Full Example of Accounting Cycle for Merchandising Company

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ABC Company is merchandising company. Below are accounting transactions for ABC Company.

	Nov. Financial Transactions	Amount ($)
	1.     ABC commenced business with cash………………… 2.    ABC Purchased goods on credit from SYZ, Supplier 4.    ABC Sold goods on credit to CBB, Customer……… 5.     ABC Purchased goods on cash from SKL, Supplier.. 6.     ABC Deposited Cash into bank…………………………. 7.    ABC paid salary expenses as cash for employees…. 8.    ABC Sold goods for cash………………………………….. 9.    ABC Bought furniture paid by cheque………………. 10.  ABC  returned Goods to SYZ (purchased on 2),Supplier. 12.   ABC Bought goods on credit from SA, Supplier…. 14.   ABC Cash paid to SYZ (purchased on 2), Supplier…….. ………ABC received discount from SYZ, Supplier……….. 16.    Goods returned from CBB, Customer (purchased on 4). 17.    ABC deposited cash into bank………………………… 18.   ABC sold goods on credit to CCD, Customer…… 19.   ABC paid advertisement by cheque………………… 20.   ABC paid cash to SA, Supplier………………………… 22.   ABC received cash from CBB  (purchased on 4) ……….Discount allowed to CBB, Customer………………. 25.    ABC received interest through cheque……………. 28.    Goods taken by owners for own use……………….. 30.    ABC paid for rent expense………………………………	100,000 10,000 20,000 20,000 10,000 5,000 20,000 2,000 2,000 10,000 7,800 200 3,000 10,000 12,000 1,000 5,000 6,900 100 2,000 1,000 2,000

We assume that fixed asset (furniture) bought at 9 November has useful life 3 years.

Beginning Inventory is $0 and Ending Inventory is $1,000.

Required:

1. Prepare General Journal
2. Prepare General Ledger
3. Prepare Trial Balance
4. Make Adjusting Entry
5. Prepare Adjusted Trial Balance
6. Prepare income statement
7. Prepare balance sheet
8. Make closing entry
9. Prepare Adjusted Trial Balance

Solution

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1. Prepare General Journal

DATE		ACCOUNT NAME & DESCRIPTION	DEBIT	CREDIT
Nov. 01	Cash on hand		100,000
		Captial		100,000
	ABC commenced business with cash
2	Purchase		10,000
		A/P		10,000
	Purchased goods on credit from SYZ,
4	A/R		20,000
		Sale		20,000
	Sold goods on credit to CKJ, customer
5	Purchase		20,000
		Cash on hand		20,000
	Purchased goods on cash from SKL
6	Cash at Bank		10,000
		Cash on hand		10,000
	ABC Deposited Cash into bank
7	Salary Expense		5,000
		Cash on hand		5,000
	Paid salary expenses as cash for employees
8	Cash on hand		20,000
		Sale		20,000
	ABC Sold goods for cash
9	Furniture		2,000
		Cash at Bank		2,000
	ABC Bought furniture paid by cheque
10	AP		2,000
		Purchase  Return		2,000
	ABC returned Goods to SYZ purchased on 2
12	Purchase		10,000
		AP		10,000
	ABC Bought goods on credit from SA
14	AP		8,000
		Cash on hand		7,800
		Discount received		200
	Cash paid  and settlement discount
16	Sale Return		3,000
		A/R		3,000
	Goods returned from CBB, Customer on 4
17	Cash at Bank		10,000
		Cash on hand		10,000
	Deposited cash into bank
18	A/R		12,000
		Sale		12,000
	ABC sold goods on credit to CCD
19	Advertising  Expense		1,000
		Cash at bank		1,000
	Paid advertisement by cheque
20	AP		5,000
		Cash on hand		5,000
	ABC paid cash to SA, Supplier
22	Cash on hand		6,900
	Discount	allowed	100
		A/R		7,000
	Received cash from CBB and cash discount
25	Cash at Bank		2,000
		Interest Revenue		2,000
	Received interest through cheque
28	Drawing		1,000
		Purchase		1,000
	Goods taken by owners for own use
31	Rent Expense		3,000
		Cash on hand		3,000
	Paid for office rent