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De La Salle University

Professional Schools, Inc.


Graduate School of Business

ACC5000
(Financial Accounting)

Case:

PC Depot

Submitted by:
Grp. 5

Darwin Clemente
Raymond Martinez
Jose Erwin Sebastian

Submitted to:

Prof. Virgilio Avila


Synthesis

The case concerns PC Depot, a newly opened retail Store for personal
computers and hand-held calculators owned and managed by Barbara
Thompson. Knowing the importance of proper recording, she hires an
accountant to set up her accounting system. To assist her, the accountant Chris
Jerrard initially set-up a journal form to serve as an example for Barbara to follow.

Point of View

This case shall be tackled from the point of view of the Chris Jerrard who
is the accountant in question.

Problem Statement

The case is concerned with the development of chart of accounts and a


recording system that would make it easy for Barbara to record her financial
transactions that would be easily understood by herself as well for Chris Jerrard
to use in the preparation of the Stores’ Financial Statement.

Objectives

The study of this case shall have the following objectives:

1. To set up a complete chart of accounts for the stores transaction that is


simple to understand and use.

2. To be able to easily post the transaction in a manner that will correctly


record the events and address the accounting needs.

3. To easily be able to digest and analyze the transactions and give Barbara
a better feel of her financial position.

Areas of Consideration

Based on the facts provided, it is assumed that the following are true:
1. The transactions are limited to those listed on the General Journal.
2. The transactions are true and the summaries are factual.
3. That the consideration for our financial report is only for the month of
September.
4. That the Chart of Accounts are not complete and will be developed as
required.

Analysis of the Initial Transactions Entered by Chris Jerrard:


1. That the initial cash outlay of the company is $ 165,000 that was raised
from a Bank Loan of 100,000 with an interest rate of 15% and Barbara’s
own Capital of 65,000.
Accounts needs are :
ASSET : CASH
LIABILITIES : NOTES PAYABLE, PROPRIETARY CAPITAL

2. That the store space was rented for $ 1,485 paid for in cash.
Accounts needs are :
EXPENSE : RENT

3. That the Store was provided with $ 137,500 worth of inventory on credit.
Accounts needs are :
ASSET : INVENTORY
LIABILITIES : ACCOUNTS PAYABLE

4. That furniture and fixtures for the store was bought for $ 15,500 and that
the lifespan of these furniture and fixtures is estimated to be 10 years.
Accounts needs are :
ASSET : FURNITURE AND FIXTURE
CONTRA-ACCOUNT : ACCUMULATED DEPRECIATION

5. That $ 1,320 in cash was spent to advertise the store.


Accounts needs are :
EXPENSE : RENT

6. That workers were paid $ 935 in cash for work done


Accounts needs are :
EXPENSE : WAGES

7. Office supplies were purchased in cash in the amount of $ 1,100.


Accounts needs are :
EXPENSE : OFFICE SUPPLIES

8. That $ 275 was paid for utilities used in the store.


Accounts needs are :
EXPENSE : UTILITIES

Analysis of the Transaction entered by Barbara

9. Total Cash Sales for the Month of September is $ 38,000.


Accounts needs are :
INCOME : SALES
10. Total Sales made on Credit was $ 14,850.
Accounts needs are :
ASSET : ACCOUNTS RECEIVABLE

11. Total of $ 3,614 was collected from the Sales made on Credit.

12. That the supplier was paid in part with $ 96,195.

13. Supplier delivers anew $ 49,940 worth of goods on credit.

14. Barbara notes that the cost of the goods she has sold is worth $ 38,140.
Accounts needs are :
EXPENSE : COST OF GOODS SOLD

15. Wages is paid to assistant $ 688.

16. An equivalent of $ 440 worth of wages were still to be paid for September.
Accounts needs are :
LIABILITIES : WAGES PAYABLE

17. An advance for the next month rent was paid for $ 1,485.
Accounts needs are :
ASSET :ADVANCE RENT

18. Barbara pays for an insurance with a one year coverage that began in 1
September and will expire 31 August the following year of $ 2,310.00.
Accounts needs are :
ASSET : PREPAID EXPENSE
CONTRA-ACCOUNT : APPLIED COST

19. Electric Bill for September worth $ 226 was received but not yet paid.
Accounts needs are :
LIABILITIES : UTILITIES PAYABLE

20. Barbara purchases a Store sign worth $ 1,760 with a downpayment of


$660 and balance to be paid for by the end of the year worth $ 1,100.

Based on the above analysis, we have came up with a Chart of Accounts. In our
analysis however, we added 2 more accounts to properly address the company’s
expense in the preparation of its Income Statement. These 2 accounts are
expense accounts needed to properly address the cost of operating the
business. These are Depreciation Expense, Interest Expense and Allowances
for Bad Debts.
By properly naming the accounts and their relationship to one another, we can
now easily journal and post transactions of the company.
Our Chart of Accounts is as follows:
Assets
Current Assets
Cash
Inventory
Accounts Receivable
Less: Allowances for Bad debts
Pre-paid Expense
Insurance
Less: Applied Cost
Others: Advance Rent
Fixed Assets
Furniture and fixtures
Less: Accumulated Depreciation
Liabilities and Proprietary Capital
Current Liabilities
Accounts Payable
Wages Payable
Utilities Payable
Taxes Payable
Interest Due
Long Term Liabilities
Notes Payable
Proprietary Capital
Retained Earnings

Income
Sales Revenue

Expenses
Cost of Goods Sold
Utilities
Rent
Advertising
Office Supplies
Wages
Depreciation Expense
Applied Costs
Insurance
Interest Payments
Allowances for Bad Debts