Statement of Owners Equity - Assignment Example

? General Journal Entries, Ledger Accounts, Trial Balance, Income ment, ment of Owners Equity and Balance Sheet (Case of Amal Translation) Insert name Course code Instructor’s name Name of the university General Journal Entries, Ledger Accounts, Trial Balance, Income Statement, Statement of Owners Equity and Balance Sheet 1. Preparing General Journal Entries To Record The Transactions General journal entries is the initial point of reporting various transactions of the business into the accounting system. It provide a chronological method of recording all the business transactions. In the same note, it gives explanations of the transactions and the affected accounts by showing decrease and increase in the accounts. In simple definition, General journal is a statement where double entry bookkeeping are posted by debiting an accouting followed by a corresponding crediting of another accounting using the same amount (Carl, James and Jonathan, 2008). Both debited and credited amount should be equal to maintain the accounting equation. Based on the available accounting information system, an organization may use specialized journal alongside the generalized journal entries in order to have an effective record keeping system. In this case, the application of a general journal entries can be limited to adjustments, as well as, in non routine entries. Below is a computed General Journal Entrues for various transaction of the Amal Translation. General Journal Entries For The Event Date Account Debit (AED) Credit (AED) 1-Sep Cash   400,000       Amal's Capital   400,000 1-Sep Furniture   13,000       Amal's Capital   13,000 1-Sep Equipment   120,000       Amal's Capital   120,000 2-Sep Building   354,000       Cash   200,000     Note Payable (Long -term)   154,000 4-Sep Equipment   70,000       Cash   30,000     Note Payable (30 days)   40,000 6-Sep Prepaid Insurance   3000       Cash   3,000 8-Sep Cash   16,200       Translation Fee Earned   16,200 9-Sep Equipment   30,000       Cash   9000     Note Payable(Long term)   21,000 10-Sep Account Receivable   60,000       Translation Fee   60,000 11-Sep Furniture   7,900       Account Payable   79,000 12-Sep Account Receivable   24,000       Translation Fee Earned   24,000 14-Sep Rental Expense   2100       Account Payable   2100 16-Sep Cash   48,000       Unearned Fees   48,000 20-Sep Wage Expense   4800       Cash   4800 25-Sep Cash   60,000       Account Receivable   60,000 27-Sep Account Payable   7,900       Cash   79,000 28-Sep Repairs Expense   250       Cash   250 29-Sep Amal's Drawing   4960       Cash   4960 29-Sep Note Payable   20,000       Cash   20,000 30-Sep Wage Expense   4800       Cash   4800 30-Sep Advertising Expense   6600       Cash   6600 2.0 Opening Ledger Accounts Leger Accounts Ledger account is the second entry point of business transaction into the company’s accounting system. Accounting information contained in the ledger account relates to daily transactions of the business. It collects all credits and debts that relates to the account head within a single space. In this respect, credit and debit entries are two naturally opposing actions. In real practice, the amount use in the transaction off sets against one another. Whatever remain is the balance or the difference after the set off. This difference is referred to as ledger account balance. Ledger balancing is the process of calculating the balances of ledger accounts. Irrespective of the number of credit or debit ledger accounts available, the balance is calculated by setting off total debits of the company against the total credits. The differece between the two sums gives the ledger account balance. When setting off, the assumption made is that greater sum is set off from the smaller sum. The following equations summarizes the interpretation of ledger account balance. (Total debit- Total Credit): Applicable in case debit amount is greater. (Total credit- Total debit): Applicable when credit amount is greater. In mathematic model, the absolute difference between total credit and total debit is the balance. The following equation is used in calculating ledger account balance Ledger Account Balance = ( Total Debit – Total Credit) Posting the journal Entries for Amal Translation into the ledger accounts Cash Date Explanation Debit (AED) Credit (AED) Balance (AED) 1-Sep Owners Investments 400,000   400,000 2-Sep Building down payment   200,000 200,000 4-Sep Equipment down payments   30,000 170,000 6-Sep Insurance Premium   3000 167,000 8-Sep Translation fee Earned 16,200   183,200 9-Sep Equipment down payments   9,000 174,200 16-Sep Payments 48,000   222,200 20-Sep Wage   4800 217,400 25-Sep Account Receivable 60,000   277,400 27-Sep Account Payable   7900 269,500 28-Sep Repair expenses   250 269,250 29-Sep Owners Withdrawal   4960 264,290 29-Sep Note Payable   20,000 244,290 30-Sep Wage   4800 239,490 30-Sep TV advertisement   6600 232,890 Accounts Receivable Date Explanation Debit Credit Balance 10-Sep Translation Fee Earned 60,000   60,000 12-Sep Translation Fee Earned 24,000   84,000 25-Sep Cash   60,000 24,000 Prepaid Insurance Date Explanation Debit Credit Balance 6-Sep Insurance Premium 3,000   3,000 Equipment Date Explanation Debit Credit Balance 1-Sep Amal's Capital 120,000   120,000 4-Sep Acquired Equipment 70,000   190,000 9-Sep Acquired Equipment 30,000   220,000 Building Date Explanation Debit Credit Balance 2-Sep Acquired building 354,000   354,000 Furniture Date Explanation Debit Credit Balance 1-Sep Amal's Capital 13,000   13,000 11-Sep Acquired Furniture 7,900   20,900           Accounts Payable Date Explanation Debit Credit Balance 11-Sep Bought Furniture   7,900 7,900 14-Sep Equipment Rental Fee   2100 10,000 27-Sep Payment of furniture bought on credit 7,900   2,100 Notes Payable Date Explanation Debit Credit Balance 2-Sep Loan for Building   154,000 154,000 4-Sep Loan for equipment   40,000 194,000 9-Sep Loan for Equipment   21,000 215,000 29-Sep Repayment for equipment 20,000   195,000 Unearned Fees Date Explanation Debit Credit Balance 16-Sep Prepayment   48,000 48,000           Amal’s Capital Date Explanation Debit Credit Balance 1-Sep Cash   400,000 400,000 1-Sep Furniture   13,000 413,000 1-Sep Equipments   120,000 533,000 Amal’sDrawings Date Explanation Debit Credit Balance 29-Sep Owner's withdrawal 4,960   4,960 Translation Fees Earned Date Explanation Debit Credit Balance 8-Sep Cash   16,200 16,200 10-Sep Account Receivables   60,000 76,200 12-Sep Account Receivables   24,000 100,200 Wages Expense Date Explanation Debit Credit Balance 20-Sep Wage to assistant 4,800   4,800 30-Sep Wage to assistant 4800   9,600 Rental Expense Date Explanation Debit Credit Balance 14-Sep Rental of equipment 2,100   2,100 Advertising Expense Date Explanation Debit Credit Balance 20-Sep TV advertisement 6,600   6,600 Repairs Expense Date Explanation Debit Credit Balance 28-Sep Minor Equipment Repair 250   250 3.0 Preparing a Trial Balance In simple explanation, a trial balance is a list credit and debit accounts of a particular entity totaled at the end of given period of time- monthly basis. Its format comprises of two columns representing debit and credit balances respectively. Usually, the preparation of trial balance is done after the completion of journalized and general ledger of the entity’s transactions. Debit and credit balances must be equal in the trial balance. Below is the trial balance for Amal Translation. Amal Translation Trial balance As at 30th September   DR (AED) CR (AED) Cash 232,890   Amal Capital   533000 Furniture 20,900   Equipment 220,000   Building 354,000   Wage Expense 9,600   Repair Expense 250   Unearned Fee   48,000 Rental Expense 2,100   Account Payables   2100 Account Receivables 24,000   Translation Fee Earned   100,200 Prepaid Insurance 3000   Amal Drawing 4960   Advertising expense 6600   Notes Payables   195,000 878,300 878300 4.0 Preparing Amal Income Statement for the Month In preparing income statements, expense and revenue accounts that are contained in the trial balance are used. It is required that the income statement is computed prior to the preparation of a balance sheet. This is because profit or income amount is necessary when computing equity section. Basically, net income increases owner’s equity whereas net loss decreases equity. Amal Translating Income Statement For the Year Ended September 30 Revenue    AED  AED   Translation Fee Earned   100,200 Expenses         Wage Expense 9,600     Repair Expense 250     Rental Expense 2100     Prepaid Insurance 3000     Amal' Drawing 4960     Advertising Expense 6600         26510 Net Income     73,690 5.0 A Statement of Owners Equity This is another important report among the financial statements being used by companies. The full name for this report is “Statement of Changes in the Owner’s Equity”. The main role of the document is to show all the changes that have been made in the company owner’s equity within a particular period of time. Among these changes include drawings, capital and profit. Amal Translation Statements of Owner's Equity   AED Balance at the beginning of the month - Amal Capital 533,000 Profit for the month 73,690 Drawings -4960   601,730 6.0 The Balance Sheet Balance sheet is a financial statement showing financial performance of an organization as at a particular date. It gives lists of assets owned by the company (inventory and cash); liabilities such as (account payable and debts) and finally the shareholders equity. As opposed to other financial statements, the accuracy of balances is only valid at the time of its preparation. In brief explanation, a balance sheet summarizes total liabilities and total assets of the company at a given date- end of accounting period. As required by the Company Act, balance sheet must be published by all limited companies in operation. In the real sense, other companies such as partnerships, clubs and charities also requires to compute necessary accounting information that are required by external stakeholders for evaluation and decision making purpose. Therefore balance sheet is classified as important statements that provide an insight of an organization’s financial affairs. However, it should be noted that a balance sheet does not give the real value of the company because liabilities and assets posted are of historic cost. In addition, intangible assets such as market leadership, quality and brands are not incorporated in the balance sheet. The following is the balance sheet of Amal Translating As at September 31st. Amal Translating Balance Sheet As At September 30 Assets  (AED)  (AED) Cash   232,890 Furniture   20900 Equipment   220,000 Account Receivable   24,000 Building   354,000 Total Assets   851,790 Liabilities     Account Payable 2100   Notes Payables 195,000   Unearned Fees 48,000       245,100 Equity     Amo's Capital 533,000   Net Income 73,690 606,690 Total Liabilities and Equity   851,790 Reference Carl, S. W., James, M. R., & Jonathan, E., D. (2008). Financial & Managerial Accounting. Cengage Learning Publishers. Appendix Amal Translation. completed the following transactions in the month of September: 1Sept. Amal, invested AED400,000 cash, Furniture with a value of AED13,000, and AED120,000 of Equipment to start a business named AmalTranslation. 2 Purchased a Buildingworth AED354,000 for an office by paying AED200,000 cash and signing a long-term note payable for the balance of AED154,000. 4 Purchased an Equipment worth AED70,000 by paying AED30,000 cash and the balancepayable in 30 days. 6 Paid AED3,000 cash for the premium on a one-year insurance policy. 8 Translated contracts for a client and collected AED 16,200 cash. 9 Purchased AED30,000 of additional Equipment by paying AED9,000 cash and signing a long-term note payable for AED21,000. 10 Completed AED60,000 of TranslationServices for a client. This amount is to be received in 15 days. 11 Purchased AED7,900 of Furniture on credit. 12 Completed TranslationServices for AED24,000 on credit. 14 Received a bill for Rental of Equipment that was used on a recently completed job. The AED2,100 rental cost must be paid within 30 days. 16 Collected AED48,000 cash as payment from a client for a job to be completed in 30 days. 20Paid AED4,800 Cash for wages to her assistant. 25 Received money for the serviced provided on the 10th. 27 Paid AED7,900 cash to settle the account payable created in Sept. 11. 28 Paid AED 250 cash for minor repairs to its Equipment. 29 Amal withdrew AED4,960 cash for personal use. 29 Paid AED20,000 for the balance due on purchase made on 4th of Sept. 30 Paid AED4,800 cash wages to her assistant. 30 Paid AED6,600 cash for advertisements on the local television station during Sept. Read More