Accounting Report: Journal Entries, Financial Statements Analysis

This accounting report provides a detailed analysis of financial transactions and the preparation of financial statements. It begins with journal entries for adjusted transactions, followed by the posting of these entries to a trial balance. The report then constructs an income statement to determine profitability and a statement of changes in equity. A balance sheet is also presented to show the company's assets, liabilities, and equity. Closing entries are journalized to prepare the accounts for the next period. The report also answers questions regarding the trial balance, adjustment entries, their purposes, and the differences between adjustment and closing journal entries. The report covers topics such as journal, ledger posting, trial balance, profit & loss account, balance sheet and adjustment entries.

INTRODUCTION
Accounting is the process of recording business transfection, analysing & interpretation
and prepare all the information in presentable for which can be understood by others. Accounting
will be done by individual, small or large organization and other firms (Aidis, Estrin and
Mickiewicz, 2012). Purpose of this accounting is to provide accurate or actual information which
further provide the business information regarding their actual financial position of the company.
This report include the various topics such as journal, ledger posting, trial balance, profit & loss
account and balance sheet. Along with this, it include the various adjustment entries which
provide efficiency in order to provide correct financial position.
1. Journal Entry of Adjusted Transaction
Journalising Adjustment Entries
Particulars Debit Side Credit Side Debit ($) Credit ($)
Interest Acc Dr. 19120
To Interest Payable Acc Cr. 19120
Supplies Expense Accounts Dr. Dr. 1432.5
To Supplies Accounts Cr. 1432.5
Prepaid Insurance Accounts Dr. 764
To Cash Accounts Cr. 764
Insurance Accounts Dr. 764
To Prepaid Insurance Accounts Cr. 764
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Depreciation Accounts Dr. 8000
To Office Furniture Accounts Cr. 8000
Depreciation Accounts Dr. 18000
To Office Equipment A/c Cr. 18000
Depreciation A/C Dr. 28000
To Store Equipment Accounts Cr. 28000
Depreciation A/C Dr. 38000
To Auto-mobile Acc Cr. 38000
Unearned Revenue Acc Dr. 11950
To Revenue Acc Cr. 11950
2. Post Journal entries
Trial Balance As At 30th June 2016
Account No. Particulars Dr Cr
101 Cash at Bank 91390.00
105 Accounts Receivable 30460.00
115 Supplies 1910.00
120 Prepaid Insurance 3820.00
135 Office Furniture 47800.00
137 Acc. Depreciation. - Furniture 8000.00
140 Office Equipment 95600.00
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141 Acc. Depreciation - Equipment 18000.00
145 Store Equipment 143400.00
146 Acc. Depreciation - Equipment 28000.00
170 Automobile 191200.00
171 Acc. Depreciation - Automobile 38000.00
201 Accounts Payable 60920.00
201 Interest Payable 91380.00
201 Unearned revenue 23900.00
201 Loan Payable 9560.00
201 Mortgage Payable 191200.00
201 Paul's Capital 74893.50
201 Paul's Drawings 191.00
201 Revenue 191000.00
201 Advertising Expense 1800.00
201 Automobile Expense 5775.00
201 Depreciation Expense - Furniture 8000.00
201 Depreciation Expense - Equipment 18000.00
201
Depreciation Expense - Store
Equipment 28000.00
201 Depreciation Expense - Automobile 38000.00
201 Insurance Expense 1500.00
201 Maintenance Expense 6300.00
201 Miscellaneous Expense 1155.00
201 Rent Expense 0.00
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201 Supplies Expense 1432.50
201 Utilities Expense 0.00
201 Interest Expense 19120.00
Total 734853.50 734853.50
3. Produce Income Statement
Income Statement: This statement include all the profit related to the organixation as
well as all the expenditure which required to record for the analysis that company is in profitable
phase or not.
Income Statement of Paul Services Limited At the end of 30th June, 2016
Incomes Amount ($)
Revenue 191000
Add: Earned Portion of Unearned Revenue 11950
Total Revenue 202950
Less: Supplies Expense -1432.5
Earnings before Interest and Tax (A) 201517.5
Expenses $
Advertising 1800
Automobile 5775
Depreciation on Furniture 8000
Depreciation on Equipment 18000
Depreciation on Store Equipment 28000
Depreciation on Automobile 38000
Insurance 1500
Maintenance 6300
Miscellaneous 1155
Rent 0
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Utilities 0
Interest 19120
Total Expenses (B) 127650
Net Profit [(A)-(B)] 73867.5
4. Journalise closing entries
Journalising the closing entries
Date Particulars Debit ($) Credit ($)
30/06/16 Revenue A/C 191000
Unearned Revenue A/c 11950
To Income Summary A/C 202950
30/06/16 Income Summary A/C 129082.5
To Supplies Expense A/c 1432.5
To Interest Expense A/C 19120
To Depreciation Expense on Furniture 8000
To Depreciation Expense on
Equipment 18000
To Depreciation Expense on Store
Equipment 28000
To Depreciation Expense on
Automobile 38000
To Advertising Expense A/C 1800
To Automobile Expense A/C 5775
To Maintenance A/C 6300
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To Miscellaneous A/C 1155
To Rent Expense A/C 0
To Utilities A/C 0
To Insurance A/C 1500
30/06/16 Income Summary A/C 73867.5
To Retained Earnings A/C 73867.5
5. Create changes in Equity and Balance sheet
Statement of change in Equity: Change in the organizational equity is mentioned in the
statement of change in equity where shareholder of the company analyse that their investment
provide high or low returns (Bartov and Mohanram, 2014). This statement include the deep
analysis and it include the all required information which help the business to prepare this
statement which include shareholder's funds in the organization.
Changes in Equity of Paul
Particulars $
Paul's Capital 54341
Less: Drawings -191
Add: Retained Earnings 73867.5
Net Paul's Capital 128017.5
Balance Sheet: This statement is the part of the financial accounting which shows actual
position of the business. It include assets or liability of the company which helps the owner to
analyse their business performance. These information required by the shareholder in order to
take their decision of making further investment or not. Balance sheet help the business to
analyse their actual position and create market image in order to attract stakeholders.
Balance Sheet of Paul Services as at June 30, 2016
Assets $ $
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Current Assets
Cash at Bank 91390
Accounts Receivable 30460
Supplies 477.5
Prepaid Insurance 3820
Total Current Assets (A) 126147.5
Fixed Assets
Furniture 39800
Equipment 77600
Store Equipment 115400
Automobile 153200
Total Fixed Assets (B) 386000
Total Assets [(A)+ (B) = C] 512147.5
Equity and Liabilities
Current Liabilities
Accounts Payable 60920
Interest Payable 110500
Unearned Revenue 11950
Total Current Liabilities (D) 183370
Long-Term Liabilities
Loan Payable 9560
Mortgage Payable 191200
Total Long-Term Liabilities (E) 200760
Total Liabilities [(D) + (E) = F] 384130
Equity
Paul's Capital 128017.5
Total Equity (G) 128017.5
Total Equity and Liabilities (F) + (G) 512147.5
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*Working Notes:
Depreciation Adjustments
Particulars Amount
Furniture 47800
Less: Depreciation -8000
Net Value of Furniture 39800
Equipment 95600
Less: Depreciation -18000
Net Value of Equipment 77600
Store Equipment 143400
Less: Depreciation -28000
Net Value of Store Equipment 115400
Automobile 191200
Less: Depreciation -38000
Net Value of Automobile 153200
6. Answer the following Questions
(A) Trail Balance and the reason of preparing it:
Trail Balance: It is a accounts which include the ledger accounts balance with their
name for the purpose of preparing closing accounts. It is also called book keeping process to
record financial transaction. Trial balance have to two sides where they record each transaction
such as debit or credit. Every entry recorded as per their nature and it can be prepared on
monthly or yearly basis (Bonner, Clor-Proell and Koonce, 2014). But mostly organization
prepared on annual basis at the end of the financial year and it will make sure that each entry will
be correctly and posted in right side of the accounts. Purpose of preparing trail balance is to
make sure that each transaction will be recorded in well manner. Along with this, it help the
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manager or accountant to identify the error which enable to provide the equal balance of the
debit or credit side.
Reasons of preparing Trail Balance:
 Biggest reason of prepare trial balance is to be identify the mathematical error or any
mistake at the time of recording transaction.
 Another reason it that, it help the organization to analyse their accounts and each entries
which further provide the information weather information is correct or not.
 It also helps in identifying any mistake, error, omission of entries etc. and it will be
formulated by the organization (Del Negro and Sims, 2015). Company have to build trail balance because it further helps in preparing financial
statement which is very important for the future decision making process.
(B) Adjustment Entries and it's reasons:
Adjustment Entries: It is those types of entries which is used by the company in order to
provide accurate results. It include those entries which is mistakenly not recorded in journal
entry. It will create different while preparing trail balance and nit provide the actual balance of
the business (Lawrence, 2019). These adjustment will be done at the end of financial year when
organizations close their accounts for the final results. It include the various types of adjustment
entries such as accrued expenses, revenues, prepaid expenses, depreciation, amortisation,
reserves, allowance for doubtful accounts, etc. With the help of these adjusted entries companies
able to determine their actual financial position.
Reason of recording Adjustment entries:
 It will helps in analysing the accuracy of trial balance of the organization (Durham and
Basch, 2015). These entries required to match their debit or credit balance in order to produce accurate
financial statements.
(C) Purpose of developing adjusted Trail Balance:
Purpose of writing Adjustment Entry:
 Purpose of adjustment entries is to provide accurate balance of debit or credit side of trail
balance with the help of accrual basis.
 These entries will be done due to avoiding the unequal balance of trail balance.
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 For the accurate or true result of the transactions which help the further users to make
their decision.
(D) Difference between adjustment or closing journal entries:
Adjustment entries: It will done due to balance their trial balance amount where debit or
credit side of accounts are required to same. But if it is not happen then accountant have to pass
adjustment entry for the accurate results (Fay and Negangard, 2017).
Closing entries: It is those entries which required to pass at the end year of financial year
for the final adjustment. This entry pass for covering all the accounts balance with zero and it is
called closing entry. It is made for the different items such as revenue, expenses, dividend
drawings etc.
Difference between closing and adjustment entries:
Adjustment entry are made at the end of the financial year after preparing trial balance
and it is required for balancing debit or credit balance. On the other hand, closing entries are
adjusted after preparing final accounts so trial balance will be converted to zero balance.
Adjustment entries are made when individual mistakenly nor record the entry and it will
generate dis balance in the amounts (Kapan and Minoiu, 2013). Closing entries are done for the
formulation of temporary accounts into permanent accounts.
CONCLUSION
From the above discussion, it has been concluded that accounting help the organization to
record or maintain their each transaction on daily basis. It further helps the organization to
maintain in a specific manner such as firstly pass the journals, ledger posting, trial balance, profit
or loss accounts and then balance sheet. With the help of these accounts organization able to
evaluate their actual performance and then analyse weather it is good or not.
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