Journal Entries for a New Operation

JOURNAL ENTRIES FOR A NEW
OPERATION
“GILES CLEANING and LAWN MOWING SERVICE”
Submitted To:
Dr Elvia Shauki
Course Coordinator
Submitted By:
Name: Tasnia Hasan
Stud
ent ID: 110251046
Course Name:
Financial Accounting
Abstract

Accounting cycle Mind Map
Below is a graphical presentation of the accounting cycle prepared and extracted using mind
map software.
Diagram 1: Ten steps in the accounting cycle
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Accounting cycle entails recording, processing and summarizing of financial information
from initialization of a transaction to preparation of reversing entry to close adjusting entries of
the accounting period. There are ten processes involved in the accounting cycle as outlined
below (Bragg, 2011, 7)
Identify and analyze a transaction
It involves careful examination of a sale to determine how to classify the transaction as per
the accounting tool. The accounting tool states that assets less liabilities should be equal to the
owner's equity. Therefore, the bookkeeper decides whether the transaction is a credit or a debit
(Needles and Crosson, 2014, pp 16).
Prepare Journal entries
Using the double entry or single entry, the bookkeeper details the company’s transactions
for the period under review, and the accounts affected by the transactions. Journal entries
manage transactions for easy decision-making (Juan, 2007, 37).
Posting in the ledger
Posting the journal entries in the ledger summarizes the information contained in the journal
entries by placing them in appropriate accounts depending on the nature of the transaction.
Ledger accounts help classify transactions for a better understanding of the financials (Ryan and
Collett, 2017, 98).
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Unadjusted trial balance
It contains all the information captured in the ledger accounts. It involves the transfer of
financial information from the ledger accounts to the trial balance without passing any
adjustments.
Adjusting entries
Adjusting entries pass amendments to the revenue and expenses account to align them to
the accounting period incurred. The adjusting entries include depreciation expense, deferred
income, deferred expense, accrued expenses, and accrued revenue. According to the accrual
basis of accounting, recording of revenue and expenses is in the accounting period-incurred
(Gilbertson et al., 2014, pp5).
Adjusted trial balance
It involves incorporation of the adjusting entries to the unadjusted trial balance. It's an internal
document prepared by the bookkeeper for a clear understanding of effects the adjusting entries
have on the financial position of the company.
Financial statements
Financial statements entail summary of financial activities of the company to indicate an
accurate financial position for the business. The financial statements include profit and loss
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account, balance sheet, cash flow statements, statement of changes in equity, movement of
assets, and statement of retained earnings among others (Bragg, 2013, 41).
Closing entries
These journal entries prepared at the end of the accounting period, to transfer balances from
the temporary account to permanent accounts such as income statement and the balance sheet.
The process involves resetting of the temporary accounts at the end of the financial year. The
closing of the revenue and expenses accounts is through the income summary.
Post-closing trial balance
The post-closing trial balance account contains all permanent accounts with balances after
zeroing out of the temporary accountants by posting the closing entries. The trial balance
includes real reports after the closure of nominal accounts (Thomas et al., 2019, 42).
Reversing entries
These journal entries prepared at the beginning of an accounting period to cancel out
adjusting entries from the previous accounting period. The purpose of the reversing entries is to
ensure the accuracy of the financial records since the accruals would be settled in the current
accounting period (Warren et al., 2017, 56).
Journal entries for June 2019
Date Account name Debit Credit
June 1 Bank $360,000
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Capital $360,000
Being own contribution to the business
Prepaid rent 23,500
cash 23,500
Being rent paid in advance
June 2 Equipment 120,960
Cash 25,500
Account payable 95,460
Being part of the payment for equipment purchase
Washing supplies 3,180
Cash 3,180
Being purchase of washing supplies
Oil and fuel supplies 5,220
Cash 5,220
Being purchase for oil and fuel supplies
June 3 Advertisement
expense
2,880
Cash 2,880
Being payment for advertisement expense
June 6 Cash 540
Unearned revenue 540
Being earned revenue from cleaning services
Cash 8,400
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