The Following Financial Statements Are Provided From The Prior Account
The following financial statements are provided from the prior accounting period for J & L Accounting, Inc.: Post-closing trial balance, balance sheet, income statement, and statement of retained earnings. The post-closing trial balance as of December 31, 2017, lists account titles with their debit and credit balances, amounting to total debits and credits of $72,100. The balance sheet as of December 31, 2017, reports total assets of $59,500, with cash, vehicles, and equipment, and shows no liabilities, with stockholders' equity totaling $59,500. The income statement for the month ending December 31, 2017, indicates total revenues of $10,275 and total expenses of $8,650, resulting in net income of $1,625. The statement of retained earnings for the same period begins with $19,875, adds net income, and shows no dividends paid, resulting in ending retained earnings of $21,500.
Using Form A, set up the accounts for the general ledger with beginning balances from the post-closing trial balance. Journalize the following transactions for January 2018, ensuring debits equal credits:
- January 1, 2018: Paid $12,000 cash for prepaying rent for the year.
- January 4, 2018: Earned $1,900 cash for services performed.
- January 9, 2018: Paid $850 cash for advertising.
- January 10, 2018: Purchased $75 in office supplies with cash.
- January 14, 2018: Earned $2,725 cash for services performed.
- January 20, 2018: Paid $660 cash for a telephone bill; received a $2,925 utility bill to be paid later on February 15, 2018.
- January 27, 2018: Performed accounting services on account amounting to $3,750.
- January 28, 2018: Paid $1,500 cash for an advertising bill.
Post the journal entries to their respective general ledger accounts, ensuring debits and credits are correctly recorded. Calculate account balances by adding debits and credits repeatedly to ensure accuracy. Using the ledger balances, prepare an unadjusted trial balance, verifying that total debits equal total credits. Any discrepancies should be identified and corrected.
Make adjusting entries for:
- Prepaid rent used ($1,000).
- Vehicle depreciation ($100).
- Equipment depreciation ($100).
Post these adjusting entries to the general ledger accounts and update the balances accordingly. Create an adjusted trial balance, ensuring that total debits equal total credits. Using the adjusted balances, prepare the income statement, reflecting revenues and expenses to determine net income.
Record and post closing entries to transfer revenues, expenses, and dividends to retained earnings. Calculate new ledger balances and prepare a post-closing trial balance. Finally, using the post-closing trial balance, prepare a balance sheet that accurately reflects assets, liabilities, and stockholders’ equity, ensuring the accounting equation balances. Then, prepare the statement of retained earnings for January 2018, starting with the beginning balance, adding net income, and noting that no dividends were paid.
Paper For Above instruction
Financial Statements and Accounting Cycle for J & L
The Following Financial Statements Are Provided From The Prior Account
The given task involves setting up and analyzing the accounting records for J & L Accounting, Inc. for the period ending January 31, 2018, starting from the post-closing trial balance of December 31, 2017. The task includes constructing a general ledger, journalizing transactions, posting entries, preparing trial balances (both unadjusted and adjusted), recording adjusting entries, preparing financial statements such as the income statement, balance sheet, and statement of retained earnings, and completing the closing process with subsequent post-closing trial balance.
Step 1: Setup and Initialization
Using Form A, the first step is to set up the general ledger accounts, inserting beginning balances from the December 31, 2017 post-closing trial balance. The ledger should include asset, liability, equity, revenue, and expense accounts, with initial balances as provided. For assets such as Cash, Vehicles, and Equipment, their respective balances are recorded. Stockholders' equity accounts—Common Stock and Retained Earnings—are also included, totaling $59,500. This provides the starting point for the new accounting period.
Step 2: Journalizing January 2018 Transactions
Careful journal entries are required for subsequent transactions, maintaining the fundamental accounting principle: debits equal credits. Transactions include prepaying rent, earning revenue, paying for advertising and supplies, receiving cash for services, incurring utility bills, performing services on account, and paying advertising bills. Each transaction is recorded in the journal, with detailed entries reflecting the accounts affected, debited and credited appropriately.
Step 3: Posting and Calculating Ledger Balances
Each journal entry must be posted to the respective ledger accounts, ensuring that postings are accurate and reflected on the correct debit or credit side, using the Post Ref. column for tracking. After posting, calculate each account’s balance by summing debits and credits multiple times for accuracy, taking care to identify errors or discrepancies.
Step 4: Preparing the Unadjusted Trial Balance
Based on the ledger balances, prepare an unadjusted trial balance using Form C. Verify that total debits equal total credits. Discrepancies indicate recording errors that need correction before proceeding to the next steps.
Step 5: Adjusting Entries
Record adjusting entries to account for rent consumed ($1,000), vehicle depreciation ($100), and equipment depreciation ($100). Post these to the ledger, update balances, and then prepare an adjusted trial balance. Ensure the totals balance and the accounting records are accurate before creating financial statements.
Step 6: Financial Statements
Using the adjusted trial balance, prepare the income statement reflecting total revenues and expenses to compute net income. Then, prepare the Statement of Retained Earnings, starting with the previous balance, adding net income, and noting no dividends paid. This shows the updated retained earnings for January 2018.
Step 7: Closing Entries
Journalize and post closing entries to transfer revenues, expenses, and dividends to retained earnings.
Recalculate account balances and prepare a post-closing trial balance, ensuring total debits equal total credits. These steps close out temporary accounts and prepare the accounts for the next period.
Step 8: Final Financial Position
Finally, produce a balance sheet based on the post-closing trial balance. The sum of assets must equal liabilities plus stockholders' equity, verifying the fundamental accounting equation's balance. This statement provides a snapshot of the company's financial position as of January 31, 2018.
Conclusion
This comprehensive process ensures accurate record-keeping, financial reporting, and compliance with GAAP principles. Proper execution of each step guarantees that the financial statements reflect the true financial health of J & L Accounting, Inc. for the period ending January 31, 2018.
References
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