Course title: Accounting I

Program: BBA 2-A

Name: Noor Fatima
Roll number: 028
Question # 01
Develop a case study of a new business of your own choice either a service
organization or manufacturing organization. Apply complete accounting cycle
(Hint: Overnight Auto Service). Make sure to complete all requirements, which are
listed below:
 Requirement 1 Prepare the journal entries in the general journal.
 Requirement 2 Post general entries to the general ledger.
 Requirement 3 Prepare unadjusted trail balance.
 Requirement 4 Prepare the adjusting entries.
 Requirement 5 Post adjusting entries to the general ledger.
 Requirement 6 prepare an adjusted trial balance.
 Requirement 7 Prepare the financial statements.
 Requirement 8 Prepare closing entries.

Dan Humphery retired from a government job after 20 years of active duty. Dan
decides it will be fun to become a barber and open his own shop called “Dan’s
Barbershop”. He will run the barbershop form his home for the first couple months
while he identifies a new location for his shop.
Since his government job included several years of logistics, he is also going to
operate a consulting practice where he will help budding barbers create a barbering
practice. He will charge a flat fee or a per hour charge. His consulting practice will
be recognized as service revenue and will provide additional revenue while he
develops his barbering practice.
He obtains a barber’s license after the required training and is ready to open his
shop on August 1st. The transactions from the first month of business are as follow:
Transactions for august
Date Transaction
Aug. 1 Dan issues $70,000 shares of common stock for cash
Aug. 3 Dan purchases barbering equipment for $45,000 from which $37,000
was paid immediately with cash, and the remaining $7,500 was billed
to Dan with payment due in 30 days. He decided to buy used
 equipment, because he was not truly sure if he wanted to run a barber
shop. He assumed that he will replace the used equipment within a
couple of years.
Aug. 6 Dan purchases supplies for $300 cash.
Aug. 10 Dan provides $4,000 in services to a customer who asked to be billed
for the services.
Aug 13 Dan pays a $75 utility bill with cash.
Aug. 14 Dan receives $3,200 cash in advance from a customer for services not
Not yet rendered.
Aug. 16 Dan distributed $150 cash in dividends to stockholders.
Aug. 17 Dan receives $5,200 cash from a customer for services rendered.
Aug. 19 Dan paid $2,000 toward the outstanding liability from Aug. 3
Transaction.
Aug. 22 Dan paid $4,600 cash in salaries expense to employees.
Aug. 28 The customer from the August 10 transaction pays $1,500 cash
Dan’s account.
REQUIREMENT# 01
The complete Journal for August is following;
JOURNAL
Date Account Debit Credit
Aug. 1, 2019 Cash 70,000
Common stock 70,000

Aug. 3, 2019 Equipment 45,000

Cash 37,000
Account Payable 7,500

Aug. 6, 2019 Supplies 300

Cash 300

Aug. 10, 2019 Accounts Receivable 4,000

Service Revenue 4,000

Aug. 13, 2019 Utility Expense 75

Cash 75

Aug. 14, 2019 Cash 3,200

Unearned Revenue 3,200

Aug. 16, 2019 Dividends 150

Cash 150

Aug. 17, 2019 Cash 5,200

Service Revenue 5,200

Aug. 19, 2019 Accounts Payable 2,000

Cash 2,000

Aug. 22, 2019 Salaries Expense 4,600

Cash 4,600
Cash 1,500
Aug. 28, 2019 Accounts Receivable 1,500
REQUIREMENT# 02
GENERAL LEDGER
The ledger is visually represented by T-accounts. Dan will go through each
transaction and transfer the account information into the debit or credit side of that
ledger account. Any account that has more than one transaction needs to have a
final balance calculated.

Cash
Dr Cr
Aug. 1 70,000 37,000 Aug. 3
Aug. 14 3,200 300 Aug. 6
Aug. 17 5,200 75 Aug. 13
Aug. 28 1,500 150 Aug. 16
2,000 Aug. 19
4,600 Aug. 22

Bal. 37,275

Accounts payable
Dr Cr
Aug. 19 2,000 7,500 Aug. 3

Bal. 5,500
 Common Stock
Dr Cr
70,000 Aug. 1

Bal. 70,000

Accounts Receivable
Dr Cr
Aug.10 4,000 1,500 Aug.3

Bal. 2,500

Unearned Revenue
Dr Cr
3,200 Aug. 14

Bal. 3,200

Dividends
Dr Cr
Aug. 16 150

Bal. 150
 Supplies
Dr Cr
Aug.6 300

Service Revenue
Dr Cr
4,000 Aug. 10
5,200 Aug. 17

Bal: 9,200

Equipment
Dr Cr
Aug.3 300

Bal: 300

Salaries expense
Dr Cr
Aug. 22 4,600

Bal: 4,600
 Utility Expense
Dr Cr
Aug. 13 75

Bal: 75

REQUIREMENT# 03
The final debit or credit balance in each account is transferred to the unadjusted
trial balance.
Unadjusted trial balance of Dan’s barber shop;

Dan’s barbershop
Unadjusted Trial Balance
August 21st, 2019

Account Debit Credit

Cash 35,275
Accounts Receivable 2,500
Supplies 300
Equipment 45,000
Accounts Payable 5,500
Unearned Revenue 3,200
Common Stock 70,000
Dividends 150
Service Revenue 9,200
Salaries Expense 4,600
Utility Expense 75

Total $87,900 $87,900

REQUIREMENT# 04
On August 31, Dan has the following transactions
Date Transactions
Aug. 31 Dan took an inventory of supplies and discovered that $250 of
supplies remain unused at the end of the month.
Aug. 31 The equipment purchased on August 3 depreciated $2,500 during
the month of August.
Aug. 31 Dan performed $1,100 of services during August for the customer
from the August 14 transaction.
Aug. 31 Reviewing the company bank statement, he discovers $350 of
interest earned during the month of August that was previously uncollected and
unrecorded. As a new customer for the bank, the interest was paid by a bank that
offered an above-market-average interest rate.
Aug. 31 Unpaid and previously unrecorded income taxes for the month are
$3,400. The tax payment was to cover his federal quarterly estimated income taxes.
He lives in a state that does not have an individual income tax.

JOURNAL
Date Account Debit Credit
Aug. 31, 2019 Supplies Expense 50
Supplies 50

Aug. 31, 2019 Depreciation expense: Equipment 2,500

Accumulated Depreciated: Equipment 2,500

Aug. 31, 2019 Unearned Revenue 1,100

Service Revenue 1,100

Aug. 31, 2019 Interest Receivable 350

Interest Revenue 350

Aug. 31, 2019 Income Tax Expense 3,400

Income Tax Payable 3,400
REQUIREMENT# 5
Ledger Entries
Cash
Dr Cr
Aug. 1 70,000 37,500 Aug. 3
Aug. 14 3,200 300 Aug. 6
Aug. 17 5,200 75 Aug. 13
Aug. 28 1,500 150 Aug. 16
2,000 Aug. 19
4,600 Aug. 22

Bal: 35,275

Accounts payable
Dr Cr
Aug. 19 2,000 7,500 Aug. 3

Bal: 5,500

Common stock
Dr Cr
70,000 Aug. 1

Bal: 70,000

Accounts receivable
Dr Cr
Aug. 10 4,000 1,500 Aug. 28

Bal: 2,500
 Unearned Revenue
Dr Cr
Aug. 31 1,100 3,200 Aug.14

Bal: 2,100

Dividends
Dr Cr
Aug. 16 150

Bal: 150

Interest Receivable
Dr Cr
Aug. 10 4,000

Bal: 2,500

Income Tax Payable

Dr Cr
3,400 Aug. 31

Bal: 3,400

Service revenue
Dr Cr
4,000 Aug. 10
5,200 Aug. 17
1,100 Aug. 31
Bal: 10,300
 Supplies
Dr Cr
Aug. 6 300 50 Aug. 31

Bal: 250

Interest Revenue
Dr Cr
350 Aug. 31

Bal: 350

Equipment
Dr Cr
Aug. 3 45,000

Bal: 45,000

Salaries Expense
Dr Cr
Aug. 22 4,600

Bal; 4,600

Accumulated Depreciation: Equipment

Dr Cr
2,500 Aug. 31

Bal: 2,500
 Utility Expense
Dr Cr
Aug. 13 75

Bal: 75

Supplies Expense
Dr Cr
Aug. 31 50

Bal: 50

Depreciation Expense: Equipment

Dr Cr
Aug. 31 2,500

Bal: 2,500

Income Tax Expense

Dr Cr
Aug. 31 3,400

Bal: 3,400

REQUIREMENT # 06
 Adjusted Trial Balance

Dan’s Barbershop
Adjusted Trial Balance
August 31, 2019
Account Debit Credit
Cash 35,275
Accounts Receivable 2,500
Interest Receivable 350
Supplies 250
Equipment 45,000
Accumulated Depreciation: Equipment 2,500
Accounts Payable 5,500
Unearned Revenue 2,100
Income Tax Payable 3,400
Common Stock 70,000
Dividends 150
Interest Revenue 350
Service Revenue 10,300
Supplies Expense 50
Depreciation Expense: Equipment 2,500
Income Tax Expense 3,400
Salaries Expense 4,600
Utility Expense 75

Total $94,150 $94,150

REQUIREMENT# 07
 Dan’s Barbershop
Income Statement
August 31, 2019

Revenues
Interest Revenue 350
Service Revenue 10,300
Total Revenues $10,650

Expenses
Supplies Expense 50
Depreciation Expense: Equipment 2,500
Salaries Expense 4,500
Utility Expense 75
Income Tax Expense 3,400
Total Expense 10,625

Net Income $25

Dan’s Barbershop
Statement of Retained Earnings
August 31, 2019
Beginning Retained Earnings (Aug. 1) $0
Net Income 25
Dividends (150)
Ending Retained Earnings (Aug. 31) $(120)

Dan’s Barbershop
 Balance Sheet
August 31, 2019
Assets
Cash $35,000
Accounts Receivable 2,500
Interest Receivable 350
Supplies 250
Equipment $45,000
Accumulated Depreciation: Equipment 2,500 42,500
Total Assets $80,875

Liabilities
Accounts Payable $5,500
Income Tax Payable 3,400
Unearned Revenue 2,100
Total Revenue 11,000

Stockholders’ equity
Common stock 70,000
Ending Retained Earnings (125)
Total Stockholders’ Equity 69,875

Total liabilities and Stockholders’ Equity $80,875

REQUIREMENT# 08
 Dan’s Barbershop
Closing entries
August 31, 2019
Account Debit Credit
Cash 35,275
Accounts Receivable 2,500
Interest Receivable 350
Supplies 250
Equipment 45,000
Accumulated Depreciation: Equipment 2,500
Accounts Payable 5,500
Unearned Revenue 2,100
Income Tax Payable 3,400
Common Stock 70,000
Retained Earning 125
Total $83,500 $83,500