PM Milestone Two Guidelines And Rubric For ACC 201 R2129

111722 508 Pm Milestone Two Guidelines And Rubric Acc 201 R2129

In Milestone Two, you will use your trial balance results from Milestone One to create financial statements, which will be part of the report you present to your employer. Using the account balances from your trial balance, you are tasked with preparing an income statement, statement of owner’s equity, and balance sheet. Additionally, you need to perform closing entries to close temporary accounts.

The scenario involves recording business transactions for the first month of a newly opened service business, using source documents and transaction data provided by the owner. Since the business does not use computerized accounting, you will apply the accounting cycle in Excel for recording transactions and generating financial reports. Your work should build on your previous Milestone One submission, incorporating any feedback received, and utilize the provided chart of accounts and classification for each account type.

Your deliverables include:

• Preparing the income statement using the adjusted trial balance.
• Preparing the statement of owner’s equity using the adjusted trial balance.
• Preparing the balance sheet, dividing assets and liabilities into respective sections using the adjusted trial balance.
• Completing the closing entries by closing all temporary income statement accounts and transferring balances accordingly.

All work should be completed in Excel, adding or updating the relevant tabs in your existing workbook from Milestone One. Be attentive to accuracy, ensuring debits equal credits and required accounts are correctly used. The process involves posting journal entries to ledger accounts, calculating account balances, and transferring ending balances to financial statements.

Resources include a walkthrough video and a transcript for guidance. Use the provided chart of accounts to identify proper accounts for recording transactions. Final financial statements should appropriately reflect the trial balance data, and closing entries should accurately close income and expense accounts, updating owner’s equity.

Paper For Above instruction

This paper presents the comprehensive process of utilizing trial balance data from Milestone One to construct key financial statements for a newly established service business. The goal is to accurately compile an income statement, statement of owner’s equity, and balance sheet, followed by executing closing entries to reset temporary accounts for the next accounting period. The methodology integrates theoretical understanding with practical application, tailored to scenario-specific transactions and account classifications, within the constraints of non-computerized bookkeeping practices using Excel.

In the initial phase, the trial balance serves as the principal source of financial data. Ensuring the accuracy of this balance is crucial, as any discrepancies impede correct financial reporting. The first step involves preparing the income statement, which summarizes revenues and expenses to determine net income. Using the adjusted trial balance, all revenue and expense accounts are extracted and organized to produce a clear depiction of the business’s profitability for the period. For instance, the business’s service revenue, rent expense, advertising expense, and wages expense are accounted for to reflect the operational performance.

The statement of owner’s equity provides insight into the changes in owner’s capital over the reporting period. It begins with the opening capital balance, adds owner contributions, and incorporates net income, while subtracting owner withdrawals. The adjusted trial balance supplies the necessary figures for calculating net income, which is then added to the starting owner’s equity to determine the ending amount. This statement not only depicts the owner’s interest but also highlights how operational results and owner transactions impact the owner’s stake in the business.

The balance sheet is constructed by classifying and tallying all asset and liability accounts as per the trial balance. Assets are divided into current assets like cash and accounts receivable, and non-current assets such as office furniture, net of accumulated depreciation. Liabilities are separated into current liabilities like accounts payable and wages payable, and long-term liabilities, including notes payable. The owner’s equity section incorporates owner’s capital and retained earnings derived from net income, following the closing of temporary accounts. The balance sheet's fundamental purpose is to illustrate the company’s financial position at the period’s end, ensuring that total assets equal liabilities plus owner’s equity, maintaining accounting equation integrity.

Closing entries form an essential part of the accounting cycle, resetting temporary accounts (revenues and expenses) to zero to prepare for the next period. This process involves transferring the balances of revenue and expense accounts to the income summary, then transferring the net balance from the income summary to the owner’s capital account. Any dividends or owner withdrawals are also closed to owner’s capital, and the process is documented meticulously in the “Closing Entries” tab of the workbook. Proper execution ensures clean closing and accurate reflection of retained earnings and capital balances.

The entire process underscores the importance of precision, adherence to accounting principles, and systematic record-keeping in manual accounting environments. It also emphasizes the role of Excel as a tool in organizing, calculating, and translating raw transaction data into meaningful financial reports that facilitate informed decision-making by stakeholders. The culmination of these steps results in comprehensive and accurate financial statements that portray the business’s financial health, operational success, and owner's investment interest accurately.

In conclusion, this milestone tests the ability to apply fundamental accounting procedures comprehensively, from trial balance adjustment to statutory financial statements and closing procedures, using manual bookkeeping techniques. It reinforces critical skills in financial analysis, transaction recording, account classification, and report preparation, which are vital for effective financial management and professional competence in accounting practices.

References

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