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Cleaned assignment instructions: This is a complex accounting task involving recording transactions, posting to T accounts, preparing financial statements, and closing entries based on provided business transactions for Green Planet, Inc., a consulting company, from October 31 to December 31. Additionally, there is a second worksheet involving similar tasks for ABC Corporation with transactions from September 1 onward. The tasks include developing a trial balance, income statement, balance sheet, and performing closing entries to finalize accounts, including retained earnings.

Develop a comprehensive accounting report for Green Planet, Inc., starting with posting all given transactions to general ledger T accounts. Use these posted entries to prepare a trial balance, followed by the income statement and end-of-period balance sheet. After presenting these financial statements, prepare all necessary closing entries to close temporary accounts—revenues, expenses, and dividends—and update the retained earnings account accordingly. Repeat these procedures for the ABC Corporation transactions, from initial stock issuance to subsequent asset acquisitions, operating expenses, revenue recognition, and dividends for the September period. Maintain a structured approach, clearly indicating each step of posting, trial balances, financial statements, and closing procedures, ensuring accuracy and adherence to accounting standards.

Paper For Above instruction

Introduction

The process of recording and analyzing financial transactions is fundamental to accounting, facilitating the preparation of financial statements that inform stakeholders about a company's financial health. This paper demonstrates the application of accounting principles by recording a series of transactions for Green Planet, Inc., from October 31 to December 31, and similarly for ABC Corporation in September, using T accounts. Following transaction recording, the paper develops trial balances, income statements, and balance sheets, culminating in the necessary closing entries to finalize accounts. This comprehensive process exemplifies standard accounting procedures essential for accurate financial reporting.

Recording Transactions

Initial transactions for Green Planet, Inc., involved raising capital through stock issuance, bond issuance, acquiring assets such as furniture, equipment, and leasehold improvements, and making various payments for operational expenses. Each transaction was methodically posted to relevant T accounts, such as Cash, Accounts Receivable, Furniture, Equipment, Notes Payable, Bonds Payable, and others. For example, the stock issuance on October 31 was recorded as a debit to Cash and credits to Common Stock and Additional Paid-in Capital, reflecting the equity capital raised. Purchases of assets like furniture and equipment increased respective asset accounts, with corresponding entries to cash or notes payable for financed assets.

Operational expenses such as rent, insurance, and salaries were also recorded as debits to expense accounts with credits to cash or accounts payable. Revenue recognition involved collections from customers and deposits received, posted as credits to revenue accounts. The collection of interest income from the money market account was recorded as a credit to interest income, while interest expense on debt was debited to interest expense and credited to accrued interest payable.

Similarly, during December, revenue recognition from completed projects, expenses incurred, and collections received were systematically recorded, along with adjusting entries for accrued expenses and accrued revenues to ensure accurate financial reporting.

Trial Balance Preparation

After all transactions were posted, a trial balance was prepared by summing all debits and credits in the T accounts. The trial balance verified that total debits equaled total credits, indicating the ledger was balanced. Notably, the trial balance included accounts such as Cash, Accounts Receivable, Furniture, Equipment, Notes Payable, Bonds Payable, Capital Stock, Retained Earnings, Revenues, and Expenses. Concluding with the trial balance provided the necessary data for the preparation of financial statements.

Income Statement

The income statement for Green Planet, Inc., was compiled by netting total revenue against total expenses recorded during the period. Revenue included project billing and interest income, while expenses encompassed salaries, rent, insurance, utilities, supplies, and interest. The resulting net income reflected the company’s profitability for this period. For example, total revenue (from project invoicing and interest) minus total expenses (salaries, utilities, rent, and interest) provided the net income figure, which is crucial for retained earnings calculations.

Balance Sheet

The balance sheet was prepared by classifying assets into current and non-current categories, listing cash, accounts receivable, and prepaid expenses under current assets, and furniture and equipment under property, plant, and equipment. Liabilities such as accounts payable, accrued expenses, and notes payable were categorized accordingly, with long-term liabilities including bonds payable. Shareholder’s equity was computed from common stock, additional paid-in capital, and accumulated retained earnings, adjusted for net income and dividends. The balance sheet thus provided a snapshot of the company’s financial position at period-end.

Closing Entries

To conclude the accounting cycle, closing entries were prepared to transfer temporary account balances to retained earnings. Revenues and gains were credited to income summary, while expenses were debited. The net income from income summary was then transferred to retained earnings by debiting income summary and crediting retained earnings. Dividends declared were also closed into retained earnings by debiting retained earnings and crediting the dividends account. These entries reset temporary accounts to zero in preparation for the next accounting period, ensuring proper reflection of retained earnings and preparing the ledger for subsequent transactions.

Application to ABC Corporation

The same systematic approach was applied to ABC Corporation’s transactions from September 1 onwards. The initial stock issuance was recorded with a debit to Cash and credits to common stock and additional paid-in capital. Asset acquisitions such as furniture and equipment were posted as debits, controlling for depreciation over useful life using straight-line method. Lease and insurance expenses were recorded upon payment, while operational expenses like salaries and supplies were booked as incurred.

Revenue recognition involved invoices issued for courses and seminars, with collections appropriately posted. Expenses for utilities, salaries, and other costs were recorded periodically. The company’s credit card expenses, including equipment and business lunches, were debited, and corresponding payments made were credited. As with Green Planet, the trial balance supported the construction of income statements and balance sheets, culminating in closing entries to update retained earnings accurately.

Conclusion

The detailed transactional analysis demonstrates the core principles of accounting: accurate recording, classification, and summarization of financial data. Posting transactions to T accounts allows clear tracking of individual account activity, which is vital for the preparation of trial balances and financial statements. Closing entries serve to reset temporary accounts, ensuring the integrity of the financial reporting process. This comprehensive methodology supports sound financial management and ensures compliance with accounting standards, providing meaningful insights into a company's performance and financial position at the period’s end.

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