Jack Uzi Wholesale Toys Online Operates Out Of His Office

Jack Uzi Wholesale Toys Online Operates Out Of His Office In His Par

Jack Uzi, wholesale toys online, operates out of his office in his parents’ apartment, with 0 inventory. Every toy he sells is first purchased then re-sold, only after the order comes through. You need to help him out with his bookkeeping. The following transactions occurred in October: a. Paid £500 for lease of computer equipment in advance for November, b. Cash Sales of £4,847 (for stuffed animal), c. Cash sales of £4,486 (for Educational Toys), d. Cash sales of £4,702 (for Video Games), e. Cash Sales of £1,827 (for Pretend-play toys), f. Purchase of office supplies on account from Bing's Office Supply, £416, g. Withdrawal by owner (Jack Uzi) of £1,600, h. Payment on account (Bing's), £390, i. Payment of wages with cash, £2,500, j. Payment for cleaning services with cash, £74, k. Payment to purchase stuffed animal, £4,044, l. Payment to purchase Educational Toys, £3,547, m. Payment to purchase Video Games, £4,169, n. Payment to purchase Pretend-play toys, £1,382. Further, he has account balances for the beginning of October as follows: Cash £2,000, Accounts Payable, Bing's Office Supply £75, Office Supplies £75, Jack Uzi, Capital £2,000. Instructions: 1. Prepare books of original entries (Sales journal, purchase journal, cash journal) 2. Prepare the general ledger 3. Adjust the bank balance for overdraft fees (£20 less) 4. Prepare a trial balance for October 2017 5. Prepare a cash flow statement for October 31, 2017 6. Prepare an income statement for October 2017 7. Prepare a balance sheet for October 31, 2017.

The problem involves bookkeeping, financial statement preparation, and analysis of financial ratios based on provided data.

Paper For Above instruction

The purpose of this paper is to comprehensively analyze Jack Uzi’s business transactions over October, prepare the necessary accounting records, and evaluate his financial position and performance. This analysis provides insights into the recording of daily transactions, financial statement construction, and financial ratio interpretation, which are essential competencies in accounting practice.

Introduction

Jack Uzi's homemade toy wholesale business operates with a unique structure—selling toys online with zero inventory on hand. His operational model relies on purchasing toys after receiving customer orders. Managing his financial records accurately ensures he can assess cash flows, profitability, and financial health. This paper demonstrates the process of recording transactions, adjusting entries, and preparing financial statements based on the provided data.

Part 1: Bookkeeping and Journal Entries

The first step involves recording transactions using books of original entry—specifically, sales journal, purchase journal, and cash journal. Sales journal captures all credit and cash sales; purchase journal logs all purchase transactions; and the cash journal records all cash receipts and payments.

For October, the sales journal includes cash sales totaling £16,862, derived from the sum of sales for stuffed animals (£4,847), educational toys (£4,486), video games (£4,702), and pretend-play toys (£1,827). These are recorded as cash receipts. The purchase journal documents purchases of office supplies (£416), stuffed animals (£4,044), educational toys (£3,547), video games (£4,169), and pretend-play toys (£1,382). The cash journal records all cash inflows and outflows, including payments for wages, cleaning, and supplier accounts.

Part 2: General Ledger Preparation

The general ledger consolidates all account data, reflecting debits and credits from each journal entry. Starting with beginning balances—cash (£2,000), accounts payable (£75), office supplies (£75), and capital (£2,000)—we record all subsequent transactions to reflect the current financial position. For example, cash receipts from sales increase the cash account, while payments decrease it. Payments on accounts payable decrease liabilities, while withdrawals reduce capital.

Part 3: Bank Balance Adjustment

Jack Uzi's bank balance is adjusted for overdraft fees of £20, reducing the recorded cash balance. This correction ensures that financial statements accurately reflect the true cash position after all banking fees.

Part 4: Trial Balance Preparation

The trial balance summarizes all ledger account balances. It serves as a check for the equality of debits and credits. Key balances include cash, accounts payable, office supplies, wages payable, and owner’s capital, adjusted for transactions during October.

Part 5: Cash Flow Statement

The cash flow statement classifies cash movements into operating activities, investing activities, and financing activities. Operating activities include cash received from sales and payments for wages, supplies, and purchases. Investing activities involve purchases of toys and equipment. The owner’s withdrawal is classified under financing activities. The net cash change for October is the sum of these activities, reflecting increases or decreases in cash.

Part 6: Income Statement

The income statement reports revenues and expenses for October. Total sales revenue amounts to £16,862. Expenses include wages (£2,500), cleaning (£74), and purchases of inventory (£4,044 for stuffed animals, £3,547 for educational toys, £4,169 for video games, and £1,382 for pretend-play toys). The gross profit is the difference between sales and cost of goods sold, with net profit determined after deducting expenses.

Part 7: Balance Sheet

The balance sheet displays assets, liabilities, and owner’s equity as of October 31, 2017. Assets include cash, office supplies, and inventory (computed from purchases). Liabilities include accounts payable and accrued expenses. Owner’s equity combines beginning capital, net profit retained, and withdrawals.

Analysis of Financial Ratios

Using the financial data, ratios such as current ratio, acid-test ratio, debt-equity ratio, profit margin, and return on owner’s equity are calculated. These ratios evaluate liquidity, solvency, and profitability, providing comprehensive insights into Jack Uzi’s business financial health.

Conclusion

The detailed recording and analysis of Jack Uzi’s October transactions prove that accurate bookkeeping not only results in precise financial statements but also enables better decision-making. Ratios indicate the business's liquidity and solvency position, critical for ongoing operations and growth prospects.

References

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