’s equity LEARNING OBJECTIVE Understand what accounts increase and decrease owner’s equity. 2 LO 2 Sierra’s transactions as a sole proprietor. .
