Accounting Cycle: Journal Entries, Ledger, and Financial Statements

This report provides a detailed solution to a comprehensive accounting cycle problem for Williamson Quality Automotive. It begins with an explanation of the accounting equation and its components, followed by a series of journal entries documenting various transactions, including contributions, purchases, payments, and revenue recognition. The report then presents the general ledger accounts, unadjusted and adjusted trial balances, and the preparation of the income statement, statement of changes in owner's equity, balance sheet, and post-closing trial balance. The solution includes all necessary calculations and classifications, providing a complete accounting cycle for the given scenario, demonstrating the flow of financial information from transactions to financial statements. The report concludes with references to academic sources that support the concepts discussed.

Running head: REPORT 1
MANAGEMENT ACCOUNTING
STUDENT DETAILS:
4/17/2019

REPORT 2
The accounting equation is the foundation of system related to the double-entry. The accounting
equation states he balance sheet of company where the total of all the assets of a company is
similar to the sum of liabilities of corporation and equity of shareholder (Koopman, Wang and
Wei, 2014). On the basis of the double-entry system, the accounting equation makes sure that the
balance sheet remains “balanced,” and all entries conducted on the side of debit must have the
corresponding entry on a side of credit (Warren and Jones, 2018). Following is the formula of
accounting equation-
Assets= Liabilities + Owner's Equity
Assets= (Liabilities + Owner’s Equity)
The balance sheet of a company keeps the foundation of an accounting equation:
 Place the total assets of corporation on a balance sheet for a period.
 All the liabilities that must be the separate listing on a balance sheet of company.
 Place whole equity of the shareholders and add the numbers to all liabilities as total.
 Total assets would be the sum total equity and liabilities.
In this way, the accounting equation makes the basis for the double-entry accounting and is a
brief illustration of the perception that expand in a difficult, expanded, and multi-item state of
the balance sheet. As per the double-entry accounting system, the balance sheet of company
is made where the total asset of a corporation are same to the complete liabilities and
stakeholder equity (Schwaiger, 2015).

REPORT 3
Fundamentally, the representation every use of capital or asset to the all sources of capital,
wherever debt capital requires to liabilities and equity capital lead to an equity of
shareholder. The accounting equation is a very helpful in evaluating whether the transactions
related to the business carried on by the corporation are being correctly states in the book and
account (Pratt, 2016). For an entity keeping proper accounts, all the separate transactions
related to business would be stated in minimum 2 accounts. It can be calculated as follows-
Assets = Liabilities+ Owner’s equity
Cash + Accounts Receivable + Office Supplies + Prepaid Insurance + Equipment + Land =
(Accounts Payable + Utilities Payable + Unearned Revenue + Notes Payable) + (Capital +
Withdrawals + Service Revenue + Salaries Expense + Rent Expense + Utilities Expense +
Advertising Expense)
54540 + 2700 + 2400 + 4000 + 10620 + 18000 = (2000 + 280 + 1440 + 28000) + (50000 +
3000 + 20200 + 3600 + 700 +280 + 800)
Journal entries
Date particulars Debit Credit
December 1 Cash
Williamson, capital
(Being owner contribution
made)
50,000
50,000
December 1 Equipment
Cash
(Purchased equipment with
cash)
10,800
10,800
December 1 Prepared insurance
Cash
(Paid insurance in advance)
4,500
4, 500
December 9 Land
Cash
(Purchased land with cash)
18,000
18,000
December 10 Office supplies
Account payable
(purchased office supplies
3,000
3,000

REPORT 4
on account)
December 19 Cash
Notes payable
(Borrowed cash on notes
payable)
28,000
28,000
December 22 Advertising expenses
Cash
(Paid cash expenses)
800
800
December 26 Account payable
Cash
(Paid cash on account)
1,000
1,000
December 28 Utilities expense
Utilities payable
(Accrued Utility Liability)
280
280
December 31 Cash
Account Receivable
Service Revenue
(To record service revenue)
17,500
2,700
20,200
December 31 Salaries expense
Rent Expense
Cash
(To record expenses)
3,600
7,00
4,300
December 31 Cash
Unearned revenue
(To record unearned
revenue)
1,440
1,440
December 31 Williamson, withdrawal
cash
(To record owner’s draw)
3,000
3,000
December 31 Supplies expenses
Office supplies
(To record used office
supplies)
600
600
December 31 Depreciation expense-
equipment
Accumulated
depreciation-equipment
(To record depreciation of
equipment)
180
180
December 31 Insurance expense
Prepaid expense
(To record expired
insurance)
500
500
December 31 Interest expense
Interest payable
(To accrue interest
75
75

REPORT 5
expense)
December 31 Income summary
Salaries expense
Rent expense
Utilities Expense
Advertising Expense
Supplies expense
Insurance expense
Interest expense
Depreciation
expense-equipment
(To close expenses)
6,375
3,600
700
280
800
600
500
75
180
December 31 Service Revenue
Income summary
(To close revenue)
20,200
20,200
December 31 Income Summary
Williamson, capital
(To close income summary)
13,465
13,465
December 31 Williamson, capital
Williamson, withdrawals
(To close withdrawals)
3,000
3,000
General Ledger
Cash ledger-
Account receivable
Dec. 31 2,700
Land
Dec. 9 18,000
Balance 18,000
Accounts payable
Dec. 26 1,000 3,000 Dec. 10
2,000 Balance
December 1 50000
December 19 28000
December 31 17500
December 31 1440
10800 December 1
4500 December 1
18000 December 9
800 December 22
1000 December 26
4300 December 31
3000 December 31
54540 balance

REPORT 6
Utilities payable
280 Dec. 28
280 Balance
Unearned
revenue
1,440 Dec. 31
1,440 Balance
Withdrawls
Dec. 31 3,000 3,000 Clos. 4
Bal. 0
Balance 2,700
Office supplies
Dec. 31 3,000 600 Dec. 31
Balance 2,400
Equipment
Dec. 31 3,000 600 Dec. 31
Balance 2,400
Accumulated depreciation-equipment
180 Dec. 31
180 Balance
Interest payable
75 Dec. 31
75 Balance
Notes payable-Williamson

REPORT 7
28,000 Dec. 19
28,000 Balance
Land
Dec. 9 18,000
Balance 18,000
Accounts payable
Dec. 26 1,000 3,000 Dec. 10
2,000 Balance
Utilities payable
280 Dec. 28
280 Balance
Unearned
revenue
1,440 Dec. 31
1,440 Balance
Withdrawals
Dec. 31 3,000 3,000 Clos. 4
Bal. 0
Supplies expense
Dec. 31 600 600 Clos.1
Bal. 0
Interest expense
Dec. 31 75 75 Clos.1
Bal. 0
depreciation expense
Dec. 31 180 180 Clos.1
Bal. 0
Income summary
clos. 1 6,735 20,200 Clos. 2
clos. 3 13,465 13,465 Bal.

REPORT 8
0 Bal.
Salaries Expense
Dec. 31 3,600 3,600 Clos. 1
Bal. 0
Capital Williamson
Clos. 4 3,000 50,000 Dec. 31
13465 clos.3
60,465 Bal.
Service Revenue
Clos. 2 20,200 20,200 Dec. 31
0 Balance
Rent expenses
Dec. 31 700 700 Clos.1
Bal. 0
Advertising expenses
Dec. 28 800 800 Clos.1
Bal. 0
Unadjusted trial balance
Particulars Debit ($)
Credit
($)
cash 54540
account receivable 2700
office supplies 3000
prepared
insurance 4500
equipment 10800
Land 18000
account payable 2000
utilities payable 280
unearned revenue 1440
notes payable 28000
Williamson, capital 50000

REPORT 9
Williamson,
withdrawal 3000
service revenue 20200
salaries expense 3600
rent expense 700
utilities expense 280
advertising 800
Total 101920
10192
0
Adjusted trial Balance
Particulars Debit
($)
credit
($)
cash 54540
account receivable 2700
office supplies 2400
prepared insurance 4000
equipment 10800
accumulated depreciation 180
Land 18000
account payable 2000
utilities payable 280
interest payable 74
unearned revenue 1440
notes payable 28000
Williamson, capital 50000
Williamson, withdrawal 3000
service revenue 20200
salaries expense 3600
rent expense 700
utilities expense 280
advertising 800
Supplies expenses 600
insurance expenses 500
interest expenses 75
depreciation expenses-equipment 180
Income statement
Williamson Quality Automotive
Income statement
One month ending December 31, 2014

REPORT 10
Revenues: $ $
Service revenue 20200
Expenses:
salary expense 3600
rent expense 700
utilities expense 280
advertising expense 800
supplies expense 600
insurance expense 500
interest expense 75
Depreciation expense-equipment 180
Total expense 6735
Net Income 13465
Statement of changes in owner's equity
Williamson Quality Automotive
Statement of changes in owner's equity
One month ending December 31, 2014
Williamson, capital December 1, 2014 0
owner's contribution 50000
net income for December 13465
63465
owner withdrawals -3000
Williamson, capital December 31, 2014 60465
Williamson Quality Automotive
Balance sheet
31-Dec-14

REPORT 11
Assets $ Liabilities $
Cash 54540 account payables 2000
account receivable 2700 utilities payable 280
office supplies 2400 interest payable 75
prepaid insurance 4000 unearned revenue 1440
equipment
10800 notes payable 28000
less: accumulated depreciation-equipment (180) 10620 Total liabilities 31795
land 18000 Owner's equity
Williamson, capital 60465
Total assets 92260 Total liabilities & owner's equity 92260
Post-closing trial balance
particulars Debit Credit
cash 54540
account receivable 2700
office supplies 2400
prepaid insurance 4000
equipment 10800
accumulated depreciation-equipment 180
land 18000
account payables 2000
utilities payable 280
interest payable 75
unearned revenue 1440
notes payable 28000
Williamson, capital 60465
Total 92440 92440

REPORT 12

REPORT 13
References
Koopman, R., Wang, Z. and Wei, S.J. (2014) Tracing value-added and double counting in gross
exports. American Economic Review, 104(2), pp.459-94.
Pratt, J. (2016) Financial accounting in an economic context. Springer: John Wiley & Sons.
Schwaiger, W.S. (2015) October. The REA accounting model: Enhancing understandability and
applicability. In International Conference on Conceptual Modeling (pp. 566-573). Springer,
Cham.
Warren, C. and Jones, J. (2018) Corporate financial accounting. Australia: Cengage Learning.