After Graduating From College, You Have Decided To Open A Bo

After Graduating From College You Have Decided To Open a Bookkeepingco

After graduating from college, you have decided to open a bookkeeping consulting firm. The firm, named NAME Consulting Inc., was incorporated in July 2016. Starting July 1st, the firm received various assets in exchange for 1,000 shares of common stock, including cash, accounts receivable, supplies, and office equipment. The firm engaged in multiple transactions during July, such as paying rent, purchasing insurance, acquiring additional office equipment on credit, receiving and making cash payments from clients, paying salaries, advertising expenses, and providing consulting services to clients, all documented with specific invoice numbers.

Your task is to record all these transactions and post them to the general ledger accounts. After recording, perform a bank reconciliation, journalize and post necessary adjusting entries, and prepare a worksheet with unadjusted trial balances. Use the data to complete month-end adjustments, including adjustments for supplies on hand, insurance, rent, equipment depreciation, and accrued salaries, along with unearned fees as of July 31.

Following adjustments, prepare the financial statements: Income Statement, Retained Earnings Statement, and Balance Sheet. Then, record and post the closing entries, and prepare a post-closing trial balance. Finally, write a memorandum to your bank regarding the profitability of the new corporation.

This project includes all data such as the general ledger, journal entries, bank reconciliation, and worksheet; your focus is to complete the closing process, prepare the trial balance, and analyze the profitability for the bank memorandum.

Paper For Above instruction

Introduction

The inception of NAME Consulting Inc. in July 2016 marks an essential phase in establishing a new bookkeeping consulting firm. The initial transactions involved acquiring assets such as cash, accounts receivable, supplies, and office equipment, contributing to the company's capitalization and operational foundation. This paper documents recording the transactions, adjusting entries, financial statement preparations, and analysis of profitability, providing a comprehensive overview of the accounting cycle during the first month of operations.

Recording Initial Transactions

The initial transactions include issuance of common stock in exchange for various assets. Cash received was $13,500, accounts receivable $20,800, supplies valued at $3,200, and office equipment costing $7,500 with a residual value of $320 and a useful life of three years. The recorded journal entries reflect the debit to assets and credit to common stock equity accounts.

Subsequent transactions involved operational activities such as paying rent, purchasing insurance policies, acquiring additional office equipment on credit, and receiving cash from clients. For example, the firm paid two months' rent and a one-year insurance premium in advance, creating prepaid expenses. It also purchased additional office equipment on account, which will be depreciated over its useful life.

Cash Receipts and Payments

Throughout July, the firm engaged in numerous cash transactions. It received cash from clients both on account and for immediate services, totaling significant revenues. Cash paid for advertisement, supplies, salaries, the telephone bill, and electricity bill affected the cash account and corresponding expenses and liabilities. Each of these transactions was systematically journalized, following accrual and cash basis principles where applicable.

Adjusting Entries

At the end of July, adjustments were made for supplies on hand, insurance expense, rent expense, and depreciation of office equipment. Supplies on hand were counted at $1,525, and depreciation of office equipment was calculated using straight-line method over three years. Additionally, accrued salaries through July 31 and unearned revenue for services yet to be performed were recognized with appropriate adjusting journal entries, aligning expenses and revenues to the correct periods.

Financial Statements Preparation

Using the adjusted trial balance, the income statement reports revenues and expenses for July, revealing net income. The retained earnings statement starts with the beginning balance, adds net income, and deducts dividends paid, resulting in the ending retained earnings. The balance sheet presents the company's financial position at July 31, listing assets, liabilities, and equity, incorporating all adjustments.

Closing Entries and Post-Closing Trial Balance

The temporary accounts—revenues, expenses, dividends—were closed to retained earnings through journal entries. These closing entries reset the temporary account balances to zero, preparing the books for the next accounting period. The post-closing trial balance confirms all permanent accounts are correctly balanced and ready for future transactions.

Bank Reconciliation

The bank statement was reconciled with the company's cash ledger, adjusting for outstanding checks and deposits in transit. This process ensures the accuracy of cash records, identifying discrepancies and correcting the general ledger as necessary through journal entries.

Profitability Analysis and Bank Memorandum

The profitability of the firm was evaluated by analyzing net income and cash flow, indicating the firm’s initial financial health. A memorandum was drafted to the bank, summarizing the firm’s profitability, emphasizing positive cash flow and earnings, which demonstrate financial stability and potential for growth.

Conclusion

The first month of operations for NAME Consulting Inc. involved meticulous recording of transactions, precise adjustments, and comprehensive financial statement preparation. The positive profit outlook and strong asset base suggest a promising start for the new enterprise, while proper adherence to accounting principles ensures ongoing financial clarity and integrity.

References

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