The document provides journal entries for transactions of a sole proprietorship educational services company owned by Mr. A over a period. Key transactions include Mr. A contributing capital of $10,000, purchasing assets like a laptop and furniture, acquiring education software on a 6-year lease, earning revenue from fees, paying expenses like rent and salaries, and recording depreciation. At the end, financial statements including an income statement showing a net profit of $322 and a balance sheet are presented.

1. We assume that the company is providing educational services and is a sole proprietorship owned
by Mr. A. Following are transactions that can be included.
Journal Entries
Sr. No. Particulars Debit Credit
1 Cash $10,000
Mr. A - Capital $10,000
(Capital brought in by Mr. A)
2 Teaching Materials Expense $1,000
RM Stationers (Accounts Payable) $1,000
(Purchased teaching materials on credit)
3 Laptop (asset) $900
Cash $900
(Laptop purchased for business - useful life 5 years)
4 Rent Expense $1,300
Cash $1,300
(Rent paid in advance for 13 months)
5 Furniture (asset) $1,500
Cash $1,500
(Furniture purchased - useful life 10 years)
6 Right to use - Education Software $2,178
Lease liability $2,178
(Acquired Education Software on lease of $500 per year for 6
years - recorded at present value of lease payments discounted
at interest rate of 10%)

2. 7 Supplies $400
Cash $400
(Supplies like books and stationery necessary for providing
services)
8 Cash $2,000
Service Revenue $2,000
(Fees received directly in Cash from Students for services
provided in real time)
9 Accounts Receivable $5,000
Service Revenue $5,000
(Earned income receivable from students for services provided)
10 Teaching Materials Expense $350
Discount Received $25
Cash $325
(Paid in directly in Cash for Teaching materials purchased from
NM Traders)
11 Salary Expense $600
Cash $600
(Paid salary to administrative personnel)
12 Utilities Expense $780
Cash $780
(Cash paid for utilities like electricity and internet)
13 Examination Expenses $200
Cash $200

3. (Paid examination expenses)
14 Cash $3,000
Accounts Receivable $3,000
(Amount received from students)
15 RM Stationers (Accounts Payable) $900
Cash $900
(Paid HK Stationers for purchases made)
16 Service Revenue $700
Unearned Revenue $700
(Proportion of service not yet provided to students)
17 Prepaid Rent $100
Rent Expense $100
(Rent expense aid in excess for 1 month)
(Amount = $1,300 x 1/ 13 months)
18 Salary Expense $50
Salary Payable $50
(Salary due to administrative staff but not yet paid)
19 Utilities Expense $20
Utilities Payable $20
(Utilities Expense pertaining to this year but not paid)
(Assuming Double Declining Balance (DDB) method of
depreciation is used in order to reduce tax burden in the
beginning)

4. 20 Depreciation Expense - Laptop $360
Accumulated Depreciation - Laptop $360
(Depreciation expense charged for the year)
(Rate under SLM = 100/ 5 years = 20%)
(Rate under DDB = 2 x 20% = 40%)
(Amount = $900 x 40%)
21 Depreciation Expense - Furniture $300
Accumulated Depreciation - Furniture $300
(Depreciation expense charged for the year)
(Rate under SLM = 100/ 10 years = 10%)
(Rate under DDB = 2 x 10% = 20%)
(Amount = $1500 x 20%)
22 Bad Debts Expense $100
Allowance for Uncollectible accounts $100
(Allowance made for uncollectible accounts at 5% of amount due
from students)
(Balance in Accounts Receivable = $5000 - $3000 = $2000)
(Allowance = $2000 x 5%)
23 Supplies Expense $325
Supplies $325
(Supplies expense recorded after counting Supplies left)
(Amount = $400 - $75 (Supplies left) = $325)
24 Lease liability $282
Interest Expense (10%) $218

5. Cash $500
(Lease liability paid)
Interest Expense = $2178 x 10% = $218)
25 Amortization Expense $500
Right to use - Education Software $500
(Amortization Expense recorded for the year)
(Since it will not be available as expense to Mr.A, it is charged to
amortization under Straight line method)
(Amount = $3,000/ 6 years = $500)
26 Drawings $1,000
Cash $1,000
(Amount withdrawn by Mr. A)
Calculation of Lease liability:
Year Lease payment (a) Discounting factor at 10% (b) Present Value (a x b)
1 $500 0.909091 $454.55
2 $500 0.826446 $413.22
3 $500 0.751315 $375.66
4 $500 0.683013 $341.51
5 $500 0.620921 $310.46
6 $500 0.564474 $282.24
Total present value $2,177.63
Trial Balance Debit Credit
Cash $6,595
Accounts Receivable $2,000
Allowance for Uncollectible accounts $100

6. Supplies $75
Prepaid Rent $100
Laptop (asset) $900
Accumulated Depreciation - Laptop $360
Furniture (asset) $1,500
Accumulated Depreciation - Furniture $300
Right to use - Education Software $1,678
RM Stationers (Accounts Payable) $100
Unearned Revenue $700
Salary Payable $50
Utilities Payable $20
Lease liability $1,895
Mr. A - Capital $10,000
Drawings $1,000
Service Revenue $6,300
Discount Received $25
Teaching Materials Expense $1,350
Rent Expense $1,200
Salary Expense $650
Utilities Expense $800
Examination Expenses $200
Depreciation Expense - Laptop $360
Depreciation Expense - Furniture $300
Bad Debts Expense $100
Supplies Expense $325
Amortization Expense $500

7. Interest Expense (10%) $218
$19,850 $19,850
Income Statement Amount Amount
Service Revenue $6,300
Discount Received $25
Less: Expenses
Teaching Materials Expense $1,350
Rent Expense $1,200
Salary Expense $650
Amortization Expense $500
Utilities Expense $800
Examination Expenses $200
Depreciation Expense - Laptop $360
Depreciation Expense - Furniture $300
Bad Debts Expense $100
Supplies Expense $325 ($5,785)
Operating Profit $540
Less: Interest Expense ($218)
Net Profit $322
Balance Sheet Amount Amount
Assets:
Current Assets
Cash $6,595
Supplies $75

8. Accounts Receivable $2,000
Allowance for Uncollectible accounts ($100) $1,900
Prepaid Rent $100
Total Current Assets $8,670
Non-Current Assets:
Fixed Assets
Laptop (asset) $900
Less: Accumulated Depreciation ($360) $540
Furniture (asset) $1,500
Less: Accumulated Depreciation ($300) $1,200
Right to use - Education Software $1,678
Total Non-Current Assets $3,418
Total Assets $12,088
Liabilities and Equity:
Current Liabilities
RM Stationers (Accounts Payable) $100
Unearned Revenue $700
Salary Payable $50
Utilities Payable $20
Total Current liabilities $870
Non-current liabilities
Lease liability $1,895
Total Non-current liabilities $1,895

9. Total Liabilities $2,765
Owner's Equity
Capital $10,000
Add: Net Profit $322
Less: Drawings ($1,000) $9,322
Total liabilities and Equity $12,088