...annual companies only complete one accounting cycle per year. Accounting Cycle Steps This cycle starts with a business event. Bookkeepers analyze the transaction and record it in the general journal with a journal entry. The debits and credits from the journal are then posted to the general ledger where an unadjusted trial balance can be prepared. After accountants and management analyze the balances on the unadjusted trial balance, they can then make end of period adjustments like depreciation expense and expense accruals. These adjusted journal entries are posted to the trial balance turning it into an adjusted trial balance. Now that all the end of the year adjustments are made and the adjusted trial balance matches the subsidiary accounts, financial statements can be prepared. After financial statements are published and released to the public, the company can close its books for the period. Closing...
Words: 7143 - Pages: 29
...he invested in equipment for loading and unloading tyres by paying $10,000 cash on the day of commencement of business. Tom sees great potential in this business and endeavours to maintain double entry accounting records. It has been two months since the start of business and now, he has engaged your service as an accountant to develop the double entry recording system. As there are small expenses paid directly by Tom, you recommended a Petty Cash Advance be established and a Petty Cash Book maintained. The trial balance below shows the summary of transactions in the first two months of business, now carried forward to the 1st of April 2014. CHOICE TRUCK TYRES TRIAL BALANCE AS AT 1 APRIL 2014 ACCOUNT Cash at bank Accounts Receivable Equipment (paid cash on 1 February 2014) Accounts Payable Loan from BankOnUs Ltd Capital – Tom Blakeney Drawings – Tom Blakeney (Equity) Sales Purchases Electricity Equipment Running Costs Insurance - Equipment Interest Office Supplies Rent Telephone Wages TOTAL DEBIT $ 15,320 46,500 10,000 25,000 41,670 20,000 5,000 66,000 65,000 1,500 200 300 1,000 150 6,000 200 1,500 152,670 152,670 CREDIT $ Page | 1 Information relating to the opening trial balance is as follows: 1. The Purchases and Sales history for the past two months is as follows: Purchases Sales Opening Inventory As at 1 April 2014 Standard TT 150 @ $300ea 100 @ $450ea 50 @ $300ea Premium TT 40 @ $500ea...
Words: 1202 - Pages: 5
...What is GAAP and what is the purpose of GAAP GAAP means generally accepted accounting principles and are a compilation of authoritative accounting standards that public, nongovernmental entities within the USA are required to follow by the authority of the Securities and Exchange Commission. Since 1973, the SEC designated the Financial Accounting Standards Board and a private, non-profit organization are as the one responsible for establishing U.S. GAAP. What is the purpose of a balance sheet? What information does it provide? The purpose of a Balance Sheet is to report the financial position of a company at a certain point in time. It is divided into two columns. The first lists what the company owns (assets) on the left. The second shows what the company owes (liabilities and net worth) on the right. At the bottom of each list is the total of that column. As the name implies, the bottom line of the balance sheet must always Balance. In other words, the total assets are equal to the total liabilities plus the net worth. Marianne M. Huey The purpose of a Balance Sheet is to report the financial position of a company at a certain point in time. It is divided into two columns. The first lists what the company owns (assets) on the left. The second shows what the company owes (liabilities and net worth) on the right. At the bottom of each list is the total of that column. As the name implies, the bottom line of the balance sheet must always "balance." In other words, the total...
Words: 1385 - Pages: 6
...Exercise Chapter 2: 4. For each of the following (1) identify the type of account as an asset, liability, equity, revenue, or expense, (2) identify the normal balance of the account, and (3) enter debit (Dr.) or credit (Cr.) to identify the kind of entry that would increase the account balance. a. Cash b. Legal expense c. Prepaid Insurance d. Land e. Accounts Receivable f. Owner Withdrawals g. License Fee Revenue h. Unearned Revenue i. Fees Earned j. Equipment k. Notes Payable l. Owner Capital 6. Groro Co. bills a client $62,000 for services provided and agrees to accept the following three items in full payment: (1) $10,000 cash, (2) computer equipment worth $80,000, and (3) to assume responsibility for a $28,000 note payable related to the computer equipment. The entry Groro makes to record this transaction includes which one or more of the following? a. $28,000 increase in a liability account b. $10,000 increase in the Cash account c. $10,000 increase in a revenue account d. $62,000 increase in an asset account e. $62,000 increase in a revenue account f. $62,000 increase in an equity account 9. Prepare general journal entries to record the transactions below for Spade Company by using the following accounts: Cash; Account Receivable; Office Supplies; Office Equipment; Accounts Payable; K. Spade, Capital; K. Spade, Withdrawals; Fees Earned; and Rent Expense. Use the letters beside each transaction...
Words: 549 - Pages: 3
...ASSIGNMENT BRIEF EDEXCEL BTEC L3 Extended a Diploma in Business Unit 8 ACCOUNTING SYSTEMS (Task A) P1 In this assignment I am going to identify and explain the various documents that a business needs to prepare and used in its day to day activities and transactions. In first place, the price quotation is a document that an organisation submits to one or more potential clients enquiring for the price of a product or service. Typically, the price quotation presents the list of prices customarily used when the requesting organisation's requirements are more complex. Therefore, we identify this document as a formal statement of promise, submitted usually in response to a request for quotation by potential supplier, to supply the goods or services required by a buyer, at specified prices, and within a specified period. A quotation may also contain terms of sale and payment, and warranties. If the case of the requesting organisation does not wish to accept the price quotation of a certain good or service, it may decline it or request a new price quote as the quotation is the formal quote from the seller to the buyer for a quantity of goods, at a specific price, to be delivered at a specific time. The quotation is provided within the context of a validity time frame, and purchase orders placed during the quotations validity are accepted for delivery at the price stated. Therefore, we can define the price quotation as a proposal to the buyer from the seller...
Words: 4440 - Pages: 18
...Business Folio First Phase - Business Information Introduction Phase (Team Assignment) DUE DATE: in Week 5 (10 marks) LOCATION: both online electronic submission through the Blackboard and hard copy submission to SIM are required INTRODUCTION OF BUSINESS FOLIO The Business Folio consists of two related phases. This scaffolding exercise aims to reach the learning outcome that you will be able to record financial information through both manual accounting information systems and computerised accounting information systems, and compare and consolidate your knowledge within both systems. You will be given structured instructions to set up a business, create your own Chart of Accounts, and prepare a set of transations within a general journal. This forms the Business Information Introduction Phase. Based on the feedback from your tutors from this phase and supporting materials, demonstrations, instructions on computerised accounting system, you will then process the information that you created in the Introduction phase, through a computerised accounting system. Capability in this application is achieved through the development of generic capabilities. Therefore, the best preparation for this folio is to study the lecture materials and the readings from the text as well as consider real life examples of businesses. Each phase of your Business Folio must be accompanied by an Assignment Cover Sheet. Each phase of Business Folio must be submitted electronically through...
Words: 3329 - Pages: 14
...20 Purchased goods for cash Rm1,500. 23 Collected from customers Rm2,500. 25 Paid utility bills Rm800. 28 Paid creditors the balance due for office equipment. 29 Bought delivery van costing rm50,000, paid Rm10,000 cash, with the balance to be settled later. 30 Owner withdrew cash rm2,500 and stock costing Rm2,000 for personal use. 30. Paid salaries of workers Rm12,000. Record the above transaction in ledgers and prepare a trial balance on 30 June 2008. Solution to Q1 Capital Account Date | Details | Amt RM | Date | Details | Amt RM | 30.6. | Bal Car/ for | 55500 | 1.6. | bank | 30000 | | | | | M/car | 20000 | | | | | furniture | 5500 | | Total | 55500 | | Total | 55500 | Motor car Account Date | Details | Amt RM | Date | Details | Amt RM | 1.6. | Capital | 20000 | 30.6. | Bal Car/For | 20000 | | | | | | | | | | | | | | Total | 20000 | | Total | 20000 | Furniture Account Date | Details | Amt RM | Date | Details | Amt RM | 1.6. |...
Words: 2848 - Pages: 12
...a. Identify specific considerations from Parts I and II of the case that affect your assessments of engagement risk and acceptable audit risk. Use each of the three factors in the text to categorize your conclusions: External users’ reliance on financial statements After analyzing Pinnacle’s Income statements and other supporting documentation we concluded that the company has a low risk for failure in the next 12 months. Due to Pinnacle’s size and the field on which it performs (technology and manufacturing ), external users will rely significantly on the financial statements to gain assurance of the company’s current state and its future prospects. In addition, the amount of liabilities documented on Pinnacle’s financials make it more likely for investors and parties of interest to leverage the company’s income statements and balance sheets to help them decide on future investment option. Likelihood of financial difficulties Once the audit is completed and the audit is reported is issued , there is a significant risk for Pinnacle to experience financial difficulties included but not limited to bankruptcy. Based on this assumption, the engagement risk level should be increased and the acceptable audit risk should be issued. Management integrity Pinnacle’s Management Team has not demonstrated consistent ethical judgment in many of their choices. They have, to a certain extent. In addition, the organization’s lack of a clear stance regarding...
Words: 525 - Pages: 3
...Financial Benefits of an Automated Accounts Payable System for Business While businesses have become bigger and more complex over time, there has been a lag in the harmonisation of financial systems over time especially the Accounts Payable. The complexity of business has been as a result of various factors such as mergers and acquisitions as well as cross-border trade which is affected by factors that include but not limited to different tax regulations, currency and the languages of instruction. This affects the Accounts Payable as it requires real time data especially with regard to a business’ suppliers and buyers for it to be effective. Lack of an automated Accounts Payable system leads to inherent problems such as delayed payments to an organisation’s suppliers, while delaying payments to suppliers may in the short run appear beneficial to an organisation’s cash flows, it actually may lead to the organisation losing some early payment discounts from suppliers which would otherwise represent huge savings on the organisation’s part. Delayed payments also affect long-term relationships with the suppliers as cash flow issues on the part of the suppliers may lead to a cessation of important supplies to the organisation. This ultimately hurts the organisation’s performance. Despite the disadvantages stated above, adoption of automated Accounts Payable has been slow even though recent trends suggest the prospects are changing, a majority of the organisations surveyed indicated...
Words: 565 - Pages: 3
...Books of Accounts& Balancing off accounts of "Olivia's Pizza Parlour": Dr Bank Cr 200717-1 K.Henriques 18421-1 Betta Ltd 50031-1 motor van 4000Balance c\d 6661 ____ 11345 | 200701-1 Capital 10,00005-1 Cash 75012-1 Cash 50024-1 J.Carlton 95 ____ 11345 Balance b\d | Dr Capital Cr 20071-1 Bank 10,000 ____ 10,000 | | Dr Purchases Cr | 2007 2-1 Creditors 1,063 9-1 Cash 546 10-1 Creditors 755 _____ ...
Words: 620 - Pages: 3
...Evaluate the value of a set of Final Accounts to a business. Who would be interesting in a Final Account. A final account is produced at the end of each financial year however it can be done more than once a year depending on the business and usually consists of trading account, profit and loss account and a balance sheet. There are different people who are interesting in the final accounts and want to know the business is doing financially. They each have different objectives for the business and they will use the final accounts to work out if they are getting what they want from the business. Interesting users of Final accounts are the: * Owner interesting in profit. * Shareholders interesting in profit and share price. * Managers interesting in the prestige and expansion. * Employees interesting in higher wages and keeping their job. * Customers interesting in low price, quality and credits. * Banks interesting in getting their money back. * Government interesting in tax (Inland Revenue). * Suppliers interesting in getting paid on time. * Competitors interesting in wining over customers. Which person would find the information of value the most. The owners of the business would find the final accounts most valuable because this would enable them to know how well the business has performed by looking at the profit and loss account and balance sheet. Which would give them information on the profitability,...
Words: 443 - Pages: 2
...Q1: Define the current account balance fully and explain what it is made up. Specifically, you should show the relationship between the current account and the trade account. A: Current account balance is the difference between a country’s savings (imports) and investments (exports). If it is positive, the country had enough funds to invest abroad; however, if it is negative the domestic investments of the company were financed by foreign investors. Whereas trade account It is defined as the sum of the balance of goods and services exported, net income from abroad, minus the sum of goods and services imported which is included in the current account Current Account = Changes in net foreign assets Q2: What is the sovereign debt and which countries within the EZ are suffering from it? A: Sovereign debt is bonds, securities, or bills issued by a national government (in domestic or foreign currency) to finance the country’s growth. Theoretically sovereign doubts are considered to be low on risks, since the government has different measures to guarantee returns, e.g. increased taxes or print money. Though practically, a number of governments in the past could not repay their debt , and defaulted. The riskier, the investment, the higher the returns. Countries within the EZ suffering from sovereign debt are: 1) Greece 2) Ireland 3) Italy 4) Portugal 5) Spain Q3: What is the external imbalance refer to, why...
Words: 525 - Pages: 3
...Statement of Cash Flows Chapter 13 McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Purpose of the Statement Provides information about the cash receipts and cash payments of a business entity during the accounting period. Helps investors with questions about the company’s • • • • Ability to generate positive cash flows. Ability to meet its obligations and to pay dividends. Need for external financing. Investing and financing transactions for the period. 13-2 Company Name Statement of Cash Flows Period Covered p g Cash flows from operating activities: [List of individual inflows and outflows] Net cash from (used in) operating activities Cash flows from investing activities: [List of individual inflows and outflows] Net cash from (used in) investing activities Cash flows from financing activities: [List of individual inflows and outflows] Net cash from (used in) financing activities Net increase (decrease) in Cash Cash (and equivalents) balance at beginning of period Cash (and equivalents) balance at end of period $ ##### ##### ##### $ ##### ##### $ ##### 13-3 Classification of Cash Flows The Statement of Cash Flows must include the following three sections: • Cash Flows from Operating Activities • Cash Flows from Investing Activities • Cash Flows from Financing Activities 13-4 Operating Activities Inflows from: • Interest and dividends • received Sales to customers + Outflows to: ...
Words: 2045 - Pages: 9
...financing, money is borrowed to be repaid over a fixed period of time, generally with interest. The lender derives no ownership interest in the business and the business has no other obligations except full repayment of the loan. In equity financing, money is exchanged for a share of ownership in the business. The business raises funds without incurring debt and has no obligation to repay specific sums at specific milestones (YChange). Sources of Debt Financing Accounts Receivable Collection Acceleration Accounts receivable collection acceleration provides cash funding on the strength of a company’s outstanding invoices. Instead of buying accounts, lenders use invoices as collateral against which they extend short-term loans. An accounts receivable lender handles other aspects of the account, including collections and deposits, which will give the company the ability to focus on other areas of productivity (Inc.com). Factoring Under a factoring arrangement, a finance company agrees to take over a company’s accounts receivable collections and keep the money from those collections in exchange for an immediate cash payment to the company. When a factoring arrangement is used the finance company takes over the risk of loss on any bad debts, though it will have the right to pick which types of receivables it will accept in order to reduce its risk of loss (Bragg). Asset-based Loans An asset-based loan uses fixed assets or inventory as its collateral. The bank use the resale...
Words: 1110 - Pages: 5
...transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. Current account:The difference between a nation’s savings and its investment. The current account is an important indicator about an economy's health. It is defined as the sum of the balance of trade, net income from abroad and net current transfers. A positive current account balance indicates that the nation is a net lender to the rest of the world, while a negative current account balance indicates that it is a net borrower from the rest of the world. A current account surplus increases a nation’s net foreign assets by the amount of the surplus, and a current account deficit decreases it by that amount. The current account and the capital account are the two main components of a nation’s balance of payments. Capital account:In macroeconomics and international finance, the capital account is one of two primary components of the balance of payments, the other being the current account. Whereas the current account reflects a nation's net income, the capital account reflects net change in ownership of national assets. A surplus in the capital account means money is flowing into the country, but unlike a surplus in the current account, the...
Words: 971 - Pages: 4
