5 Elements of Accounting ABC Corporation

Income Statement
Asset For the year ended Dec 31 2003
Expense
Liability Service Revenue
owner Equity
Revenue Less EXPENSES
Salries Expense
Advertisement Expense
Income Statement' Insurance Expense
Utilities Expense
Expense Rent Exoense
Revenue Total Expenses
Gross Profit/ EBIT*
Profit = Revenue - Expense Less Interest Expense
EBT*
Less Income Tax
Net Income

Q1: Following is the pre-closing trial balance of ADM & Co on December 31st, 2003
Title of Account Debit Credit
Cash 10,000
Accounts Receivables 24,000 2003
Merchandise Inventory (1-1-03) 20,000 31-Dec
Prepaid Insurance 8,000
Office Equipment 100,000
Allowance for Depreciation 20,000
Accounts Payables 16,000 31-Dec
Capital 104,600
Drawings 12,000
Sales 160,000
Sales Discount 8,000 31-Dec
Purchases 80,000
Purchases return and allowance 10,000
Transportation In 11,600
Advertisement Expense 17,000 31-Dec
Salaries Expense 20,000
310,600 310,600

31-Dec
Data for adjustments on December 31st, 2003
i)       Insurance Expired Rs. 5000
ii)     Allowance for depreciation on equipment Rs 4000
iii)   Unpaid salaries Rs. 4000
iv)   Advertisement prepaid Rs. 2400
v)      Make allowance for doubtful debts at 10% of accounts receivables at the end of the year
vi)   Merchandise inventory on December 31, 2003 Rs 30,000
Required
i)       Pass general entries on Dec 31 to record adjusting entries
ii)     Prepare Adjusted Trial balance
 ABC Corporation
Income Statement
he year ended Dec 31 2003 For the year ended Dec
Amounts Amouts
XXXX Sales Revenue
Less
Sales Discount
xx Sales Return and Allowance
xx Net Sales
xx
xx Less Cost of Goods Sold (COGS)
xx
(XX) Merchandise Inventory (Beg)
XX * Earnings Before Interest and Taxes Purchases
(XX) Less
XXX Earnings Before Taxes Purchase return
(XX) Purchase discount
XX Add transportaion in
Net Purchases
Cost of Goods Available for Sales
Less Merchanise inventory end
COGS
Gross Profit
Less Expenses
Salries Expense
Advertisement Expense
Insurance Expense
Utilities Expense
Rent Exoense
Total Expenses
OPERATING PROFIT /EBIT
Add other income
Rent Income
Net Income

ADM & Co
ADJUSTING ENTRIES
For The Year Ended Dec 31st 2003
Title of Accoun
Insurance Expense 5000 Cash
Prepaid Insurance 5000 Accounts Receivables
(Adjust Prepaiud Insurance) Allowance for Bad Debt
 I Merchandise Inventory (1-1-
Depreciation Expense 4000 Prepaid Insurance
Allowance for Depreciation 4000 Prepaid Advertisment
(Record Depreciation Expense) Office Equipment
Allowance for Depreciation
Salaries Expense 4000 Accounts Payables
Salaries Payable 4000 Salaries Payable
(Record Unpaid salaries) Capital
Drawings
Prepaid Advertisement 2400 I Sales
Advertisement Expense 2400 I Sales Discount
(Adjust advertisement expense) I Purchases
I Purchases return and allowa
Bad Debt Expense 2400 I Transportation In
Allowance for Bad Debt 2400 I Advertisement Expense
(Record Bad Debt expense) I Salaries Expense
I Insurance Expense
I Depreciation Expense
I Bad Debt Expense
 ABC Corporation
Income Statement
For the year ended Dec 31 2003
Amount Amount Amount
XXX Assets
Current Assets
xx Cash
n and Allowance xx (XX) Bank
XXX Accounts Receivables
Less Allowance for bad Debt
of Goods Sold (COGS) Merchandise Inventory (end)
Prepaids
se Inventory (Beg) XX Total Current Assets
XX
Non Current Assets
xx Office Equipment
xx (xx) less Allowance for Depreciation
xx Building
Net Purchases XX Plants
ods Available for Sales XX machinary
anise inventory end (xx) Land
(XX) Total Non Current Assets
Gross Profit XXX
TOTAL ASSETS
xx
ment Expense xx
xx
xx
xx
Total Expenses (XX)
OPERATING PROFIT /EBIT XX

xx
XX

ADM & Co
Trial Balace
AS on Dec 31st 2003
Title of Account Dr Cr
10,000 Sales Revenue
Accounts Receivables 24,000 Less Sales Discount
Allowance for Bad Debt 2400 Net Sales
Merchandise Inventory (1-1-03) 20,000
Prepaid Insurance 3,000 Less Cost of Goods Sold
Prepaid Advertisment 2,400 Merchandise Inventory (Beg)
Office Equipment 100,000 Purchases
Allowance for Depreciation 24,000 Less Purchase Return and Allowance
Accounts Payables 16,000 Transportaion In
Salaries Payable 4,000 Cost of Goods Available for S
104,600 Less Merchandise Inventory (end)
12,000 Cost of Goods Sold
160,000 Gross Profit
Sales Discount 8,000 Less Expenses
80,000
Purchases return and allowance 10,000 Advertisement Expense
Transportation In 11,600 Salaries Expense
Advertisement Expense 14,600 Insurance Expense
Salaries Expense 24,000 Depreciation Expense
Insurance Expense 5,000 Bad Debt Expense
Depreciation Expense 4,000 Total Expenses
Bad Debt Expense 2,400 NET INCOME
321,000 321,000
 ABC Corporation
Balance Sheet
For the year ended Dec 31 2003

Assets Amount Amount EQUITIES

Current Assets LIABILITIES
xx Accounts Payable
xx Expense Payable
Receivables xx Unearned Revenue
wance for bad Debt (xx) xx Total Liabilities
dise Inventory (end) xx
xx OWNER EQUITIES
Total Current Assets XX Capital Share Capital
Add net profit Paid Up Capital
Non Current Assets less Drawings Add Retained Earnings
XX Total Owner Equities
ance for Depreciation (xx)
xx
xx
xx
xx
Total Non Current Assets XX

TOTAL ASSETS XXX Total EQUITIES

ADM & Co
INCOME STATEMENT
For the Year Ended Dec 31st 2003
Amounts Amounts Amounts
160,000 Asset
(8,000)
152,000 Cash
 Accounts Receivables
of Goods Sold Less Allowance for bad Debt
dise Inventory (Beg) 20,000 Merchandise Inventory (end)
80,000 Prepaid Insurance
hase Return and Allowance (10,000) 70,000 Prepaid Advertisement
11,600
Cost of Goods Available for Sales 101,600
handise Inventory (end) (30,000)
Cost of Goods Sold (71,600) Office Equipment
Gross Profit 80,400 less Allowance for Depreciati

ment Expense 14,600

24,000
5,000
tion Expense 4,000
2,400 Accounts Payable
Total Expenses (50,000) Salaries Payable
NET INCOME 30,400

Capital
Add net Profit
Less Drawings
UITIES Amount Amount Assets
Current Assets
xx Cash
xx Bank
xx Accounts Receivables
XX Less Allowance for bad Debt
Merchandise Inventory (end)
Prepaids
XX xx Total Current Assets
XX xx
ned Earnings XX (xx) Non Current Assets
XX Office Equipment
less Allowance for Depreciation
Building
Plants
machinary
Land
Total Non Current Assets

XXX TOTAL ASSETS

EQUITIES
LIABILITIES
Accounts Payable
Expense Payable
Unearned Revenue
Total Liabilities

OWNER EQUITIES
Capital
Add net profit
less Drawings
Total Owner Equities
ABC Corporation
Balance Sheet Total EQUITIES
For the year ended Dec 31 2003

Assets Amount Amount

Current Assets
10,000
Accounts Receivables 24,000
Less Allowance for bad Debt (2,400) 21,600
Merchandise Inventory (end) 30,000
Prepaid Insurance 3,000
Prepaid Advertisement 2,400
Total Current Assets 67,000

Non Current Assets

Office Equipment 100,000
less Allowance for Depreciation (24,000)
Total Non Current Assets 76,000

TOTAL ASSETS 143,000

EQUITIES
LIABILITIES
Accounts Payable 16,000
Salaries Payable 4,000
Total Liabilities 20,000

Owner Equity

104,600
Add net Profit 30,400
Less Drawings (12,000)
Total Owner's Equity 123,000
Total EQUITIES 143,000
 Assets Amount Amount
Current Assets
xx
xx
Receivables xx
wance for bad Debt (xx) xx
dise Inventory (end) xx
xx
Total Current Assets XX

Non Current Assets

XX
ance for Depreciation (xx)
xx
xx
xx
xx
Total Non Current Assets XX

TOTAL ASSETS XXX

EQUITIES
LIABILITIES
xx
xx
xx
Total Liabilities XX

OWNER EQUITIES
Share Capital XX xx
Paid Up Capital XX xx
Add Retained Earnings XX (xx)
Total Owner Equities XX

Total EQUITIES XXX

 Elements of Accounting

Asset For the Year Ended Dec

Liabiulity
Capital
Revenue Sales Revenue
expense Less
Sales Discount
Sales Return
Profit = Revenue - Expense Net Sales

LESS Cost of GOODS SOLD (COGS)

Merchandise Inventory (beg)
Add Purchases
Less
Purchase Return
Purchase Discount
Transportaioj In
Cost of Goods Available for Sales
Less Merchandise Inventory (end)
COST OF GOODS SOLD (COGS)
GROSS PROFIT
Less EXPENSES

Salaries Expenxe
Advertisment Expense
Insurance Expense
Rent Expense
Utility Expense
Total EXPENSES
Operating INCOME /EBIT/Net INCOME
Other Income
Rent Income
NET INCOME

Q1: Following is the pre-closing trial balance of ADM & Co on December 31st, 2003
Title of Account Debit Credit
Cash 10,000
Accounts Receivables 24,000 2003
Merchandise Inventory (1-1-03) 20,000 31-Dec
Prepaid Insurance 8,000
Office Equipment 100,000
Allowance for Depreciation 20,000
Accounts Payables 16,000 31-Dec
Capital 104,600
Drawings 12,000
Sales 160,000
Sales Discount 8,000 31-Dec
Purchases 80,000
Purchases return and allowance 10,000
Transportation In 11,600
Advertisement Expense 17,000 31-Dec
Salaries Expense 20,000
310,600 310,600

31-Dec
Data for adjustments on December 31st, 2003
i)       Insurance Expired Rs. 5000
ii)     Allowance for depreciation on equipment Rs 4000
iii)   Unpaid salaries Rs. 4000
iv)   Advertisement prepaid Rs. 2400
v)      Make allowance for doubtful debts at 10% of accounts receivables at the end of the year
vi)   Merchandise inventory on December 31, 2003 Rs 30,000
Required
i)       Pass general entries on Dec 31 to record adjusting entries
ii)     Prepare Adjusted Trial balance
 ABC Corporation ABC Corporation
INCOME STATEMENT INCOME STATEMENT
For the Year Ended Dec 31 200 For the Year Ended Dec 31 200
Amounts Amounts Amounts

XXXX Service Revenue Earned

xx Less Expenses
xx (XX) Salaries Expenxe
XXX Advertisment Expense
Insurance Expense
Rent Expense
XX Utility Expense
XX Total Expenses
Gross Profit/EBIT*
xx Interest Expense
xx (xx) XX EBT*
XX Income tax expense
able for Sales XX NET INCOME
(XX)
(XX)

* Earnings Before Interest and Taxes

xx * Earning Before Taxes
xx
xx
xx
xx
(XX)
/EBIT/Net INCOME XX

XX
XX

ADM & Co
ADJUSTING ENTRIES
For The Year Ended Dec 31st 2003
Title of Account
Insurance Expense 5000 Cash
Prepaid Insurance 5000 Accounts Receivables
(Adjust Prepaiud Insurance) Allowance for Bad Debt
I Merchandise Inventory (1-1-
Depreciation Expense 4000 Prepaid Insurance
Allowance for Depreciation 4000 Prepaid Advertisment
(Record Depreciation Expense) Office Equipment
Allowance for Depreciation
Salaries Expense 4000 Accounts Payables
Salaries Payable 4000 Salaries Payable
(Record Unpaid salaries) Capital
Drawings
Prepaid Advertisement 2400 I Sales
Advertisement Expense 2400 I Sales Discount
(Adjust advertisement expense) I Purchases
I Purchases return and allowa
Bad Debt Expense 2400 I Transportation In
Allowance for Bad Debt 2400 I Advertisement Expense
(Record Bad Debt expense) I Salaries Expense
I Insurance Expense
I Depreciation Expense
I Bad Debt Expense
Dec 31 200
Amount Amount

XXXX

xx
xx
xx
xx
xx
(XXX)
XX
(xx)
XX
(xx)
XX

ADM & Co
Trial Balace
AS on Dec 31st 2003
Title of Account Dr Cr
10,000
Accounts Receivables 24,000 Sales Revenue
Allowance for Bad Debt 2400 Less Sales Discount
Merchandise Inventory (1-1-03) 20,000 NET SALES
Prepaid Insurance 3,000 Less COST OF GOODS SOLD
Prepaid Advertisment 2,400 Merchandise Inventory (Beg)
Office Equipment 100,000 Add Purchases
Allowance for Depreciation 24,000 Less Purchase return and Allownace
Accounts Payables 16,000 Transportaion In
Salaries Payable 4,000 Cost of Goods Available foir
104,600 Less Merchandise Inventory (end)
12,000 COST OF GOODS SOLD
160,000 GROSS PROFIT
Sales Discount 8,000 LESS EXPENSEES
80,000 Advertisement Expense
Purchases return and allowance 10,000 Salaries Expense
Transportation In 11,600 Insurance Expense
Advertisement Expense 14,600 Depreciation Expense
Salaries Expense 24,000 Bad Debt Expense
Insurance Expense 5,000 TotaL Expenses
Depreciation Expense 4,000 NET INCOME
Bad Debt Expense 2,400
321,000 321,000
 ADM & Co
INCOME STATEMENT
For the Year Ended Dec 31st 2003
Amount Amount Amount

160,000
 (8,000)
NET SALES 152,000
T OF GOODS SOLD
dise Inventory (Beg) 20,000
80,000
hase return and Allownace (10,000) 70,000
11,600
Cost of Goods Available foir Sales 101,600
handise Inventory (end) (30,000)
COST OF GOODS SOLD (71,600)
GROSS PROFIT 80,400

ment Expense 14,600

24,000
5,000
tion Expense 4,000
2,400
TotaL Expenses (50,000)
NET INCOME 30,400