Tuft It Out Accounting Cycle Assgn

Complete Accounting Cycle – Journalizing …

Tuft It Out is a new carpet & furniture cleaning business started by Tony Ufton. The business will clean carpets and upholstered furniture for residential and commercial clients. Tony officially started the business as of December 1, 2012. For the last couple of weeks of November, Tony had been setting up the business and had done a couple of jobs for some of his friends and businesses owned by friends. Tony had taken an introductory course in accounting and had set up a chart of accounts that he wanted to use as a starting point.

Chart of Accounts – proposed by Tony

As you journalize, jot new accounts in the blanks below, if you need more space to jot them to the right of the chart.

100 Cash 210 Accounts Payable – Acme

105 A/R – Proper T Realty Ltd. 250 Bank Loan

130 Office Supplies 300 T. Ufton Capital

135 Cleaning Supplies 400 Carpet Cleaning

150 Office Furniture 410 Upholstery Cleaning

160 Cleaning Equipment 502 Wages

165 Office Equipment 505 Supplies Expense

170 Work Vehicles 510 Rent Expense

515 Repair & Maintenance

520 Advertising Expense

530 Utilities Expense

590 Miscellaneous Expenses

Start-up In an effort to be ready to go, Tony had purchased some cleaning equipment ($5,500) and some cleaning supplies ($450) and some letterhead, blank invoices, etc. ($225). The supplies he purchased from Periodic Chemical Cleaners and Word Press Printing with his own debit card. An invoice was received from Acme Industrial Suppliers (A7420) for the cleaning equipment. When applying for a business loan, Tony had opened a business bank account and transferred $20,000 of his funds into the account. Proper T Realty was a business owned by Tony’s friend Kate. Tony is going to rent some warehouse/office space from her business. Tony had completed a cleaning of the Kate’s offices and made out the first invoice (TIO-0001) for $1,085 $800 carpet cleaning and $285 for cleaning of furniture in the reception area.

MEMO: Re: Start-up

From the ‘start-up’ transactions I completed, the business will begin with:

Cash $20,000 Office Supplies $225 Cleaning Supplies $450

Cleaning Equipment $5,500 A/R – Proper T $1085 A/P – Acme $5,500

Carpet Cleaning $800 Upholstery Cleaning $285 Thanks - Tony

Journalizing: Whilst you journalize the entries it might be a good idea to jot down (with the ‘Chart of Accounts’ on 1st page) the new accounts required (with numbers). If you do this before you setting up the ledger for posting, then it easier to set up the journal pages and keep accounts in the proper groupings. 1. Record an ‘opening entry’ in the general journal per the memo on start-up from Tony. 2. Journalize the following entries for the first month of operations.

Dec. 1 Cheque issued to Proper T Realty ($3,800) as initial rent payment on warehouse/office space rented – the payment was rent for the first six months plus a security deposit. Memo from Tony attached indicating that this payment should be placed in a new current asset account called “Prepaid Rent” which will represent ‘unused rent’ and should be listed between A/R accounts and the supplies accounts.

2 Purchase invoice from Shylock Automotive for the purchase of 2 used utility vans. Invoice indicated receipt of a funds transfer from the business account ($18,000) and an outstanding balance of $20,000 that was financed through an auto loan.

4 Cheque issued to Manulife Financial ($2,520) for business insurance policy. This was a multi-year policy (effective December 1, 2012). Similar to the rent above, record this in an asset account called “Prepaid Insurance” which will appear above the Prepaid Rent account from the above transaction.

5 Tony placed ads with the local newspaper ($175) and radio stations ($240). All were paid with company debit card and receipts (KWR-2398 and KFM1498) were submitted.

6 Memo from Tony indicating that his personal computer, printer, router, etc. were now in the office and being used solely for the business purposes. Originally purchased for $2,580 but now valued (by Carbon Computing) as $1,350.

8 Invoices (TOI-002, TOI-003 and TOI-004) issued to Sysco Ltd. ($1,350), Schluter Automotive ($595) and Manulife Financial ($2,830). Breakdown was $3,950 for carpet cleaning and $825 for furniture cleaning.

8 Invoice received from Sunar Furniture ($1,897) for desk, table, chair, room divider and file cabinet to be use in the office area.

9 Cheque issued to Acme ($5,500) as payment for equipment purchased at start-up (A7420).

10 Debit memo (DM-773) received from bank indicating that the loan funds ($15,000) had been deposited in the business account. Tony had called the bank manager who apologized for not having the funds in earlier and indicated that there would not be any charges if the account had been in an overdraft position as a result.

10 Cheque issued to B. Taylor ($95) as an allowance complaint about stains which were not removable. Tony would like all discounts and allowances given to be kept track of by the accounting system. Create an account called ‘Sales Discounts’ (#450) which will be what is called a ‘contra-revenue’ account – it will be in the revenue section but will have a debit balance which will be subtracted from the 2 revenue accounts to give “Net Sales”.

10 Invoice (MB-7093) received from McBean Machines for purchase of industrial carpet cleaner ($3,190) a second smaller carpet cleaner ($1,260) and 5 boxes of disposable cleaning pads used with carpet cleaners ($675).

11 Invoice received from Sign Age ($350) for rental of lit signs announcing the new business and location.

12 Cheque issued ($510) to Tony for expense report submitted showing expenditures on gas/oil etc. for vans ($230), office supplies ($200) and miscellaneous expenses ($80).

14 Cheque issued to McBean Machine ($4,920) as payment for invoice MB-7093 less a 4% discount for early payment.

14 Tony purchased a new computer & peripherals at Carbon Computing ($2,643). The computer was for Tony and his family (replacing his old computer now used by the company). The invoice submitted by Tony indicated that $500 had been paid with the company debit card and the remainder was due in 9 months. The balance owing will be paid by Tony personally.

15 Cash receipts summary for first 2 weeks of December (deposits are made daily but will be recorded in the accounting records every 2 weeks):

Cash customers – carpet $7,947 Cash Customers – furniture 3,775 Proper T Realty (TOI-001) 1,085 Schluter Automotive (TOI-003) 577 ($595 less $18 discount) Total $13,384

17 Invoice received from Word Press ($800) for purchase of promotional flyers (2,500) to be distributed to customers and potential customers.

19 Invoices (TOI-005 to TOI-008) issued to Sysco Ltd. ($990), 303 Logistics ($1,475), Bingeman’s Entertainment ($3,065) and Manulife Financial ($1,790). Breakdown was $5,845 for carpet cleaning and $1,475 for furniture cleaning.

23 Invoice received from BRE Automotive ($367) for repairs to company vehicle.

23 Credit invoice issued to Bingeman’s Entertainment ($250) as a discount for them signing a 1-year contract for regular cleaning of conference and entertainment complexes. Additional work will be completed as required/requested.

28 Invoice received from Conestoga Mall Ltd. ($425) for rental of space in mall. Tony had a display booth set-up in the mall to promote the new business. Customers of the mall could bring in a small area carpet or piece of furniture in and employees would demonstrate the equipment and clean the item for free.

29 Cash receipts summary for last 2 weeks of December:

Cash customers – carpet $9,495 Cash Customers – furniture 4,533 Sysco (TOI-002 & 005) 2,246 ($1,350+$990 less $94 discount **) Manulife Financial (TOI-00) 2,717 ($2,830 less $113 discount) Total $18,991

** discount taken on TOI-002 ($94) was too late and will not be allowed; a statement showing the outstanding balance will be sent to Sysco Ltd.

30 Direct Deposit Summary indicates transfer of funds to employees ($3760) for the first 2 weeks of work and what will be a regular transfer to Tony ($2,100).

Month-end / Year-end

The business has only been in operation for 1 month but this is also the end of a month and as such year-end procedures must be completed. Make a list of questions you might ask Tony so that you can make accruals and adjustments for the year-end.

General Journal Page 1

Date Particulars PR Debit Credit

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General Journal Page __


Tuft It Out Accounting Cycle Assgn

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