Instructions - Read First! Management Tools Assignment 1 ✓ Solved

Instructions-Read First! Management Tools Assignment # 1 and #2

1) All Journal Entries MUST include the "Explanation" line.

2) All Debit account entry lines MUST be fully left-justified. All Credit account entry lines MUST be indented 4 or 5 spaces, UNIFORMLY.

Assignment #1: You will be required to create at least ONE additional general Ledger Account to accommodate a few Journal Entries.

Assignment #2: You may create one "Miscellaneous Expense" account in the General Ledger to accommodate all of the otherwise unspecified entries, OR you may create 2 or 3 new G/L accounts. For example, "Utilities."

Requirements Assignment #1 Due in Unit 02:

  • Prepare the Journal Entries in the General Journal
  • Post Journal Entries to the General Ledger
  • Prepare an Unadjusted Trial Balance

Assignment #2 - Due in Unit 03:

  • Prepare the Adjusting Entries
  • Post Adjusting Entries to the General Ledger
  • Prepare an Adjusted Trial Balance
  • Prepare the Financial Statements
  • Prepare the Closing Entries
  • Post Closing Entries to the General Ledger
  • Prepare the Post Closing Trial Balance

Note: Remember that Debits must equal Credits - All of your Journal Entries should balance.

Paper For Above Instructions

Accounting is a critical discipline that allows businesses to track their financial activities, ensuring that they remain viable and successful. The need for accurate management tools in accounting cannot be overemphasized. This paper will illustrate the essential components of completing the Management Tools Assignments 1 and 2, focusing on journal entries, general ledger accounts, trial balances, adjusting entries, financial statements, and closing procedures.

Assignment 1 – Journal Entries

To start, journal entries record all transactions within a business. In the unit covering the month of June, several transactions occurred that need to be documented properly. Each entry must include a date, description, and the corresponding debit and credit for each account impacted. For instance:

  • On June 1, cash was received from Dustin Larkin's capital investment of $20,250. The journal entry would be:
Debit: Cash $10,000
Credit: Dustin Larkin Capital $20,250
  • Furthermore, other entries include several revenue and expense accounts that must be recorded accurately to ensure that the entire financial picture is captured. For example, miscellaneous expenses of $450 that encompass telephone and electricity bills would also be entered.

    • General Ledger Accounts

    After preparing the journal entries, the next step requires posting these entries to the general ledger. The general ledger serves as the central repository of all accounts and helps in tracking balances. For the general ledger to be effective, each account must be formatted properly, and entries should reflect their corresponding journal entries accurately.

    In creating a general ledger, the cash account essentially showcases all cash inflows and outflows. By referencing the journal entries made for June, one would indeed find records of cash transactions, adjusting entries, and subsequent balance calculations. This exercise is essential for maintaining accurate financial reporting.

    Trial Balance Preparation

    Once the journal entries have been posted into the general ledger, the unadjusted trial balance can be prepared. The trial balance serves to verify that debits and credits are equal. For example, calculating the balances after all entries have been made for June, one could find that:

    • Cash: $8,875
    • Accounts Receivable: $3,450
    • Supplies: $2,000
    • ...

    This trial balance ensures that the books are in equilibrium as discrepancies may lead to inaccuracies in the financial statements.

    Adjusting Entries

    Making adjusting entries is crucial in accounting to ensure that all revenues and expenses are recognized when they are incurred, not when cash is exchanged. For instance:

    • On June 30, an adjustment is made for the insurance expense of $150, advanced to ensure that the financial statements reflect accurate figures.
    • Another adjustment may include accruing for salaries payable, thus ensuring all accrued liabilities are recognized in financial reports.

    Such adjustments must also be posted to the general ledger and reflect appropriately on the adjusted trial balance.

    Financial Statements Creation

    The essence of accounting culminates in the production of financial statements which provide stakeholders with an overview of the financial position of a business. The key statements include:

    • Income Statement documenting revenues and expenses resulting in a net income of $7,205 for the month of June.
    • Statement of Owner's Equity that details changes in equity through contributions and withdrawals, alongside the net income.
    • Balance Sheet reflecting assets, liabilities, and equity at a specific point in time. For example, assets totaled $26,075, while total liabilities were $3,120, leading to an equity of $22,955.

    Closing Entries

    The closing process is vital as it resets temporary accounts for the next accounting period. This involves transferring the balances from income and expense accounts to the Income Summary which eventually brings the net income to the Retained Earnings account. The closing entries for June 30 would typically include:

    • Closing the Fees Earned account with the corresponding income summary.
    • Closing several expense accounts to ensure only permanent accounts remain open in the general ledger.

    Upon completion of all closing entries, a post-closing trial balance will be prepared to verify the accuracy of the permanent accounts still active, ensuring that the books are ready for the next fiscal period.

    Conclusion

    This paper outlines the fundamental steps and components necessary for the completion of the Management Tools Assignments 1 and 2. By ensuring that each step from journal entry recording to the finalization of financial statements is handled accurately, businesses can maintain robust financial health and prepare for future growth.

    References

    • Horngren, C. T., Sundem, G. L., & Elliott, J. A. (2013). Introduction to Financial Accounting. Pearson Education.
    • Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Accounting Principles. Wiley.
    • Wild, J. J., Shaw, K. W., & Chiappetta, B. (2020). Fundamentals of Financial Accounting. McGraw-Hill.
    • Gelinas, U. J., & Dull, R. (2017). Accounting Information Systems. Cengage Learning.
    • Schroeder, R. G., Clark, M. W., & Clark, J. W. (2019). Financial Accounting Theory and Analysis: Text and Cases. Wiley.
    • Spiceland, J. D., Nelson, M. W., & Thomas, M. M. (2019). Financial Accounting. McGraw-Hill.
    • Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2013). Financial Accounting. Wiley.
    • Halsey, A. H., & Roberts, M. S. (2018). Accounting for Managers: Interpreting Financial Statements. Routledge.
    • Bernstein, L. A., & Wild, J. J. (2014). Analysis of Financial Statements. McGraw-Hill.
    • Needles, B. E., Powers, M., & Crosson, S. V. (2021). Financial Accounting. Cengage Learning.

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