
HI6006 Competitive Strategy Editing Service
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A report has been prepared on the financial accounting cycle for Paul services as on 30 June 2016. It includes all the business concepts and all the steps for preparation and finalization of the books of accounts including the posting of the journal entries, posting them to the respective ledger accounts, preparing the unadjusted trial balance on the basis of the same, posting the adjustment entries at the end of the accounting period and preparing the adjusted trial balance. Post all this done the income thesis statement is being prepared and the closing journal entries is being passed for closing the books of accounts. Post all this, the balance sheet and the statement of changes in equity is being prepared at the end of the period and that marks the closure of books for an accounting period. Towards the end, the reason for preparing each of the reports and passing journal entries has been mentioned[ CITATION Gre17 \l 1033 ].
The initial unadjusted trial balance of the given company as on 30th June has been shown below
Paul services Trial Balance As At 30 June 2016 | |||||
Acc | Account Name | Unadjusted | |||
Debit | Credit | ||||
101 | Cash at Bank | 48,100 |
| ||
105 | Accounts Receivable | 16,030 |
| ||
115 | Supplies | 1,480 |
| ||
120 | Prepaid Insurance | 2,960 |
| ||
135 | Office Furniture | 37,000 |
| ||
137 | Acc. Depreciation. - Furniture |
| - | ||
140 | Office Equipment | 74,000 |
| ||
141 | Acc. Depreciation - Equipment |
| - | ||
145 | Store Equipment | 111,000 |
| ||
146 | Acc. Depreciation - Equipment |
| - | ||
170 | Automobile | 148,000 |
| ||
171 | Acc. Depreciation - Automobile |
| - | ||
201 | Accounts Payable |
| 32,060 | ||
201 | Interest Payable |
| 48,090 | ||
201 | Unearned revenue |
| 18,500 | ||
201 | Loan Payable |
| 7,400 | ||
201 | Mortgage Payable |
| 148,000 | ||
201 | Paul's Capital |
| 48,898 | ||
201 | Paul's Drawings | 148 |
| ||
201 | Revenue |
| 148,000 | ||
201 | Advertising Expense | 1,000 |
| ||
201 | Automobile Expense | 5,775 |
| ||
201 | Depreciation Expense - Furniture | - |
| ||
201 | Depreciation Expense - Equipment | - |
| ||
201 | Depreciation Expense - Store Equipment | - |
| ||
201 | Depreciation Expense - Automobile | - |
| ||
201 | Insurance Expense | 800 |
| ||
201 | Maintenance Expense | 3,500 |
| ||
201 | Miscellaneous Expense | 1,155 |
| ||
201 | Rent Expense | - |
| ||
201 | Supplies Expense | - |
| ||
201 | Utilities Expense | - |
| ||
201 | Interest Expense | - |
| ||
Total | 450,948 | 450,948 |
For the given year, the adjustment journal entries have been shown below:
Paul Services | ||||
Adjustment Journal Entries | ||||
Date | Particulars | Dr./Cr. | Amt | Amt |
30-Jun | Interest Expense | Dr. |
| |
| To Accrued Interest
| Cr. |
| 14,800 |
|
|
|
|
|
30-Jun | Insurance Expense | Dr. | 2,368 |
|
| To Prepaid Insurance | Cr. |
| 2,368 |
|
|
|
|
|
30-Jun | Depreciation Expense - Furniture | Dr. | 2,219 |
|
| To Acc. Depreciation. - Furniture | Cr. |
| 2,219 |
|
|
|
|
|
30-Jun | Depreciation Expense - Equipment | Dr. | 5,370 |
|
| To Acc. Depreciation - Office Equipment | Cr. |
| 5,370 |
|
|
|
|
|
30-Jun | Depreciation Expense - Store Equipment | Dr. | 4,370 |
|
| To Acc. Depreciation - Store Equipment | Cr. |
| 4,370 |
|
|
|
|
|
30-Jun | Depreciation Expense - Automobile | Dr. | 6,521 |
|
| To Acc. Depreciation - Automobile | Cr. |
| 6,521 |
|
|
|
|
|
30-Jun | Revenue | Dr. | 9,250 |
|
| To Unearned Revenue | Cr. |
| 9,250 |
|
|
|
|
|
The Trial balance post all the adjustments has been shown below:
Paul services Trial Balance As At 30 June 2016 | |||||||
Acc | Account Name | Unadjusted | Adjustments | Adjusted | |||
Debit | Credit | Debit | Credit | Debit | Credit | ||
101 | Cash at Bank | 48,100 |
|
|
| 48,100 |
|
105 | Accounts Receivable | 16,030 |
|
|
| 16,030 |
|
115 | Supplies | 1,480 |
|
|
| 1,480 |
|
120 | Prepaid Insurance | 2,960 |
|
| 2,368 | 592 |
|
135 | Office Furniture | 37,000 |
|
|
| 37,000 |
|
137 | Acc. Depreciation. - Furniture |
| - |
| 2,219 |
| 2,219 |
140 | Office Equipment | 74,000 |
|
|
| 74,000 |
|
141 | Acc. Depreciation - Equipment |
| - |
| 5,370 |
| 5,370 |
145 | Store Equipment | 111,000 |
|
|
| 111,000 |
|
146 | Acc. Depreciation - Equipment |
| - |
| 4,370 |
| 4,370 |
170 | Automobile | 148,000 |
|
|
| 148,000 |
|
171 | Acc. Depreciation - Automobile |
| - |
| 6,521 |
| 6,521 |
201 | Accounts Payable |
| 32,060 |
|
|
| 32,060 |
201 | Interest Payable |
| 48,090 |
| 14,800 |
| 62,890 |
201 | Unearned revenue |
| 18,500 |
| 9,250 |
| 27,750 |
201 | Loan Payable |
| 7,400 |
|
|
| 7,400 |
201 | Mortgage Payable |
| 148,000 |
|
|
| 148,000 |
201 | Paul's Capital |
| 48,898 |
|
|
| 48,898 |
201 | Paul's Drawings | 148 |
|
|
| 148 |
|
201 | Revenue |
| 148,000 | 9,250 |
|
| 138,750 |
201 | Advertising Expense | 1,000 |
|
|
| 1,000 |
|
201 | Automobile Expense | 5,775 |
|
|
| 5,775 |
|
201 | Depreciation Expense - Furniture | - |
| 2,219 |
| 2,219 |
|
201 | Depreciation Expense - Equipment | - |
| 5,370 |
| 5,370 |
|
201 | Depreciation Expense - Store Equipment | - |
| 4,370 |
| 4,370 |
|
201 | Depreciation Expense - Automobile | - |
| 6,521 |
| 6,521 |
|
201 | Insurance Expense | 800 |
| 2,368 |
| 3,168 |
|
201 | Maintenance Expense | 3,500 |
|
|
| 3,500 |
|
201 | Miscellaneous Expense | 1,155 |
|
|
| 1,155 |
|
201 | Rent Expense | - |
|
|
| - |
|
201 | Supplies Expense | - |
|
|
| - |
|
201 | Utilities Expense | - |
|
|
| - |
|
201 | Interest Expense | - |
| 14,800 |
| 14,800 |
|
Total | 450,948 | 450,948 | 44,897 | 44,897 | 484,227 | 484,227 |
Below shown is the income statement for the company for the year ended 30thJune 2016:
Paul Services | ||
Income Statement | ||
For the period ended 30th June 2016 | ||
Particulars | Amt ($) | Amt ($) |
Revenue |
| 138,750 |
Less: Expenses |
|
|
Advertising Expense | 1,000 |
|
Automobile Expense | 5,775 |
|
Depreciation Expense - Furniture | 2,219 |
|
Depreciation Expense - Equipment | 5,370 |
|
Depreciation Expense - Store Equipment | 4,370 |
|
Depreciation Expense - Automobile | 6,521 |
|
Insurance Expense | 3,168 |
|
Maintenance Expense | 3,500 |
|
Miscellaneous Expense | 1,155 |
|
Supplies Expense | 1,110 |
|
Interest Expense | 14,800 | 48,987 |
Net Profit |
| 89,763 |
|
|
|
The journal entries at the time of closing of the books of accounts are mentioned below:
Paul Services | ||||
Closing Journal Entries | ||||
Date | Particulars | Dr./Cr. | Amt | Amt |
30-Jun | Revenue Account | Dr. | 138,750 |
|
| To Profit and Loss Account | Cr. |
| 138,750 |
|
|
|
|
|
30-Jun | Profit and Loss Account | Dr. | 48,987 |
|
| To Advertising Expense | Cr. |
| 1,000 |
| To Automobile Expense | Cr. |
| 5,775 |
| To Depreciation Expense - Furniture | Cr. |
| 2,219 |
| To Depreciation Expense - Equipment | Cr. |
| 5,370 |
| To Depreciation Expense - Store Equipment | Cr. |
| 4,370 |
| To Depreciation Expense - Automobile | Cr. |
| 6,521 |
| To Insurance Expense | Cr. |
| 3,168 |
| To Maintenance Expense | Cr. |
| 3,500 |
| To Miscellaneous Expense | Cr. |
| 1,155 |
| To Supplies Expense | Cr. |
| 1,110 |
| To Interest Expense | Cr. |
| 14,800 |
|
|
|
|
|
30-Jun | Profit and Loss Account | Dr. | 89,763 |
|
| To Retained Earnings | Cr. |
| 89,763 |
|
|
|
|
|
Below shown is theproftand loss account and the statement of changes in equity for the period 30thJune 2016[ CITATION Fay17 \l 1033 ].
Paul Services | ||
Balance Sheet | ||
as on 30th June 2016 | ||
Particulars | Amt ($) | Amt ($) |
Assets |
| - |
Non Current Assets |
|
|
Office Furniture | 37,000 |
|
Acc. Depreciation. - Furniture | (2,219) |
|
Office Equipment | 74,000 |
|
Acc. Depreciation - Equipment | (5,370) |
|
Store Equipment | 111,000 |
|
Acc. Depreciation - Equipment | (4,370) |
|
Automobile | 148,000 |
|
Acc. Depreciation - Automobile | (6,521) | 351,521 |
|
|
|
Current Assets |
|
|
Cash at Bank | 48,100 |
|
Accounts Receivable | 16,030 |
|
Supplies | 370 |
|
Prepaid Insurance | 592 | 65,092 |
Total Assets |
| 416,613 |
|
|
|
Equity & Liabilities |
|
|
Non Current Liabilities |
|
|
Loan Payable | 7,400 |
|
Mortgage Payable | 148,000 | 155,400 |
|
|
|
Current Liabilities |
|
|
Accounts Payable | 32,060 |
|
Interest Payable | 62,890 |
|
Unearned revenue | 27,750 | 122,700 |
|
|
|
Equity |
|
|
Paul's Capital | 48,898 |
|
Paul's Drawings | (148) |
|
Proft for the year | 89,763 | 138,513 |
Total Equity and Liabilities |
| 416,613 |
|
|
|
Paul Services | ||
Statement of Changes in Equity | ||
As on 30th June 2016 | ||
Particulars | Amt ($) | Amt ($) |
Equity |
|
|
Paul's Capital | 48,898 |
|
Less: Paul's Drawings | (148) |
|
Add: Profit for the year | 89,763 | 138,513 |
|
|
|
Total Equity at the end of year |
| 138,513 |
|
|
|
A trial balance is the list of all the ledger accounts with the debit and credit balances listed alongside. It is prepared to check the arithmetical accuracy of the accounting being done throughout the year and in case the debit and the credit balances are not matching, it indicates that there is an error in accounting and the same needs to be revised. It is a prerequisite to the financial planning statement preparation and helps in the final closing of the books of accounts[ CITATION Vis17 \l 1033 ].
Adjustment journal entries are being passed to accommodate for the accounting, compensating or period errors, which might have occurred in the books of accounts, during the normal accounting, cycle[ CITATION Kuh16 \l 1033 ]. The types of errors, which may be included here, are like prepaid expenses, which might have been paid earlier during the year, but then the adjustment is being done now or the depreciation has not been posted for the different assets and the same is being done now. The common types of transactions include accrual of incomes or accounting for outstanding liabilities or prepaid incomes[ CITATION Lin17 \l 1033 ]. For a business, there are always a few transactions, which may start in a given year, but the same is not completed in current year and may just be carried to New Year. There comes the need of the adjustment entries in the books.
Adjusted Trial balance is the final trial balance based on which the financial statements are being prepared[ CITATION Sit17 \l 1033 ]. It is the trial balance post adjustment of all the adjusting entries. It shows the debit and credit balances of all the accounts reconciled and thereby helping in the preparation of financial statements. It is always an internal document of the company and reported nowhere in the annual report, however, the financial statements including balance sheet, profit and loss account and equity statement is prepared based on this[ CITATION Fél17 \l 1033 ].
Closing journal entries are the ones, which are passed post the final trial balance is ready and are very different from the adjusting journal entries[ CITATION Boc16 \l 1033 ]. These are passed to transfer the balances from the temporary accounts to the permanent accounts, thereby making them zero. Temporary accounts are nothing but the income statement accounts whereas the permanent accounts are the balance sheet accounts that are being carried forward to the next year[ CITATION Das17 \l 1033 ].
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