Service Business Accounting Cycle

Assume that you are starting a new business, (your name) Accounting Services, with a new partner, Nassir Patel. Nassir has had some clients and business activity to bring and you are leaving a position at a larger firm. Youve decided for liability purposes to set yourself up as a small corporation. You agree to set up shop at the start of October to allow yourselves time to get ready for the upcoming tax and audit (busy) season. As mentioned above, your partner has some existing clients that will now be clients of your new firm.

The chart of accounts for (your name) Accounting Services is listed below. Follow the instructions to complete the accounting records for the month of October.

_____________ ACCOUNTING SERVICES

Chart of Accounts

ASSETS
101	Cash
111	Accounts Receivable
119	Allowance for Doubtful Accounts
121	Supplies Inventory
131	Prepaid Rent
134	Prepaid Insurance
141	Equipment
142	Accumulated Depreciation - Equipment
LIABILITIES
202	Accounts Payable
203	Note Payable
211	Unearned Revenues
OWNERS EQUITY
301	Common Stock
309	Retained Earnings
REVENUE
410	Fees Income
EXPENSES
511	Salaries Expense
514	Utilities Expense
517	Supplies Expense
520	Rent Expense
523	Depreciation Expense Equipment
526	Insurance Expense
529	Advertising Expense
532	Telephone Expense
535	Maintenance Expense
540	Bad Debt Expense

REQUIRED:

1. Analyze each transaction below and record it in the general journal.

2. Post the transactions for the general ledger accounts.

3. Prepare a trial balance.

4. Analyze the following information to determine/calculate adjustments:

a. Supplies were used during the month. An inventory taken on March 31 showed supplies of $780 on hand.

b. Rent expired for the month of March (see March 2nd rent transaction).

c. Insurance expired insurance for the month (see March 9th transaction).

d. The equipment brought into the business on March 1st has a useful life of 15 years and no (zero) residual value. The first adjustment for depreciation for the new equipment will be recorded at end of March.

5. Journalize and post the adjusting entries based on part 4 above.

6. Prepare an adjusted trial balance.

7. Prepare a single step income statement for the month.

8. Prepare a statement of shareholders equity.

9. Prepare a classified statement of financial position.

10. Journalize and post the closing entries.

11. Prepare a post-closing trial balance.

This should match the last 5 digits of your student ID;

If first digit is zero replace it with 1

TRANSACTIONS:

March, 2021

1 You contribute $XX,XXX for 100 shares of common stock in the new company.

1. Nassir Patels contribution to the business is $2,180 due on existing customer receivable accounts, $10,200 of new equipment. He receives 100 shares of common stock for this contribution.
2. Paid $15,900 for next 6 months of rent by issuing Cheque 1008.

2 Purchase supplies for $1,500. Cheque 1009.

7 Provided services for $6,322 in cash and $745 on credit during the first week of March.

9 Purchased a one-year insurance policy for $5,400; issued Cheque 1010 to pay the full amount in advance.

11 Collected a total of $395 on account from credit customer (related to March 7 sales ignore subsidiary ledger).

12 Issued Cheque 1011 for $631 to pay for advertising on the local radio station during the month.

13 Collected a total of $500 on account from credit customers during the second week of March (ignore subsidiary ledger).

14 Returned some supplies that were damaged for a cash refund of $50.

15 Provided services for $8,500 in cash and $400 on credit during the second week of March.

18 Purchased supplies for $900 from Fellowes, Inc. received Invoice 3284, payable in 30 days.

19 Provided services for the $3,890 in cash and $2,560 on credit during the third week of March.

20 Collected a total of $750 on account from credit customers during the third week of March (ignore subsidiary ledger).

21 Issued Cheque 1012 for $1,390 to pay for maintenance work on the office equipment.

22 Issued Cheque 1013 for $164 to pay for March advertisements in the local newspaper.

23 Received the monthly telephone bill (current month usage) for $234 and paid it with Cheque 1014.

23 Collected a total of $1,560 on account from credit customers during the fourth week of March (ignore subsidiary ledger).

26 Sent Cheque 1016 for $265 in payment of the monthly bill for utilities.

27 Provided services for $5,890 in cash and $675 on credit during the fourth week of March.

28 Issued Cheques 1017-1022 for $5,886 to pay the monthly salaries of the regular employees and three part-time workers.

30 Issued Cheque 1023 for $415 to pay for cleaning services (i.e. Maintenance Expense) for the month.

30 Purchased additional equipment for $6,000 from Master Equipment Company; issued Cheque 1024 for $1,300 and negotiated a loan (i.e. Note Payable) for the remainder. The equipment has a five-year life and no salvage value.

30 Received advance payment for tax work for new clients in the amount of $2,725.

30 Provided services for $545 in cash and $325 on credit on March 30.