WHITEGLOVES JANITORIAL SERVICE
A business case Presented to the Accountancy Department
In partial fulfillment of the Course requirements in ACTBAS1
Gutierrez, Patricia Lorenza D. Mallari, Kimberly Rose J. Ramos, Shiela Marie I. V24
10 December 2012
reliable and accurate financial statements.” Providing quantitative financial information about economic entities will not be possible without accounting. At the end of a certain period. Adjusting journal entries are non-standard entries that are made to correct an error in journalizing. etc. Everything in the business world works with the aid of this body of knowledge that is surely inevitable in such field of work. – on their net income or net loss. about economic entities. guidelines and standards called Generally Accepted Accounting Principles or GAAP which are established by the authorities. and poor application of accounting principles. regulators.
One thing that is required by GAAP is the construction of adjusting journal entries at the end of every period. Some possible errors committed in original journal entries are mathematical inaccuracies. customers. primarily financial in nature. creditors. such as transposition and transplacement errors. accrued revenue.INTRODUCTION
The Financial Recording Standards Council said that “Accountancy is a service activity. Adjusting journal entries is important to the modern-day accounting because it helps companies prepare financial
. made possible by the presentation of properly-organized. Adjusting journal entries cover the following accounts: accrued expense. depreciation and allowance for doubtful accounts. These are and should be corrected with the use of adjusting journal entries. It enables a company to properly record and report its operational activities to its stakeholders in compliance with the set of rules. accounting is the language of the business industry. Its function is to provide quantitative information. and their current financial position. ensuring that the book of accounts are in accordance to the GAAP. unearned revenue. the company declares and informs its stakeholders – investors. prepaid expense.
Mainly. that is intended to be useful in making economic decision.
To fund the expansion. they were not able to meet them. Kohl presented an erroneous Statement of Financial Position which was prepared and based on a trial balance. Ms. The bank. Kohl decided to expand their operations on July 1. confident that the business was able to meet the terms required. requires Whitegloves Janitorial Service to have P10 000 more current assets than its current liabilities at December 31. that will. Agreements were made between the two (2) parties. On December 31. Kohl acquired a bank loan on that same day for P25 000 at 10% per annum. in turn. 2012. If this is not met. too.
.statements that are accurate.
Whitegloves Janitorial Service started two (2) years ago by Nancy Kohl. Kohl presented the business’ Statement of Financial Position. 2014. On the contrary. reliable and complete Statement of Financial Position to the authorities for their bank loan. help them. 2012. Ms. payable in the following terms: P10 000 on July 1. Ms. and the balance on July 1. in their operations. 2012. then. the interest rate will rise up to 15% instead of 10%. reliable and complete. Since it performed exceptionally. 2013. With this they have to make adjusting journal entries to be able to present an accurate. not on an adjusted trial balance. Ms.
Accounts Receivable Service Income Adjusting Journal Entry
3 700 3 700
Supplies Expense Janitorial Expense Adjusting Journal Entry
2 700 2 700
Insurance Expense Prepaid Insurance Adjusting Journal Entry
1 600 1 600
Miscellaneous Expense Accounts Payable Adjusting Journal Entry
Interest Expense Interest Payable Adjusting Journal Entry
1 250 1 250
Depreciation Expense – Cleaning Equipment Accumulated Depreciation – Cleaning Equipment Adjusting Journal Entry Depreciation Expense – Transportation Equipment
2000 2 000
Accumulated Depreciation – Transportation Equipment Adjusting Journal Entry
.REPORT The following are the adjusted journal entries as of December 31.
Below is the adjusted report-form Balance Sheet for Whitegloves Janitorial Service as of December 31. 4. 2012:
WHITEGLOVES JANITORIAL SERVICE Statement of Financial Position 31-Dec-12 ASSETS Current Assets Cash Accounts Receivable Prepaid Expenses Total Current Assets Non-current Assets Property. Plant and Equipment TOTAL ASSETS LIABILITIES AND OWNER'S EQUITY Current Liabilities Trade and Other Payables Non-Current Liabilities Note Payable Total Liabilites Owner's Equity Nancy Kohl. 3. 6.Here are the following explanations for each adjusting entry made: 1. Capital TOTAL LIABILITIES AND OWNER'S EQUITY P Note P 1 6 500 12 700 5 700 P 24 900
49 000 73 900
15 000 29 250
44 650 73 900
Prepaid Expenses Janitorial Supplies Prepaid Insurance Total Note 2 .Transportation Equipment Total Note 3 .Cleaning Equipment Transportation Equipment Less: Accumulated Depreciation . Plant and Equipment Cleaning Equipment Less: Accumulated Depreciation .650 (P 24.Trade and Other Payables Notes Payable Accounts Payable Interest Payable Total
2 500 3 200 5 700
26 000 6 000 39 000 10 000
29 000 49 000
10 000 3 000 1 250 14 250
The terms of the bank loan of Whitegloves Janitorial service was met supported by the Balance Sheet above.250)
.900 – P 14.Notes to Financial Statements Note 1 .Property. The current assets exceed the current liabilities by P 10.