01 / Learn the method
Learning outcomes
Complete a bounded month-end close, then explain the unresolved work. Calculate the result, reconcile it and communicate its limitations.
Method
A balanced trial balance can still contain wrong timing or classification. Apply each supported adjustment with equal debits and credits, roll the affected accounts forward, and build statements from the adjusted balances. A balance-sheet check tests internal consistency; it does not establish completeness of the source ledger.
Smaller worked example
A separate business has $5,000 revenue and $3,000 expense. A missing $200 utility accrual lowers profit from $2,000 to $1,800 and raises liabilities $200; cash is unchanged.
02 / Put it to work
Business context and rules
Fictional Alder Advisory, 30 September 2026. Unadjusted trial balance: debit Cash 20,000, AR 15,000, Prepaid insurance 6,000, PPE cost 30,000, Operating expense 29,000; credit Accumulated depreciation 6,000, AP 12,000, Share capital 20,000, Opening retained earnings 12,000, Revenue 50,000. Debit and credit totals are 100,000 each. Evidence: one of six prepaid insurance months has expired; September depreciation is 500; received but unposted utilities are 1,200; unrecorded September service invoice is 3,000, earned and collectible, unpaid. Ignore tax and distributions. No other adjustments. Expense includes no depreciation or insurance yet.
Original synthetic inputs
| Input | Value | Unit |
|---|---|---|
| Cash debit | 20000 | USD |
| AR debit | 15000 | USD |
| Prepaid insurance debit | 6000 | USD |
| PPE cost debit | 30000 | USD |
| Operating expense debit | 29000 | USD |
| Accumulated depreciation credit | 6000 | USD |
| AP credit | 12000 | USD |
| Share capital credit | 20000 | USD |
| Opening retained earnings credit | 12000 | USD |
| Revenue credit | 50000 | USD |
| Prepaid coverage | 6 | months |
| September depreciation | 500 | USD |
| Unrecorded utilities | 1200 | USD |
| Earned unrecorded service invoice | 3000 | USD |
Required deliverables
Produce four adjusting entries, a full adjusted trial balance using all source accounts, P&L and balance sheet, plus a review memo with evidence, owner and follow-up for each adjustment. Preserve the opening retained earnings balance separately from current profit.
Use formulas for derived amounts and preserve source data. Put narrative deliverables in the workbook response area; expand it as needed. Compare amounts within 0.01 of the stated unit and percentages within 0.1 percentage point. No unsupported balancing plugs.
Workbook structure
The student workbook intentionally leaves the analysis structure open. Build the schedules required above, retain the source inputs, and add formula-based checks. You may add worksheets. The worked solution is one acceptable structure, not the only correct layout.
03 / Review your work
Try the assignment before opening the answer.
Open the worked answer and notes
Worked numerical schedule
| Measure | Value | Unit |
|---|---|---|
| Insurance expense adjustment | 1,000.00 | USD |
| Adjusted AR | 18,000.00 | USD |
| Adjusted prepaid insurance | 5,000.00 | USD |
| Adjusted accumulated depreciation | 6,500.00 | USD |
| Adjusted AP and accruals | 13,200.00 | USD |
| Adjusted revenue | 53,000.00 | USD |
| Adjusted total expense | 31,700.00 | USD |
| September profit | 21,300.00 | USD |
| Net PPE | 23,500.00 | USD |
| Total assets | 66,500.00 | USD |
| Closing equity | 53,300.00 | USD |
| Balance sheet residual | 0.00 | USD |
| Adjusted trial balance debits | 104,700.00 | USD |
| Adjusted trial balance credits | 104,700.00 | USD |
| Trial balance residual | 0.00 | USD |
Interpretation and recommended actions
Entries: Dr Insurance expense / Cr Prepaid insurance 1,000; Dr Depreciation / Cr Accumulated depreciation 500; Dr Utilities expense / Cr Accrued utilities 1,200; Dr AR / Cr Revenue 3,000. Adjusted expenses are $31,700 and revenue $53,000, giving $21,300 profit. Assets $66,500 equal liabilities $13,200 plus equity $53,300. Adjusted TB totals are $104,700. Assign the utilities estimate to AP for invoice reconciliation, earned invoice support to billing, and insurance / fixed-asset schedules to the close owner. Separate accruals from AP in the detailed TB even though the summary combines them.
Scoring rubric - 100 points
| Dimension | Points | Awarding guidance |
|---|---|---|
| Calculation | 40 | Four adjustments 12; adjusted TB 10; P&L 8; balance sheet 10. |
| Interpretation | 25 | Correct application of the case rules 10; explain the business decision 10; identify evidence or limitations 5. |
| Controls / audit trail | 20 | Traceable formulas 8; independent reconciliation 8; explicit units and signs 4. |
| Communication | 15 | Decision and numerical headline 5; actions with owners and evidence 5; concise response covering all required deliverables 5. |
Award method credit after an isolated arithmetic error rather than repeatedly deducting for it. Equivalent account labels and well-supported alternative recommendations are acceptable. Numerical tolerance is 0.01 in the stated units; no universal passing score is prescribed.
Common mistakes
Closing retained earnings twice; netting PPE cost in the trial balance; using cash as a balancing plug.
Staged hints
Retain gross PPE and accumulated depreciation in the TB. Use net PPE only in the balance sheet. Bridge opening equity to closing equity.
Instructor notes
Prerequisites: ACC-01 and ACC-02 or equivalent. The total duration of 90-120 minutes is a planning estimate, not a tested completion time. Allocate class time according to prior knowledge and reserve time for discussion of the decision and evidence.
For a simpler class, provide the model structure and work through one driver. For an extension, change one operational assumption and require a new reconciliation and recommendation. Verify the new key before distributing any variant. Open files in the intended spreadsheet application before class. Solutions are learning resources, not secure hiring examinations.
Decision
Complete the supported close adjustments and assign owners to unresolved supporting documents.
Evidence and reasoning
Balanced debits and credits alone do not establish cutoff or completeness. Earned but unbilled revenue and incurred but unbilled expense both belong in this period under the case rules.
What would change the conclusion
Billing acceptance, the utilities invoice or revised asset schedules could change the amounts. Reopen affected schedules, not an unexplained balancing account.
Related learning
Version 1.1. Synthetic teaching case. Completion time is an estimate.