ACCT 490: Principles of Accounting - Financial Reporting & Analysis

This assignment solution for Principles of Accounting (ACCT 490) covers transaction analysis, journal entries, and the preparation of financial statements. It includes an analysis of assets, liabilities, and equity, along with journal entries for various transactions such as investments, purchases of furniture and goods, and revenue from consulting fees. The solution also provides a detailed calculation of the cost of goods sold and gross profit, followed by the preparation of an income statement, statement of retained earnings, and a balance sheet. Additionally, it addresses adjusting entries related to prepaid insurance and unearned service revenue. This document is available on Desklib, a platform offering a wide range of study resources for students.

Running head: PRINCIPLES OF ACCOUNTING
Principles of accounting
Name of the student
Name of the university
Student ID
Author note

1PRINCIPLES OF ACCOUNTING
Table of Contents
Question 1..................................................................................................................................2
Question 2..................................................................................................................................3
Answer I. Cost of goods sold.................................................................................................3
Answer II. Gross profit..........................................................................................................4
Question 3..................................................................................................................................4
Question 4..................................................................................................................................5
Bibliography...............................................................................................................................7

2PRINCIPLES OF ACCOUNTING
Question 1
S.No.
T
Transactio
n
AssetsLiab
ilitie
s
Equity
Cash+goods
+
Furnit
ureEquipment=
Revenu
e=
1Investment
in business50000
Bal.Owner’s
equity50000
2Purchase
furniture5000-
Bal.Furniture5000
3Purchased
goods-10000
Bal.Goods10000
4Purchased
equipment-12000
Bal.Equipment12000
5Received
consulting
fees15000
Bal.Revenue15000
Total380001000050001200065000500001500065000
Balance sheet of Alnaeem & company
Particulars Amount Amount
Assets
Current assets
Cash (a) 38000
Goods (b) 10000
Total current assets (c) = (a+b) 48000
Non-current assets
Furniture (d) 5000
Equipment (e) 12000
Total non-current assets (f) = (d+e) 17000
Total assets (c+f) 65000
Liabilities
Current liabilities 0
Non-current liabilities 0
Total liabilities (g) 0
Equities

3PRINCIPLES OF ACCOUNTING
Owner's equity (h) 50000
Retained earnings (i) 15000
Total equity (j) = (h+i) 65000
Total liabilities and equities (g+j) 65000
Journal entries –
Sl. No. Particulars Debit Credit
1 Cash a/c…………………....Dr 50000
Owner's equity……………..Cr 50000
[investment of cash in business]
2 Furniture a/c………….…….Dr 5000
Cash…………………….….Cr 5000
[Purchased furniture with cash]
3 Goods a/c…….……….…….Dr 10000
Cash…………………..…….Cr 10000
[Purchased goods with cash]
4 Furniture a/c…………….….Dr 12000
Cash………………….…….Cr 12000
[Purchased equipment with cash]
5 Cash a/c…………………….Dr 15000
Revenues - consulting fees….Cr 15000
[Consulting fees received in cash]
Question 2
Answer I. Cost of goods sold
Particulars Amount Amount
Cost of the beginning inventory (I) $ 45,000.00
Add: Cost of the goods purchased
Purchases (a) $ 600,000.00
Less: Purchase return and allowances (b) $ 25,000.00
Less: purchase discounts (c) $ 11,000.00
Net purchase (d) = (a-b-c) $ 564,000.00
Add: Freight in (e) $ 19,000.00

4PRINCIPLES OF ACCOUNTING
Total (II) = (d+e) $ 583,000.00
Cost of available goods (III) = (I+II) $ 628,000.00
Less: Cost of the ending inventory (f) $ 55,000.00
Cost of goods sold (IV) = (III – f) $ 573,000.00
Answer II. Gross profit
Particulars Amount
Net sales (a) $ 750,000.00
Less: Cost of goods sold (b) $ 573,000.00
Gross profit (a-b) $ 177,000.00
Question 3
Income statement for the period
Date Particulars
Amoun
t
Car revenues (I) 41100
Less: expenses
Supplies expenses 5000
Advertisements 5000
Salaries 6000
Rent 4000
Insurance 1200
Total expenses (II) 21200
Net earnings (I+II) 19900
Statement of retained earnings
Date Particulars
Amoun
t
Net earnings (a) 19900
Less: Dividend (b) 1000
Retained earnings (a-b) 18900
Balance sheet

5PRINCIPLES OF ACCOUNTING
Asset Liability
Items Amount Items Amount
Current assets Current liabilities
Cash 72400 Accounts payable 5000
Account receivable 1500 Total current liabilities (III) 5000
Total current assets (I) 73900 Non-current liabilities (IV) 0
Non-current assets Total liability (V) =(III+IV) 5000
Equipment 150000 Equity
Total non-current assets (II) 150000 Common stock 200000
Retained earnings 18900
Total equity (VI) 218900
Total assets (I+II) 223900 Total liabilities and equity (V+VI) 223900
Question 4
CrDrParticularsDate
$ 8000Prepaid Insurance
a/c……………….Dr
April 1,
2016
$ 8000Cash a/c……………………………..Cr
[Pre payment made for insurance]
$ 3000Insurance expenses
a/c……………….Dr
Dec 31,
2016
$ 3000Prepaid Insurance
a/c…………………Cr
[Prepayment transferred to
expenses = $ 8000 / 24 months *
9 months]

6PRINCIPLES OF ACCOUNTING
$ 10000Cash a/c ………………………………
Dr
Nov 30,
2016
$ 10000Unearned Service revenue
a/c…………Cr
[Service revenue received in
advance]
$ 10000Unearned service revenue
a/c………….Dr
Dec 31,
2016
$ 10000Service revenue
a/c…………………….Cr
[Service provided against amount
received in advance]

7PRINCIPLES OF ACCOUNTING
Bibliography
Hampton, C., 2015. Estimating and reporting structural equation models with behavioral
accounting data. Behavioral research in accounting, 27(2), pp.1-34.
Horngren, C. and Harrison, W., 2015. ACCOUNTING: BSB110. Pearson Higher Education
AU.
Sithole, S., 2015. Effect of instructional design on learning the accounting equation in an
introductory accounting course. Journal of Accounting and Taxation, 7(8), pp.137-142.
Zeff, S.A., 2016. Forging accounting principles in five countries: A history and an analysis of
trends. Routledge.