Basswood Furniture Journal Entries Business Worksheet

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Basswood Furniture
Income Statement
For The Period Ending December 31, 20XX
Revenues
Sales Revenue
Less: Sales Return And Allowances
Less: Discounts
$ 49,564.5
150
8119.5
Net Sales
$ 41,295
Cost of Goods Sold
3,038.57
Purchases
Less: Purchase Returns and Allowances
Less: Purchase Discounts
Net Purchases
Gross Profit
$ 38,256.43
Selling And Administrative Expenses
Payroll Expense
26,375
Payroll Tax Expense
1964.94
Advertising Expense
1,325
Rent Expense
1,000
Office Supplies Expense
1566.79
Utilities Expense
137.89
Miscellaneous Expense
275.00
Depreciation
1682.29
Total Selling And Administrative
Expense
Net Profit/Loss
$ 34,326.91
$ 3,929.52
Basswood Furniture
Balance Sheet
As of December 31, 20XX
Assets
Cash
$ 35,323.50
Petty cash
468.21
Accounts Receivable
2,321.40
Office Supplies Inventory
1,914.02
Merchandise Inventory
26,611.43
Prepaid Advertisement
8,725
Prepaid Rent
1,000
Vehicles
$ 48,000
Less: Accumulated depreciation – Vehicles
Equipment
18,208.18
29,791.82
23,500.80
Less: Accumulated depreciation- Equipment
Office Furniture and Equipment
Less: Accumulated Depreciation- Office
Furniture and Equipment
Air ventilation/Dust collection system
Less: Accumulated Depreciation – Air
ventilation and dust collection system
Total Assets
15,667.20
7,833.60
6,125.04
4,083.36
2,041.68
2,436.94
67.69
2369.25
118,399.91
Liabilities
Accounts Payable
$ 9,051.94
Payroll Payable
Federal Income Tax Payable
7,395
722
Social Security Tax Payable
627.44
Medicare Tax Payable
134.38
State Income Tax Payable
284.51
City Income Tax Payable
101.56
Futa Tax Payable
618.97
Suta Tax Payable
6,091.28
Sales Tax Payable
3434.03
Total Liabilities
28,461.11
Owner’s Equity
Ian Smith Capital
Less: Ian Smith Drawing
Total Liabilities And Owner’s Equity
$ 94,938.80
5,000
$ 89,938.80
$ 118,399.91
Basswood Furniture
Balance Sheet
As of December 31, 20XX
Assets
Cash
$ 35,323.50
Petty cash
468.21
Accounts Receivable
2,321.40
Office Supplies Inventory
1,914.02
Merchandise Inventory
26,611.43
Prepaid Advertisement
8,725
Prepaid Rent
1,000
Vehicles
Less: Accumulated depreciation – Vehicles
Equipment
Less: Accumulated depreciation- Equipment
Office Furniture and Equipment
Less: Accumulated Depreciation- Office
Furniture and Equipment
Air ventilation/Dust collection system
Less: Accumulated Depreciation – Air
ventilation and dust collection system
Total Assets
$ 48,000
18,208.18
29,791.82
23,500.80
15,667.20
7,833.60
6,125.04
4,083.36
2,041.68
2,436.94
67.69
2369.25
118,399.91
Liabilities
Accounts Payable
$ 9,051.94
Payroll Payable
Federal Income Tax Payable
7,395
722
Social Security Tax Payable
627.44
Medicare Tax Payable
134.38
State Income Tax Payable
284.51
City Income Tax Payable
101.56
Futa Tax Payable
618.97
Suta Tax Payable
6,091.28
Sales Tax Payable
3434.03
Total Liabilities
28,461.11
Owner’s Equity
Ian Smith Capital
Less: Ian Smith Drawing
Total Liabilities And Owner’s Equity
$ 94,938.80
5,000
$ 89,938.80
$ 118,399.91
Basswood Furniture
Income Statement
For The Period Ending December 31, 20XX
Revenues
Sales Revenue
Less: Sales Return And Allowances
Less: Discounts
$ 49,564.5
150
8119.5
Net Sales
$ 41,295
Cost of Goods Sold
3,038.57
Purchases
Less: Purchase Returns and Allowances
Less: Purchase Discounts
Net Purchases
Gross Profit
$ 38,256.43
Selling And Administrative Expenses
Payroll Expense
26,375
Payroll Tax Expense
1964.94
Advertising Expense
1,325
Rent Expense
1,000
Office Supplies Expense
1566.79
Utilities Expense
137.89
Miscellaneous Expense
275.00
Depreciation
1682.29
Total Selling And Administrative
Expense
Net Profit/Loss
$ 34,326.91
$ 3,929.52
ACCOUNTS RECEIVABLE LEDGERS
NAME : Liya Designs.
ADDRESS: 13 Spruce Street, Archwood, PA 17514
DATE
ITEM
01/12/20XX
Balance b/f
01/12/20XX
Bank
ACCOUNT NO: AR – 020
BALANCE
POST
REF
DEBIT
CREDIT
DEBIT
CREDIT
7,580.00
268 7,580.00
–
–
ACCOUNTS RECEIVABLE LEDGER
NAME : Yu Wei Creations
ADDRESS: 91 Nittany Drive, Lansdale, PA 13956
DATE
ITEM
01/12/20XX
Balance b/f
02/12/20XX
Bank
ACCOUNT NO: AR – 030
BALANCE
POST
REF
DEBIT
CREDIT
DEBIT
CREDIT
6,437.00
1231 6,437.00
–
–
ACCOUNTS RECEIVABLE LEDGER
NAME :
ADDRESS:
DATE
ACCOUNT NO:
BALANCE
ITEM
POST
REF
DEBIT
CREDIT
DEBIT
CREDIT
ACCOUNTS PAYABLE LEDGERS
NAME : Hemlock Gas & Electric Co.
ADDRESS: Hemlock, PA 18953 – 6174
DATE
01/12/20XX
01/12/20XX
01/12/20XX
ITEM
Bal b/f
Gas
Gas
ACCOUNT NO: 9614382
BALANCE
POST
REF
Form 2
Form 2
DEBIT
CREDIT
137.89
1372.89
DEBIT
CREDIT
0
137.89
1327.89
NAME : Atlantic Telephone Co.
ADDRESS: Hemlock, PA 18952 – 6143
DATE
01/12/20XX
01/12/20XX
ITEM
Bal b/f
Local service and Distance calls
ACCOUNT NO: AP – 040
BALANCE
POST
REF
Form 3
DEBIT
CREDIT
232.64
DEBIT
CREDIT
0
232.64
CASH PAYMENTS JOURNAL
GENERAL
DATE
02/12/20XX
CHECK
NO
ACCOUNT
DEBITED OR
CREDITED
POST REF
DEBIT
CREDIT
ACCOUNTS PAYABLE
DR
PURCHASES
DR
CASH RECEIPTS JOURNAL
GENERAL
DATE
01/12/20XX
02/12/20XX
CHECK
NO
ACCOUNT
CREDITED
268 Liya Designs
Yu Wei
1231 Creations
POST REF
ACCOUNTS
RECEIVABLE CR
Liya Designs
Yu Wei
Creations
SALES
CR
SALES TAX PAYABLE CR
CASH DR
7,580.00
6,437.00
Basswood Furniture Journal Entries
Date
December 1 20XX
December 2 20XX
December 5 20XX
December 6 20XX
Account
Office supplies
Accounts payable
Debit
$137.89
Credit
$137.89
Office supplies
Accounts payable
232.64
Accounts Receivable
Cash
7,580.00
Accounts Receivable
Cash
Cash
Merchandise Inventory
COGS
Sales Revenue
6,437.00
232.64
7,580.00
6,437.00
14,250.00
14,250.00
14,250.00
14,250.00
Cash
Accounts Receivable
200.00
Accounts Receivable
COGS
1,325.00
Office Supplies
Accounts Payable
5,700.00
Accounts Payable
Cash
137.89
Accounts Payable
Cash
353.00
200.00
1,325.00
5,700.00
137.89
353.00
December 7 20XX
December 8 20XX
Accounts Payable
Cash
232.64
Accounts Payable
Cash
75.00
Accounts Payable
Cash
480.00
Cash
Merchandise Inventory
COGS
Sales Revenue
291.60
Office Supplies
Petty Cash
31.79
Cash
Accounts Receivable
Cash
Merchandise Inventory
COGS
Sales Revenue
860.00
Office Supplies
Accounts Payable
Air Ventilation/Dust Collection
System
Cash
Accounts Payable
232.64
75.00
480.00
291.60
291.60
291.60
31.79
860.00
1,176.60
1,176.60
1,176.60
1,176.60
300.00
300.00
2,436.94
750.00
1,686.94
December 9 20XX
December 12 20XX
December 13 20XX
Ian Smith Payroll Expenses
Cash
Billie Payroll Expenses
Cash
Betty Payroll Expenses
Cash
Bookkeeper Payroll Expenses
Cash
2,500.00
2.500.00
1,870.00
1,870.00
1,375.00
1,375.00
240.00
240.00
Cash
Accounts Receivable
225.00
Cash
Accounts Receivable
925.00
Accounts Receivable
Merchandise Inventory
COGS
Sales Revenue
996.40
225.00
925.00
996.40
996.40
996.40
Wood Supplies
Accounts Payable
1,235.00
Advertisement Expense
Cash
Accounts Payable
Cash
Accounts Payable
Cash
1,325.00
1,235.00
1,325.00
631.00
631.00
1,621.00
1,621.00
Accounts Payable
Cash
750.00
Accounts Payable
Cash
964.00
750.00
964.00
December 14 20XX
December 15 20XX
December 16 20XX
Ian Smith Payroll Expenses
Cash
Billie Payroll Expenses
Cash
Betty Payroll Expenses
Cash
Bookkeeper Payroll Expenses
Cash
1,500.00
Cash
Sales Discount
Merchandise Inventory
COGS
Sales Revenue
9,155.75
8,119.25
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00
17,275.00
17,275.00
17,275.0
Cash
Accounts Receivable
125.00
Miscellaneous Expenses
Cash
275.00
Federal Income Tax Expense
Social Security Tax Expense
Medicare Tax Expense
State Income Tax Expense
City Income Tax Expense
FUTA Tax Expense
SUTA Tax Expense
Sales Tax Expense
Cash
Holiday Party Expense
Petty Cash
125.00
275.00
722.00
627.44
146.74
310.69
101.20
1,050.56
7,091.28
3,750.00
13,799.91
187.50
187.50
December 26 20XX
Ian Smith Payroll Expenses
Cash
Billie Payroll Expenses
Cash
Betty Payroll Expenses
Cash
Bookkeeper Payroll Expenses
Cash
2,500.00
Prepaid Advertisement
Cash
8,725.00
Petty Cash
Cash
December 27 20XX
December 28 20XX
December 30 20XX
1,870.00
975.00
975.00
1,650.00
1,650.00
8,725.00
280.71
280.71
Cash
Accounts Receivable
1,234.00
Cash
Accounts Receivable
350.00
Cash
Accounts Receivable
50.00
Cash
Merchandise Inventory
COGS
Sales Revenue
December 29 20XX
2,500.00
1,870.00
1,234.00
350.00
50.00
14,250.00
14,250.00
14,250.00
14,250.00
Ian Smith Capital
Cash
5,000
Merchandise Inventory
COGS
150.00
Ian Smith Payroll Expenses
Cash
2,500.00
5,000
150.00
2,500.00
Billie Payroll Expenses
Cash
Betty Payroll Expenses
Cash
Bookkeeper Payroll Expenses
Cash
1,870.00
1,870.00
1,375.00
1,375.00
1,650.00
1,650.00
Basswood Furniture Journal Entries
Date
December 1 20XX
December 2 20XX
December 5 20XX
December 6 20XX
December 7 20XX
Account
Office supplies
Accounts payable
Debit
$137.89
Credit
$137.89
Office supplies
Accounts payable
232.64
Accounts Receivable
Cash
7,580.00
Accounts Receivable
Cash
Cash
Merchandise Inventory
COGS
Sales Revenue
6,437.00
232.64
7,580.00
6,437.00
14,250.00
14,250.00
14,250.00
14,250.00
Cash
Accounts Receivable
200.00
Accounts Receivable
COGS
1,325.00
Office Supplies
Accounts Payable
5,700.00
Accounts Payable
Cash
137.89
Accounts Payable
Cash
353.00
Accounts Payable
Cash
232.64
Accounts Payable
Cash
75.00
Accounts Payable
Cash
480.00
Cash
Merchandise Inventory
COGS
Sales Revenue
291.60
Office Supplies
Petty Cash
31.79
200.00
1,325.00
5,700.00
137.89
353.00
232.64
75.00
480.00
291.60
291.60
291.60
31.79
December 8 20XX
Cash
Accounts Receivable
Cash
Merchandise Inventory
COGS
Sales Revenue
Office Supplies
Accounts Payable
December 9 20XX
December 12 20XX
December 13 20XX
860.00
860.00
1,176.60
1,176.60
1,176.60
1,176.60
300.00
300.00
Air Ventilation/Dust Collection
System
Cash
Accounts Payable
2,436.94
Ian Smith Payroll Expenses
Cash
Billie Payroll Expenses
Cash
Betty Payroll Expenses
Cash
Bookkeeper Payroll Expenses
Cash
2,500.00
750.00
1,686.94
2.500.00
1,870.00
1,870.00
1,375.00
1,375.00
240.00
240.00
Cash
Accounts Receivable
225.00
Cash
Accounts Receivable
925.00
Accounts Receivable
Merchandise Inventory
COGS
Sales Revenue
996.40
225.00
925.00
996.40
996.40
996.40
Wood Supplies
Accounts Payable
1,235.00
Advertisement Expense
Cash
Accounts Payable
Cash
Accounts Payable
Cash
1,325.00
1,235.00
1,325.00
631.00
631.00
1,621.00
1,621.00
Accounts Payable
Cash
750.00
Accounts Payable
Cash
964.00
750.00
964.00
December 14 20XX
December 15 20XX
December 16 20XX
December 26 20XX
Ian Smith Payroll Expenses
Cash
Billie Payroll Expenses
Cash
Betty Payroll Expenses
Cash
Bookkeeper Payroll Expenses
Cash
1,500.00
Cash
Sales Discount
Merchandise Inventory
COGS
Sales Revenue
9,155.75
8,119.25
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00
17,275.00
17,275.00
17,275.0
Cash
Accounts Receivable
125.00
Miscellaneous Expenses
Cash
275.00
Federal Income Tax Expense
Social Security Tax Expense
Medicare Tax Expense
State Income Tax Expense
City Income Tax Expense
FUTA Tax Expense
SUTA Tax Expense
Sales Tax Expense
Cash
Holiday Party Expense
Petty Cash
125.00
275.00
722.00
627.44
146.74
310.69
101.20
1,050.56
7,091.28
3,750.00
13,799.91
187.50
187.50
Ian Smith Payroll Expenses
Cash
Billie Payroll Expenses
Cash
Betty Payroll Expenses
Cash
Bookkeeper Payroll Expenses
Cash
2,500.00
Prepaid Advertisement
Cash
8,725.00
Petty Cash
Cash
2,500.00
1,870.00
1,870.00
975.00
975.00
1,650.00
1,650.00
8,725.00
280.71
280.71
December 27 20XX
December 28 20XX
Cash
Accounts Receivable
1,234.00
Cash
Accounts Receivable
350.00
Cash
Accounts Receivable
50.00
Cash
Merchandise Inventory
COGS
Sales Revenue
December 29 20XX
December 30 20XX
1,234.00
350.00
50.00
14,250.00
14,250.00
14,250.00
14,250.00
Ian Smith Capital
Cash
5,000
Merchandise Inventory
COGS
150.00
Ian Smith Payroll Expenses
Cash
Billie Payroll Expenses
Cash
Betty Payroll Expenses
Cash
Bookkeeper Payroll Expenses
Cash
5,000
150.00
2,500.00
2,500.00
1,870.00
1,870.00
1,375.00
1,375.00
1,650.00
1,650.00
Course Name:Bookkeeping Project
Bookkeeping Project
Page:1 of 103
Course Name:Bookkeeping Project
Lesson 1 Overview
Your Bookkeeping Project requires you to use a number of forms to compile a full financial
record. You’ll be prompted to download these forms before reading the project instructions.
Be sure to store the forms in a safe place where you can refer back to them as you follow
the project instructions.
Page:2 of 103
Course Name:Bookkeeping Project
Lesson Objectives
Complete bookkeeping activities based on the knowledge learned throughout
your program
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Course Name:Bookkeeping Project
Basswood Furniture Project
The preferred and fastest way for the project to be graded is by submitting your work
online. Create your Balance Sheet and Income Statement in a Word document and save it
to your computer. Submit your graded project online by uploading the finished copy of the
Word file to the school. Grading can take up to one week depending upon instructor
workload.
To submit your project, proceed to the Lesson 1 Assignment page at the end of this
lesson, and follow the upload instructions there.
Be sure to keep a backup copy of your project.
Part A—Putting Your Accounting Knowledge Into Practice
Congratulations! Throughout your studies you’ve learned various accounting procedures
and what can occur throughout an entire accounting cycle. You’re now ready to put your
newfound knowledge to practical use. Although the basic procedures will always remain
the same, you may be required to adapt the skills you’ve obtained to suit the specific
needs of your employer’s specialized business. Keep in mind, however, that the basic
procedures will always remain the same. It’s now time to put all of your knowledge and
expertise into practice.
Characteristics of a Good Bookkeeper
Traits that make for a good bookkeeper are accuracy, efficiency, and perseverance.
Accuracy. The more accurate a bookkeeper is the fewer mistakes he or she
makes. Although no one is perfect, if Bookkeeper A is accurate only 75% of the
time and Bookkeeper B is accurate 90% of the time, Bookkeeper A will spend
more time and resources correcting mistakes. No one can be 100% accurate.
However, the degree of accuracy with which a bookkeeper completes his or her
work does reflect upon the quality of the bookkeeper.
Efficiency. This factor is closely related to accuracy. The more efficient a
bookkeeper is, the more time he or she will save. Time is money.
Page:4 of 103
Course Name:Bookkeeping Project
Perseverance. Anyone can be a data entry operator trained to input information
into a computer system. However, what happens when that information is entered
incorrectly? What separates a data entry person from a good bookkeeper is the
ability to recognize incorrect information (e.g., debits don’t equal credits), find the
problem, and then correct it. This process sometimes requires perseverance.
That is, you may not be able to find the problem the first time you look for the
mistake. The books of accounting need to be 100% accurate. A good bookkeeper
will keep looking when he or she knows that something isn’t right.
Bookkeeping Manually versus Using Computer Software
This course isn’t aimed at teaching you how to use software. Instead, the emphasis is on
learning bookkeeping. Why learn to keep books manually (by hand) instead of using a
spreadsheet or accounting software such as Peachtree or QuickBooks? Suppose an
employer must fill a bookkeeping position. Applicant A can keep books manually but
doesn’t know how to use accounting software. Applicant B has taken a course on how to
use accounting software but has never kept books manually. Who will the employer hire?
Applicant A. Why?
First, chances are that the software the company uses is customized. Therefore, the
employer will need to spend a few days teaching the use of the software to whoever is
hired. Peachtree and QuickBooks make up only a small percentage of the accounting
software marketplace for small businesses, let alone midsized and large businesses.
Instead, the vast majority of industries use accounting software that has been created
specifically for the needs of that particular industry.
Second, if Applicant B makes a mistake when entering data, he or she won’t understand
the underlying fundamentals and processes of bookkeeping to be able to correct the
mistake. Therefore, the employer would need to spend months teaching Applicant B what
Applicant A already knows.
For this project, you’re required to complete the assigned tasks manually. The advantage
to the manual completion method is that it gives you insight into the accounting process—
journalizing transactions, classifying data in the General Ledger (G/L), and using the
ledger data to produce financial statements. It’s important that you understand this overall
process. Journal forms, G/L accounts, worksheets, and financial statement forms will be
provided for you, along with realistic examples of the documents that a bookkeeper in a
typical business would maintain.
Page:5 of 103
Course Name:Bookkeeping Project
If you wish to learn how to use an accounting software program, there are numerous
books, videos, seminars, and courses available, from the software developers as well as
third parties. However, to use the software effectively you must first have bookkeeping
skills. Once you’ve completed the graded project manually, you’re encouraged to pursue
learning how to use accounting software.
The Basswood Furniture Bookkeeping Assignment
To complete this assignment, you’ll need to use the following four resources:
General Ledger (https://courses.portal2learn.com//content/enforced/15431BKK070_20_1/Lesson_1/Section_1/461/General_Ledger.pdf?
_&d2lSessionVal=QNd0GgEH0Qa0PHmdapDf5iZZa&ou=15431)
Subsidiary Ledgers (https://courses.portal2learn.com//content/enforced/15431BKK070_20_1/Lesson_1/Section_1/462/Subsidiary_Ledgers.pdf?
_&d2lSessionVal=QNd0GgEH0Qa0PHmdapDf5iZZa&ou=15431)
Journals (https://courses.portal2learn.com//content/enforced/15431BKK070_20_1/Lesson_1/Section_1/463/Journals.pdf?
_&d2lSessionVal=QNd0GgEH0Qa0PHmdapDf5iZZa&ou=15431)
Documents and
Forms (https://courses.portal2learn.com//content/enforced/15431BKK070_20_1/Lesson_1/Section_1/464/Documents_and_Forms.pdf?
_&d2lSessionVal=QNd0GgEH0Qa0PHmdapDf5iZZa&ou=15431)
Download each of these resources by clicking the links, print the PDFs, and work in them
as directed in the project instructions. These resources are also available on the next page
for ease of access if you need to download them again.
The Basswood Furniture Bookkeeping Project is designed to simulate the transactions that
occur in an office environment. Everything you need to complete the project is included in
this Basswood Furniture Project package.
In this project, you’ll be the bookkeeper for Basswood Furniture, a sole proprietorship that
specializes in home furnishings and accessories. First, you’ll need to set up the initial
books of accounting. Next, you’ll record all the indicated transactions into the appropriate
journals and post them accordingly. Then you’ll prepare a worksheet, create the necessary
financial statements for the company’s calendar year end, and finally close the accounting
Page:6 of 103
Course Name:Bookkeeping Project
period. When you’ve completed the required financial statements, you’ll submit them to the
school for grading.
The books of accounting for Basswood Furniture must be completed manually, and the
financial statements submitted in the proper format for grading. You’ll upload the following
financial statements according to the instructions found in this assignment:
Balance sheet
Income statement
The other project materials aren’t necessary for grading the project. Don’t send them to
the school.
Instructions
This project is a simulation of an actual accounting period. While no two businesses are
exactly alike, this project is a representation of the types of transactions and procedures
you’ll encounter in business bookkeeping. The only difference is that you’ll encounter more
of them in the normal course of business. For example, in the project you may make a
deposit with only two or three checks. In an actual business, your deposit can easily have
15 or 20 checks. Whether you have 2–3 or 15–20, it’s all the same. Volume doesn’t make
for different accounting procedures in most cases.
What you’ve learned throughout the program will be used in completing this project. Any
concepts that haven’t been covered during the program will be addressed during the
course of the project. Therefore, if you’re unsure about what to do, go back through the
program materials and workbooks. Review the concept and apply your understanding to
the situation as presented in the instructions.
Everything you need to complete the project is contained within the project materials in an
orderly fashion. The best way to understand what to do for this project is to read through
the instructions at least once or twice before attempting to begin the project. This will allow
you to become familiar with what needs to be done and how all the parts of the project
(forms, journals, ledgers, financial statements, etc.) fit together.
IMPORTANT NOTE
Page:7 of 103
Course Name:Bookkeeping Project
Because this project is a simulation, you won’t perform certain actions in
the instructions. For example, you won’t put checks in the mail or go to the
bank to make a deposit. However, you will perform the bookkeeping
functions of writing the checks, filling out the deposit ticket, etc. Instructions
that you obviously can’t perform due to this being a simulation, you’ll
imagine “as if” you were in an office environment. Otherwise, keep the
books for the business as you learned throughout the bookkeeping
program.
Scenario: Background
Basswood Furniture is owned and operated by Ian Smith as a sole proprietorship. Ian
rents a storefront/gallery at 124 River Lane in Hemlock, PA, 18951. The store is open
Monday through Friday from 8 . . to 7 . . He has been in business for almost two
years now. He specializes in creating custom furniture according to client specifications.
The furniture is delivered and installed, if necessary, in the client’s home or business.
Ian has hired you to be a full-charge bookkeeper effective December 1. The previous
bookkeeper left unexpectedly in November due to medical problems. Your wage will be
$15.00/hour. Since the other bookkeeper left, Ian has been trying to get by with paying
bills, employees, etc. However, he isn’t a trained bookkeeper. He needs someone who can
get up to speed quickly doing the books manually (Ian doesn’t have accounting software),
who understands bookkeeping intimately and is able to correct anything he has done in
error, and who can maintain his books accurately in the future.
This is why he has hired you. Although you have no experience—this is your first job—you
made a strong impression on Ian with your knowledge of bookkeeping. He was impressed
with your graded project for Penn Foster, which you showed him during the interview
process to obtain this position. Your immediate supervisor is Jeremy Gates, a CPA with
the accounting firm Gates and Associates, Inc. Jeremy spends one or two days at the end
of every quarter auditing the books. He is responsible for the accuracy of the books, yearend work, tax preparation, and financial advice. You’ll have access to Jeremy for any
questions or problems you may have. This, coupled with your bookkeeping skills, make
Ian confident that you’ll be able to perform well in the position of full-charge bookkeeper.
Your duties will be to maintain the accounting records and produce financial statements at
the end of each accounting period.
Page:8 of 103
Course Name:Bookkeeping Project
Basswood Furniture has three employees. Ian is paid a salary. The employees are paid on
an hourly basis.
1. Billie Redmond, helper
2. Betty Gable, secretary/coordinator
3. You, the bookkeeper
Ian makes all of the sales and constructs the furniture with the help of Billie Redmond.
Everyone is paid on a biweekly basis. Jeremy Gates bills Basswood Furniture for his
services as its accountant.
Basswood Furniture operates on a calendar year, which ends December 31. The
accounting periods are monthly, and Basswood Furniture uses an accrual basis.
A business can operate on either an accrual basis or a cash basis. When a
business first begins, it must be determined which basis it will use. The
cash basis is used by a small business with few transactions during an
accounting period. The accounting period used is usually quarterly,
semiannually, or yearly. It records the revenues and expenses when they
occur and doesn’t attempt to match the expenses with the revenues during
an accounting period. The accrual basis is what you’ve been learning
throughout your bookkeeping course. The vast majority of businesses use
the accrual basis, which uses the Generally Accepted Accounting
Principles (GAAP) matching principle by getting the expenses into the
same accounting period that the revenues occur.
Transactions are recorded in three journals:
1. General journal
2. Cash receipts journal
3. Cash disbursements journal
Page:9 of 103
Course Name:Bookkeeping Project
Any transactions that aren’t entered in the cash receipt or cash disbursement journals are
entered in the general journal.
Journal entries can be posted to the G/L anytime during the course of a week, at your
convenience. However, you’ve developed the good practice of making sure all entries are
posted on a weekly basis. At the end of an accounting period, you must make absolutely
sure that all journal entries have been posted to the G/L.
At the end of the accounting period, as part of the closing process, you’ll work with a 10column worksheet. Use it to create a Pre-Adjusted Trial Balance, making adjusting journal
entries and creating an Adjusted Trial Balance, from which an Income Statement will be
created in a format that follows GAAP guidelines. Finally, a Post-Closing Trial Balance will
be created, from which you’ll generate the company’s Balance Sheet.
Scenario: Financial Information
As the first order of business, although he doesn’t know how accurate some of the
information is, Ian has provided you with the following financial information for the period
ending November 20XX:
Chart of Accounts (Figure 1)
Trial Balance (Figure 2)
Customer list (Figure 3)
Schedule of Accounts Receivable (Figure 4)
Vendor list (Figure 5)
Schedule of Accounts Payable (Figure 6)
Schedules of vehicle depreciation (Figure 7)
Schedules of equipment depreciation (Figure 8)
Schedules of office furniture and equipment depreciation (Figure 9)
Payroll information (Figure 10)
Merchandise inventory valuation (Figure 11)
Office supplies inventory valuation (Figure 12)
Page:10 of 103
Course Name:Bookkeeping Project
This information will be used initially to set up the books of accounting for the period
December 20XX. The balances in the G/L accounts reflect all transactions recorded
through November 30 of the current year. These are the beginning balances for December
1, 20XX. The same details are true of the balances in the Accounts Payable (A/P) and
Accounts Receivable (A/R) subsidiary ledgers. Be sure to indicate with a checkmark that
you’ve done the posting in the posting reference columns of the ledgers when you open
the books. No supporting documentation or calculations are necessary as the figures
presented are assumed to be correct.
Basswood Furniture
Chart of Accounts
Number
Title
100
Cash—Business Checking
107
Petty Cash
110
Accounts Receivable
120
Merchandise Inventory
125
Office Supplies Inventory
140
Prepaid Rent
170
Vehicles
170.1
Accumulated Depreciation—Vehicles
180
Equipment
Page:11 of 103
Course Name:Bookkeeping Project
180.1
Accumulated Depreciation—Equipment
185
Office Furniture and Equipment
185.1
Accumulated Depreciation—Office Furniture and Equipment
200
Accounts Payable
210
Payroll Payable
211
Federal Income Tax Payable
212
Social Security Tax Payable
213
Medicare Tax Payable
214
State Income Tax Payable
215
City Income Tax Payable
221
FUTA Tax Payable
222
SUTA Tax Payable
230
Sales Tax Payable
300
Ian Smith, Capital
Page:12 of 103
Course Name:Bookkeeping Project
300.1
Ian Smith, Drawing
401
Sales Revenue
401.1
Sales Returns and Allowances
401.2
Sales Discounts
500
COGS—Cost of Goods Sold
505
Purchases
505.1
Purchase Returns and Allowances
505.2
Purchase Discounts
510
Payroll Expense
515
Payroll Tax Expense
520
Advertising Expense
525
Rent Expense
530
Office Supplies Expense
535
Telephone Expense
Page:13 of 103
Course Name:Bookkeeping Project
540
Utilities Expense
550
Supplies Expense
560
Miscellaneous Expense
570
Depreciation Expense
580
Cash Short and Over
590
Expense and Revenue Summary
Basswood Furniture:
Trial Balance as of November 30, 20XX
Acct. No.
Title
Debit
100
Cash—Business Checking
18,513.18
107
Petty Cash
110
Accounts Receivable
17,986.00
120
Merchandise Inventory
31,500.00
125
Office Supplies Inventory
347.23
500.00
Page:14 of 103
Credit
Course Name:Bookkeeping Project
140
Prepaid Rent
2,000.00
170
Vehicles
48,000.00
170.1
Accumulated Depreciation—Vehicles
180
Equipment
180.1
Accumulated Depreciation—Equipment
185
Office Furniture and Equipment
185.1
Accumulated Depreciation—Office Furn. and Equip.
3,743.08
200
Accounts Payable
5,004.00
210
Payroll Payable
211
Federal Income Tax Payable
722.00
212
Social Security Tax Payable
627.44
213
Medicare Tax Payable
146.74
214
State Income Tax Payable
310.69
215
City Income Tax Payable
101.20
16,624.86
23,500.80
14,361.60
6,125.04
0.00
Page:15 of 103
Course Name:Bookkeeping Project
221
FUTA Tax Payable
1,050.56
222
SUTA Tax Payable
7,091.28
230
Sales Tax Payable
3,750.00
300
Ian Smith, Capital
94,938.80
300.1
Ian Smith, Drawing
401
Sales
401.1
Sales Returns and Allowances
0.00
401.2
Sales Discounts
0.00
500
COGS—Cost of Goods Sold
0.00
505
Purchases
0.00
505.1
Purchase Returns and Allowances
0.00
505.2
Purchase Discounts
0.00
510
Payroll Expense
0.00
515
Payroll Tax Expense
0.00
0.00
0.00
Page:16 of 103
Course Name:Bookkeeping Project
520
Advertising Expense
0.00
525
Rent Expense
0.00
530
Office Supplies Expense
0.00
535
Telephone Expense
0.00
540
Utilities Expense
0.00
550
Supplies Expense
0.00
560
Miscellaneous Expense
0.00
570
Depreciation Expense
0.00
580
Cash Short and Over
0.00
590
Expense and Revenue Summary
0.00
TOTALS
148,472.25
Basswood Furniture:
Customer List—Accounts Receivable
Account Number
Customer
Page:17 of 103
148,472.25
Course Name:Bookkeeping Project
AR-010
Elizabeth Dante, 264 Landon Lane, Antigua, PA 15935
AR-020
Liya Designs, 13 Spruce Street, Archwood, PA 17514
AR-030
Yu Wei Creations, 91 Nittany Drive, Lansdale, PA 13956
AR-040
Capital Hardware, 87 Ridge Road, Anton, PA 12893
AR-050
The Antique Shoppe, 659 Market St, Sommerville, PA 15302
AR-060
Michael’s Furniture, 284 Carter Lane, Hanson, PA 14761
AR-070
Kenny Refinishing, 73 Tomey Avenue, Brighton, PA 16688
AR-080
Sam Little, 7 Ebony Drive, Adams, PA 14475
AR-090
Jim and Pearl Jones, 92 Weston Ave., Carverton, PA 18346
AR-100
Andy Mellow, 467 Reinhold Lane, Mountain Bend, PA 11321
AR-110
Quality Furniture, 101 Chester Drive, Birchwood, PA 19834
AR-120
Donna Bigelow, 901 Washington Lane, Appleton, PA 16572
Basswood Furniture:
Schedule of Accounts Receivable
November 30, 20XX
Page:18 of 103
Course Name:Bookkeeping Project
Account Number
Customer
$ Amount
AR-010
Elizabeth Dante
1,234.00
AR-020
Liya Designs
7,580.00
AR-030
Yu Wei Creations
6,437.00
AR-040
Capital Hardware
0.00
AR-050
The Antique Shoppe
350.00
AR-060
Michael’s Furniture
0.00
AR-070
Kenny Refinishing
925.00
AR-080
Sam Little
425.00
AR-090
Jim and Pearl Jones
125.00
AR-100
Andy Mellow
50.00
AR-110
Quality Furniture
0.00
AR-120
Donna Bigelow
860.00
Total
$ 17,986.00
Page:19 of 103
Course Name:Bookkeeping Project
Basswood Furniture:
Vendor List—Accounts Payable
Account Number
Vendor
AP-010
Hemlock Gas and Electric Co., Hemlock, PA 18953-6174
AP-020
The Home Improvement Center, 91 Arch St, Benton, OH 65714
AP-030
Carol’s Wood Supplies, 6 Lane Way, Canton, NJ 35741
AP-040
Atlantic Telephone Co., Hemlock, PA 18952-6143
AP-050
Woodworker Supplies, 4 Tennison Drive, Benning, NC 43852
AP-060
Everything Wood, 608 Rider Avenue, Capta, CA 93412
AP-070
Sally’s Fabrics, 593 Eleanor Road, TN 34687
AP-080
Two Guys Hardware, 29 Huntington Dr, Allenwood TN 26579
AP-090
Penn Furnishings, 84 Oakwood Avenue, Allenwood, TN 26579
AP-100
Cheryl Wood Designs, 802 Corning St, Palmerton, PA 11682
AP-110
Tom Baker, 53 Union Street, Hemlock, PA 18951
AP-120
Wood Imaginations, P.O. Box 461, Elkington, MN 43167
Page:20 of 103
Course Name:Bookkeeping Project
AP-130
Gates and Associates, Inc., 149 Elk Dr, Hemlock, PA 18953
Basswood Furniture:
Schedule of Accounts Payable
November 30, 20XX
Account Number
Vendor
$ Amount
AP-010
Hemlock Gas and Electric Co.
$ 0.00
AP-020
The Home Improvement Center
353.00
AP-030
Carol’s Wood Supplies
631.00
AP-040
Atlantic Telephone Co.
0.00
AP-050
Woodworker Supplies
1,621.00
AP-060
Everything Wood
750.00
AP-070
Sally’s Fabrics
0.00
AP-080
Two Guys Hardware
75.00
AP-090
Penn Furnishings
0.00
AP-100
Cheryl Wood Designs
Page:21 of 103
480.00
Course Name:Bookkeeping Project
AP-110
Tom Baker
130.00
AP-120
Wood Imaginations
964.00
AP-130
Gates and Associates, Inc.,
0.00
Total
$ 5,004.00
Schedules of Vehicle Depreciation
Make: Ford
Model: Econoline Van
Year: 20XX
Purchase Date: 02/01/20XX
Purchase Price: $48,000
Method of Depr.: Straight-Line
# of Years: 4
Salvage Value: $10,000
Depr. Per Period: $791.66
Period
Year 1
P/E Date
Depreciation
Amount
Accumulated
Depreciation
Book Value
Posted
48,000.00
1
2/28
791.66
791.66
47,208.34
YES
2
3/31
791.66
1583.32
46,416.68
YES
Page:22 of 103
Course Name:Bookkeeping Project
3
4/30
791.66
2374.98
45,625.02
YES
4
5/31
791.66
3166.64
44,833.36
YES
5
6/30
791.66
3958.3
44,041.70
YES
6
7/31
791.66
4749.96
43,250.04
YES
7
8/31
791.66
5541.62
42,458.38
YES
8
9/30
791.66
6333.28
41,666.72
YES
9
10/31
791.66
7124.94
40,875.06
YES
10
11/30
791.66
7916.6
40,083.40
YES
11
12/31
791.66
8708.26
39,291.74
YES
12
1/31
791.66
9499.92
38,500.08
YES
Period
Year 2
P/E Date
Depreciation
Amount
Accumulated
Depreciation
Book Value
Posted
9499.92
38,500.08
10291.58
37,708.42
13
2/28
791.66
Page:23 of 103
YES
Course Name:Bookkeeping Project
14
3/31
791.66
11083.24
36,916.76
YES
15
4/30
791.66
11874.9
36,125.10
YES
16
5/31
791.66
12666.56
35,333.44
YES
17
6/30
791.66
13458.22
34,541.78
YES
18
7/31
791.66
14249.88
33,750.12
YES
19
8/31
791.66
15041.54
32,958.46
YES
20
9/30
791.66
15833.2
32,166.80
YES
21
10/31
791.66
16624.86
31,375.14
YES
22
11/30
791.66
17416.52
30,583.48
23
12/31
791.66
18208.18
29,791.82
24
1/31
791.66
18999.84
29,000.16
Period
Year 3
P/E Date
Depreciation
Amount
Accumulated
Depreciation
Book Value
18999.84
29,000.16
Page:24 of 103
Posted
Course Name:Bookkeeping Project
25
2/28
791.66
19791.5
28,208.50
26
3/31
791.66
20583.16
27,416.84
27
4/30
791.66
21374.82
26,625.18
28
5/31
791.66
22166.48
25,833.52
29
6/30
791.66
22958.14
25,041.86
30
7/31
791.66
23749.8
24,250.20
31
8/31
791.66
24541.46
23,458.54
32
9/30
791.66
25333.12
22,666.88
33
10/31
791.66
26124.78
21,875.22
34
11/30
791.66
26916.44
21,083.56
35
12/31
791.66
27708.1
20,291.90
36
1/31
791.66
28499.76
19,500.24
Period
Year 4
P/E Date
Depreciation
Amount
Accumulated
Depreciation
Book Value
Page:25 of 103
Posted
Course Name:Bookkeeping Project
28499.76
19,500.24
37
2/28
791.66
29291.42
18,708.58
38
3/31
791.66
30083.08
17,916.92
39
4/30
791.66
30874.74
17,125.26
40
5/31
791.66
31666.4
16,333.60
41
6/30
791.66
32458.06
15,541.94
42
7/31
791.66
33249.72
14,750.28
43
8/31
791.66
34041.38
13,958.62
44
9/30
791.66
34833.04
13,166.96
45
10/31
791.66
35624.7
12,375.30
46
11/30
791.66
36416.36
11,583.64
47
12/31
791.66
37208.02
10,791.98
48
1/31
791.98
38000.00
10,000.00
Schedules of Equipment Depreciation
Page:26 of 103
Course Name:Bookkeeping Project
Items: (Initial Investment)
Table saw
Compound miter saw
Band saw
Scroll saw
Router table
Drill press
Lathe
Planer
Dust collection system
Work benches
Invoice itemized misc equipment
Purchase Date: 01/01/20XX
Purchase Price: $23,500.80
Method of Depr.: Straight-Line
# of Years: 3
Salvage Value: $0.00
Depr. Per Period: $652.80
Period
Year 1
P/E Date
Depreciation
Amount
Accumulated
Depreciation
Book Value
Posted
23,500.80
1
01/31
652.80
Page:27 of 103
652.80
22,848.00
YES
Course Name:Bookkeeping Project
2
02/28
652.80
1,305.60
22,195.20
YES
3
03/31
652.80
1,958.40
21,542.40
YES
4
04/30
652.80
2,611.20
20,889.60
YES
5
05/31
652.80
3,264.00
20,236.80
YES
6
06/30
652.80
3,916.80
19,584.00
YES
7
07/31
652.80
4,569.60
18,931.20
YES
8
08/31
652.80
5,222.40
18,278.40
YES
9
09/30
652.80
5,875.20
17,625.60
YES
10
10/31
652.80
6,528.00
16,972.80
YES
11
11/30
652.80
7,180.80
16,320.00
YES
12
12/31
652.80
7,833.60
15,667.20
YES
Period
Year 2
P/E Date
Depreciation
Amount
Accumulated
Depreciation
Book Value
Posted
7,833.60
15,667.20
Page:28 of 103
Course Name:Bookkeeping Project
1
01/31
652.80
8,486.40
15,014.40
YES
2
02/28
652.80
9,139.20
14,361.60
YES
3
03/31
652.80
9,792.00
13,708.80
YES
4
04/30
652.80
10,444.80
13,056.00
YES
5
05/31
652.80
11,097.60
12,403.20
YES
6
06/30
652.80
11,750.40
11,750.40
YES
7
07/31
652.80
12,403.20
11,097.60
YES
8
08/31
652.80
13,056.00
10,444.80
YES
9
09/30
652.80
13,708.80
9,792.00
YES
10
10/31
652.80
14,361.60
9,139.20
YES
11
11/30
652.80
15,014.40
8,486.40
12
12/31
652.80
15,667.20
7,833.60
Period
Year 3
P/E Date
Depreciation
Amount
Accumulated
Depreciation
Book Value
Page:29 of 103
Posted
Course Name:Bookkeeping Project
15,667.20
7,833.60
1
01/31
652.80
16,320.00
7,180.80
2
02/28
652.80
16,972.80
6,528.00
3
03/31
652.80
17,625.60
5,875.20
4
04/30
652.80
18,278.40
5,222.40
5
05/31
652.80
18,931.20
4,569.60
6
06/30
652.80
19,584.00
3,916.80
7
07/31
652.80
20,236.80
3,264.00
8
08/31
652.80
20,889.60
2,611.20
9
09/30
652.80
21,542.40
1,958.40
10
10/31
652.80
22,195.20
1,305.60
11
11/30
652.80
22,848.00
652.80
12
12/31
652.80
23,500.80
0.00
Schedules of Office Furniture and Equipment Depreciation
Page:30 of 103
Course Name:Bookkeeping Project
Items: (Initial Investment)
(2) Computers
Printer
Invoice itemized computer software
(2) Desks
(2) Filing cabinets
(2) Chairs
Telephone/answering/fax machine
Copier
Invoice itemized misc items
Telephone
Purchase Date: 01/01/20XX
Purchase Price: $6,125.04
Method of Depr.: Straight-Line
# of Years: 3
Salvage Value: $0.00
Depr. Per Period: $170.14
Period
Year 1
P/E Date
Depreciation
Amount
Accumulated
Depreciation
Book Value
Posted
6,125.04
1
01/31
170.14
170.14
5,954.90
YES
2
02/28
170.14
340.28
5,784.76
YES
Page:31 of 103
Course Name:Bookkeeping Project
3
03/31
170.14
510.42
5,614.62
YES
4
04/30
170.14
680.56
5,444.48
YES
5
05/31
170.14
850.70
5,274.34
YES
6
06/30
170.14
1,020.84
5,104.20
YES
7
07/31
170.14
1,190.98
4,934.06
YES
8
08/31
170.14
1,361.12
4,763.92
YES
9
09/30
170.14
1,531.26
4,593.78
YES
10
10/31
170.14
1,701.40
4,423.64
YES
11
11/30
170.14
1,871.54
4,253.50
YES
12
12/31
170.14
2,041.68
4,083.36
YES
Period
Year 2
P/E Date
Depreciation
Amount
Accumulated
Depreciation
Book Value
Posted
2,041.68
4,083.36
2,211.82
3,913.22
1
01/31
170.14
Page:32 of 103
YES
Course Name:Bookkeeping Project
2
02/28
170.14
2,381.96
3,743.08
YES
3
03/31
170.14
2,552.10
3,572.94
YES
4
04/30
170.14
2,722.24
3,402.80
YES
5
05/31
170.14
2,892.38
3,232.66
YES
6
06/30
170.14
3,062.52
3,062.52
YES
7
07/31
170.14
3,232.66
2,892.38
YES
8
08/31
170.14
3,402.80
2,722.24
YES
9
09/30
170.14
3,572.94
2,552.10
YES
10
10/31
170.14
3,743.08
2,381.96
YES
11
11/30
170.14
3,913.22
2,211.82
12
12/31
170.14
4,083.36
2,041.68
Period
Year 3
P/E Date
Depreciation
Amount
Accumulated
Depreciation
Book Value
4,083.36
2,041.68
Page:33 of 103
Posted
Course Name:Bookkeeping Project
1
01/31
170.14
4,253.50
1,871.54
2
02/28
170.14
4,423.64
1,701.40
3
03/31
170.14
4,593.78
1,531.26
4
04/30
170.14
4,763.92
1,361.12
5
05/31
170.14
4,934.06
1,190.98
6
06/30
170.14
5,104.20
1,020.84
7
07/31
170.14
5,274.34
850.70
8
08/31
170.14
5,444.48
680.56
9
09/30
170.14
5,614.62
510.42
10
10/31
170.14
5,784.76
340.28
11
11/30
170.14
5,954.90
170.14
12
12/31
170.14
6,125.04
0.00
PAYROLL INFORMATION
As of November 30, 20XX
Employee:
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Ian Smith
234 Pinewood Rd.
Hemlock, PA 18951
Status:
Married
Number of Allowances Claiming:
Additional Amount Withheld:
4
$ 0.00
Wage/Salary: $2,500.00 (Salary)
YTD Earnings: $60,000.00
Employee:
Betty Gable
465 Pinewood Rd.
Hemlock, PA 18951
Status:
Single
Number of Allowances Claiming:
Additional Amount Withheld:
0
$ 0.00
Wage/Salary: $12.50/hr
YTD Earnings: $16,500.00
Employee:
Billie Redmond
67 Oak St.
Hemlock, PA 18951
Status:
Married
Number of Allowances Claiming:
Additional Amount Withheld:
3
$ 0.00
Wage/Salary: $17.00/hr
YTD Earnings: $29,920.00
Employee:
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Janet Adams
83 Empire St.
Hemlock, PA 18951
Status:
Married
Number of Allowances Claiming:
Additional Amount Withheld:
2
$ 0.00
Wage/Salary: $15.00/hr
YTD Earnings: $24,900.00
Additional Payroll Information:
Hourly employees are paid time-and-one-half for overtime hours. Any hours
worked over 40 hours for the week qualify for overtime pay.
Hourly employees are paid double time for any hours worked over 60 hours for
the week and for working on holidays.
Currently, employees are responsible for their own insurance.
Use the following tax tables for Federal Withholding Tax from the current year Circular E:
FWT:
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Payroll Information:
Basswood Furniture
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SWT:
Pennsylvania Income State Tax Percentage: 3.07%
LWT:
Hemlock Local Withholding Tax Percentage: 1.00%
FICA:
Social Security Tax Percentage:
Employee: 6.02% on all earnings
Employer: 6.02% on all earnings
Note: The 6.02% is not the same as the 6.2% that was used in
the Payroll lesson. Be sure to use the 6.02% in your calculations
instead. (The government does change tax percentages and will
notify the business when they do. This is an example of a tax
percentage change. Use the correct percentage in your
calculations.)
Medicare Tax Percentage:
Employee: 1.45% up to $106,800 in earnings
Employer: 1.45% up to $106,800 in earnings
FUTA:
The FUTA tax percentage is 0.8% of the first $7,000 of wages per year
SUTA:
The SUTA tax percentage is 5.4% of the first $7,000 of wages per year
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Merchandise Inventory Valuation
As of November 31, 20XX
Item No.
Description
No. of Items
Amount
Total Amount
DR-0003
Dining Room Set
2
$ 2,500.00
$ 5,000.00
DRS-0005
Dining Room Set
2
$ 2,125.00
$ 4,250.00
DRS-0009
Dining Room Set
2
$ 3,455.00
$ 6,910.00
TBL-0023
Table
4
$ 65.00
$ 260.00
TBL-0037
Table
3
$ 85.00
$ 255.00
CHR-0002
Chairs – 4 set
3
$ 90.00
$ 270.00
CHR-0005
Chairs – 6 set
6
$ 120.00
$ 720.00
ETB-0003
End Table
3
$ 45.00
$ 135.00
ETB-0006
End Table
4
$ 55.00
$ 220.00
MGR-0004
Magazine Rack
5
$ 15.00
$ 75.00
WNR-0001
Wine Rack
2
$ 125.00
$ 250.00
LMP-0003
Lamp
5
$ 65.00
$ 325.00
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CTB-0007
Coffee Table
6
$ 90.00
$ 540.00
RCH-0001
Rocking Chair
4
$ 85.00
$ 340.00
DRS-0002
Dresser – 8 Drawer
3
$ 235.00
$ 705.00
DRS-0001
Dresser – 10 Drawer
1
$ 275.00
$ 275.00
DRS-0004
Dresser – 12 Drawer
1
$ 295.00
$ 295.00
BRM-0002
Bedroom Set
2
$ 3,250.00
$ 6,500.00
BRM-0003
Bedroom Set
1
$ 3,675.00
$ 3,675.00
HTC-0004
Hutch
4
$ 125.00
$ 500.00
Total inventory value
$ 31,500.00
Office Supplies Inventory Valuation
November 31, 20xx
Description
No. of Items
Amount
Total Amount
Legal Pads – 12 PK
4
$ 8.95
$ 35.80
Copy Paper – Case
4
$ 35.99
$ 143.96
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Roller Pens – Dz
4
$ 12.49
$ 49.96
Wood Pencils – Dz
20
$ 1.69
$ 33.80
Permanent Marker – Dz
2
$ 6.99
$ 13.98
Correction Fluid – Dz
1
$ 1.30
$ 1.30
Highlighter – DZ
2
$ 7.99
$ 15.98
Plain Envelopes – Box
2
$ 6.99
$ 13.98
Clasp Envelopes – Box
1
$ 13.99
$ 13.99
Receipt Book
2
$ 12.24
$ 24.48
Total Inventory Value
$ 347.23
Additional General Information
Cash—the Business Checking account is used for all transactions (including payroll).
Everything is paid for by check with the exception of petty cash. ( Petty cash is an amount
of cash that has been set aside for small purchases that you wouldn’t write a check for,
i.e., the purchase of a 50 cent newspaper.)
Petty Cash remains at an imprest amount of $500.00. ( Imprest means the balance, once
set, remains the same. The amount of the cash plus the total of the receipts should always
equal the imprest amount.)
Accounts Receivable terms are decided on an account-by-account basis, with the default
being 2/10, n30. Each week, the Schedule of Accounts Receivable is reviewed for
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collection purposes. Ian has a good rapport with his clients, having developed a good
name for himself. Credit applications are taken, checked, and approved by Ian before
setting up an account.
Merchandise Inventory is the cost of furniture that has been made and not sold yet. It’s all
furniture that’s not custom ordered. All material costs are tracked for each individual
furniture item and recorded as Merchandise Inventory. Labor and overhead costs aren’t
included in the valuation. These are taken into account when the furniture is marked up to
its sale price. The Specific ID inventory method is used to value the inventory. At the end
of each period, a physical inventory (specific ID) is taken for control purposes. When an
item from Merchandise Inventory is sold, the sale is recognized with a journal entry and an
additional journal entry is made to transfer the furniture item that was sold out of
Merchandise Inventory to COGS.
However, a large portion of the business is custom-made furniture that requires a 50%
down payment, with the remaining balance payable upon delivery (unless credit has been
extended to the client). Each custom order is assigned a job number. Sales Revenue is
recognized with each payment, and all material costs are expensed to Purchases using
that job number.
Office Supplies Inventory consists of supplies used in the general course of business. It
uses a periodic inventory method. At the end of each period, a physical inventory is taken
and the value of the inventory is determined. The book value of the inventory is then
adjusted to that physical amount.
Prepaid Rent is paid at the beginning of each year in the amount of $12,000.00 for the 12month period.
Vehicles, Equipment, and Office Furniture and Equipment are depreciated according to a
Schedule of Depreciation approved by or provided by Jeremy Grant. Any asset purchases
will be put to one of these accounts and reported to Jeremy at the end of each quarter.
Depreciation entries are made at the end of each period according to the schedules.
A/P is paid on time within the grace period unless otherwise specified to take advantage of
discounts. Each week, the Schedule of Accounts Payable will be reviewed by Ian for
payment of invoices.
Payroll is calculated on a biweekly basis. The payment is made on the following Friday.
Due to Janet Adams leaving the company, no accrual entry was made at the end of
November 20XX.
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Federal Withholding Taxes (941 Form), which includes FWT, Social Security, and
Medicare, are paid on or before the fifteenth of the month for the previous month.
State Withholding Taxes and City Withholding Taxes are paid on or before the twentieth of
the month for the previous month.
FUTA and SUTA are paid on a yearly basis, and are due on or before the end of January
of the next year.
Sales Tax is due on or before the twentieth of the month for the previous month. Currently,
no clients are tax exempt. A client will need to provide a valid Sales Tax Exemption
Certificate to be kept on file in order for Basswood Furniture not to charge sales tax.
Ian Smith will inform you as to when and how much capital he will withdraw from the
company.
Expense and Revenue Summary is the same as Income Summary and is used as a
wash, or pass-through, account. (A wash or pass-through account is an account whose
balance should always be zero. In the closing process, the revenues, expenses, and
withdraw account amounts are transferred into the expense and revenue summary
account and then immediately transferred out to the capital account, keeping the balance
in the expense and revenue summary account at zero. The balances are “passed through”
the account.)
Tips
All forms and documentation for the project are provided in the Documents and Forms
PDF (https://courses.portal2learn.com//content/enforced/15431BKK070_20_1/Lesson_1/Section_1/464/Documents_and_Forms.pdf?
_&d2lSessionVal=QNd0GgEH0Qa0PHmdapDf5iZZa&ou=15431). Documents will be
referred to by form number, which appears in the upper left-hand corner of the document.
An ample supply of blank forms has been provided to complete the project. Print more
forms as necessary.
When doing math for the project, try not to use a hand-held calculator unless you
absolutely have to. Instead, use a printer calculator, or better yet, an Excel spreadsheet.
Enter the figures to be added in one column and sum them up. Do the same thing again in
a second column. Both totals should match. If they don’t, enter the figures a third time and
sum them up. Two out of the three totals should match. Don’t just assume that the
matching totals are correct. Go back over the columns to see why the totals were different
in the first place.
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Using a hand-held calculator and just adding up the figures in a column one time leads to
very error-prone results. Bookkeeping is designed to have debits always equal credits.
Whether the entry you made is right or wrong is irrelevant when it comes to debits
equaling credits. If you make a wrong entry, you should have a wrong debit that’s the
same as the wrong credit. A bookkeeper who is always “off” isn’t accurate and won’t have
work for long. Therefore, use a printer calculator or Excel spreadsheet so you can see
what you entered, and run the numbers more than once.
Part B—Specific Instructions
Steps for Completing the Project
The following are the specific steps for completing the project. It’s assumed that you’ve
obtained the knowledge to complete the steps from your previous coursework. For
example, when working with the payroll steps, it’s assumed that you know how to do
payroll. (Only the data will be presented.) If you’re not sure as to what you should do with
the payroll information, go back over your lessons and workbooks relating to payroll.
While the instructions provided lead you step-by-step through the process of an
accounting period from start to finish, if you’re not sure what to do next or where you are in
the process, then call and speak with an instructor. Remember, the instructors can help
with the process, but not the specifics of the project. Instructors can’t help with what
journal entries to make, how to make calculations, etc.
At this point, you should have read through this assignment thoroughly, and have a good
understanding of what needs to be done to complete the project. Doing this will go a long
way towards making the project easier for you. You’re now ready to begin.
Fill out an Employee’s Withholding Allowance Certificate (Form 1) for yourself.
Every new employee must fill out this form and sign it when hired to determine
how much federal withholding tax will be held from the employee’s paycheck. For
purposes of this project, on Line 3 you’ll select “Single” for your marital status. On
Line 5, you’ll use 0 (zero) allowances. No additional amount will be withheld on
line 6.
Create the A/R accounts in the Accounts Receivable Subsidiary
Ledger (https://courses.portal2learn.com//content/enforced/15431BKK070_20_1/Lesson_1/Section_1/462/Subsidiary_Ledgers.pdf?
_&d2lSessionVal=QNd0GgEH0Qa0PHmdapDf5iZZa&ou=15431) PDF . In the
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Subsidiary Ledger, locate the section of blank forms for the Accounts Receivable.
Write in the account name and account number on a blank form for each A/R
account. Enter in the beginning balances for each account. Make sure the total of
the beginning balances in the subsidiary ledger matches the balance of the A/R
account on the G/L Trial Balance.
Do the same for the Accounts Payable Subsidiary Ledger accounts.
Open the G/L accounts by locating the section in the General
Ledger (https://courses.portal2learn.com//content/enforced/15431BKK070_20_1/Lesson_1/Section_1/461/General_Ledger.pdf?
_&d2lSessionVal=QNd0GgEH0Qa0PHmdapDf5iZZa&ou=15431) PDF, entering
the account name and account number on each blank form. Enter the beginning
balances from the G/L Trial Balance in each account. Make sure the total of the
debits for the beginning balances in the G/L accounts matches the total of the
debits on the trial balance and that the total of the credits matches the total of the
credits on the trial balance.
Enter the balance in the Cash G/L account in the Balance Brought Forward field
of the check register, toward the end of the Documents and Forms PDF next to
Check No. 2260.
Process the transactions for the month of December laid out in the following
section, making journal entries, posting to the G/L accounts, and completing the
forms or paperwork where necessary.
December
Thursday, December 1, 20XX
Received a bill (Form 2) from Hemlock Gas and Electric Co. in the amount of
$137.89 on account. Make the journal entry for receipt of the bill and post to the
proper G/L and subsidiary accounts.
Received a bill (Form 3) from the Atlantic Telephone Co. in the amount of
$232.64 on account. Make the journal entry for receipt of the bill and post to the
proper G/L and subsidiary accounts.
Received Check No. 268 (Form 4) in the amount of $7,580.00 for payment in full
from Liya Designs. Make the journal entry for receipt of the check and post to the
proper G/L and subsidiary accounts.
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Friday, December 2, 20XX
Received Check No. 1231 (Form 5) in the amount of $6,437.00 for payment in full
from Yu Wei Creations. Make the journal entry for receipt of the check and post to
the proper G/L and subsidiary accounts.
Complete a deposit ticket (found in the Documents and Forms PDF), dating it
December 2, 20XX, and include the checks received from Liya Designs and Yu
Wei Creations. On the back of each check, to endorse the checks for deposit, you
would write “For Deposit Only, Account # 309921” and then take the deposit to
the FCU (Federal Credit Union) where Basswood Furniture does its banking.
(Naturally, since this is a simulation, you won’t actually make a deposit.) Record
the amount deposited in the Check Register. Total the amount in the check
register.
Verify the posting of all of the journal entries to the G/L accounts and subsidiary
accounts for the week. Verify the amount on the check register is the balance in
the G/L Cash account. Any discrepancies need to be corrected.
Monday, December 5, 20XX
Wayne Shriver and Ian met today to discuss making custom dining room, living
room, and bedroom sets. The contract amount is for $28,500.00 (including sales
tax), to be delivered by the end of the month (December 31). Contracts are kept
by Ian. Wayne gave Ian Check No. 10178 in the amount of $14,250.00 (Form 6)
for the 50% down payment, with the remainder to be paid in full upon delivery.
This will be Job #132 for reference purposes. The down payment will be used to
cover the purchase of the materials needed. The down payment, even though it’s
not the full amount of the sale, will be recognized as revenue with a journal entry.
(If the final payment isn’t received, the furniture won’t be delivered and the
furniture will then become merchandise inventory.)
Note: This transaction can be difficult to figure out what journal entry(s) need to
be made. The best way to think about it is two-fold. First, think about making a
journal entry for the sale. Do not be concerned about the cash. Make the journal
entry for the sale on account. Then make a journal entry for the receipt of the
cash and apply it against the account. After the receipt of the cash, there’s still a
balance owed left on the account. This is why it’s easier to think of this
transaction by making two journal entries instead of combining them into one.
This is no different than, as an example, someone buying a sweater for $100 on
account. Then two weeks later that customer sends a partial payment for $30 in
the mail. In thinking about the Wayne Shriver transaction, a journal entry is made
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for the sale on account, with the only difference being that instead of two weeks
later receiving a partial payment, the “deposit” is the partial payment and is being
received almost immediately instead if two weeks later in the mail.
Received Check No. 501 (Form 7) in the amount of $200.00 for partial payment
from Sam Little. Make the journal entry for receipt of the check and post to the
proper G/L and subsidiary accounts.
Billie Redmond sold one wine rack to Michael’s Furniture in the total amount of
$1,325.00 on account (Form 8). Make a journal entry to record the sale and make
a journal entry to remove the cost of the wine rack from inventory and put it to
COGS. You should also adjust the Merchandise Inventory Valuation whenever
you make a journal entry that affects the Merchandise Inventory account. This
acts as a check. The balance on the valuation should be the balance of the G/L
account. Both should be the same balance as the inventory valuation when a
physical inventory is done at the end of the accounting period.
Tuesday, December 6, 20XX
Billie Redmond went to Tom Baker to purchase the materials needed for the
Shriver furniture (Job #132). The total invoice amount for the purchase was
$5,700.00 (Form 9). The purchase was made on account. Make the journal entry
for the purchase of the materials to the Purchase G/L account.
Tuesday is the day Ian likes to cut checks for payment of A/P accounts. First
thing in the morning, you print out the Schedule of Accounts Payable and put it on
his desk so he can decide which ones he would like to have paid. You also write
on the schedule the balance that’s in the checking account based on the amount
in the check register. Today, Ian would like you to pay the balances in the
following accounts:
Hemlock Gas and Electric Co.
The Home Improvement Center
Atlantic Telephone Co.
Two Guys Hardware
Cheryl Wood Designs
Beginning with Check No. 2260, write consecutive checks for each A/P account
in the correct amount, adjust the check register accordingly, and place the checks
on Ian’s desk for his signature. When he returns the checks to you, you’ll mark
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the invoices as paid and mail a copy of the invoices with the checks to the
vendors. (For purposes of this project, it has been assumed that you have the
invoices making up the amounts in the accounts and that they’re correct, even
though you don’t have the details for November 20XX.) Make the correct journal
entries for payment of the accounts and post to the proper G/L and subsidiary
accounts.
Wednesday, December 7, 20XX
Ian sold one end table for cash in the total amount of $291.50 to Jack Williams
(Form 10). Make a journal entry to record the sale and make a journal entry to
remove the cost of the end table from inventory and move it to COGS.
Betty Gable went to an office supplies store on her lunch break with Ian’s
approval and purchased a printer cartridge for the office copier using her own
cash. The purchase was in the total amount of $31.79. You’ll reimburse her from
petty cash using a Petty Cash Voucher (Form 11). Complete the voucher. (You
would normally attach the receipt to the voucher and file it in the petty cash box
and have Betty sign the voucher.) Record the voucher on the Petty Cash
Payments Record found in the Documents and Forms PDF under the correct
account.
Received Check No. 421 (Form 12) in the amount of $860.00 for payment in full
from Donna Bigelow. Make the journal entry for receipt of the check and post to
the proper G/L and subsidiary accounts.
Thursday, December 8, 20XX
Ian met with Janet Martinez. She signed a contract for a custom-built table and
chair to be used in her hallway. The amount was $1176.60 (including sales tax).
The furniture is to be delivered in one week. Janet paid cash in full (Form 13).
This will be Job #133 for reference purposes. Make the journal entry for the sale
and post to the proper G/L accounts.
Billie placed an order with Everything Wood for the purchase of exotic wood for
Janet Martinez. Everything Wood faxed a copy of the invoice for approval and
acceptance (Form 14) of the invoice on account. They’ll ship the wood overnight.
Make the journal entry for the receipt of the invoice and post to the proper G/L
and subsidiary accounts.
Ian felt the need for a better air ventilation/dust collection system. He went over to
Rocker Woodcraft to purchase a system, taking Check No. 2265 with him. He
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brought back the dust collection system and the invoice from Rocker Woodcraft
(Form 15). He wrote the check in the amount of $750.00 as partial payment, with
the remaining to be billed to Basswood Furniture on account. The dust collection
system is an asset. Its useful life will be three years, with a residual value
(salvage value) of zero. Record the journal entry for the invoice in the correct G/L
accounts and create a new subsidiary ledger account for Rocker Woodcraft.
Create a Schedule of Depreciation for the asset, assuming straight-line
depreciation. (The purchase of the system is being made on the eighth of the
month. According to GAAP, because the purchase is made before the fifteenth of
the month, the depreciation of the asset can be recognized from the beginning of
the month. Therefore, for depreciation purposes, at the end of the accounting
period, you’ll recognize one month’s worth of depreciation for December as if the
asset was purchased on the first of the month.) At the end of the accounting
period, you’ll provide Jeremy Gates with the asset information and schedule so
that he can review it and make any changes if necessary.
Friday, December 9, 20XX
The following time cards were given to you during the week for you to calculate
the payroll for the period ending 12/02/20XX.
Time Card
Name:
Ian Smith
P/E:
12/2/XX
Date
Hours Worked
11/21
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11/22
11/23
11/24
11/25
11/28
11/29
11/30
12/1
12/2
Total Hours
Salary
$ 2,500.00
Time Card
Name:
Billie Redmond
P/E:
12/2/XX
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Date
Hours Worked
11/21
8.0
11/22
8.0
11/23
8.0
11/24
8.0
11/25
8.0
11/28
8.0
11/29
8.0
11/30
8.0
12/1
8.0
12/2
8.0
Total Hours
80.0
Time Card
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Holiday
Course Name:Bookkeeping Project
Name:
Betty Gable
P/E:
12/2/XX
Date
Hours Worked
11/21
8.0
11/22
8.0
11/23
8.0
11/24
8.0
11/25
8.0
11/28
8.0
11/29
8.0
11/30
8.0
12/1
8.0
12/2
8.0
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Holiday
Course Name:Bookkeeping Project
Total Hours
80.0
Time Card
Name:
Yourself
P/E:
12/2/XX
Date
Hours Worked
11/21
0.0
11/22
0.0
11/23
0.0
11/24
0.0
11/25
0.0
11/28
0.0
11/29
0.0
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Holiday
Course Name:Bookkeeping Project
11/30
0.0
12/1
8.0
12/2
8.0
Total Hours
16.0
Complete an Employee Earnings Record for each employee and the Payroll
Register for the payroll period using the payroll information provided to you by Ian
on the first day you went to work for him. Write a check payable to each
employee for their net pay, beginning with Check No. 2266, and complete the
attached check register. Place the checks on Ian’s desk for his signature and
distribution to the employees. Ian will also be informing the employees that since
the next pay date is December 23 and the business will be closed for the holiday,
checks will be distributed on Monday, December 26 instead of December 23.
Make and post the journal entry for the employees’ payroll. Make and post the
journal entry to record the additional payroll expense to the employer for the
employer’s portion of Social Security, Medicare, FUTA, and SUTA using the tax
expense account.
Make the deposit for the week. Complete a deposit ticket for the checks received
from Wayne Shriver, Sam Little, and Donna Bigelow, plus the cash received
during the week for cash sales. Record the amount deposited in the Check
Register. Total the amount in the check register.
Verify the posting of all of the journal entries to the G/L accounts and subsidiary
accounts for the week. Verify the amount on the check register is the balance in
the G/L Cash account. Any discrepancies need to be corrected.
Monday, December 12, 20XX
Received Check No. 511 (Form 16) in the amount of $225.00 for payment in full
from Sam Little. Make the journal entry for receipt of the check and post to the
proper G/L and subsidiary accounts.
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Received Check No. 42 (Form 17) in the amount of $925.00 for payment in full
from Kenny Refinishing. Make the journal entry for receipt of the check and post
to the proper G/L and subsidiary accounts.
Billie sold two end tables and a coffee table to Quality Furniture in the total
amount of $996.40 on account (Form 18). Make a journal entry to record the sale
and make a journal entry to remove the cost of the furniture from inventory and
move it to COGS. Post to the G/L.
Billie drove to Carol’s Wood Supplies and purchased on account (Form 19)
materials to build the following items for merchandise inventory: 2 each DSK0001 Desk and BCS-0001 Bookcase, and 1 FLK-0001 Footlocker. Record the
items in inventory, make a journal entry for the purchase on account, and post it
to the G/L.
Ian discussed advertising and marketing with John Powell from Powell Marketing,
Inc. During the meeting, Ian wanted you to write out a check to Powell Marketing,
Inc. in the amount of $1,325.00 for billboard advertising during the rest of the
month of December. You wrote Check No. 2270 for that amount, using it as the
invoice and receipt. After adjusting the check register, you then made a journal
entry and posted it to the G/L.
Tuesday, December 13, 20XX
Tuesday is the day to cut checks for payment of A/P accounts. You print out the
Schedule of Accounts Payable and give it to Ian so he can decide which accounts
to pay. You also write on the schedule the balance that’s in the checking account
based on the check register. Today, Ian would like you to pay the balances in the
following accounts:
Carol’s Wood Supplies (only the amount in the account as of the end of
November)
Woodworker Supplies
Everything Wood (only the amount in the account as of the end of
November)
Wood Imaginations
Beginning with Check No. 2271, write a check for each account in the correct
amount, adjust the check register accordingly, and place the checks on Ian’s desk
for his signature. When he returns the checks to you, you’ll mark the invoices as
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paid and mail a copy of the invoices with the checks to the vendors. (For
purposes of this project, it has been assumed that you have the invoices making
up the amounts in the accounts and that they’re correct even though you don’t
have the details for November 20XX.) Make the correct journal entries for
payment of the accounts and post to the proper G/L and subsidiary accounts.
Due to the excellent performance of the company this year, Ian has decided to
give each employee (including himself) a bonus of $1,500.00. (You will also get a
bonus even though you haven’t been with the company for very long.) He has
instructed you to issue a special payroll tomorrow. (A bonus amount is treated the
same a gross pay amount.)
Pete Schwab, a friend of Ian’s, stopped in the shop to see Ian. On his way out,
Billie helped Pete load a dining room set into Pete’s truck. Ian presented you with
a check (Form 20) in the amount of $9,155.75 from Pete as payment in full for the
purchase of DRS-0009 Dining Room Set. The dining room set retails for
$17,275.00; however, Ian gave Pete a 50% discount. Make a journal entry to
record the sale (don’t forget about the discount) and make a journal entry to
remove the cost of the furniture from inventory and move it to COGS. Post the
entries to the G/L.
Wednesday, December 14, 20XX
Prepare the payroll for the holiday bonus. (Use the bi-weekly Federal Withholding
Chart for FWT.) Write a check payable to each employee for their net pay,
beginning with Check No. 2275, and complete the attached check register. Place
the checks on Ian’s desk for his signature and distribution to the employees.
Make and post the journal entry for the employees’ payroll. Make and post the
journal entry to record the additional payroll expense to the employer for Social
Security, Medicare, FUTA and SUTA.
Received Check No. 149 (Form 21) in the amount of $125.00 for payment in full
from Jim and Pearl Jones. Make the journal entry for receipt of the check and
post to the proper G/L and subsidiary accounts.
Clean-It-Rite cleaning service performed the monthly cleaning of the offices and
shop. Ian paid the invoice (Form 22) with Check No. 2279 in the amount of
$275.00. Make the journal entry as a miscellaneous expense and post the entry
to the G/L.
Delivered custom furniture for Janet Martinez on Job #133.
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Thursday, December 15, 20XX
Tomorrow, Ian is treating all employees and their families to a holiday party. Therefore,
daily work that would normally be done tomorrow will need to be completed today.
Federal payroll withholding taxes need to be paid by the fifteenth of the month for
the previous month’s withholdings. The federal withholding tax (commonly
referred to as the 941 Tax) consists of the FWT withheld from the employees and
FICA. It’s submitted using Form 8109. FICA is made up of the Social Security and
Medicare withholdings from the employees and the matching amounts from the
employer. The amount to be paid is for the previous month—November 20XX.
Look at the entries made in the G/L accounts to determine the amounts that need
to be paid. ( Don’t just look at the balance in the accounts. If you assume the
balance of the G/L account is the amount to be paid, you’ll be incorrect. Most
likely, the balance includes a payroll entry for the current month along with the
balance from the previous month. Once a mistake is made, it can take up to two
years of going back and forth with the government to get the error corrected.)
Complete Form 8109 (Form 23), writing in the amount of the deposit and the
company’s EIN number, which is 40-37462. (Form 8109 acts as a deposit slip for
the tax. When you complete the form and write the check, you’ll take it to the
bank to make the deposit—“deposit” in this case meaning a withdrawal from your
checking account and deposit into the government’s account.) Color in the tilted
oval next to “941” as the Type of Tax and the quarter that the tax period pertains
to (November is in the fourth quarter). Write Check No. 2280, payable to “U.S.
Treasury,” for the amount to be deposited. Be sure to write the EIN, type of tax,
and tax period on the check. This deposit must be stamped by the fifteenth of the
month. This is a high priority, since today is the fifteenth. Waiting until tomorrow
will incur substantial penalties and interest.
Make the bank deposit, including the checks and/or cash received during the
week. Record the amount deposited in the Check Register. Total the amount in
the check register.
Pennsylvania Sales Tax is to be remitted to the state by the twentieth of every
month in the amount collected for the previous month—in this case, November
20XX. Just as you did with remitting the federal payroll taxes for the previous
month, you need to look at the entries in the G/L account and determine the total
amount that was collected for the month of November. Complete the PA Dept. of
Revenue Sales Tax Collection Bureau form (Form 24). Use it to make the journal
entry and post the entry to the G/L. Payment of the sales tax will be done
electronically through the government’s Web site. In the checkbook, void Check
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No. 2281 and complete the check register showing the payment to the “PA Dept.
of Revenue—ETF” for the amount of the remittance. ( ETF stand for “Electronic
Transfer Funds.”)
Verify the posting of all of the journal entries to the G/L accounts and subsidiary
accounts for the week. Verify that the amount on the check register is the balance
in the G/L Cash account. Any discrepancies need to be corrected.
Friday, December 16, 20XX
The holiday party was wonderful. The only work required for the day is to reimburse Ian
$187.50 for the receipts he provided you for having the party catered, out of petty cash.
Create a petty cash voucher (Form 25) and make the entry to the Petty Cash
Payments Record.
December 19–23, 20XX
The business is closed for the week before Christmas.
Monday, December 26, 20XX
The following time cards were given to you during the week for you to calculate
the payroll for the period ending 12/16/20XX.
Complete an Employee Earnings Record and the Payroll Register for the payroll
period ending 12/16/XX. Write a check payable to each employee for their net
pay, beginning with Check No. 2282, and complete the attached check register.
Place the checks on Ian’s desk for his signature and distribution to the
employees. Make and post the journal and the additional payroll tax expense to
the employer.
Time Card
Name:
Ian Smith
P/E:
12/16/XX
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Course Name:Bookkeeping Project
Date
Hours Worked
12/5
12/6
12/7
12/8
12/9
12/12
12/13
12/14
12/15
12/16
Total Hours
Salary
$ 2,500.00
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Course Name:Bookkeeping Project
Time Card
Name:
Billie Redmond
P/E:
12/16/XX
Date
Hours Worked
12/5
8.0
12/6
8.0
12/7
8.0
12/8
8.0
12/9
8.0
12/12
8.0
12/13
8.0
12/14
8.0
12/15
8.0
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Course Name:Bookkeeping Project
12/16
8.0
Total Hours
80.0
Time Card
Name:
Betty Gable
P/E:
12/16/XX
Date
Hours Worked
12/5
8.0
12/6
8.0
12/7
8.0
12/8
8.0
12/9
8.0
12/12
4.0
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Course Name:Bookkeeping Project
12/13
4.0
12/14
4.0
12/15
4.0
12/16
8.0
Total Hours
64.0
Time Card
Name:
Yourself
P/E:
12/16/XX
Date
Hours Worked
12/5
8.0
12/6
8.0
12/7
8.0
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Course Name:Bookkeeping Project
12/8
8.0
12/9
8.0
12/12
8.0
12/13
8.0
12/14
8.0
12/15
8.0
12/16
8.0
Total Hours
80.0
Ian met with Fran Ogilvy from The Capitol Media Group, Inc. about television
advertising for the next quarter, January 1 through March 31, 20XX. Ian wrote
Check No. 2286 in the amount of $8,725.00 to The Capitol Media Group, Inc. in
payment of the invoice (Form 26) for the prepaid advertising. You’ll need to create
a new G/L account #145 for Prepaid Advertising. Journalize and post the entry,
completing the check register.
Reimburse the petty cash by writing Check No. 2287 for the total amount of the
receipts in the Petty Cash Payments Record, making the check payable to
“Cash.” Journalize the entry from the Petty Cash Payments Record and post it to
the G/L accounts. Cash the check at the FCU and replenish the cash in the petty
cash box. The amount of cash in the box should be the imprest amount.
Tuesday, December 27, 20XX
Print out the Schedule of Accounts Payable and give it to Ian so he can decide
which accounts to pay. You also write on the schedule the balance that’s in the
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Course Name:Bookkeeping Project
checking account based on the check register. Ian has decided not to pay any of
the A/P this week.
Received Check No. 631 (Form 27) in the amount of $1,234.00 for payment in full
from Elizabeth Dante. Make the journal entry for receipt of the check and post to
the proper G/L and subsidiary accounts.
Received Check No. 11304 (Form 28) in the amount of $350.00 for payment in
full from The Antique Shoppe. Make the journal entry for receipt of the check and
post to the proper G/L and subsidiary accounts.
Wednesday, December 28, 20XX
Received Check No. 172 (Form 29) in the amount of $50.00 for payment in full
from Andy Mellow. Make the journal entry for receipt of the check and post to the
proper G/L and subsidiary accounts.
Delivered the custom furniture to Wayne Shriver for Job #132 (Form 30).
Received payment for the invoice (Form 31) with Check No. 10769 in the amount
of $14,250.00. Since the down payment was already received and a journal entry
already made to recognize that portion of the sale, make the journal entry for
receipt of the check and post to the proper G/L accounts.
Ian wishes to make a withdrawal from his capital account. He presents you with a
memo (Form 32) for the withdrawal. You make Check No. 2288 payable to Ian
Smith in the amount of $5,000.00 and use the memo to create and post the
journal entry to the G/L.
Thursday, December 29, 20XX
Liya Adams from Liya Designs stopped by the store to return an end table. The
cost to make the custom-built end table was $150.00. This end table will be
added to Merchandise Inventory as Item No. ETB-0012. Ian agreed to issue her a
credit memorandum (Form 33) and she agreed that the credit could be put on her
account. Make the journal entry for the credit memorandum and post to the
proper G/L and subsidiary accounts.
Note: This can be a difficult entry to make. You need to think through the
transactions and the journal entries made to be able to come up with the correct
journal entry. This is where using T-accounts as a tool helps. First, a sale was
made that was on account. The cost of the materials for the custom-built furniture
was paid for with a check and put against purchases to have the expenses match
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the revenues. These transactions occurred in November. The accounting period
was closed and the profit transferred to the capital account. Then in December,
the receivable was paid for with a check. Now the item is being returned and
being entered into inventory. Instead of a check or cash, a credit to her account is
being given.
This is a two-step process:
1. Make a journal entry for the return of the item purchased.
2. Make a journal entry to add the item back into Merchandise Inventory.
Friday, December 30, 20XX
Today is the last working day in the accounting period. Therefore, there are a few things
that need to be done to be able to close out the accounting period.
Note: For most businesses, the tasks will be similar. For example, physical inventories
need to taken. However, each business will have its own set of tasks that will need to be
done. Also, just because it’s the last day of the month doesn’t mean that the financial
statements for the period end will be completed on that day. They’ll usually be completed
sometime into the next period, depending upon the size of the business and the amount of
work involved.
You inform Betty that she needs to take a physical inventory of all the
merchandise that’s on hand, including the item number, a description of the item,
and how many of the item are physically present. When she returns the form with
the inventory, you’ll extend the costs of the merchandise and use it as your
merchandise inventory valuation. This amount should be the same amount as the
balance in the Merchandise Inventory account in the G/L. If it’s not the same, the
discrepancy must be looked into and a correction made.
Note: The reason Betty, the secretary, is taking the inventory is for control
purposes. If Billie takes the inventory, it’s too easy for her to put down the quantity
of an item as, say, six, when only five are physically there because she stole one.
This is only one small part of the control systems that accountants learn when
getting their education.
You inform Billie that she needs to take a physical inventory of all of the office
supplies that are on hand. When she returns the form with the inventory, you’ll
extend the costs of the office supplies and use it as your office supplies valuation.
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Course Name:Bookkeeping Project
The following time cards were given to you during the week for you to calculate
the payroll for the period ending 12/30/20XX. Since the employees won’t be paid
for the pay period ending 12/30/20XX until January 6, 20XX, this information will
be needed to make a payroll accrual adjusting entry when creating the financial
statements and closing out the accounting period.
Note: When using timecards, on holidays, employees will have a tendency to
write 8.0 hours to make sure they will be paid for the holiday even though they
will have the day off as a paid holiday. As a bookkeeper doing payroll, it’s your
responsibility to know what employees should be paid for regardless of what they
put on their timecards. For Basswood, the business is closed and no one works
on holidays. The employees will be paid straight time for the 8 hours as holiday
pay. Only if they actually work those days (in the workplace you will know this by
being informed about the situation) would the employee get paid time and a half
or double time, depending upon what is warranted.
Time Card
Name:
Ian Smith
P/E:
12/30/XX
Date
Hours Worked
12/19
12/20
12/21
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Course Name:Bookkeeping Project
12/22
12/23
12/26
12/27
12/28
12/29
12/30
Total Hours
Salary
$ 2,500.00
Time Card
Name:
Billie Redmond
P/E:
12/30/XX
Page:74 of 103
Course Name:Bookkeeping Project
Date
Hours Worked
12/19
8.0
Holiday
12/20
8.0
Holiday
12/21
8.0
Holiday
12/22
8.0
Holiday
12/23
8.0
Holiday
12/26
8.0
12/27
8.0
12/28
8.0
12/29
8.0
12/30
8.0
Total Hours
80.0
Time Card
Name:
Betty Gable
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Course Name:Bookkeeping Project
P/E:
12/30/XX
Date
Hours Worked
12/19
8.0
Holiday
12/20
8.0
Holiday
12/21
8.0
Holiday
12/22
8.0
Holiday
12/23
8.0
Holiday
12/26
8.0
12/27
8.0
12/28
8.0
12/29
8.0
12/30
8.0
Total Hours
80.0
Page:76 of 103
Course Name:Bookkeeping Project
Time Card
Name:
Yourself
P/E:
12/30/XX
Date
Hours Worked
12/19
8.0
Holiday
12/20
8.0
Holiday
12/21
8.0
Holiday
12/22
8.0
Holiday
12/23
8.0
Holiday
12/26
8.0
12/27
8.0
12/28
8.0
12/29
8.0
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Course Name:Bookkeeping Project
12/30
8.0
Total Hours
80.0
Make the bank deposit. Record the amount deposited in the Check Register.
Total the amount in the check register.
Verify the posting of all of the journal entries to the G/L accounts and subsidiary
accounts for the week. Verify the amount on the check register is the balance in
the G/L Cash account. Any discrepancies need to be corrected.
January
Monday, January 2, 20XX
You’ll begin to close out the end of the accounting period for December. To do this you’ll
be using the blank forms in the Documents and
Forms (https://courses.portal2learn.com/content/enforced/15431BKK070_20_1/Lesson_1/Section_1/464/Documents_and_Forms.pdf) PDF. You’ll use the
Worksheet and then use the forms provided for creating the financial statements.
On Friday, December 30, you should have made sure that you posted all the
entries in your journal to the G/L accounts. If this hasn’t been done, then you
must do it now. Once done, total the balances in the G/L accounts.
Create a 10-column Worksheet. (Review the lessons for Financial Reports along
with the associated accounting practices in the workbook for completing the
Worksheet if you’re unsure as to what you need to do.) The first two columns
should be labeled Trial Balance. The next two should be labeled Adjustments.
The next are Adjusted Trial Balance, Income Statement, and Balance Sheet.
Each set of columns will have a debit and a credit column. Down the left side of
the worksheet list all the G/L accounts and put their balances in the appropriate
debit or credit column under Trial Balance. These are your Pre-Adjusted Trial
Balance figures. Foot (total) the debit column and credit column. Your debits
must equal your credits.
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If your debits don’t equal your credits, then you’ve made a technical error somewhere.
This error must be corrected before you can go any further. Often this is just a math error.
(This is why it was suggested you use a printer calculator or Excel spreadsheet, to help
you find math errors.) Subtract the two totals and come up with a figure. Then scan your
work, looking through the journals and the general ledger accounts to see where the
mistake may be.
Note: You should not start the project over. This is a waste of time, and can lead to further
errors. If the error can’t be found by carefully looking over your work, then follow the
procedure laid out below.
DEBITS EQUALING CREDITS ERROR DETECTION PROCEDURE
It’s important to realize that debits not equaling credits has nothing to do
with whether the journal entries made are right or wrong. As an example,
let’s say you pay rent in the amount of $1,100.00. The entry for this should
be a debit to Rent Expense for $1,100.00 and a credit to Cash for
$1,100.00. However, for whatever reason, the journal entry made is a debit
to Rent Expense for $1,010.00 and the credit to Cash for $1,010.00. While
this entry is wrong because it should be for $1,100.00, that’s irrelevant. The
debit of $1,010.00 is equal to the credit of $1,010.00. Debits equaling
credits is purely a mechanical/technical issue unrelated to the correctness
of the journal entry made. Therefore, focus on the numbers while following
these steps:
1. Get several different-colored highlighters and make a copy of the
journals.
2. Set the original journals aside. You’ll use them only to make the
correction when you’ve found a mistake.
3. Look at each journal entry. Look to see that the first entry has a
debit equal to the amount of the credit. If they’re the same or
equal for a multiple-line entry, take a yellow highlighter and
highlight those numbers. Continue doing this for each and every
journal entry. When you come across a journal entry that has
multiple line items, such as the payroll entry, do the math several
times when adding up the debit or credit. Do each and every
journal entry this way. Don’t just add up the debits on the page
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Course Name:Bookkeeping Project
and the credits on the page to see that they equal. You need to
look at each journal entry.
4. If you find an error, correct the original copy of the journal and the
associated G/L account. If the error is in the amount that makes
your debits equal your credits, then you’re finished. If not, then
you must continue on. Remember, just like a bank reconciliation, if
you’re off by some amount there may be multiple errors that net
out to that amount. Therefore, if you’re still off, keep looking.
5. If you’ve gone through all of the journals and have highlighted all
the journal entries but haven’t found the error, then you’ll need to
make a copy of the General Ledger. Put the original aside.
6. Using the copy of the highlighted journals and the copy of the G/L,
take a different colored highlighter and begin checking the posting
of the journal entries to the G/L accounts.
7. This time, you’re not looking at each entry. Instead, you’re looking
at each line item of each entry. Look at your first journal entry and
the first line item, which should be a debit (it should be a debit
because when making correct journal entries, the debits are listed
first before the credits) and look at the G/L account to which it was
posted. Is it on the debit side of the account? Is it the same exact
number? If the answer to these two questions is yes, then
highlight the number in the journal and the number in the ledger
signifying that it’s correct. Go through each and every line item in
each and every journal entry, highlighting when the posting is
correct.
8. If an error is found, correct it on the original. Again, if the
correction brings the total debits back in line to equal your credits,
you should be finished. If not, you must keep looking.
9. If you highlight all of the journal entries and their associated
postings to the G/L accounts and haven’t found the error, it’s time
to do the math to get the balances in the G/L accounts. In a G/L
account, add up the debits several times. Add up the credits
several times. Subtract one from the other, giving you a balance.
Whichever total figure was greater, the debit or the credit, the
balance goes on the greater side. If the balance is correct, then
place a checkmark next to the figure. If an error was made, correct
it on the original copy of the G/L.
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10. If no error to the balances of the G/L accounts has been found,
make a copy of the Worksheet and set the original aside. Get out
another colored highlighter and begin with the first G/L account.
Verify that the balance of the debit or the credit has been
transferred to the Worksheet correctly—that is, it’s on the correct
debit or credit side and in the correct amount. If so, then highlight
the G/L account balance and the figure on the Worksheet. If not,
make the correction on the original. If the correction brings the
total debits back in line to equal your credits, you’re finished. If
not, you must continue.
11. If you’ve highlighted all of the figures on the Worksheet, the last
thing to do is to foot the debits and credits on the Worksheet
several times for accuracy. The total amounts should be equal.
12. If you focus and follow this procedure, you should be able to find
the error or errors and correct them.
Sometimes, you can get to the end of this procedure and still have your
debits not equal the credits. If this happens, then you not only made an
error when you were originally doing the books, but you also then made an
error somewhere in doing the procedure and you should go back through it
again, making fresh copies of the original books.
There’s no excuse for the debits not equaling the credits. This is the
fundamental, underpinning rule of bookkeeping. Debits equaling credits
goes a long way toward preventing “cooking the books.” It’s the foundation
of financial statements and the basis of the accounting equation. The
accounting equation is found on the Balance Sheet, and if it doesn’t
balance, something is wrong and the statement has no credibility. If the
financial statements are fudged to bring them into balance, this opens up
the company to legal liabilities.
Assuming that the debits equal the credits in the Trial Balance columns of the
Worksheet, making adjusting/ correcting entries is the next step in the process of
closing out the period. In the workplace it’s usually the controller/accountant who
handles the worksheet, making the adjusting journal entries, creating the financial
statements, and making the entries to close out the accounting period. You’re
doing these procedures to become familiar with the process. It’s also possible
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Course Name:Bookkeeping Project
that the company will need financial statements for its own internal use. Instead
of paying a CPA to create financial statements that will never be seen outside the
company, they’ll look to you (especially if you’re a full-charge bookkeeper), to
create those financial statements.
To make adjustments, look at each G/L account to make sure it’s correct. You
start at the top of the Trial Balance and work your way down, account by account.
If an adjusting entry does need to be made, it should be dated on the last day of
the period (12/31/XX for the project) to have it go into the correct accounting
period.
Is the G/L Cash—Business Checking account balance the same as the
Check Register? If not, an adjusting entry might need to be made to
correct the discrepancy.
The reason for the word “might” is because the Check Register must be
reconciled to the Bank Statement for the period. In the workplace, you
would do a bank reconciliation and make adjusting entries for things like
service charges, NSF charges, errors in amounts, etc. However, for this
project, we’re assuming that the balance in the Check Register is the
same balance on the Bank Statement and no adjusting entry is needed
if your G/L Cash account has the same balance as the Check Register.
If not, then an entry would need to be made to correct the error. What
you don’t do is go back and change the incorrect entry. Instead, you
should make the adjusting entry with an explanation of the error and
what this adjusting journal entry is doing to correct it. This is what you
do whenever you’re correcting an error. You never just go back and
change the original entry. Doing this violates GAAP.
Is the Petty Cash imprest amount $500.00? If yes, then no adjusting
entry needs to be made.
Create an Accounts Receivable Subsidiary Ledger Trial Balance. This is
nothing more than a listing of the A/R accounts and the balances in
those accounts with a total amount, similar to a G/L Trial Balance (T/B).
(The same will be done for the Accounts Payable Subsidiary Ledger
and G/L A/P account.) Are the balances in the Accounts Receivable
Subsidiary Ledger Accounts correct? If not, then the error needs to be
found and an adjustment made. If yes, is the total balance of the
Subsidiary Ledger the same as the balance in the G/L A/R account? If
so, then no adjusting entry needs to be made. If not, then the error
needs to be found and an adjustment made.
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Extend the value (calculate the total amount) of the Merchandise
Inventory from the physical inventory Betty gave you as the
Merchandise Inventory Valuation. This amount should be the same as
the amount in the G/L Merchandise Inventory account. If not, an
adjustment should be made. Note: Before making that adjusting entry,
go back over the transactions for the month and look at those that
affected Merchandise Inventory. At the beginning of the period, the
amount in the G/L account was the same as the physical inventory at
the end of the accounting period in November. Therefore, whenever an
item was taken out of or put into the physical inventory, a journal entry
should have been made to Merchandise Inventory. The balance in the
account should have always matched the physical inventory because
Basswood Furniture uses the specific ID method of inventory. ( Specific
ID is used when you can specifically account for each item. For
example, in a car lot that has 10 cars in inventory, you know each
specific car’s VIN. When the 2011 Cadillac gets sold, you know exactly
which one should be removed from inventory and its cost. It’s not useful
for something like keeping an inventory of M&Ms. How do you know
which bag is sold or stolen?)
Extend the value of the Office Supplies Inventory from the physical
inventory Billie gave you. The Office Supplies Inventory Valuation
comes to $178.46. (You’re not being given the specific breakdown of the
physical inventory. You’ll just use the figure of $178.46 as the value of
the physical inventory. You don’t need to create the Office Supplies
Inventory Valuation for the project.) Adjust the Office Supplies Inventory
to the correct amount.
Rent was prepaid at the beginning of the year. Using the information
provided to you when you first started working, make an adjustment to
the Prepaid Rent.
Does an adjusting entry need to be made for Prepaid Advertising, and if
so how much?
The Vehicles account should be the same because there were no new
purchases. However, an adjusting entry for depreciation needs to be
made in the Accum. Depr.—Vehicles account. Take the figure from the
Schedule of Depreciation.
The air ventilation/dust collection system was purchased. Make sure the
balance in the Equipment account is correct and make the adjusting
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Course Name:Bookkeeping Project
entry for depreciation in the Accum. Depr.—Equipment account. Take
the figures from the Schedule of Depreciation.
The Office Furniture and Equipment account should be the same
because there were no new purchases. However, the adjusting entry for
depreciation needs to be made in the Accum. Depr.—Office Furniture
and Equipment account. Take the figures from the Schedule of
Depreciation.
Verify the balance in the Accounts Payable Subsidiary Ledger with the
balance in the G/L A/P account the same way that you did with the G/L
A/R.
On Friday, you received the time cards for the P/E 12/30/XX. Since the
next pay date isn’t until 01/06/XX an adjusting journal entry needs to be
made in the Payroll account to get the payroll into the correct
accounting period. Calculate and make the adjusting accrued payroll
entry. ( Note: Once this accounting period is closed, additional journal
entries would need to be m…