Financial Accounting Report: Paul Services, Year Ended June 2016

This report presents a comprehensive financial accounting analysis of Paul Services for the year ended June 30, 2016. It begins with an adjusted trial balance, followed by the journalization of adjustment transactions, and post-adjusting journal entries. The report then details closing entries, an income statement, a statement of financial position (balance sheet), and a statement of changes in equity (SOCE). Key elements include the calculation of net profit, an assessment of the company's assets and liabilities, and an overview of the owner's equity. The conclusion summarizes the findings, highlighting the importance of financial accounting tools for evaluating business performance and financial planning. The report utilizes financial data to illustrate the financial position of the company and offers insights into the company's profitability and financial health.

Business Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Adjusted Trial Balance................................................................................................................1
Journalization of adjustment transaction.....................................................................................2
Post-adjusting journal entries......................................................................................................4
Closing entries.............................................................................................................................4
Income statement.........................................................................................................................5
Statement of financial position or balance sheet.........................................................................6
Statement of changes in equity (SOCE)......................................................................................8
CONCLUSION................................................................................................................................9

INTRODUCTION
Financial accounting is highly significant which in turn provides assistance in tracking
the monetary transactions or performance of the company. In this, accounting manager of the
firm undertakes standardized guidelines to record summarize and present monetary transaction in
financial reports. The present report is based on the data set of Paul services which will reflect
his financial position for the year ended on 30th June 2016. Besides this, it will also shed light on
the aspects of closing entries, trial balance, income statement and balance sheet which are the
main elements of financial accounting.
Adjusted Trial Balance
Trial balance: It may be served or presented as a bookkeeping worksheet which in turn
shows balances of all the ledgers account. At the time of financial statement preparation it is one
of the main sheet which gives input for the preparation of income statement, balance sheets and
accounts pertaining to changes in equity. In accordance with the double entry system adjustments
pertaining to financial aspects place impact on two sides. Hence, by considering the given
adjustments following trial balance has been prepared:
Paul services Trial Balance As At 30 JUNE 2016
Account No Account Name Debit Credit
101 Cash at Bank $197,680
105 Accounts Receivable $60,060
115 Supplies $3,500
120 Prepaid Insurance $5,600
135 Office Furniture $56,000
137 Acc. Depreciation. - Furniture $12,833
140 Office Equipment $112,000
141 Acc. Depreciation - Equipment $25,667
145 Store Equipment $189,000
146 Acc. Depreciation - Equipment $19,250

170 Automobile $252,000
171 Acc. Depreciation - Automobile $25,667
201 Accounts Payable $120,120
202 Interest Payable $180,180
207 Unearned revenue $35,000
210 Loan Payable $14,000
215 Mortgage Payable $280,000
301 Paul's Capital $159,153
305 Paul's Drawings $77,000
401 Revenue $297,500
601 Advertising Expense $3,600
605 Automobile Expense $5,775
615 Depreciation Expense - Furniture $26,833
620 Depreciation Expense - Equipment $53,667
625 Depreciation Expense - Store Equipment $40,250
640 Depreciation Expense - Automobile $53,667
650 Insurance Expense $1,880
665 Maintenance Expense $12,600
670 Miscellaneous Expense $1,155
675 Rent Expense $2,567
680 Supplies Expense less Prepaid supplies) $4,433
685 Utilities Expense $3,850
690 Interest Expense $33,133
Outstanding interest on Mortgage $28,000
Prepaid insurance $1,120
Total $1,197,370 $1,197,370
Journalization of adjustment transaction
Statement which is prepared to keep or record the accounting transactions in a
chronological order is known as Journal. It is the prior step that is undertaken to prepare financial
statements (Accounting Journal Entries, 2017). Moreover, it further helps in developing ledger,
trial balance and financial statements.

Journal entries of the adjusted transactions for the period ended on 30th June 2016 are as
follows:
S. No. Particulars Debit (in $) Credit (in $)
1. Depreciation expenses
a/c Dr.
To Furniture a/c
$14,000
$14,000
2. Depreciation expenses
a/c Dr.
To equipment a/c
$28,000
$28,000
3. Depreciation expenses
a/c Dr.
To Store equipment
a/c
$21,000
$21,000
4. Depreciation expenses
a/c Dr.
To automobile a/c
$28,000
$28,000
5. Interest on Mortgage
a/c Dr.
To outstanding
interest a/c
$28000
$28000
6. Supplies expenses Dr.
To supplies
$4433
$4433
7. Prepaid insurance a/c
Dr.
To insurance a/c
$1120
$1120
8. Cash a/c Dr.
To sales
$17500
$17500
Note: In the case of depreciation two types of entries can be done such as:

1. Depreciation a/c Dr.
To accumulated depreciation a/c
2. Depreciation a/c Dr.
To Related assets such as machinery a/c
Hence, here amount of depreciation has directly deducted from the figure of assets to
show the net one. By considering this, second entry of depreciation has been done to show the
adjustments regarding the same and their effects.
Post-adjusting journal entries
Ledger may be served as an accounting book which in turn helps in transferring all the journal
entries into the individual accounts in a chronological sequence. Hence, process which is
followed to record journal entries into the ledger accounts is referred as posting. Such process is
highly effective which in turn provides assistance in preparing trial balance in an effectual way.
Depreciation a/c
Amount (in $) Amount (in $)
Depreciation on furniture $14,000
Depreciation on store equipment $28,000
Depreciation on equipment $21,000
Depreciation on automobile $28,000
Furniture a/c
Amount (in $) Amount (in $)
$14,000 $70,000
$56,000

Equipment a/c
Amount (in $) Amount (in $)
$28,000 $140,000
$112,000
Store equipment a/c
Amount (in $) Amount (in $)
$21,000 $210,000
$189,000
Automobile a/c
Amount (in $) Amount (in $)
$28,000 $280,000
$252,000
Interest on Mortgage a/c
Amount (in $) Amount (in $)
5133
28000
33133

Outstanding interest a/c
Amount (in $) Amount (in $)
28000
28000
Supplies expense a/c
Amount (in $) Amount (in $)
$5133 700
$4,433
Office supplies a/c
Amount (in $) Amount (in $)
2800
700
3500
Prepaid insurance a/c
Amount (in $) Amount (in $)
5600
1120
6720

Insurance a/c
Amount (in $) Amount (in $)
1120 3000
1880
Cash a/c
Amount (in $) Amount (in $)
180180
17500
$197,680
Sales a/c
Amount (in $) Amount (in $)
280000
17500
297500
Closing entries
S. No
.
Particulars Debit (in $) Credit (in $)
1. Revenue a/c Dr.
To income summary a/c
$297,500
$297,500
2. Income summary a/c Dr.
To Advertising Expense
$243,410
$3,600

To Automobile Expense
To Depreciation Expense –
Furniture
To Depreciation Expense –
Equipment
To Depreciation Expense – Store
Equipment
To Depreciation Expense –
Automobile
To Insurance Expense
To Maintenance Expense
To Miscellaneous Expense
To Rent Expense
To Supplies Expense less Prepaid
supplies)
To Utilities Expense
To Interest Expense
$5775
$26833
$53667
$40250
$53667
1880
$12600
$1155
$2567
$4433
$3850
$33133
3. Income Summary a/c
To Retained earnings a/c
$54,090
$54,090
4. Mr. Paul Capital
To Mr. Paul’s, Drawing a/c
$77,000
$77000
Income statement
In the field of finance, income statement is also known as profitability account which in
turn furnishes information about the profit earned over the expenses during financial year.
Income statement offers opportunity to the firm to evaluate its profitability over the years and in
against to the competitors (Introduction to Income Statement, 2017). Along with this, income
statement also gives input or indication to the business unit about the areas of business unit that

demands for control. By considering its significance level and for fulfilling the need of
stakeholders firm prepare such statement at the end of accounting year:
Profitability statement of Paul services for the year ended on 30th June 2016 is
enumerated below:
Particulars
Figures (in
$)
Figures (in
$)
Net Figures (in
$)
Sales revenue $280,000 $297,500
Less: Unearned revenue received at the end
of June $17,500
Less: COGS -
Gross profit (GP) $297,500
Less: Indirect expenditure
Advertising Expense $3,600
Automobile Expense $5,775
Depreciation Expense - Furniture $26,833
Depreciation Expense - Equipment $53,667
Depreciation Expense - Store Equipment $40,250
Depreciation Expense - Automobile $53,667
Insurance Expense $1,880
Maintenance Expense $12,600
Miscellaneous Expense $1,155
Rent Expense $2,567
Supplies Expense less Prepaid supplies) $4,433
Utilities Expense $3,850
Interest Expense $33,133
$243,410
Net profit $54,090
Interpretation:The above depicted income statement clearly shows that net profit of Paul
services accounted for $54090 respectively for the financial year 2016. In against to the sales
revenue net profit of the company was not higher in 2016. Thus, firm should lay emphasis on
undertaking budgetary control tools and techniques which in turmn helps in finding deviations as
well as enabl to take significant corrective measures within the suitable time frame.

Statement of financial position or balance sheet
Balance sheet: This statement renders information about assets, liabilities and
shareholders’ equity. Statement of financial position clearly indicates what company owns and
owes at a certain point of time. It also depicts the amount that is invested by shareholders during
the specified time frame (Introduction to Balance Sheet, 2017). In the business unit, stakeholders
are highly interested to evaluate balance because it helps in assessing the extent to which firm’s
efficiency performance, liquidity and solvency position is sound.
Balance sheet of Paul services for the financial year ended on 30th June 2016 is depicted
below:
Particulars
Figures (in
$)
Figures (in
$)
Net Figures (in
$)
Net Figures
(in
Assets
Non-current or fixed assets
Office Furniture $70,000 $56,000
Less: Depreciation $14,000
Office Equipment $140,000 $112,000
Less: Depreciation $28,000
Store Equipment $210,000 $189,000
Less: Depreciation $21,000
Automobile $280,000 $252,000
Less: Depreciation $28,000
Total fixed assets $609,000
Current assets
Cash at Bank $197,680
Accounts Receivable $60,060
Supplies $3,500
Prepaid Insurance 6720
Total current assets $267,960
Total assets ( Fixed +
current) $876,960
Non-current liabilities
Acc. Depreciation. - $12,833