SUBJECT: FINANCIAL ACCOUNTING PRACTICE SET ____(name)_________ACCOUNTING SERVICES

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.

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 October 31 showed supplies of $680 on hand.

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

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

d) The equipment brought into the business on October 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 the end of October.

e) You and your partner estimated on October 31st that $312 of the receivable balance will not be collected (hint: see page 420 for entry this is a bonus markif your entry is correct).

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. IMPORTANT: Assignments should be formatted to fit on 8 ^1/2x 11 inch sheets (i.e. content should not spread over the width of two pages).

TRANSACTIONS:

October

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 $9,900 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 October.

9 Purchased a one-year insurance policy for $4,800; issued Cheque 1010 to pay the full amount in advance.

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

12 Issued Cheque 1011 for $431 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 October (ignore subsidiary ledger).

14 Returned some supplies that were damaged for a cash refund of $40.

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

18 Purchased supplies for $800 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 October.

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

25 Driving through town you notice that one of your new customers, a used book store, has put up an OUT OF BUSINESS sign in its window and the building is empty. You look and notice that the business still owes you $450 for work youve completed and invoiced you dont expect that this amount will ever be collected. (Note: the Allowance Method is used to account for bad debt.

26 Sent Cheque 1016 for $235 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 October.

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 October 30.

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 Fees Income 410 EXPENSES 511 Salaries Expense 1514 Utilities Expense 517 Supplies Expense 520 Rent Expense 523 Depreciation Expense - Equipment 526 Insurance Expense 529 Advertising Expense 532 Telephone Expense Maintenance Expense 540 Bad Debt Expense 535