Chart Of Accounts Use This Worksheet As Reference Only

Chart Of Accountsuse This Worksheet As Reference Only There Is Nothin

Use this worksheet as reference only. There is nothing to complete or change, but you will need to know what accounts are used in Jessi's Creative Design business. No new accounts will need to be added, and by the end of Part 3 of the problem, all accounts will have been used at least once.

Assets 100, Liabilities 200, Stockholders's Equity 300, Revenue 400, Expense 500. Specific accounts include Cash, Accounts Receivable, Supplies, Prepaid Photo Subscriptions, Prepaid Advertising, Equipment, Accumulated Depreciation-Equipment, Accounts Payable, Unearned Revenue, Common Stock, Dividends, Service Revenue, Advertising Expense, Supplies Expense, Photo Expense, Depreciation Expense.

You will post journal entries in Part 1, adjusting entries in Part 2, and closing entries in Part 3 to these T-accounts. The process involves journalizing transactions, posting to T-accounts, and preparing trial balances and financial statements, following instructions from modules 2, 4, 5, and 6 as indicated in the instructions.

Paper For Above instruction

Jessi's Creative Design: A Complete Financial Accounting Process

Jessi’s Creative Design, a budding enterprise in digital design, embarked on its financial journey in April. As a new business, establishing accurate financial records is crucial for tracking performance, ensuring compliance, and making informed decisions. This paper explores the comprehensive accounting process for Jessi’s Creative Design, including the setup of the chart of accounts, recording transactions, posting to T-accounts, preparing trial balances, adjusting entries, and culminating in the creation of financial statements and closing entries. The entire process follows standard accounting principles and practices, with special attention to the specifics of Jessi’s transactions during the first month of operation.

Introduction

Accurate financial recording is fundamental for any business to gauge its economic health. Jessi’s Creative Design, a sole proprietorship, relies on systematic record-keeping to document its financial activities. The initial step involves understanding the chart of accounts, which categorizes all accounts used in financial statements. Jessi’s chart includes asset accounts such as Cash, Accounts Receivable, Supplies, and Equipment; liability accounts like Accounts Payable and Unearned Revenue; equity accounts like Common Stock and Retained Earnings; revenue accounts including Service Revenue; and expense accounts such as Advertising Expense, Supplies Expense, Photo Expense, and Depreciation Expense.

Transaction Recording (Part 1)

The first transactions include Jessi’s initial investment of $10,000 in the company, recorded as a credit to Common Stock and a debit to Cash. Equipment purchases, such as a computer, printer, monitor, and software, are recorded as increases in Equipment. Supplies and advertising expenses are purchased and recorded accordingly, with any liabilities originating from credit purchases. Income from services like flyer designs or website setup are recognized as Service Revenue, while payments received directly in cash are recorded as increases in Cash and Service Revenue accounts. Payments made on liabilities, such as computer payments or supply payments, are recorded as decreases in Cash and increases in Accounts Payable when applicable.

Posting to T-Accounts and Trial Balance

All journal entries are posted to corresponding T-accounts, maintaining debits on the left and credits on the right. For example, the initial investment increases Cash (asset) and Stockholders’ Equity (Common Stock). Equipment purchases increase Equipment assets and Accounts Payable liabilities. At month-end, unadjusted trial balances are compiled by summing debits and credits from all T-accounts, verifying that total debits equal total credits.

Adjusting Entries (Part 2)

Adjustments are necessary to reflect the true financial position at April 30. Depreciation expense is recorded for equipment, reducing book value. Supplies used are expensed, and remaining supplies are adjusted. Prepaid subscriptions are amortized based on usage, with a portion expensed. Web-related expenses accrued but not yet paid, and income earned but not yet billed, are recorded through adjusting entries. For example, Jessi performed additional work for the Mexican restaurant worth $1,000, which increases Accounts Receivable and Service Revenue, while recognizing corresponding expenses. These adjustments are posted to the T-accounts, and an adjusted trial balance is prepared to reflect these changes accurately.

Financial Statements and Closing (Part 3)

Using the adjusted trial balance, Jessi’s financial statements—the Income Statement, Statement of Retained Earnings, and Balance Sheet—are prepared to summarize the business’s financial performance and position for April. The Income Statement reports revenues and expenses, resulting in net income. The Statement of Retained Earnings begins with the opening balance, adds net income, and deducts dividends declared, arriving at ending retained earnings. The Balance Sheet presents assets, liabilities, and equity, reflecting the company's financial position at month’s end.

Subsequently, closing entries are journalized to transfer temporary account balances (revenues, expenses, dividends) to Retained Earnings, resetting these accounts for the next period. These closing entries are posted to T-accounts, and a post-closing trial balance confirms the accounts are ready for the next period, with only permanent accounts remaining.

Conclusion

The detailed accounting cycle performed for Jessi’s Creative Design exemplifies standard practices necessary for establishing and maintaining accurate financial records. These procedures ensure correct reporting of profitability, financial position, and changes in equity, forming a foundation for future growth and compliance with accounting standards. Accurate record-keeping ultimately empowers Jessi to make informed business decisions and provides her CPA with reliable data for tax filings and financial analysis.

References

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• AccountingTools. (2023). How to Record a Journal Entry. Retrieved from https://www.accountingtools.com/articles/how-to-record-a-journal-entry.html
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• AccountingCoach. (2023). How to Prepare a Trial Balance. Retrieved from https://www.accountingcoach.com/trial-balance/explanation