Comprehensive Business Accounting Assignment: Financial Analysis

This assignment provides a detailed analysis of business accounting principles. It begins with journalizing adjustment transactions, including interest, supplies, prepaid insurance, depreciation, and unearned revenue. The solution then demonstrates the posting of these adjustments into a worksheet, followed by the creation of an income statement, journalizing closing entries, and constructing a statement of changes in equity and a balance sheet. The assignment also explains the trial balance, its purpose, and the reasons behind its creation, along with the rationale for adjustment entries and their purpose. It clarifies the difference between adjustment and closing journal entries, providing a complete understanding of the accounting cycle. The assignment covers various financial aspects of a company, including assets, liabilities, and equity, and how they are reflected in financial statements. The document is contributed by a student to be published on the website Desklib. Desklib is a platform which provides all the necessary AI based study tools for students.

Business accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Journalising adjustment transactions...........................................................................................1
Posting of adjustment entries in worksheet.................................................................................2
Creation of income statements.....................................................................................................4
Journalising closing entries..........................................................................................................5
Creation of change and equity statement and balance sheet........................................................7
Trial balance and reason behind creation of it.............................................................................9
Adjustment entries and reason behind recording of adjustment journals entries......................10
Purpose of writing adjusted trial balance...................................................................................10
Difference between adjustment and closing journal entries......................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Business accounting can be defined as the process of analysing, recording and
interpreting accounting information for the purpose of formulating different accounts and
statements such as journal, ledger, trial balance, income statement and balance sheet. With the
help of all of them actual performance of the company is determined (Bui and De Villiers, 2017).
In present report various topics are discussed which includes posting adjustment and closing
entries, formulating financial statements etc. Apart from this trial balance, reason behind
formulating it, adjustment entries reasons behind writing them and purpose of them, difference
between adjustment and closing entries etc. are also covered under this report.
MAIN BODY
Journalising adjustment transactions
Particulars
Debit
Column
Credit
Column Dr. ($) Cr. ($)
Interest A/C Dr. 19120
To Interest Payable
A/C Cr. 19120
Supplies Expense
A/C Dr. Dr. 1432.5
To Supplies A/C Cr. 1432.5
Prepaid Insurance
A/C Dr. 764
To Cash A/C Cr. 764
Insurance A/C Dr. 764
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To Prepaid
Insurance A/C Cr. 764
Depreciation A/C Dr. 8000
To Office Furniture
A/c Cr. 8000
Depreciation A/C Dr. 18000
To Office
Equipment A/c Cr. 18000
Depreciation A/C Dr. 28000
To Store Equipment
A/c Cr. 28000
Depreciation A/C Dr. 38000
To Automobile A/c Cr. 38000
Unearned Revenue
A/C Dr. 11950
To Revenue A/C Cr. 11950
Posting of adjustment entries in worksheet
Paul services Trial Balance As At 30 June 2016
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Account
No Account Name Debit Credit
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
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
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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
201 Supplies Expense 1432.50
201 Utilities Expense 0.00
201 Interest Expense 19120.00
734853.50 734853.50
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Creation of income statements
Income statement: The statement which helps to determine that company is generating
profits or losses is known as income statement. All the expenses and and revenues are recorded
in it.
Income Statement of Paul Services for the period ending
on 30 June, 2016
Incomes $
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
5

Utilities 0
Interest 19120
Total Expenses (B) 127650
Net Profit [(A)-(B)] 73867.5
Journalising closing entries
Journalising the closing entries
Date Particulars Dr. ($) Cr. ($)
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
18000
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Equipment
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
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
Creation of change and equity statement and balance sheet
Statement of changes in equity: The statement in which changes in organisation's
equities are mentioned is known as statement of changes in equity. It helps shareholders to
analyse that their fund is increased or decreased in an accounting year. It is vital for enterprises
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to create it as it helps to keep detailed information regarding shareholder's funds within the
company.
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: The statement in which information regarding assets and liabilities of a
company bis recorded in known as balance sheet. With the help of it actual performance of the
organisation can be determined. It guides stakeholders to make strategic decisions of making
investment, providing credit, buying products etc. It is essential for entities to formulate balance
sheet appropriately as it helps to determine actual position and market image of the company.
Balance Sheet of Paul Services as at June 30, 2016
Assets $ $
Current Assets
Cash at Bank 91390
Accounts Receivable 30460
Supplies 477.5
Prepaid Insurance 764
Total Current Assets (A) 123091.5
Fixed Assets
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Furniture 39800
Equipment 77600
Store Equipment 115400
Automobile 153200
Total Fixed Assets (B) 386000
Total Assets [(A)+ (B) = C] 509091.5
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
Working notes:
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Depreciation Adjustments
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
Trial balance and reason behind creation of it
Trial balance: It is a type of statement which is formulated by business entities in order
to record closing balance of ledger accounts. In other words it can be defined as bookkeeping
worksheet in which all the ledger balances are compiled in debit and credit side according to
nature of their closing balances (Trial balance, 2019). Organisations formulate trial balance
periodically, mainly at end of financial year. Main purpose of creation of trial balance is to make
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