Assessment 1 Ankitkumar Parmar

ACCT 600 S00219729

(A)
Brown Cleaning and Gardening Services
General Journal
At the end of June, 2017

Date Particulars Debit ($) Credit ($)

June 01 Cash at Bank 120000
Capital 120000
(Capital brought in by Mr. Lorne Browne)
June 01 Prepaid Rent 7800
Cash at Bank 7800
(Advance Rent for 3 months)
June 02 Cleaning and Gardening Equipment 40320
Cash at Bank 8500
Account Payable 31820
(Cleaning and gardening equipment
purchased for cash and credit)

June 02 Washing Supplies 1060

Fuel and Oil Supplies 1740
Cash at Bank 2800
(Washing Supplies, and fuel and oil
supplies purchased)

June 03 Prepaid Advertisement 960

Cash at Bank 960
(Paid for 12 weeks of Advertisement in
advance)

June 06 Cash at Bank 180

Cash at Bank 2800
Cleaning Revenue 180
Lawn mowing Revenue 2800
(Received $180 for house cleaning and
$2800 for lawn mowing)

June 08 Cash at Bank 6400

Unearned Cleaning Revenue 6400
(Received two months cash in advance for
cleaning service to be rendered to a local
shopping Centre)

June 13 Cash at Bank 3000

Lawn mowing Revenue 3000
(Cash Received for lawn mowing services
provided a week ago)
Assessment 1 Ankitkumar Parmar
ACCT 600 S00219729
June 14 Wages 1540
Cash at Bank 1540
(Wages paid to the assistant)

June 21 Cash at Bank 4090

Account Receivable 300
Cleaning Revenue 1600
Lawn mowing Revenue 2790
(Revenue received for lawn mowing and
cleaning services and also revenue )

June 28 Cash at Bank 4290

Cleaning Revenue 1760
Lawn Mowing Revenue 2530
(Cash for cleaning and previous week
outstanding income)

June 28 Wages Expense 1670

Cash at Bank 1670
(Casual wages paid to Assistant)

June 30 Drawings 4000

Cash at Bank 4000
(Drawing by owner Loren Browne)
Assessment 1 Ankitkumar Parmar
ACCT 600 S00219729

(B) Brown Cleaning and Gardening Services

Adjusting General Journal
At the end of June, 2017

Date Particulars Debit ($) Credit ($)

Jun 30 Wages Expense 620
(1) Wages Payable 620
(Accrued Wages to employee)

30 Washing Supplies Used 800

(2) Washing Supplies 800
(Washing supplies that have been used)

30 Fuel & Oil Supplies Used 990

(3) Fuel & Oil Supplies 990
(Fuel & Oil supplies that have been used)

30 Advertising Expense 320

(4) Prepaid Advertising 320
(Four weeks advertising expired)

30 Accounts Receivable 550

(5) Cleaning Revenue 550
(Cleaning services performed)

30 Unearned Cleaning Revenue 2 400

(6) Cleaning Revenue 2 400
(Three weeks’ cleaning services provided to
shopping centre)

30 Rent Expense 2 600

(7) Prepaid Rent 2 600
(Rent expense for the month of June)

30 Depreciation Expense 560

(8) Accumulated Depreciation 560
(Depreciation on cleaning and gardening
equipment for one month)
Assessment 1 Ankitkumar Parmar
ACCT 600 S00219729

Explanations:

1. The Assistant has performed additional services for the business but yet not
paid for that. So, Wages to assistant of an additional $620 needs to record as
a liability. An accrual wages entry is made by the business on 30 June to show
the additional expense and the corresponding liability.

2. Washing supplies were purchased for $1060 on 2 June and declared as an

asset. As the supplies are used for cleaning services, it needs to consider as the
expense and need to reflect in the reduction of the original asset on hand. On
30 June on hand washing supplies ware $260 means that $800 worth of
washing supplies are used for cleaning services.

3. Explanation of Fuel & Oil Supplies entry is same as above washing supplies
entry.

4. The advertising contract signed with Community Newspapers amounted $960

for 12 weeks. As the amount was paid in advance by the business, it is treated
as Prepaid expenses as an asset. But till 30 June, 4 weeks of advertise has been
published, hence, we need to post entry for 4 week advertising as expense and
remaining 8 week subscription can considered as asset.

5. On 29 June, cleaning services have been provided to clients but client have not
paid yet for services, so it must be invoice for the amount receivable. And the
entity is entitled to receive payment for services given hence, all receivables
need to consider in the period in which services are provided, and need to
enter as assets.

6. The shopping centre has paid $6400 advance for 2 months (8weeks) cleaning
service and business has already provided three weeks of cleaning services. So
we need to reduce our Unearned Revenue (liability) with $2400 ($6400*3/8)
and transferred to cleaning revenue.

7. On 1 June the business paid advance rent of $7800 for 3 months which was
entered as prepaid rent (asset) but at the end of month business utilised one
month rent of $ 2600. So we need to consider $2600 as expense and remaining
$5200 as prepaid rent (asset).

8. On 2nd June, the business has bought cleaning and gardening equipment of $40
320 and the useful life of this equipment is expected to be six years. Therefor
end of the month, depreciation of this equipment must be recorded to indicate
the usage of the equipment in the period. Depreciation is calculated as follows:
$40 320 ÷ 6 years = $6720 per year so $6720/12 = $560
Assessment 1 Ankitkumar Parmar
ACCT 600 S00219729

(C)
Brown Cleaning and Gardening Services
Adjusted Trail Balance
At the end of June, 2017

Account Debit($) Credit($)

Cash at Bank 113 490
Accounts Receivable 850
Prepaid Rent 5 200
Washing Supplies 260
Fuel & Oil Supplies 750
Prepaid Advertising 640
Cleaning and Gardening Equipment 40 320
Accumulated Depreciation 560
Accounts Payable 31 820
Unearned Cleaning Revenue 4 000
Wages Payable 620
Lorne Browne, Capital 120 000
Lorne Browne, Drawings 4 000
Cleaning Revenue 6 490
Gardening Revenue 11 120
Wages Expense 3 830
Advertising Expense 320
Rent Expense 2 600
Washing Supplies Used 800
Fuel & Oil Supplies Used 990
Depreciation Expense 560
Total ‘174 610 174 610
Assessment 1 Ankitkumar Parmar
ACCT 600 S00219729

(D) Closing Entry

Date Particular Debit($) Credit($)

30th June,2017 Close revenue accounts

(a)
Cleaning Revenue 6 490
Gardening Revenue 11 120
Profit or Loss Summary 17 610

(b) Close expense accounts

Profit or Loss Summary 9 100
Wages Expense 3 830
Advertising Expense 320
Rent Expense 2 600
Washing Supplies Used 800
Fuel & Oil Supplies Used 990
Depreciation Expense 560

(c) Close Profit and Loss accounts

Profit or Loss Summary 8 510
Lorne Browne, Capital 8 510

(d) Close drawings to capital

Lorne Browne, Capital 4 000
Lorne Browne, Drawings 4 000
Assessment 1 Ankitkumar Parmar
ACCT 600 S00219729

(E)

BROWNE CLEANING AND GARDENING SERVICES

Income Statement
for the month ended 30 June 2017 Debit($) Credit($)
INCOME
Cleaning revenue 6 490
Gardening revenue 11 120 17 610

EXPENSES
Wages expense 3 830
Advertising expense 320
Rent expense 2 600
Washing supplies used 800
Fuel & Oil supplies used 990
Depreciation expense 560 9 100
PROFIT 8 510

BROWNE CLEANING AND GARDENING SERVICES

Balance Sheet
as at 30 June 2017 Debit($) Credit($)
CURRENT ASSETS
Cash at bank 113 490
Accounts receivable 850
Prepaid rent 5 200
Washing supplies 260
Fuel supplies 750
Prepaid advertising 640
Total current assets 121 190
NON-CURRENT ASSETS
Cleaning and gardening equipment 40 320

Less: Accumulated depreciation (560)

Total non-current assets 39 760
Assessment 1 Ankitkumar Parmar
ACCT 600 S00219729
TOTAL ASSETS 160 950
CURRENT LIABILITIES
Accounts payable 31 820
Unearned cleaning revenue 4 000
Wages payable 620
TOTAL LIABILITIES 36 440
NET ASSETS 124 510

EQUITY
Lorne Browne, Capital 124 510
TOTAL EQUITY 124 510

(F) How Financial Statement can be used by stakeholder for decision making?

Financial Statement is structured reporting of company’s financial performance in

specific period of time (Australian Accounting Standards Board (AASB), 2015). It
provides information about entity’s assets, liabilities, income, expenses, equity, and
cash flows. There are mainly four types of financial statement;
1) Statement of Financial Position. It is also known as Balance sheet which includes
assets ,liability , equity like cash, inventory, plant, machinery, creditors, loans, owner’
capital, share capital.
2) Income Statement. It is also known as Profit & Loss account which includes
income and expenses of business over a period of time. For example, sales revenue,
dividend income, salaries, wages, rent, depreciation etc.
3) Cash Flow statement which shows cash and bank balance movement in specific
period. Cash movement can be by three ways that are operating activities, investing
activities, and financing activities. For example revenue from primary business
activity, purchase of plant or factory, cash from share capital, loan etc.
4) Statement of change in Equity which is known as statement of Retain Earning. It
shows movement in owner’s capital by issuing shares.

Stakeholders are the groups or people who have an interest in the activity and
outcome of a business and upon whom business depends to achieve its own
objectives(Harrison and Van Der Laan Smith, 2015). There are two sorts of
stakeholders in business; internal stakeholder and external stakeholder. Internal
stakeholders are the people inside the company. For example managers, employees,
board members etc. On the other hand, external stakeholders are the people who are
not directly part of the company. For example, shareholders, customers, suppliers etc.
How the users of financial statement utilize the information is presented below.
Assessment 1 Ankitkumar Parmar
ACCT 600 S00219729

Managers and Board members are key persons for any business. In today’s
competitive business world, they have focus on main two objectives; profitability and
liquidity. These indicators can be found in financial statement. By using such
indicator they can make changes in their financial policies that can lead to
profitability(Mihaela, 2008).

Employees can get appropriate information about organization future prospect,

financial stability and profitability of the business from the financial statement so that
they can know about their job security, retirement remuneration(Mihaela, 2008).

Shareholders can able calculate the risk and return on investment by assessing the
financial statement of the company so that they can make decision about their future
investment in the company (Accounting-simplified.com, 2017).

Creditors like banks and other financial institutes can see the creditability and
solvency means their ability to repay the loans. Moreover, they will get valuate of the
assets for the loans against capital goods(Mihaela, 2008).

The suppliers are mainly interested in checking, weather company able to carry out
its financial obligation or not. So that they can take decision on how many days credit
period to be given company for the payments(Mihaela, 2008).

Government departments, especially income tax authorities are interested in

company’s financial performance for the taxation purpose. Also they can utilize the
information to calculate the tax liability of the entity (accountingverse.com, 2017).

Customers utilize the financial statement to know company’s ability to continue in

future and stability in performance. For example, distributors are the customer of the
company who resell the company’s product. So for making decision about any
contract with the company data of financial statement are very important for them
(accountingverse.com, 2017).
Assessment 1 Ankitkumar Parmar
ACCT 600 S00219729

References :

Accountingverse.com. (2017). Users of Financial Statements - AccountingVerse.

[online] Available at: http://www.accountingverse.com/accounting-basics/users-of-

financial-statements.html [Accessed 7 Apr. 2017].

Accounting-simplified.com. (2017). Purpose of Financial Statements and Users of

Financial Statements. [online] Available at: http://accounting-

simplified.com/purpose-of-financial-statements.html [Accessed 7 Apr. 2017].

Australian Accounting Standards Board (AASB), (2015). Presentation of Financial

Statements. Australia, p.8.

Harrison, J. S. & Van Der Laan Smith, J. 2015. Responsible Accounting for

Stakeholders. Journal of Management Studies, 52, 935-960.

Mihaela, L. 2008. Regarding the users of financial statements and their information

needs. Studies and Scientific Researches : Economics Edition, 0, 49-55.