Project Goal: The Goal Of This Graded Project Is To Create

Project Goalthe Goal Of This Graded Project Is To Create the Following

The goal of this graded project is to create the following financial statements for J & L Accounting, Inc.: balance sheet, income statement, statement of retained earnings, and post-closing trial balance. The financial statements must be created in a Word or Excel file and uploaded for grading. The project requires setting up general ledger accounts with beginning balances from the prior period, journalizing transactions, posting to the ledger, preparing unadjusted and adjusted trial balances, making adjusting entries, closing entries, and preparing financial statements based on the final balances.

The project also involves detailed recording of transactions such as prepayment of rent, service revenues, advertising expenses, supplies, utilities, and on-account services, culminating in the preparation of accurate financial statements that reflect the company’s financial position and performance for the period ending December 31, 2012, and the subsequent period starting January 1, 2013.

Paper For Above instruction

The comprehensive accounting cycle for J & L Accounting, Inc. during the January 2013 period entails meticulous steps that incorporate the creation of ledger accounts, recording transactions, adjusting entries, closing entries, and the preparation of financial statements to accurately reflect the company's financial status.

Introduction

Accounting is foundational to understanding an organization’s financial health and involves systematic processes that record, summarize, and interpret financial transactions. For J & L Accounting, Inc., the accounting cycle begins with setting up ledger accounts using prior period balances and proceeds through recording transactions, adjusting entries, closing out temporary accounts, and finally constructing financial statements. This process ensures compliance with Generally Accepted Accounting Principles (GAAP) and provides transparent financial information for decision-making.

Establishing the General Ledger Accounts

Using the prior period post-closing trial balance as beginning balances, ledger accounts are set up. These accounts include cash, accounts receivable, prepaid rent, vehicles, equipment, accumulated depreciation, accounts payable, common stock, retained earnings, and various expense and revenue accounts. Accurate setup of these accounts ensures a smooth transition into the current period’s accounting activities, aligning opening balances with the previous period’s closing balances.

Journalizing Transactions

The next step involves journalizing transactions such as prepaying rent, receiving service payments, purchasing advertising, acquiring supplies, paying bills, and performing services on credit. Each transaction is recorded with a journal entry where the total debits equal total credits, maintaining the fundamental accounting equation. For example, prepaying rent decreases cash and increases prepaid rent asset, while service revenue increases cash and revenue accounts.

Posting to the General Ledger

Journal entries are then posted to their corresponding ledger accounts, ensuring the transfer of debit and credit amounts to the correct accounts. This step consolidates all transactional data into account balances, serving as the foundation for financial reports. The post-ref column tracks each posting for accuracy.

Trial Balance Preparation

An unadjusted trial balance is compiled from ledger balances, verifying that total debits equal total credits. This step acts as a preliminary check before making adjustments; discrepancies highlight errors needing correction.

Adjusting Journal Entries

Adjustments are necessary to account for accrued expenses, prepaid expense usage, and depreciation. For instance, prepaid rent is adjusted down to reflect the portion used during the period, while depreciation expenses for vehicles and equipment are recorded to allocate their costs over their useful lives. Making these adjustments ensures that financial statements present an accurate picture of financial position and performance.

Post-Adjustments Ledger Balances

Adjusting entries are posted to ledger accounts, recalculating balances to reflect updated asset and expense values. This step prepares the data for accurate financial statement preparation.

Financial Statement Preparation

Using the adjusted trial balance, the income statement is prepared to report revenues and expenses, culminating in net income. The statement of retained earnings starts with the previous period's retained earnings, adjusts for net income and dividends, and calculates the ending retained earnings. The balance sheet then presents assets, liabilities, and stockholders’ equity based on the final ledger balances, ensuring all accounts are properly classified and summed.

Closing Entries

At period-end, temporary accounts like revenues, expenses, and dividends are closed to retained earnings through closing journal entries. This process resets these accounts to zero, readying them for the next accounting period, and updates retained earnings with net income for the period.

Final Balances and Post-Closing Trial Balance

The closing entries are posted to ledger accounts, and a final post-closing trial balance is prepared. This balances all permanent accounts, confirming the ledger's correctness. The final balance sheet and statement of retained earnings accurately depict the company’s financial standing on December 31, 2012.

Conclusion

The accounting cycle for J & L Accounting, Inc. demonstrates the structured approach necessary for accurate financial reporting. From establishing ledger accounts and recording transactions to adjusting entries, closing, and financial statement development, each step builds upon the previous to ensure compliance, accuracy, and transparency. Mastery of this cycle provides essential insights into the company's financial health, facilitating informed decision-making for stakeholders.

References

  • Beams, M. (2021). Financial Accounting: Tools for Business Decision Making. Pearson.
  • Gibson, C. H. (2018). Financial Reporting & Analysis. Cengage Learning.
  • Hermanson, D. R., & Rittenberg, L. (2018). Accounting Theory: Conceptual Issues in a Political and Economic Environment. South-Western Cengage Learning.
  • Hoffridge, R. (2019). Principles of Financial Accounting. Sage Publications.
  • Li, C. (2020). Accounting Principles, Volume 1. McGraw-Hill Education.
  • Needles, B. E., & Powers, M. (2019). Financial Accounting. Cengage.
  • Revsine, L., Collins, D., & Johnson, W. (2019). Financial Reporting & Analysis. Pearson.
  • Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2020). Financial Accounting. Wiley.
  • Wild, J. J., Subramanyam, K. R., & Halsey, R. (2019). Financial Statement Analysis. McGraw-Hill Education.
  • Everything Accounting Standards and GAAP - (2023). Financial Accounting Standards Board. https://fasb.org

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