Competencies In this project, you will demonstrate your mastery of the following competencies: Record and present financial information by applying the appropriate framework and guidelines of accounting for business transactions Determine asset accounts and their disclosure in the financial statements Determine liability and equity accounts and their disclosure in the financial statements Scenario You were recently hired as an entry-level bookkeeper for a service business that recently opened. This is the first month in operation for the business and your first task is to record business transactions for their first month using the source documents and transaction data the owner will provide to you. Because this is a small business that does not use computerized accounting, you will apply the accounting cycle in Excel to record transactions and generate financial reporting results for the owner. Directions Company Accounting Workbook Use accepted accounting principles to follow and record your business transactions for a one-month period from the first step of the accounting cycle through the reporting process. You will build on the workbook you created in Milestones One and Two, or you may start over with the blank Company Accounting Workbook Template (linked below in the What to Submit section), incorporating instructor feedback where applicable. After you complete your workbook, you will prepare a summary report of your work. Your completed accounting workbook will consist of journal entries for each transaction and postings of transactions to account ledgers. You will develop a trial balance from the ledger balances, and use these balances to prepare the income statement, statement of owner’s equity, and the balance sheet. After the preparation of the financial statements, closing entries will be entered to transfer earnings to equity and prepare temporary accounts for the new accounting period. Use the instructions below to complete your workbook. Specifically, you must address the following rubric criteria: Record Financial Data: Use accepted accounting principles to accurately capture business transactions for the month using the data provided in the accounting data appendix (linked in the Supporting Materials section). You will need to address the following: Accuracy: Prepare entries that are accurate in that they fully reflect the appropriate information. Completeness: Prepare entries that are complete for the month, including transferring posted entries to T accounts. Unadjusted Trial Balance: Prepare the unadjusted trial balance portion of the “Trial Balance” tab of the company accounting workbook, ensuring that the total debits and credits match. Financial Statements: Create financial statements using appropriate methods based on accepted accounting principles. Be sure to prepare these financial statements in the order listed, as there are important interdependencies among them. Finalize the process by closing temporary accounts. Income Statement: Prepare the income statement using the adjusted trial balance. Statement of Owner’s Equity: Prepare the statement of owner’s equity using the adjusted trial balance. Balance Sheet Assets: Prepare the balance sheet asset entries using the adjusted trial balance. Balance Sheet Liabilities: Prepare the balance sheet liabilities entries using the adjusted trial balance. Closing Entries: Complete the “Closing Entries” tab of the company accounting workbook by closing all temporary income statement amounts to create closing entries. Summary Report After you have finished preparing all the financial statements, analyze the statements and write a short report summarizing your findings. Use the template provided in the What to Submit section to complete your report. There is also a Final Project Walkthrough video available in Supporting Materials that will provide guidance for completing your template. In addition to the financial statement results, the owners have requested that you provide them with additional information as further growth is anticipated. They would like more input from you to support the best possible decisions for the business. In addition, the owners are requesting that you provide them with some suggestions on simple internal controls they can integrate to ensure protection of company assets, and accuracy in the company’s financial data. The owners are also considering acquiring more long-term/fixed assets, such as vehicles, equipment, buildings, and so on. They would like your input on the different options available for depreciation of these costs. Adding sales of product is also a consideration for expansion. The owners want to know what accounting considerations will be involved with this change. Summary: Write a summary of what the financial statements indicate about the company’s financial health and performance. Purpose: Discuss the accounting process and the resulting financial statements as they relate to meeting the informational needs of the user. Process: Explain the process used to produce accurate account balances and financial statements from the individual transaction data. Consider what is being communicated through each of the financial statements you prepared (income statement, statement of equity and balance sheet) and how this information will be used in business decision making and planning. Analysis: Explain the company’s cash position, its net income as a percentage of sales, and its current liabilities to current assets position. Results: Discuss the results regarding profitability of the first month of operations. Consider how well the company is positioned to meet current liabilities. Be sure to include the percentage of revenues that result in profit/net income and the current ratio when discussing profitability and liquidity based on the recorded month’s results. Consider key points in your observations of results: is the company operating profitably (what percent of revenues result in profit/net income)? How well-poised are they to meet liabilities (discuss liquidity and current ratio)? Recommendations: Recommend a simple system of controls that can be implemented to ensure protection of company assets and the accuracy and integrity of their financial data as they anticipate further growth. Consider additional controls that will support the potential for adding merchandise and additional assets with business growth/expansion. Asset Valuation: Discuss the treatment of current and long-term assets on the balance sheet. Discuss at least two different methods of depreciation. Consider how the methods of depreciation will be determined. Discuss how LIFO, FIFO, and average methods will differ and provide examples of types of applicable merchandising. Consider how accounting will change with the addition of merchandise inventory.
This chart of accounts should help you identify
the appropriate accounts to record to as you are
analyzing and journaling transactions for this
workbook. There is nothing to complete on this
page; this is simply a resource for you.
Asset Accounts
Liability Accounts
Acct #
Cash
Accounts Receivable
Prepaid Rent
Office Furniture
Office Supplies
Accumulated Depreciation (contra asset)
101 Notes Payable
102 Accounts Payable
103 Wages Payable
104
105
106
Equity Accounts
Acct #
Acct #
201 Owner’s Capital
202 Owner Draws
203
301
302
Revenue Accounts
Acct #
Service Revenue
401
Expense Accounts
Acct #
Rent expense
Business License Expense
Insurance Expense
Repairs and Maintenance
Advertising Expense
Wages Expense
Utilities Expense
Depreciation Expense
501
502
503
504
506
507
508
509
A Company
General Journal Entries
Date
1-Mar Cash
Notes Payable
Accounts
2-Mar Business License Expense
Journal Entry Tips
Debit
125,000.00
Credit
125,000.00
250.00
250.00
2-Mar Prepaid Rent
Rent Expense
Cash
950.00
950.00
5-Mar Cash
Office Funiture
Owners Capital
15,000.00
2,750.00
6-Mar Service Revenue
Cash
650.00
8-Mar Cash
Service Revenue
500.00
10-Mar Accounts receivable
Service Revenue
1,725.00
15-Mar Insurance Expense
Cash
750.00
March 20 Utilities Expense
Accounts Payable
$135.00
1,900.00
17,750.00
650.00
500.00
1,725.00
750.00
$135.00
The debited account is recorded first
Debits and credits must always equal
There can be compound entries in wh
Be sure to use your chart of accounts
Each account you will record to is alread
20-Mar Maintenance Expense
Cash
95.00
22-Mar Owners Withdrawal
Cash
500.00
25-Mar Office Supplies
215.00
95.00
500.00
215.00
25-Mar Accounts Receivable
Service Revenue
350.00
30-Mar Accounts Payable
Cash
500.00
30-Mar Cash
Accounts Receivable
1,725.00
31-Mar Wages Expense
Wages Payable
31-Mar Accounts Receivable
Services Revenue
31-Mar Depreciation Expense
Accumulated Depreciation
Total
350.00
500.00
1,725.00
275.00
275.00
3,500.00
3,500.00
45.83
45.83
155,865.83
155,865.83 If Red, this means your debits and credits do not eq
re can be compound entries in which two accounts receive a debt to an equivalent credited amount to one account.
Assets
Liabilities
Cash
1-Mar $ 125,000.00 $ 250.00
1-Mar
5-Mar $ 15,000.00 $ 950.00
2-Mar
6-Mar $
650.00 $ 750.00
15-Mar
25-Mar $
350.00 $ 500.00
22-Mar
30-Mar $ 1,725.00 $ 215.00
25-Mar
$
95.00 $Mar 20
$ 500.00
30-Mar
$ 142,725.00 $ 3,260.00
$ 139,465.00
10-Mar $
31-Mar $
Accounts Rec.
1,725.00 $ 1,725.00
3,500.00
$
$
5,225.00 $ 1,725.00
3,500.00
2-Mar $
Prepaid Rent
950.00 $ 950.00
$
$
5-Mar $
$
$
950.00 $
–
950.00
Office Furniture
2,750.00
2,750.00 $
2,750.00
–
30-Mar
Notes Payable
$ 125,000.00
$
–
$ 125,000.00
$ 125,000.00
Accounts Payable
30-Mar $ 500.00 $
500.00
$
135.00
$ 500.00 $
$
$
–
$
$
8-Mar
20-Mar
635.00
135.00
Wages Payable
$
275.00
Mar 2
31-Mar
275.00
275.00
31-Mar
25-Mar $
$
$
Office Supplies
215.00
215.00 $
215.00
–
Accumulated Depreciation
$45.83
$
–
$
$
45.83
45.83
Mar 31
Equity
Revenue
Owner’s Capital
$ 17,750.00
$
–
$ 17,750.00
$ 17,750.00
Service Revenue
$ 650.00
$ 1,725.00
$ 350.00
$ 3,500.00
5-Mar
$
–
$ 6,225.00
$ 6,225.00
Owner Draws
22-Mar $ 500.00
$ 500.00 $
$ 500.00
–
Posting to the ledger/t accounts
Don’t overthink it!
You are just posting each debit and credit from the journal entries to the account you identified in the entry.
These accounts are set to calculate your balances for you.
Please be careful not to delete the running totals as those will calculate the ending balance.
The ending balance will transfer to the Trial Balance sheet.
If you have posted all entries and your trial balance is not in balance (total debits = total credits),
this means that there is an error.
nue
Expenses
6-Mar
10-Mar
25-Mar
31-Mar
Rent Expense
2-Mar $ 950.00
$ 950.00 $
$ 950.00
–
Business License Expense
1-Mar $ 250.00
$ 250.00 $
$ 250.00
–
Insurance Expense
15-Mar $ 750.00
you identified in the entry.
e ending balance.
debits = total credits),
$ 750.00 $
$ 750.00
–
Repairs & Maint.
20-Mar $ 95.00
$ 95.00 $
$ 95.00
–
Advertising Expense
8-Mar $ 500.00
$ 500.00 $
$ 500.00
–
Wages Expense
31-Mar $ 275.00
$ 275.00 $
$ 275.00
–
Utilities Expense
20-Mar $ 135.00
$ 135.00 $
$ 135.00
–
Depreciation Expense
31-Mar $ 45.83
$ 45.83 $
$ 45.83
–
Trial Balance
As of 03/31/20XX
Unadjusted trial balance
Account
Cash
Accounts Receivable
Prepaid Rent
Office Furniture
Office Supplies
Accumulated Depreciation
Notes Payable
Accounts Payable
Wages Payable
Owner’s Capital
Owner Draws
Service Revenue
Rent Expense
Business License Expense
Depreciation Expense
Insurance Expense
Repairs and Maintenance Expense
Advertising Expense
Wages Expense
Utilities Expense
Total:
Debit
Credit
136,065.00
6,950.00
950.00
2,750.00
215.00
45.83
125,000.00
1,135.00
275.00
17,750.00
500.00
6,225.00
950.00
250.00
45.83
750.00
95.00
500.00
275.00
135.00
150,430.83
150,430.83
Debits should equal credits
`
Trial Balance
Balances from the t accounts will autofill your trial balance.
If total debits do not equal total credits in the trial balance, you know you have an error.
These are the balances that will be used to prepare the financial statements.
Be sure to implement feedback provided by your instructor for this Milestone One submission!
A Company
Income Statement
For Month ending 3/31/20XX
Revenues
Service Revenue
Total Revenues
$
6,225.00
$
6,225.00
$
$
$
$
$
$
$
$
950.00
250.00
750.00
500.00
275.00
135.00
95.00
45.83
Operating Expenses:
Rent Expense
Business License Expense
Insurance Expense
Advertising Expense
Wage Expense
Utility Expense
Repairs and Maintenance Expense
Depreciation Expense
Total Operating Expenses:
3,000.83
Net Income
3,224.17
Company Name
Statement of Owner’s Equity
Period Ending 03/31/20XX
Beginning Capital on 3/01/20XX
Increases to capital
Net income/loss:
Owner Contributions
Subtotal:
$
–
0
$3,224.17
$17,750.00
$
20,974.17
$
500.00
$
20,474.17
Decreases to capital
Owner Draws
Ending Equity as of 03/31/20XX
A Company
Balance Sheet
As of March 31, 20XX
Assets
Current Assets:
Cash
Accounts Receivable
Prepaid Rent
Office Supplies
Total Current Assets
136,065.00
6,950.00
950.00
215.00
144,180.00
Non-Current Assets:
Office Furniture
Accumulated Depreciation
Total Non Current/Fixed Assets
Total Assets:
2,750.00
(45.83)
2,704.17
146,884.17
Liabilities and Owners’ Equity
Current Liabilities:
Accounts Payable
Wages Payable
1,135.00
275.00
Total Current Liabilities
Long Term Liabilities:
1,410.00
Notes Payable
125,000.00
Total Long Term Liabilities:
125,000.00
Total Liabilities:
126,410.00
Owner’s Equity
Owners Capital
Net Income
17,250.00
$3,227.17
Total Equity
20,477.17
Total Liabilities & Equity
146,887.17
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