Bus-fp3061 fundamentals of accounting overview: complete a 3-part

BUS-FP3061 Fundamentals of Accounting

OVERVIEW:

Complete a 3-part assessment in which you create journal entries for a variety of business events, test your recall of accounting fundamentals by answering a series of questions, and identify and prepare entries for the corporate ownership business type.

Although many small businesses might operate on a cash basis, most of the larger ones use the accrual basis to record business events in the general journal. Learning the language of business is very challenging. There are so many terms, procedures, processes, and dos and do nots that keeping track of all of them requires a separate space in one’s brain. There are three business ownership types: (1) proprietorship, (2) partnership, and (3) corporation. Many of their accounting transactions are similar. However, there are some business events that require special transaction handling in accounting entries.

RESOURCES:

Templates for Parts 1-3, attached

INSTRUCTIONS:

Part 1 (See attached template for data to be used) – Although many small businesses might operate on a cash basis, most of the larger ones use the accrual basis to record business events in the general journal. In this assessment, apply your knowledge of various business events that require journal entries to be made.

For this part of the assessment, use the Assessment 4, Part 1 Template to create journal entries for each of the following business events for Magnolia Greens Frisbee Golf Course:

Part 2 – (See attached template for questions to answer)

Part 3 – There are three business ownership types: (1) proprietorship, (2) partnership, and (3) corporation. Many of their accounting transactions are similar. However, there are some business events that require special transaction handling in accounting entries.

For this part of the assessment, use the Assessment 4, Part 3 Template to identify and prepare entries for the corporate ownership business type.

Imagine you are an accountant for J. Malone’s Law Firm, Inc. The accounts and transactions of the firm are listed below. Analyze each transaction. Identify the account or accounts to be debited and credited and, using the provided template, prepare a journal entry for each in the proper format.

Here is an example to record the owner’s investment to start the business:

• Cash: $54,000.
• Common stock: $54,000.

Use the following account titles for this scenario:

Assets

• Cash.
• Accounts receivable.
• Prepaid rent.
• Office equipment.
• Automobiles.

Liabilities

• Accounts payable.
• Interest payable.
• Note payable.

Owner’s Equity

Expenses

• Automobile expense.
• Rent expense.
• Utilities expense.
• Salaries expense.
• Interest expense.
• Telephone expense.

Revenues

Transactions

Justin Malone:

• Invested $54,000 in cash to start the business.
• Paid $3,000 for 3 month’s rent.
• Bought a used automobile for the firm for $16,000 in cash.
• Performed services for $3,000 in cash.
• Paid $400 for automobile repairs.
• Performed legal services for $3,750 on credit.
• Borrowed $25,000 from the local bank to help expand his business.
• Purchased office chairs for $2,100 on credit.
• Received $1,800 from credit clients.
• Paid $1,000 on account to reduce the amount owed for the office chairs (purchased in item 8).
• Issued a check for $560 to pay the monthly utility bill.
• Purchased office equipment for $8,400. Paid half in cash; the remainder to be paid in 30 days.
• Issued a check for $5,680 to pay salaries.
• Performed legal services for $1,850 in cash.
• Performed legal services for $2,600 on credit.
• Collected $1,600 on accounts receivable from charge clients.
• One month’s worth of rent (paid in item 2) has expired.
• One month’s interest $145 accrued on the note payable (from item 7).

…………………………………………………………………………………………………………………………………………

For this assessment, use the Assessment 4, Part 2 Template to record your answers to the following short-answer questions designed to test your recall of accounting fundamentals.

1.      Define the internal and external users of accounting data. What data would each group most likely want to review? Provide examples of each user type.

2.      Describe the role ethics plays in the operation of an accounting system. Include a couple of examples.

3.      Select three among the several accounting conventions prescribed by law, regulators, and accounting organizations. For each selection, describe its purpose and provide an example of how it would be applied to an accounting system.

4.      Describe each of the three main financial statements—the end products of the work that takes place in an accounting system over a period of time—studied in the course. What does each statement present? Why is it important to prepare these? Who uses the information in the statements? Describe the interrelationship among the three statements.

5.      Discuss the rules of debit and credit as apply to each of the account types that would appear on a company’s balance sheet and income statement. Identify the normal balance for each account type and provide an example event for each. Analyzing business events requires the accountant to make several judgments about the facts contained in the event.

BUS-FP3061 – Fundamentals of Accounting

Instructions

Accounts to be used:

·         Cash.

·         Prepaid insurance.

·         Land.

·         Buildings.

·         Equipment.

·         Accounts payable.

·         Unearned service revenue.

·         Owner’s capital.

·         Owner’s drawings.

·         Service revenue.

·         Advertising expense.

·         Salaries and wages expense.

Leave a space between each dated transaction.