Create the following financial statements for j & l accounting, inc.

 

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

 

 

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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                  

 http://www.justanswer.com/business-finance-homework/8o4ly-hi-need-help-project-you-ve-answered.html

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

 

J & L Accounting, Inc. Statement of Retained Earnings

For the Month Ending December 31, 2012

 

 

Retained Earnings, December 1, 2012

19,875.00

Add: Net Income

1,625.00

 

Subtotal

 

21,500.00

Less: Dividends

         0.00

Retained Earnings, December 31, 2012

21,500.00

 

1)  Using the following blank forms (make as many copies as necessary), set up the general ledger accounts for the general ledger and insert the beginning balances for the accounts from the post-closing trial balance. The balances from the post-closing trial balance become the beginning balances of the accounts for the next account period.

 

 

 

 

 

 

 

DATE                         ITEM

 

POST

REF.       DEBIT      CREDIT

BALANCE DEBIT      CREDIT

 

 

 

DATE                         ITEM

 

POST

REF.       DEBIT      CREDIT

BALANCE DEBIT      CREDIT

 

2)  Journalize the following transactions in the general jour- nal using the following blank form (make as many copies as needed). When making journal entries, each individ- ual journal entry’s debits should equal its credits. (The amount for a journal  entry can be  incorrect or the entry can be  incorrect. However, the debits still have to equal the credits even though the entry is incorrect. If the jour- nal entry is incorrect, it can be  corrected later when making adjusting/correcting journal entries. For exam- ple, if the amount is supposed to be  $1,100, and for

some reason the amount of $1,010 is recorded, this is acceptable—although incorrect, it can be  corrected later.) The total of the debits must always equal the total of the credits  for each journal  entry—always. This is a funda- mental GAAP that cannot be  violated.

 

a. On January 1, 2013, a payment  in cash  for $12,000 is made for prepaying rent for the entire year 2013.

 

b. On January 4, 2013, accounting services are performed and payment is received in cash for the amount of $1,900.

 

c. On January 9, 2013, a payment in cash for advertising is made in the amount of $850.

 

d. On January 10, 2013, office  supplies are purchased in the amount of $75 with cash.

 

e. On January 14, 2013, accounting services are performed and payment is received in cash for the amount of $2,725.

 

f.  On January 20, 2013, the telephone bill  for the amount of $660 is received and paid with cash.

 

g. On January 20, 2013, the utilities bill  for $2,925  is received. The bill  won’t be  paid until it is due on February 15, 2013.

 

h. On January 27, 2013, accounting services are performed on account in the amount of $3,750.

 

i.  On January 28, 2013, a payment  in cash  for $1,500 is made for a bill  from an advertising  agency.

 

 

DATE                                      ACCOUNTS

POST

REF.          Dr.             Cr.

 

3)  Post the general journal  entries  from the journal  to the corresponding general ledger accounts, paying particular attention to the posting being made (debit or credit). Use the Post Ref. column to ensure that each line item of the journal entries is posted correctly to each general ledger account. Posting from the journal  to the general ledger is nothing more than rearranging the information. If the debits equal the credits  for a particular journal entry and the information is posted correctly, then the total of the debits should equal the total of the credits

in the general ledger.

 

4)  Calculate the balances in the general ledger accounts. (Use an Excel spreadsheet or a printing calculator, and run the numbers several times for accuracy. Often, deb- its won’t equal credits on the trial balance because a hand-held calculator is used and the math is done only once. Using a hand-held calculator can introduce errors. This is why an Excel spreadsheet is recommended. However, if a hand-held calculator is all that’s available to you, be sure to do  the math enough times that you know the cal- culations are accurate.) To calculate the balances in the ledger accounts, you’ll need to do  the following:

 

1)  Add  the debits.

 

2)  Add  the credits.

 

3)  Subtract the larger amount from the other,  or, alternatively, keep the running balance of the amount in the account and whether it’s a debit or credit on the ledger.

 

5)  Create an unadjusted trial balance from the balances in the general ledger accounts. (Once again, be  very careful when doing the math. When calculating the totals of the debit and credit columns, they should be  equal. If not,

do  not continue until the debits equal the credits. An error has been made and must be  found and corrected from the previous steps.) See  page 129 of the text for an example of an unadjusted trial balance. Use the following blank form.

 

 

 

 

 

ACCOUNT                                          DEBIT                 CREDIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12                                                                                                                     Business, Accounting, and You

 

6)  Journalize the following adjusting journal entries in the general journal, being sure that the debits equal the credits:

 

a. Calculate and make the adjustment for the amount of pre-paid rent that has been used.

 

b. Make an adjusting journal entry in the amount of $1,000  for depreciation of the vehicles.

 

c. Make an adjusting journal entry in the amount of $100 for depreciation of the equipment.

 

7)  Post the adjusting journal entries to the respective gen- eral ledger accounts, again being sure that the postings are to the correct debit or credit side and that the Post Ref. column is used.

 

8)  Calculate the new balances in the general ledger accounts.

Create an adjusted trial balance from the balances in the general ledger accounts using the same blank form that was provided in step 5 when you created the unadjusted trial balance. See  page 137 of the textbook for an exam- ple  of an adjusted trial balance. Make sure the math is correct and that the debit column is equal to the credit column. If not, don’t continue until the error has been found.

9)  Create the income statement for J & L Accounting, Inc. using the information from the adjusted trial balance. Use the following blank form to create the income statement. Its format should be  the same as the format used  for the statement provided at the beginning of the project for the prior accounting period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Graded Project                                                                                                                         13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14                                                                                                                     Business, Accounting, and You

 

10)   Create the closing journal entries in the general journal to close the revenue, expense, and dividend accounts to the retained earnings account, paying attention to debits equaling credits.

 

11)   Post the closing journal entries to the respective general ledger accounts.

 

12)   Calculate the balances in the general ledger accounts.

 

13)   Create a post-closing  trial balance  from the balances in the general ledger accounts using the same blank form that was provided in step 5 when you created the unadjusted trial balance. The post-closing trial balance should be  in the same format as the post-closing trial balance provided at the beginning of the project for the prior accounting period. Make sure the math is correct and that the debit column is equal to the credit column. If not, don’t continue until the error has been found.

 

14)   Create the balance  sheet  for J & L Accounting, Inc. using the information from the post-closing  trial balance.  If the debits equal the credits  from the previous work and the closing entries were made properly, then the accounting equation should balance on the balance sheet. If the assets don’t equal the liabilities plus stockholders’ equity, an error has been made that needs to be  corrected. The bal- ance of the accounting equation is another fundamental GAAP principle that can’t be  violated. Use the following form to create the balance  sheet.  Its format should be

the same as the format of the statement provided at the

beginning of the project for the prior accounting period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Graded Project                                                                                                                         15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16                                                                                                                     Business, Accounting, and You

 

15)   Create the statement of retained earnings for J & L Accounting, Inc. using the ending balance  from the statement of retained earnings from the prior period and the net income from the income statement for the

January accounting period. (No dividends were paid out during the month of January.) Follow the same format from the statement of retained earnings at the beginning of the graded project for the prior accounting period

using the blank form on the following page.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Graded Project                                                                                                                         17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18                                                                                                                     Business, Accounting, and You

 

Having created the balance sheet, the income statement,

the statement of retained earnings, and the post-closing trial balance on the blank forms that were provided, the financial statements must now to be  typed up in a Microsoft Word document and saved as a .doc or .docx file. Microsoft Excel can also be  used (saving the file with the extension .xls or

.xlsx). Each financial statement should be  on its own page

(or worksheet). The name of the file should include your stu- dent ID number and the graded project exam number, such as “21512345_061552.docx” as an example.

 

Insert tables in the Word document if you feel  you need them to format the financial statements. Alternatively, space and tab in Word to get the formatting of the statements set up correctly. Formatting is important. Also, keep in mind  that points will be  deducted for incorrect capitalization, spelling, underlining and double underlining, as well  as for improper headings, dates, indentations, and columns.

 

Create all of the financial statements in one file. Submission of more than one file will result in the project being returned as ungraded. Submission of only one file is important for tracking and grading purposes.

 

Images or scanned images of the financial statements and inserted into a Word document will also result in the project being returned as ungraded. This prevents the ability to “mark up” the file, and financial statements that are hand- written are generally considered unprofessional.

 

Only the financial statements are required. Submitted journals, ledgers, or unadjusted and adjusted trial balance will not  be evaluated.

 

 

 

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