Miller Delivery Service completed the following transactions during December 2016: Dec. 1 Miller Delivery Service began operations by receiving $10,000 cash and a truck with a fair value of $20,000 from Robert Miller. The business issued Miller shares of common stock in exchange for this contribution. 1 Paid $1,000 cash for a four-month insurance policy. The policy begins December 1. 4 Paid $500 cash for office supplies. 12 Performed delivery services for a customer and received $2,000 cash. 15 Completed a large delivery job, billed the customer, $2,500, and received a promise to collect the $2,500 within one week. 18 Paid employee salary, $1,000. 20 Received $15,000 cash for performing delivery services. 22 Collected $800 in advance for delivery service to be performed later. 25 Collected $2,500 cash from customer on account. 27 Purchased fuel for the truck, paying $300 on account. (Credit Accounts Payable) 28 Performed delivery services on account, $700. 29 Paid office rent, $1,600, for the month of December. 30 Paid $300 on account. 31 Cash dividends of $3,000 were paid to stockholders. Requirements Requirements Record each transaction in the journal using the following chart of accounts. Explanations are not required. Post the transactions in the T-accounts. Prepare an unadjusted trial balance as of December 31, 2016. Prepare a worksheet as of December 31, 2016. (optional) Journalize the adjusting entries using the following adjustment data and also by reviewing the journal entries prepared in Requirement 1. Post adjusting entries to the T-accounts. Adjustment data: Accrued Salaries Expense, $1,000. Depreciation was recorded on the truck using the straight-line method. Assume a useful life of five years and a salvage value of $5,000. Prepaid Insurance for the month has expired. Office Supplies on hand, $100. Unearned Revenue earned during the month, $300. Accrued Service Revenue, $650. Prepare an adjusted trial balance as of December 31, 2016. Prepare Miller Delivery Service’s income statement and statement of retained earnings for the month ended December 31, 2016, and the classified balance sheet on that date. On the income statement, list expenses in decreasing order by amount—that is, the largest expense first, the smallest expense last. Journalize the closing entries, and post to the T-accounts. Prepare a post-closing trial balance as of December 31, 2016.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Miller Delivery Service completed the following transactions during December 2016:
Dec. 1 Miller Delivery Service began operations by receiving $10,000 cash and a truck with a fair value of $20,000 from Robert Miller. The business issued Miller shares of common stock in exchange for this contribution.
1 Paid $1,000 cash for a four-month insurance policy. The policy begins December 1.
4 Paid $500 cash for office supplies.
12 Performed delivery services for a customer and received $2,000 cash.
15 Completed a large delivery job, billed the customer, $2,500, and received a promise to collect the $2,500 within one week.
18 Paid employee salary, $1,000. 20 Received $15,000 cash for performing delivery services.
22 Collected $800 in advance for delivery service to be performed later.
25 Collected $2,500 cash from customer on account.
27 Purchased fuel for the truck, paying $300 on account. (Credit Accounts Payable)
28 Performed delivery services on account, $700.
29 Paid office rent, $1,600, for the month of December.
30 Paid $300 on account.
31 Cash dividends of $3,000 were paid to stockholders.
Requirements
Requirements
- Record each transaction in the journal using the following chart of accounts. Explanations are not required.
- Post the transactions in the T-accounts.
- Prepare an unadjusted
trial balance as of December 31, 2016. - Prepare a worksheet as of December 31, 2016. (optional)
- Journalize the
adjusting entries using the following adjustment data and also by reviewing thejournal entries prepared in Requirement 1. Post adjusting entries to the T-accounts.
Adjustment data:
- Accrued Salaries Expense, $1,000.
Depreciation was recorded on the truck using the straight-line method. Assume a useful life of five years and a salvage value of $5,000.- Prepaid Insurance for the month has expired.
- Office Supplies on hand, $100.
- Unearned Revenue earned during the month, $300.
- Accrued Service Revenue, $650.
- Prepare an adjusted trial balance as of December 31, 2016.
- Prepare Miller Delivery Service’s income statement and statement of
retained earnings for the month ended December 31, 2016, and the classified balance sheet on that date. On the income statement, list expenses in decreasing order by amount—that is, the largest expense first, the smallest expense last. - Journalize the closing
entries, and post to the T-accounts. - Prepare a post-closing trial balance as of December 31, 2016.
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