Use accounting templates - Essay Example

Entities prepare journals to record the transactions entered into during a particular period. In all the transactions, the double entry requirements must be adhered to. After recording the entries in the journal, the entries are then posted to the trial balance before preparing the final financial statements (Dyckman, Magee & Pfeiffer, 2011). From the income statements, a firm’s net profit is calculated whole the balance sheets shows the assets and liabilities of the firms. Date Transaction Debit (Dhs) Credit (Dhs) January 1 cash 180000 capital 180000 (to record amount cash invested In business) 3 Prepaid rent 12000 cash 12000 To record rent paid 4 equipment 20000 cash 20000 To record purchase of equipment 5 Prepaid insurance 15000 Cash 15000 Payment of insurance in advance 6 furniture 10000 Creditors(Cartin) 10000 Acquisition of furniture on credit 7 Supplies 30000 Cash 30000 To record payment of supplies 9 advertisement 20000 Creditors (Gulf newspaper) 20000 Records amount owed to gulf newspaper 10 Cash 40000 Creditors(Alsafa) 40000 Record prepaid audit income 11 Debtors 60000 Audit income 60000 Records audit income owing 12 Creditors (Catrin) 50000 Cash 50000 Records cash payment to Catrin 18 Creditors(Gulf newspaper) 15000 Cash 15000 Records advertisement cost paid to Gulf newspaper) 25 Cash 80000 Consulting income 80000 To record amount earned for consulting services 26 capital 20000 cash 20000 To record amount withdrawn from business 28 Creditors (Al Safa) 40000 Auditing income 40000 To record audit income earned 29 Utility expense 12000 cash 12000 To record amount incurred on utility 30 salaries 8000 cash 8000 To record salary payment 31 rent 1000 Prepaid rent 1000 To record rent expense 31 Insurance 1250 Prepaid insurance 1250 To record insurance expense General ledgers Trial balance as at 31th January 2010 Particulars Debit ( Dhs) Credit (Dhs) Cash 118,000 Capital 160,000 Salaries 8,000 Prepaid Rent 11000 Rent Expense 1000 Equipment 20,000 Prepaid Insurance 15,000 Insurance Expense 13750 Creditors (35000) Supplies 10,000 Furniture 10,000 Supplies expense 20000 Advertisements 30,000 Debtors 60,000 Audit income 100,000 Consulting income 80,000 Utility Expense 12,000 Suspense 10000 Total 315,000 315,000 Income statement for the month ended 31st January 2010 Particulars (Dhs) (Dhs) income Audit income 100000 Consulting income 80000 180000 Expenses rent 1000 insurance 1250 advertisement 30000 supplies 20000 Utility expense 12000 salaries 8000 Total expenses 72250 Net profit 107750 Balance sheet as at 31 January 2010 Noncurrent assets Furniture 10000 Equipment 20000 Current assets 30000 Prepaid rent 11000 Prepaid insurance 13750 debtors 60000 supplies 10000 Cash 118000 Total current assets 212750 Total Assets 242750 equity 160000 Net profit 107750 Current liabilities Creditors (35000) Suspense 10000 242750 In summary, the firm recorded a profit in the year.

The financial statements of the business must be prepared to show the financial performance to the stakeholders who are interested in the determination of the firm’s success. Reference Dyckman, TR, Magee, RP & Pfeiffer, GM 2011, Financial accounting (3rd ed.), Cambridge: Business Publishers, Westmont.