On April 1. 201s, Jiro Nozomi created a new travel agency. Adventure Travel. The following transactions occurred during the company’s first month. April 1 Nozomi invested $30,000 cash and computer equipment worth $20,000 in the company. April 2 The company rented furnished office space by paying $1,800 cash for the first month’s (April) rent. April 3 The company purchased $1,000 of office supplies for cash. April 10 The company paid $2,400 cash for the premium on a 12-month insurance policy. Coverage begins on April 11. April 14 The company paid $1,600 cash for two weeks’ salaries earned by employees. April 24 The company collected $8,000 cash on commissions from airlines on tickets obtained for customers. April 28 The company paid $1,600 cash for two weeks’ salaries earned by employees. April 29 The company paid $350 cash for minor repairs to the company’s computer. April 30 The company paid $750 cash for this month’s telephone bill. April 30 Nozomi withdrew $1,500 cash from the company for personal use. The company’s chart of accounts follows: Required 1. Use T-Accts to set up each account listed in its chart of accounts. 2. Prepare journal entries to record the transactions for April and post them to the T-Accts accounts. The company records prepaid and unearned items in balance sheet accounts. 3. Prepare an unadjusted trial balance as of April 30. 4. Use the following information to journalize and post adjusting entries for the month: a. Two-thirds (or $133) of one month’s insurance coverage has expired. b. At the end of the month, $600 of office supplies are still available. c. This month’s depreciation on the computer equipment is $500. d. Employees earned $420 of unpaid and unrecorded salaries as of month-end. e. The company earned $1,750 of commissions that are not yet billed at month-end. 5. Prepare the adjusted trial balance as of April 30. Prepare the income statement and the statement of owner’s equity for the month of April and the balance sheet at April 30, 2015. 6. Prepare journal entries to close the temporary accounts and post these entries to the T-Acct. 7. Prepare a post-closing trial balance.
Since you have asked how to go about this question, here is what you have to do:
1. Do all the journal entries for the transactions happened from April 1 to April 30. While posting these entries use Accounting heads which are given in Chart of Accounts (Be careful while choosing the accounting head)
eg. For first transaction, where Nozomi invested cash and capital in the business
Entry – 101 Cash A/c Dr. $30,000
167 Computer Equipment A/c Dr. $ 20,000
301 J Nozomi Capital A/c Cr. $ 50,000
2. Prepare T- ledger Accounts and do ledger posting from all the journal entries to their respective Ledger Accounts
eg. J Nozomi Capital
By Cash $ 30,000
By Computer Equipmet $ 20,000
3. After doing ledger posting, prepare trial balance by taking closing balance of each ledger account. Just check whether the closing balance is Debit or Credit and place it in Trial Balance Accordingly. This will be your unadjusted Trial Balance.
4. Now, do journal entries for adjustment which are given in Point no. 4 in question from (a) to (e) and post these transactions to their respective ledger accounts.
5. After posting those entries to their ledger accounts, you will get your adjusted closing balances, which will result in adjusted closing balance of each account and prepare trial balace with those adjusted blances. This will be your adjusted trial balance.
6. Now you have to prepare Statement of Income, where only income and expense accounts to be disclosed. so accordingly, take balance of account no 405 to 901 as all of these are income and expense accounts. First disclose all income and then less all expenses from that which results in your profit/(loss).
7. For Statement of owner’s equity, this is nothing but your different presentation of Capital and withdrawl account. Mention your opening balance of the Capital and withdrawl account and then show all the movement happened during the April Month and then closing balance. You should take all these balance from their respective ledger accounts.
8. Balance Sheet – Take balances of Asset and Liabilities head, which are from 101 to 301. Remember to include the balance of profit in your equity while preparing the balance sheet.
9. Now close all the temporary accounts, these include all the income and expense account and proprietor’s drawing account. As these balances will not get carried forward next year we have to close the accounts and make the balance Zero.
eg For Income, Income A/c Dr. Let’s suppose $10,000
Income Summary Cr Let’s suppose $ 10,000
For expenses, Income Summary Dr $8,000
Expense Cr $8,000
Net off, Income Summary Dr (10,000-8,000) $ 2,000
Retained Earning Cr $ 2,000
Like this way you have to close all inocme and expense, make them Zero, take all the balance to Retained Earning which will match with your profit in Statement of income.
10. Last step, Post Closing Trial Balance – Now all the income and expense balance becomes zero after this closing entry. So in your Post closing trial balance only Assets and Liabilities balances will come.