Accounts

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Accounts

  1. 1. 1 RUNNING HEAD: ASSIGNMENT OF ACCOUNTS Assignment of Accounts Deepak Mehra CIIS
  2. 2. 2 Date Explanation P.R. Debit Credit 2011 July 1. Cash Office Equipment Wilf Eazy Capital Capital Introduced 40000 30000 70000 2. Office Equipment Truck Note Payable Purchase of equipment and truck 9000 56000 65000 3. Land Cash Note payable Purchase of a land for an office use 124000 40800 83200 5. Building Cash Purchase a building for cash 21000 21000 9. Insurance Policy Cash Paid the premium on two one year insurance policy 9600 9600 12. Cash Service Revenue Provide a service to a child 3200 3200 15. Office Equipment Cash Note Payable Purchase office equipment for cash and give note payable 6500 700 5800 20. Account Receivable Service Revenue Complete service for a client 3750 3750 21. Account Receivable Service Revenue Complete another on credit 9200 9200 22. Rent 1300
  3. 3. 3 Account Payable Received a bill for rent 1300 Date Explanation P.R. Debit Credit 23. Cash Account Receivable Collected cash from July 21 5000 5000 24. Wages Cash Paid wages 1600 1600 25. Account Payable Cash Paid Cash for Account Payable 1300 1300 26. Misc. Exp. Cash Paid cash for some repair of truck 1425 1425 27. Owner Withdrawals Cash Withdrew cash for Personal Use 3785 3785 28. Wages Cash Paid cash to wages 1600 1600 29. Advertisement Cash Paid Cash to a Local Newspaper 8000 8000 30. Cash Accrued Service Revenue Received in advance for service in August 1400 1400
  4. 4. 4 List of Accounts: - Account Number Assets Cash 101 Office Equipment 102 Land 103 Building 104 Insurance Policy 105 Account Receivable 106 Truck 107 Liabilities Notes Payable 201 Account Payable 201 Accrued Service Revenue 203 Income Service Revenue 301 Expenses Wages 401 Misc. Exp. 402 Rent 403 Advertisement 404 Owner Withdrew 405
  5. 5. 5 Ledger Cash Account Number 101 Date Explanation P.R. Debit Credit Balance 2011 July 1. Wilf Eazy Capital 40000 40000 3. Land 40800 (40800) 5. Building 21000 (21800) 9. Insurance Policy 9600 (31400) 12. Service Revenue 3200 (28200) 15. Office Equipment 700 (28900) 23. Account Receivable 5000 (23900) 24. Wages 1600 (25500) 25. Account Receivable 1300 (26800) 26. Misc. Exp. 1425 (28225) 27. Owner Withdrawal 3785 (32010) 28. Wages 1600 (33610) 29. Advertisement 1400 (34410) (33010) Office Equipment Account Number 102 Date Explanation P.R. Debit Credit Balance 2011 July 1. Wilf Eazy Capital 30000 30000 2. Note Payable 9000 39000 15. Cash 700 39700 15. Note Payable 5800 45500 Land Account Number 103 Date Explanation P.R. Debit Credit Balance 2011 July 3. Cash 40800 40800 Note Payable 85200 124000
  6. 6. 6 Building Account Number 104 Date Explanation P.R. Debit Credit Balance 2011 July 5. Cash 21000 21000 Insurance Policy Account Number 105 Date Explanation P.R. Debit Credit Balance 2011 July 9. Cash 9600 9600 Account Receivable Account Number 106 Date Explanation P.R. Debit Credit Balance 2011 July 20. Service Revenue 3750 3750 21. Service Revenue 9200 12950 23. Cash 5000 7950 Truck Account Number 107 Date Explanation P.R. Debit Credit Balance 2011 July 2. Note Payable 56000 56000
  7. 7. 7 Notes Payable Account Number 201 Date Explanation P.R. Debit Credit Balance 2011 July 2. Office Equipment 9000 9000 Truck 56000 65000 3. Land 83200 148200 15. Office Equipment 5800 (154000) Account Payable Account Number 202 Date Explanation P.R. Debit Credit Balance 2011 July 22. Rent 1300 1300 Cash 1300 - Accrued Service Revenue Account Number 203 Date Explanation P.R. Debit Credit Balance 2011 July 30. Cash 1400 (1400) Service Revenue Account Number 301 Date Explanation P.R. Debit Credit Balance 2011 July 12. Cash 3200 3200 20. Account Receivable 3750 6950 21. Account Receivable 9200 (16150)
  8. 8. 8 Wages Account Number 401 Date Explanation P.R. Debit Credit Balance 2011 July 24. Cash 1600 1600 28. Cash 1600 3200 Misc. Exp. Account Number 402 Date Explanation P.R. Debit Credit Balance 2011 July 24. Cash 1425 1425 Rent Account Number 403 Date Explanation P.R. Debit Credit Balance 2011 July 22. Account Payable 1300 1300 Advertisement Account Number 404 Date Explanation P.R. Debit Credit Balance 2011 July 29. Cash 800 800 Owner Withdrawal Account Number 405 Date Explanation P.R. Debit Credit Balance 2011 July 27. Cash 3785 3785
  9. 9. 9 Wilf Eazy Capital Account Number 204 Date Explanation P.R. Debit Credit Balance 2011 July 1. Cash 40000 40000 Office Equipment 30000 (70000) Eazy-Carry Co. Trial Balance 1 July, 2011 Account Number Account Name Debit Credit 101 Cash - 33010 102 Office Equipment 45500 - 103 Land 124000 - 104 Building 21000 - 105 Insurance Policy 9600 - 106 Account Receivable 7950 - 107 Truck 56000 - 201 Notes Payable - 154000 202 Account Payable - - 203 Accrued Payable - 1400 204 Wilf Eazy Capital - 70000 301 Service Revenue - 16150
  10. 10. 10 Account Number Account Name Debit Credit 401 Wages 3200 - 402 Misc. Exp. 1425 - 403 Rent 1300 - 404 Advertisement 800 - 405 Owner’s Withdrawal 3785 - 274560 274560
  11. 11. 11 Question 1) What are Adjusting Entries? How do you record these entries? Explain various types of Adjusting Entries with 2 examples of each? Answer 1) Adjusting entries are journal entries recorded at the end of an accounting period to adjust Income and expense accounts so that they comply with the accrual concept of accounting. Main purpose is to match incomes and expenses to appropriate accounting periods. Various types are:-  Accruals: These include revenues not yet received nor recorded and expenses not yet paid nor recorded. For example, interest expense on loan accrued in the current period but not yet paid.  Non-cash: These adjusting entries record non-cash items such as depreciation expense, allowance for doubtful debts etc.  Prepayments: These are revenues received in advance and recorded as liabilities, to be recorded as revenue and expenses paid in advance and recorded as assets, to be recorded as expense. For example, adjustments to unearned revenue, prepaid insurance, office supplies, prepaid rent, etc.
  12. 12. 12 Ques2) What is a Revering Entry? What is the procedure to record it? Illustrate with an example? Ans2) Reversing entries are passed at the beginning of an accounting period as an optional step of accounting cycle to cancel the effect of previous period adjusting entries involving future payments or receipts of cash. For Example: - For example: Dec 31, 2012 Balance Sheet shows Salaries Payable for $ 1000 under Current Liabilities. Treatment:  On Jan 1, 2013: Pass the Revering Entry: o Salaries Payable $1000 Salaries Expense $1000  When the Salaries will be paid in cash, the normal entry will be passed (Present Salary=$500) o Salaries Expense $1500 Cash $1500
  13. 13. 13 Question 3) What do you mean by GAAP? Explain in brief main principles with 1 example? Answer 3) The underlying concepts that make up acceptable accounting practices are referred to as Generally Accepted Accounting Principles (GAAP) Main principles are:-  Business Entity Principle:-Example, Ram having two businesses ABC & XYZ should make accounts of both the businesses separately instead of making single for both of them.  Cost Principles:-Example, A company purchased machinery for $ 3000 should record it as $ 3000 only, though the market value of the same is $ 4000.  Revenue Recognition Principles:-Example, On Jan 10, Mr. John provided services to a client for $ 500 but client paid cash on Jan 15. Therefore, revenue will be recorded on Jan 10 only and as Cash Equivalent (Accounts Receivable) not Cash.  Going Concern Principles:-Example, Purchase Building for $20000.It will give profit to business for the long period of time say 10-15 years.  Accrual Principles:-Example, Salaries expense for December 2012 which are to be paid in January 2013 should be recorded in December 2012 only and not in January 2013. As the expenses should match to the period in which they occurred.  Matching Principles:-Example, Salaries expense for December 2012 which are to be paid in January 2013 should be recorded in December 2012 only and not in January 2013. As the expenses should match to the period in which they occurred.  Timeliness Principles:-Example, A company can prepare its statements for a period of 1 year from Jan to Dec (Calendar year) or April to March (Financial Year).
  14. 14. 14 Question 4) What is Accounting Cycle? Illustrate its various steps through diagram? Answer 4) Accounting cycle is a step-by-step process of recording, classification and summarization of economic transactions of a business. It generates useful financial information in the form of Financial Statements including Income Statement, Balance Sheet, Cash Flow Statement and Statement of Changes in Equity.
  15. 15. 15 Question 5) What is Rectification of Error? How would you rectify following errors: i) The purchase of Office Furniture for $ 500 cash was recorded as Office Supplies Purchases. ii) The $ 450 Service Revenue received in cash was recorded as $ 540. Answer 5) Date Explanation P.R. Debit Credit 1. Office Furniture Office Supplies 500 500 2. Service Revenue Cash 90 90

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