Worked Example:

At the end of its first month operations, Truong Answering Service has the following unadjusted trial
balance.

Truong Answering Service

Trial Balance
31 August 2020
Debit ($) Credit ($)
Cash 5400
Accounts receivable 2800
Prepaid insurance 2400
Supplies 1300
Equipment 60000
Notes payable 40000
Accounts payable 2400
Natalie Truong, Capital 30000
Natalie Truong, Drawings 1000
Service revenue 4900
Salaries expense 3200
Utilities expense 800
Advertising expense 400
77300 77300

Other data consist of the following:

a. Insurance expires at the rate of $200 per month.
b. There are $1000 of supplies on hand as at 31 August.
c. Monthly depreciation on the equipment is $900.
d. Interest of $500 on the notes payable has accrued during August.

Instructions:
a. Prepare a worksheet
b. Prepare a classified statement of financial position assuming $35,000 of the notes payable are
long-term.
c. Journalise the closing entries.
 Truong Answering Service
Statement of Financial Position
31 August 2020
Non-current assets $ $ $
Equipment 60000 900 59100

Current assets
Cash 5400
Accounts receivable 2800
Prepaid insurance 2200
Supplies 1000 11400
Total Assets $70500

Current liabilities
Notes payable 5000
Accounts payable 2400
Interest payable 500
Total current liabilities 7900
Non-current liabilities
Notes payable 35000
Total liabilities 42900
Owner’s Equity
Natalie Truong, Capital 27600*
Total liabilities and owner’s equity $70500

* Natalie Truong, Capital, $30,000 less drawings $1000 and loss $1400.

Closing entries:
Date Details Debit ($) Credit ($)
Aug 31 Service Revenue 4900
Profit and loss summary 4900

Aug 31 Profit and loss summary 6300

Salaries expense 3200
Utilities expense 8000
Advertising expense 400
Insurance expense
Supplies expense
Depreciation expense
Interest expense

Aug 31 Natalie Truong, Capital 1400

Profit and loss summary 1400

Aug 311 Natalie Truong, Capital 1000

Natalie Truong, Drawings 1000
Complete Accounting Cycles with Worksheet

Eve Tsai opened Tsai’s Window Washing on 1 July 2020. During July the following transactions were
completed.

July 1 Tsai invested $12000 cash in the business.

1 Purchased used truck for $6000, paying $3000 cash and the balance on account.
3 Purchased cleaning supplies for $1300 on account.
5 Paid $1200 cash on 1-year insurance policy effective 1 July.
12 Invoiced customers $2500 for cleaning services.
18 Paid $1000 cash on amount owed on truck and $900 on account owed on cleaning
supplies.
20 Paid $1200 cash for employee salaries.
21 Collected $1400 cash from customers invoiced on 12 July.
25 Invoiced customers $3000 for cleaning services.
31 Paid petrol expenses for the month on the truck $200.
31 Withdrew $900 cash for personal use.

The charts of accounts for Tsai’s Window Washing contains the following accounts:

Cash Accounts receivable Cleaning supplies

Prepaid insurance Equipment Accumulated depreciation – equipment
Accounts payable Salaries payable Capital
Drawings Service revenue Profit and loss summary
Petrol expense Depreciation expense Cleaning supplies expense
Insurance expense Salaries expense

a. Journalise and post the July transactions.

b. Prepare a trial balance as at 31 July on a worksheet. ($20,000)
c. Enter the following adjustment on the worksheet. (adjusted trial balance $22,300)
d. Prepare the income statement and a statement of changes in equity for July and a classified
statement of financial position as at 31 July. (profit $4000, Total assets $18,200)
e. Journalise and post adjusting entries.
f. Journalise and post-closing entries.
g. Prepare a post-closing trial balance as at 31 July. (post-closing trial balance $18,400)
1. The following trial balance was extracted from the books of Picollo at 31 May 2011.

$ $
Land and Buildings, cost 100,000
Accumulated depreciation – Land and Buildings 40,000
Plant and Machinery, cost 76,000
Accumulated depreciation – Plant and Machinery 32,000
Accounts receivable 14,000
Accounts payable 6,300
Bank 5,500
Sales 300,000
Purchases 190,000
Inventory 30,000
Wages 56,000
Heating and lighting 17,600
Repairs to Plant and Machinery 5,100
Advertising 7,000
Drawings 27,100
Capital 150,000
528,300 528,300

Further information:
 Inventory at 31 May 2011 is $42,000.
 Land and buildings at cost is made up as follows: Land $20,000 and Buildings $80,000.
 Buildings are depreciated at 4% per annum on the straight-line basis.
 Plant and machinery are depreciation at 25% per annum on the reducing balance basis.
 At 31 May 2011, $1800 was owing for heating and lighting. $6000 of the cost of advertising
related to the year beginning 1 June 2011.
 In the year ended 31 May 2011, Piccolo had taken inventory costing $4,000 for his personal use.
No entry had been made in the books for this.

Prepare:

a. Piccolo’s Income Statement for the year ended 31 May 2011.

b. Piccolo’s Statement of Financial Position at 31 May 2011.
2. Wilhelmina is a trader whose financial year ends on 31 March. Her trial balance at 31 March 2011
was as follows:

$ $
Property, cost 45000
Accumulated depreciation – Property 13500
Plant and Machinery, cost 21000
Accumulated depreciation – Plant and Machinery 9200
Office Equipment, cost 7000
Accumulated depreciation – Office Equipment 2400
Accounts receivable 1526
Accounts payable 973
Inventory 13000
Bank 1964
Wages 13017
Electricity 1012
Sundry expenses 1234
Repairs to Machinery 643
Interest on loan 1000
Sales 80600
Purchases 50914
Returns 1590 825
Long-term Loan 20000
Drawings 18598
Capital 50000
177,498 177,498

Further information:
 Inventory at 31 March 2011 cost $16,000.
 The loan was received in 2008 and is repayable in 2013. Interest on the loan is at the rate of 10%
per annum.
 The property was acquired on 1 October 2009 for a period of 15 years. It is being depreciated on
the straight-line basis.
 Plant and machinery are depreciated on the reducing-balance method at the rate of 25%.
 Office equipment is depreciated at 15% per annum on the straight-line basis.
 At 31 March 2011, $300 was owing for electricity, and sundry expenses of $180 had been
prepaid.

Prepare:

a. Wilhelmina’s Income Statement for the year ended 31 May 2011.

b. Wilhelmina’s Statement of Financial Position at 31 May 2011.