PF 061579

PF           061579

Lesson 1: Business, Accounting, and You

The goal of this graded project is to create the following financial statements for J & L Accounting, Inc.:

 

Balance sheet

Income statement

Statement of retained earnings

Post-closing trial balance

 

The financial statements must be created in one Microsoft Word document (.doc or .docx  file). Alternatively, an Excel workbook may be  used (.xls or .xlsx file). The Word or Excel file will be  uploaded  for grading.

 

 

INSTRUCTIONS

The project is to be  done by  hand with a pencil and paper. Use the blank forms provided. At the end of the project, you’ll be  given instructions  for creating  and uploading  the financial statements  in a Word or Excel file for grading.

 

 

Note:  The formatting of financial statements is important. They follow  Generally Accepted Accounting Principles (GAAP), which creates a uniformity of financial statements for analyz- ing. This allows for an easier comparison, as all businesses follow  GAAP. Therefore, the financial statements should be created exactly the same way shown or referenced in the text- book. Failure to do  so will result in a loss of points.

 

The project references “debits equaling credits.” This is a fun- damental principle of accounting that can’t be  violated and if so is not  acceptable under any circumstance. Debits not equaling credits  allows for “cooking of the books,” which is presenting false information. It also allows for embezzlement, which is theft by  management or employees. If debits don’t equal credits, the cause may be  a lack of understanding of accounting principles, such as those presented in the text- book and assigned homework problems, or a lack of focus

and concentration when making journal entries, posting to ledger accounts, or completing math. Remember—instructors are available to help you with material you may be  struggling with. Mistakes of the lack-of-focus variety are best corrected by  going back over the work until the error is found.

 

The accounting equation must balance on the balance sheet. This is another fundamental principle of accounting that can’t be  violated and if so is completely unacceptable. When the equation doesn’t balance and the numbers are “fudged,”

this is easily detectable by  someone who knows accounting. If your debits equal your credits and you understand  which general ledger accounts belong on which financial state- ments, then the accounting equation should balance. It’s really all about understanding the concepts and applying

that understanding.

 

The following financial statements are provided from the prior accounting period for J & L Accounting, Inc.:

 

a)  Post-closing trial balance b)  Balance sheet

c)  Income statement

 

d)  Statement of retained earnings

 

J & L Accounting, Inc. Post-Closing Trial Balance December 31, 2012

 

BALANCE

 

ACCOUNT TITLE                                                      DEBIT                  CREDIT

 

Cash, Business Checking	20,500.00
Accounts Receivable
Prepaid Rent
Vehicles	48,000.00
Accumulated Depreciation, Vehicles		12,000.00
Equipment	3,600.00
Accumulated Depreciation, Equipment		600.00
Accounts Payable
Common Stock		38,000.00
Retained Earnings		21,500.00
Dividends
Service Revenue
Advertising Expense
Rent Expense
Office Supplies Expense
Telephone Expense
Utilities Expense
Depreciation Expense
TOTALS	72,100.00	72,100.00

J & L Accounting, Inc.

Balance Sheet

As of December 31, 2012

 

ASSETS

 

Cash, Business Checking			20,500.00
Accounts Receivable			0.00
Prepaid Rent Vehicles	48,000.00		0.00
Less: Accumulated Depreciation, Vehicles	12,000.00		36,000.00
Equipment	3,600.00
Less: Accumulated Depreciation, Equipment	600.00		3,000.00
TOTAL ASSETS			59,500.00

 

 

LIABILITIES

Accounts Payable                                                                                                 0.00

 

TOTAL LIABILITIES                                                                                            0.00

 

 

STOCKHOLDERS’ EQUITY

 

Common Stock	38,000.00
Retained Earnings	21,500.00
TOTAL STOCKHOLDERS’ EQUITY	59,500.00

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                      59,500.00

J & L Accounting, Inc. Income Statement

For the Month Ending December 31, 2012

 

REVENUES

 

Service Revenue                                                                                          10,275.00

 

EXPENSES

 

Advertising Expense	2,300.00
Rent Expense	1,000.00
Office Supplies Expense	300.00
Telephone Expense	750.00
Utilities Expense	3,200.00
Depreciation Expense	1,100.00
TOTAL EXPENSES		8,650.00
NET INCOME		1,625.00