Accounting Assignment: Trial Balance to Financial Statements

This accounting assignment solution demonstrates the process of preparing and analyzing a trial balance, making necessary adjusting entries, and constructing financial statements. It includes steps such as adjusting entries for interest, supplies, insurance, and depreciation, and then preparing an adjusted trial balance. The solution further illustrates the creation of an income statement, balance sheet, and statement of changes in equity. It also explains the purpose of each step, from ensuring the general ledger is balanced to adhering to the accrual concept of accounting. The document also explains the significance of adjusting and closing entries in maintaining accurate financial records and provides an overview of how these elements connect to provide a comprehensive view of a company's financial position. Desklib provides a range of similar solved assignments and past papers to assist students in their studies.

ACCOUNTING 1
ACCOUNTING

ACCOUNTING 2
Contents
Step 2:.........................................................................................................................................3
Step 3:.........................................................................................................................................3
Step 4:.........................................................................................................................................4
Step 5:.........................................................................................................................................5
Step 6:.........................................................................................................................................6
Step 7:.........................................................................................................................................7
Part 1:......................................................................................................................................7
Part 2:......................................................................................................................................8
Part 3:......................................................................................................................................9
Part 4:......................................................................................................................................9
References................................................................................................................................10

ACCOUNTING 3
Step 2:
Particulars Debit Credit
Interest expense
16,600.0
0
To interest payable
16,600.0
0
Supplies expense
1,245.0
0
To Supplies
1,245.0
0
Insurance expense
2,656.0
0
To prepaid insurance
2,656.0
0
Depreciation expense-office furniture
20,000.0
0
To Accumulated depreciation-office
furniture 20000
Depreciation expense-office equipment
16,000.0
0

ACCOUNTING 4
To Accumulated depreciation-office
equipment
16,000.0
0
Depreciation expense-equipment
12,000.0
0
To Accumulated depreciation-equipment
12,000.0
0
Depreciation expense-automobile
16,000.0
0
To Accumulated depreciation-automobile
16,000.0
0
Revenue
10,375.0
0
To unearned revenue
10,375.0
0
Step 3:

ACCOUNTING 5
Adjusted trial balance Income statement Balance Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
101 Cash at Bank 65,520.00 65,520.00 65,520.00
105 Accounts Receivable 21,840.00 21,840.00 21,840.00
115 Supplies 1,660.00 1,245.00 415.00 415.00
120 Prepaid Insurance 3,320.00 2,656.00 664.00 664.00
135 Office Furniture 41,500.00 41,500.00 41,500.00
137 Acc. Depreciation. - Furniture 20,000.00 20,000.00 20,000.00
140 Office Equipment 83,000.00 83,000.00 83,000.00
141 Acc. Depreciation - Equipment 16,000.00 16,000.00 16,000.00
145 Store Equipment 1,24,500.00 1,24,500.00 1,24,500.00
146 Acc. Depreciation - Equipment 12,000.00 12,000.00 12,000.00
170 Automobile 1,66,000.00 1,66,000.00 1,66,000.00
171 Acc. Depreciation - Automobile 16,000.00 16,000.00 16,000.00
201 Accounts Payable 43,680.00 43,680.00 43,680.00
201 Interest Payable 65,520.00 16,600.00 82,120.00 82,120.00
201 Unearned revenue 20,750.00 10,375.00 10,375.00 10,375.00
201 Loan Payable 8,300.00 8,300.00 8,300.00
201 Mortgage Payable 1,66,000.00 1,66,000.00 1,66,000.00
201 Paul's Capital 51,136.00 51,136.00 1,28,964.00
201 Paul's Drawings 166.00 166.00
201 Revenue 1,66,000.00 10,375.00 1,76,375.00 1,76,375.00
201 Advertising Expense 1,300.00 1,300.00 1,300.00
201 Automobile Expense 5,775.00 5,775.00 5,775.00
201 Depreciation Expense - Furniture 16,000.00 16,000.00 16,000.00
201 Depreciation Expense - Equipment 12,000.00 12,000.00 12,000.00
201 Depreciation Expense - Store Equipment 20,000.00 20,000.00 20,000.00
201 Depreciation Expense - Automobile 16,000.00 16,000.00 16,000.00
201 Insurance Expense 1,100.00 2,656.00 3,756.00 3,756.00
201 Maintenance Expense 4,550.00 4,550.00 4,550.00
201 Miscellaneous Expense 1,155.00 1,155.00 1,155.00
201 Rent Expense - -
201 Supplies Expense 1,245.00 1,245.00 1,245.00
201 Utilities Expense - -
201 Interest Expense 16,600.00 16,600.00 16,600.00
Total 5,21,386.00 5,21,386.00 94,876.00 94,876.00 6,01,986.00 6,01,986.00 98,381.00 1,76,375.00 5,03,439.00 5,03,439.00
Profit earned 77,994.00
1,76,375.00 1,76,375.00
Unadjusted trial balance Adjustment
Step 4:
Income statement
Revenue
1,76,375.0
0
Less: expenses:
Advertising Expense
1,300.
00
Automobile Expense
5,775.
00

ACCOUNTING 6
Depreciation Expense - Furniture
16,000.
00
Depreciation Expense - Equipment
12,000.
00
Depreciation Expense - Store
Equipment
20,000.
00
Depreciation Expense - Automobile
16,000.
00
Insurance Expense
3,756.
00
Maintenance Expense
4,550.
00
Miscellaneous Expense
1,155.
00
Rent Expense -
Supplies Expense
1,245.
00
Utilities Expense -
Interest Expense
16,600.
00
98,381.0
0
Gross profit
77,994.0
0

ACCOUNTING 7
Step 5:
Particulars Debit Credit
Revenues
1,76,375.0
0
To Income summary
1,76,375.0
0
Income summary 98381
To Advertising Expense
1,300.0
0
To Automobile Expense
5,775.0
0
To Depreciation Expense - Furniture
16,000.0
0
To Depreciation Expense - Equipment
12,000.0
0
To Depreciation Expense - Store
Equipment
20,000.0
0
To Depreciation Expense - Automobile
16,000.0
0
To Insurance Expense 3,756.0

ACCOUNTING 8
0
To Maintenance Expense
4,550.0
0
To Miscellaneous Expense
1,155.0
0
To Rent Expense -
To Supplies Expense
1,245.0
0
To Utilities Expense -
To Interest Expense
16,600.0
0
Step 6:
Statement of changes in equity
Opening capital
51,136.0
0
Less: drawings
166.0
0
Add: gross profit
77,994.0
0 1,28,964.00
closing capital 1,28,964.00

ACCOUNTING 9
Balance Sheet
Cash at bank
65,520.0
0
Accounts receivables
21,840.0
0
Supplies
415.0
0
Prepaid insurance
664.0
0
Total Current Assets
88,439.0
0
Office furniture less accumulated
depreciation
21,500.0
0
Office equipment less accumulated
depreciation
67,000.0
0
Store equipment less accumulated
depreciation
1,12,500.0
0
Automobile less accumulated
depreciation
1,50,000.0
0

ACCOUNTING 10
Total Non-current Assets
3,51,000.0
0
Total Assets
4,39,439.0
0
Liabilities:
Accounts Payable
43,680.0
0
Interest Payable
82,120.0
0
Unearned revenue
10,375.0
0
Loan Payable
8,300.0
0
Mortgage Payable
1,66,000.0
0
Total current liabilities
3,10,475.0
0
Shareholders’ equity:
Capital 1,28,964.0

ACCOUNTING 11
0
Total liabilities and shareholders’
equity
4,39,439.0
0
Step 7:
Part 1:
The main aim of the preparation of this statement is to ensure that all of the entries are
recorded successfully into the general ledger of the company. This is the list which lists
down the various balances in the balance sheet. The total amount of the dollar amounts
equal to the debit and credit in each one of the accounting entries and these amounts are
supposed to match. In case, the total amount of the debit is not equal to the credit
amount, then that merely means that the general ledger is not balanced and which also
means that there is an error. From the practical perspective, the packages of the
accounting software’s today, the users are not allowed to enter the entries that are not
balanced in GL. This means that the trial balance is not required by the companies that
use the computerised software’s for the purposes of preparing their financial statements.
In case, the business is recording the business transactions in manual manner, then the
trial balance prepared shall have no value. This is in light of the fact that financial
statements cannot be prepared using the trial balance which is not balanced. When the
financial records are maintained manually, then the trial balance is used for the purposes

ACCOUNTING 12
of creating the final accounts. This means that the account balances have to be
aggregated manually into the line items that are contained in the final accounts.
This statement is also used by the auditors. They require this trail balance since they
have to transfer the balances of each account from this report into the desired software of
auditing. Then they use the different audit procedures for the purposes of testing these
balances (Bragg, 2019).
For the purposes of understanding this trial balance, an understanding of the double entry
system which seeks to record the entry equal and on the opposite side of the general ledger.
The second concept used is that of journal in which all of the transactions have to be recorded
in the doubt entry book keeping system and also, the ledger which includes the summary of
all of the journals that are of similar nature.
All of the business transactions that have been entered into in the month will have to be
summarised at the end of the month and be classified into the various different categorised.
Once the worksheet is prepared, then the activities are divided into the productive and the
non-productive categories. All of the business transactions are recorded through a journal
entry, each item is summarised and then classified on the basis of the ledgers. Then these
items are classified in the trial balance.
A trial balance is the sheet which records all of these ledger balances that are categorised into
debit and credit. This is a typical trial balance that would have the name of the ledger and the
various balances. This is prepared as on a particular date which is usually a financial year or a
calendar year (Clear tax, 2019).
Part 2: