PF 061579

PF 061579.

PF           061579

Lesson 1: Business, Accounting, and You

The goal of this graded project is to create the following financial statements for J & L Accounting, Inc.:


Balance sheet

Income statement

Statement of retained earnings

Post-closing trial balance


The financial statements must be created in one Microsoft Word document (.doc or .docx  file). Alternatively, an Excel workbook may be  used (.xls or .xlsx file). The Word or Excel file will be  uploaded  for grading.




The project is to be  done by  hand with a pencil and paper. Use the blank forms provided. At the end of the project, you’ll be  given instructions  for creating  and uploading  the financial statements  in a Word or Excel file for grading.



Note:  The formatting of financial statements is important. They follow  Generally Accepted Accounting Principles (GAAP), which creates a uniformity of financial statements for analyz- ing. This allows for an easier comparison, as all businesses follow  GAAP. Therefore, the financial statements should be created exactly the same way shown or referenced in the text- book. Failure to do  so will result in a loss of points.


The project references “debits equaling credits.” This is a fun- damental principle of accounting that can’t be  violated and if so is not  acceptable under any circumstance. Debits not equaling credits  allows for “cooking of the books,” which is presenting false information. It also allows for embezzlement, which is theft by  management or employees. If debits don’t equal credits, the cause may be  a lack of understanding of accounting principles, such as those presented in the text- book and assigned homework problems, or a lack of focus

and concentration when making journal entries, posting to ledger accounts, or completing math. Remember—instructors are available to help you with material you may be  struggling with. Mistakes of the lack-of-focus variety are best corrected by  going back over the work until the error is found.


The accounting equation must balance on the balance sheet. This is another fundamental principle of accounting that can’t be  violated and if so is completely unacceptable. When the equation doesn’t balance and the numbers are “fudged,”

this is easily detectable by  someone who knows accounting. If your debits equal your credits and you understand  which general ledger accounts belong on which financial state- ments, then the accounting equation should balance. It’s really all about understanding the concepts and applying

that understanding.


The following financial statements are provided from the prior accounting period for J & L Accounting, Inc.:


a)  Post-closing trial balance b)  Balance sheet

c)  Income statement


d)  Statement of retained earnings


J & L Accounting, Inc. Post-Closing Trial Balance December 31, 2012




ACCOUNT TITLE                                                      DEBIT                  CREDIT


Cash, Business Checking 20,500.00  
Accounts Receivable  
Prepaid Rent  
Vehicles 48,000.00
Accumulated Depreciation, Vehicles   12,000.00
Equipment 3,600.00  
Accumulated Depreciation, Equipment   600.00
Accounts Payable    
Common Stock   38,000.00
Retained Earnings   21,500.00
Service Revenue    
Advertising Expense    
Rent Expense    
Office Supplies Expense    
Telephone Expense    
Utilities Expense    
Depreciation Expense    
TOTALS 72,100.00 72,100.00

J & L Accounting, Inc.

Balance Sheet

As of December 31, 2012




Cash, Business Checking     20,500.00
Accounts Receivable     0.00
Prepaid Rent




Less: Accumulated Depreciation, Vehicles 12,000.00   36,000.00
Equipment 3,600.00    
Less: Accumulated Depreciation, Equipment 600.00   3,000.00






Accounts Payable                                                                                                 0.00


TOTAL LIABILITIES                                                                                            0.00





Common Stock 38,000.00
Retained Earnings 21,500.00



TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                      59,500.00

J & L Accounting, Inc. Income Statement

For the Month Ending December 31, 2012




Service Revenue                                                                                          10,275.00




Advertising Expense 2,300.00  
Rent Expense 1,000.00
Office Supplies Expense 300.00
Telephone Expense 750.00
Utilities Expense 3,200.00
Depreciation Expense 1,100.00




J & L Accounting, Inc. Statement of Retained Earnings

For the Month Ending December 31, 2012



Retained Earnings, December 1, 2012 19,875.00
Add: Net Income 1,625.00




Less: Dividends          0.00
Retained Earnings, December 31, 2012 21,500.00

1)  Using the following blank forms (make as many copies as necessary), set up the general ledger accounts for the general ledger and insert the beginning balances for the accounts from the post-closing trial balance. The balances from the post-closing trial balance become the beginning balances of the accounts for the next account period.


PF 061579


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