Case:
You are preparing the financial statements for the year ended October 31, 20X5, for Zadell Software Company.
• You began with the trial balance of the ledger, which balanced, and then made the required adjusting entries.
• To save time, you omitted preparing an adjusted trial balance.
• After making the adjustments on the work sheet, you extended the balances from the trial balance, adjusted for the adjusting entries, and computed amounts for the income statement and the balance sheet columns.
Required:
a. When you added the total debits and the total credits on the income statement, you found that the credits exceeded the debits by $45,000. Did the business have a profit or a loss?
b. You took the balancing amount from the income statement columns to the debit column of the balance sheet and found that the total debits exceeded the total credits in the balance sheet. The difference between the total debits and the total credits on the balance sheet is $90,000. What is the cause of this difference? (Except for these errors, everything else is correct.)