Background: Matthews Delivery Service Completed The Followin

Backgroundmatthews Delivery Service Completed The Following Transacti

Analyze the December 2014 transactions of Matthews Delivery Service, including recording journal entries, adjusting entries, reviewing ledger accounts, trial balances, and financial statements, and executing closing entries to prepare the company’s financial statements for the period.

Paper For Above instruction

Matthews Delivery Service's financial activities during December 2014 encompass a series of transactions and adjustments that require meticulous recording and analysis to accurately reflect the company's financial position and performance. This comprehensive process involves initial journal entries, adjustments for accrued and deferred items, reviewing trial balances, and preparing income statements and balance sheets, culminating in closing entries to finalize the accounting cycle for the period.

Introduction

Effective financial management and accurate reporting are fundamental for assessing a company's operational health. Matthews Delivery Service's transactions in December 2014 exemplify core accounting processes—initial journalizing, adjustments, ledger review, trial balance preparation, financial statement creation, and closing entries—that underpin reliable financial reporting. This paper elaborates on each of these steps within the context of the company's activities, integrating relevant accounting principles and standards.

Initial Journal Entries for December Transactions

The initial recordings of Matthews Delivery Service’s transactions commenced on December 1, 2014, when the company began operations. The owner contributed both cash and a truck, resulting in a debit to Cash and Vehicles (or Truck) accounts, and a credit to Common Stock. Subsequent transactions involved cash payments, service revenues, expenses, and collections, each recorded in accordance with the accrual basis of accounting. For example, paying for insurance and supplies, performing delivery services, billing customers, and paying employees and vendors are all systematically journalized to reflect the company’s economic activities accurately.

Adjusting Entries and Their Significance

At the end of December, adjustments are necessary to align financial records with the accrual accounting principles. The adjustments include accruing salaries expense, recording depreciation on the truck—calculated using the straight-line method over five years with a salvage value of $5,000—updating prepaid insurance, supplies, unearned revenue, and accrued service revenue. These entries ensure revenues and expenses are recognized in the period they occur, matching income with related expenses and reflecting the true financial position at year-end.

Reviewing Ledger Accounts and Trial Balances

Post-journalizing and adjusting, the ledger is reviewed to verify the correctness and completeness of postings, capturing the unadjusted trial balance. This process helps identify discrepancies early, enabling corrective measures before finalizing financial statements. The unadjusted trial balance provides a snapshot of all account balances before adjustments, serving as a baseline for subsequent adjustments and preparing the adjusted trial balance.

Preparation of Financial Statements

Utilizing the adjusted trial balance, the income statement and classified balance sheet are prepared. The income statement for December 2014 consolidates revenues and expenses derived from service activities, providing insight into profitability. The balance sheet reflects the company's assets, liabilities, and equity as of December 31, 2014, including adjustments for accrued and deferred items. These statements collectively enable stakeholders to evaluate the company’s financial health and operational efficiency.

Closing Entries and Finalizing Accounts

The closing process involves transferring temporary account balances—revenues, expenses, and dividends—to retained earnings, resetting these accounts for the next period. Accurate closing ensures that the accounts reflect only the current period’s activity in the income statement and that the retained earnings account captures cumulative profits or losses. The post-closing trial balance then confirms the equilibrium of permanent accounts, readying the accounts for the next fiscal period.

Conclusion

The December 2014 transactions and subsequent accounting procedures at Matthews Delivery Service illustrate the systematic approach essential for maintaining accurate financial records. From initial journal entries through adjustments, financial statement preparation, and closing, each step adheres to Generally Accepted Accounting Principles (GAAP), providing transparency, accountability, and valuable financial insights. Proper application of these procedures ensures that management, investors, and other stakeholders receive reliable information to support decision-making and strategic planning.

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