LEARN HOW TO APPLY ACCOUNTING CYCLE FOR P

Capital contribution entry: Dr Cash/Assets

Cr Owner's Capital
Ex:
Dr Cash 100,000
Cr Peter's Capital 100,000
Capital withdrawal entry: Dr Owner's Withdrawal
Cr Cash
Ex:
Dr Peter's Withdrawal 2,000
Cr Cash 2,000
Proprietorship will not declare and pay Dividends
Instead of preparing Retained earnings statement, Proprietorship prepare Statement of changes in Owner's equity. All othe
Closing entries book to Capital account.

PROPRIETO
G CYCLE FOR PROPRIETORSHIP

in Owner's equity. All other section are the same.

PROPRIETORSHIP'S FINANCIAL STATEMENTS

CORPORATION'S FINANCIAL STATEMENTS
On October 1, 2022, Bao Nguyen launched a computer services company called Business Solutions, which
provides consulting services, computer system installations, and custom program development. Bao Nguyen
adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial
statements on December 31, 2022. The company’s chart of accounts follows.
101 Cash 403 Computer services revenue
106 Accounts receivable 612 Depreciation expense—Office equipment
126 Computer supplies 613 Depreciation expense—Computer equipment
128 Prepaid insurance 623 Wages expense
131 Prepaid rent 637 Insurance expense
163 Office equipment 640 Rent expense
164 Accumulated depreciation—Office equipment 652 Computer supplies expense
167 Computer equipment 655 Advertising expense
168 Accumulated depreciation—Computer equipment 676 Mileage expense
201 Accounts payable 677 Miscellaneous expenses
210 Wages payable 684 Repairs expense—Computer
236 Unearned computer services revenue 301 Bao Nguyen, Capital
302 Bao Nguyen, Withdrawals
Oct. 1 Bao Nguyen invested $45,xxx cash, a $20,000 computer system, and $8,000 of office equipment in
the company.
2 The company paid $3,3xx cash for four months’ rent.
3 The company purchased $1,420 of computer supplies on credit from Harris Office Products.
5 The company paid $2,220 cash for one year’s premium on a property and liability insurance
policy.
6 The company billed Easy Leasing $4,8xx for services performed in installing a new web server.
8 The company paid $1,420 cash for the computer supplies purchased from Harris Office Products
on October 3.
10 The company hired Lyn Addie as a part-time assistant for $125 per day, as needed.
12 The company billed Easy Leasing another $1,4xx for services performed.
15 The company received $4,8xx cash from Easy Leasing as partial payment on its account.
17 The company paid $805 cash to repair computer equipment that was damaged when moving it.
20 The company paid $1,728 cash for advertisements published in the local newspaper.
22 The company received $1,4xx cash from Easy Leasing on its account.
28 The company billed IFM Company $5,208 for services performed.
31 The company paid $875 cash for Lyn Addie’s wages for seven days’ work.
31 Bao Nguyen withdrew $3,6xx cash from the company for personal use.

Nov. 1 The company reimbursed Bao Nguyen in cash for business automobile mileage allowance (Bao Nguyen logged 1,000 miles at $0.32
2 The company received $4,633 cash from Liu Corporation for computer services performed.
5 The company purchased computer supplies for $1,125 cash from Harris Office Products.
8 The company billed Gomez Co. $5,668 for services performed.
13 The company received notification from Alex’s Engineering Co. that Business Solutions’ bid of
$3,950 for an upcoming project is accepted.
18 The company received $2,208 cash from IFM Company as partial payment of the October 28 bill.
22 The company donated $25x cash to the United Way in the company’s name.
24 The company completed work for Alex’s Engineering Co. and sent it a bill for $3,950.
25 The company sent another bill to IFM Company for the past-due amount of $3,000.
28 The company reimbursed Bao Nguyen in cash for business automobile mileage (1,200 miles at $0.32
per mile).
30 The company paid $1,750 cash for Lyn Addie’s wages for 14 days’ work.
30 Bao Nguyen withdrew $2,xxx cash from the company for personal use.

Dec. 2 Paid $1,025 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
3 Paid $500 cash for minor repairs to the company’s computer.
4 Received $3,950 cash from Alex’s Engineering Co. for the receivable from November.
10 Paid cash to Lyn Addie for six days of work at the rate of $125 per day.
14 Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,000 on a proposed project has been accepted. Alex’s paid a $1,500 cash a
15 Purchased $1,100 of computer supplies on credit from Harris Office Products.
16 Sent a reminder to Gomez Co. to pay the fee for services recorded on November 8.
20 Completed a project for Liu Corporation and received $5,625 cash.
22–26 Took the week off for the holidays.
28 Received $3,000 cash from Gomez Co. on its receivable.
29 Reimbursed Bao Nguyen for business automobile mileage (600 miles at $0.32 per mile).
31 Bao Nguyen withdrew $1,500 cash from the company for personal use.

The following additional facts are collected for use in making adjusting entries prior to preparing financial
statements for the company’s first three months:
a. The December 31 inventory count of computer supplies shows $580 still available.
b. Three months have expired since the 12-month insurance premium was paid in advance.
c. As of December 31, Lyn Addie has not been paid for four days of work at $125 per day.
d. The computer system, acquired on October 1, is expected to have a four-year life with no salvage value.
e. The office equipment, acquired on October 1, is expected to have a five-year life with no salvage value.
f. Three of the four months’ prepaid rent has expired.
Complete the accounting cycle for the 3 months ended Dec 31, 2022 until you finish their 3-month financial statements
and post-closing TB at Dec 31, 2022. You could use T accounts instead of Ledgers in posting step.
guyen logged 1,000 miles at $0.32 per mile).
epted. Alex’s paid a $1,500 cash advance to Business Solutions.
 GENERAL JOURNAL

Date Account Titles and Explanation P.R. Debit

1-Oct Cash 101 45,359
Computer Equipment 167 20,000
Office Equipment 163 8,000
Bao Nguyen, Capital
Investment of Bao Nguyen in the company

2-Oct Prepaid rent 131 3,359

Cash 101
Paying cash for four months's rent

3-Oct Computer supplies 126 1,420

Accouts Payable 201
Purchasing computer supplies on credit from Harris Office Products

5-Oct Prepaid Insurance 128 2,220

Cash 101
Paying cash for one year's premium insurance

6-Oct Accounts receivable 106

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Credit

73,359

3,359

1,420

2,220