The Accounting Cycle

Mr. Alwys Right opened "The Right Cleaners" on March 1, 2020.

It mainly attracts businesses in Suva CBD, which are closed during weekends and on public holidays. Cleaning services are provided from 9am: 9pm and employees are paid on weekly basis. The chart of accounts for the cleaning operations is provided below:

CHART OF ACCOUNTS

Assets Revenue

111 Cash 411 Services Revenue

112 Accounts Receivable

113 Supplies `

114 Prepaid Insurance

Expenses

115 Prepaid Rent 511 Maintenance & Repairs Expense

116 Equipment 512 Supplies Expense

117 Accumulated Depr. - Equipment 513 Depreciation Expense

514 Insurance Expense

Liabilities 516 Wages Expense

211 Accounts Payable 517 Rent Expense

212 Wages Payable 518 Inerest Expense

213 Loan

214 Interest Payable

Owner's Equity

311 A. Right , Capital

312 A.Right, Drawings

313 Income Summary (Profit / Loss)

The following transactions took place during March, 2020.

Mar 1 - A.Right invested cash in the business, $15 000.

Mar 1 - Interest on loan will be paid on the first day of each subsequent month. An agreement was signed on a 6-month, 6%, of $6 000 loan payable.

Mar 1 - Purchased a used truck for $8 000 cash.

Mar 2 - Paid $1 500 cash to cover rent from March 1 through May 31.

Mar 3 - Paid $2 400 cash on a 6 month insurance policy effective March 1.

Mar 6 - Purchased cleaning supplies on account, $2 000.

Mar 14 - Billed customers $3 700 for cleaning services performed.

Mar 18 - Paid $500 on amount owed to cleaning supplies.

Mar 20 - Paid $1 750 cash for employee wages.

Mar 21 - Collected $1600 cash from customers billed on March 14.

Mar 28 - Billed customers $4 200 for cleaning services performed.

Mar 31 - Paid $350 for gas and oil used in truck during the month (Use maintenance & repair expense).

Mar 31 - Owner withdrew $900 cash from the company.

Adjustment information for the end of March is provided below:

a)Services performed but billed and uncollected at March 31 were $200.

b)Depreciation on the equipment for this month was $250.

c)One-sixth of the insurance expired.

d) An inventory count shows $280 of cleaning supplies on hand at March 31.

e)Accrued but unpaid employee wages were $1 080.

f)One month of prepaid rent has expired.

g)One month of interest expense related to the loan has accrued and will be paid on April 1.

INSTRUCTIONS:

1. Journalize the March transaction from (1-31).
2. Post the entries in (i) above to ledge accounts (use T accounts).
3. PREPARE unadjusted Trial Balance at March 31.
4. Journalize the adjusting entries from (a-g).
5. Prepare the income statement for March.
6. Prepare classified balance sheet (vertical format) at March 31.