Module 2 Assignment: Accounting Cycle of a Service Business

This project is a continuation of the Module 1 assignment. You will continue setting up the
accounting records of Glorious Graphix using a spreadsheet. The purpose of this activity is to
give you a valuable opportunity to experience, get the feel, and comprehend the conceptual
ideas of the accounting cycle of a service business. This activity should be done individually.
Deadline will be on January 8, 2021.

General Information

Glorious Graphix, a service business owned and managed by Ms. Layla Ignacio, provides
graphic design services for individual and corporate clients. Its services include designing
corporate logos, identity packages, business cards, promotional products, brochures, flyers,
catalogs, posters, event tarpaulins, t-shirts, invitations, social media graphics and similar media.
Ms. Ignacio was previously a regular employee and has been doing graphic designs for friends,
family and eventually for businesses after office hours. Her clients have grown over time that
she is no longer able to cater to all of them while working as a regular employee. After careful
consideration, she decided to pursue her passion as a graphic artist by quitting her job and
putting up her own business. After completing the business registration and other legal
requirements, Glorious Graphix officially began its operations on November 3, 2020 in Iligan
City.

Additional information

The business is using the asset method in recording its prepayments of expenses and uses the
liability method in recording advanced collections of income.

It was determined that depreciation for all depreciable assets of the business shall be recorded
at the end of each month. If the asset is acquired from 1st to 15th of a month, the depreciation
should be charged for the entire 1 month. If the asset is acquired between 16th to 31st of a
month, then only half a month depreciation should be charged.

Glorious Graphix uses only the Cash Receipts Journal and Cash Disbursements Journal as
special journals. All other transactions that cannot be recorded in the said special journals are
recorded in the general journal.

The following transactions occurred during November 2020:

November

3 Ms. Ignacio paid the business permits and licenses fees amounting to P ____________
from her own funds. (Provide the amount, do some research and estimates. Give only
the approximate amount, no need to be exact.)

3 The lease contract for the use of the business space was executed. It was agreed that
the monthly rent payment shall be P5,000. The space is owned by Ms. Ignacio’s parents.
 The owners usually require the payment of one month's deposit and first two months'
rent before the occupancy. However, they allow Glorious Graphix to occupy the property
after payment of the first two months’ rent which shall be made not later than November
5, 2020.

4 Ms. Ignacio paid for repairs and various minor improvements of the business space
amounting to P5,600 from her personal funds.

4 Ordered a computer from TechnoHub for use in the business with a total cost of
P36,000. The computer has an estimated useful life of 3 years. A purchase order (P.O.)
was issued indicating the specifications, quantity and agreed prices. As indicated in the
P.O., 50% down payment shall be made upon delivery and a note will be issued by
Glorious Graphix for the remaining 50%.

4 Ms. Ignacio provides various office equipment valued at P18,000 in total, all with a
remaining useful life of approximately 2 years, to the business.

5 Ms. Ignacio decided to have a separate cash account for Glorious Graphix. She
withdrew cash in the amount of P55,000 from her personal bank account, of which
P5,000 was used to purchase various items for personal use and P50,000 was provided
for the business.

5 Paid rent for November 2020 and December 2020 in accordance with the lease
agreement.

6 Hired Nikka as office assistant for a daily salary of P_______.(Provide the amount, do
some research and estimates. Give only the approximate amount, no need to be exact.)
It was agreed that Nikka shall be paid every 15th and 30th of the month for actual
services rendered.

7 The computer previously ordered for the business was delivered by TechnoHub. A
delivery receipt was signed by Glorious acknowledging receipt of the equipment.
TechnoHub issued an official receipt to Glorious for the 50% down payment and
Glorious Graphix issued a 30-day note for the balance.

8 The business purchased 2-months worth of office supplies with a total amount of P6,000
for cash. Physical count shall be done every end of each month to determine the actual
quantity used for the business.

9 The business paid P1,500 for social media advertising of the business.

10 Paid a one-year property insurance premium for the business amounting to P1,200.
Adjustments shall be made at the end of each month for the expired portion.

11 Completed graphic designs for Zid Company amounting to P5,000, the customer paid in
cash.
12 Paid installation fees and telephone and internet service for the month of November
2020 amounting to P2,300.

13 Completed graphic designs for Ying Company’s upcoming events and billed P4,500 for
it. Payment is due on or before November 20, 2020.

14 Paid Nikka her salary for services rendered from November 6 - November 14, 2020,
equivalent to 8 working days.

17 Received P3,000 from Travis, Inc as 50% down payment for various graphic designs to
be completed on or before November 25, 2020.

19 Received cash from Ying Company as full payment for services previously rendered and
billed.

21 Completed various graphic designs for individual clients with a total amount of P3,600.
The customers all paid in cash.

25 Completed various graphic designs for Travis, Inc. Glorious Graphix issued an official
receipt for the full payment which is equivalent to 50% of the total amount.

28 Received P10,000 from Xcell,Inc as 50% down payment for various graphic design
services for the company to be completed not later than the 10th day of the following
month.

30 Partial payment for the 30-day note owed to TechnoHub was made. The amount paid by
Glorious is equivalent to 40% of its cash balance before this transaction. (Amount
should be approximate only, no need to be exact, round off to the nearest thousand)

December. (This is a continuation of the previous activity so please note that some of the
December 2020 transactions should be analyzed with reference to the November 2020
transactions.)

1 Paid cash amounting to P600.00 for the purchase of an ink and ink cartridge for a printer
used by the business.

3 Received the electricity bill from Iligan Light and Power, Inc. and paid P2,342 for electric
consumption covering November 1-30, 2020.

4 Paid Nikka her salary for services rendered from November 16 - November 28, 2020,
which is equivalent to 12 working days.

5 Withdrew cash from a personal savings account amounting to P10,000 to be used in the
operations of the business.

7 Issued official receipts to various individual clients amounting to a total of P6,815 for
services already rendered.
8 Paid the remaining balance of the note payable to TechnoHub.

9 Completed various graphic designs for Xcell, Inc. and billed the said client for the
remaining amount due.

10 Paid advance rental for the month of January 2021.

11 Paid P935.75 for ads created from posts on Glorious Graphix’ Facebook page.

12 Received cash from Xcell, Inc. as full payment for the completed graphic designs.

14 Ms. Layla Ignacio obtained some office supplies from the business worth P646.00 for
personal use.

15 Paid Nikka her salary for services rendered from December 4 - December 15, 2020,
which is equivalent to 10 working days.

17 Completed graphic designs for the upcoming company event of DM Enterprises worth
P3,450 and billed the said client for the services.

19 Received cash from various individual clients amounting to a total of P7,900 for services
already rendered. Official receipts were issued for each client.

21 Received cash from DM Enterprises as full payment for services previously rendered.

23 Withdrew cash from the business for personal use, P5,000.

26 It was estimated that the remaining office supplies will all be consumed by the business
by the end of the month. Thus, Nikka ordered various office supplies amounting to
P3,410 from Crown Paper and Stationer.

28 The business paid for minor repairs of its equipment amounting to P760.00.

28 Office supplies previously ordered were delivered by Crown Paper. A delivery receipt
was signed indicating receipt of the items in good order and condition. Crown Paper
issued an official receipt to Glorious Graphix for the total amount.

29 Agreed to provide graphic design services for Matti Co.’s corporate identity, product
package designs and marketing collaterals for a total amount of P20,000. Matti
Company paid a downpayment equivalent to 40% of the total agreed price.

29 Completed various graphic designs for Jingle, Inc.’s amounting to P5,000 and issued a
billing statement for the said client.

30 Paid Nikka her salary for services rendered from December 16 - December 30, 2020,
which is equivalent to 11 working days.
MODULE 2 INSTRUCTIONS/TASKS.

General Instructions: This is a continuation of your Module 1 activity. Make a copy of the file
you submitted for your Module 1 assignment and rename the file in the following format:
“Initials & Family Name:FAR Project Module 2 (e.g. BMTeano: ACT110 Project Module 2).
Please refer to this spreadsheet file for the format/template of your Module 2 Project. You may
make the necessary adjustments to the format (spacing, column width, height, font
colors, and the like) whenever you need to.

After completing the tasks provided below, please share the spreadsheet file with me
([email protected]) or set it up so that “anyone within MSU-IIT with the link can
view”. Submit the file in the submission bin provided in our MOLE Classroom not later than
January 8, 2021.

1. JOURNALIZING. Journalize the December transactions in the General Journal (GJ),

Cash Receipts Journal (CRJ) or Cash Disbursements Journal (CDJ), whichever is
appropriate. This a continuation so please retain the journal entries you prepared for the
November transactions, including the adjusting entries.
a. Refer to the Chart of Accounts when journalizing. Please note that you may not
use all of the accounts listed therein.
b. Make sure that you record the financial transactions in the appropriate journal
(Use only the GJ, CDJ and CRJ).
c. Indicate the description of each entry. Put 1 line-space between them.

2. POSTING. Retain the GL postings of the November transactions, including the adjusting
entries. If the November 30, 2020 adjusting entries were not yet posted to the General
ledger, please post those first before posting the December 2020 journal entries.

From the respective journals, post the December journal entries to the General Ledger
(GL). Don’t forget to fill up the reference columns in the journals and in the ledger
appropriately.

a. Transfer the date of the transaction from the journal to the ledger.
b. Indicate the page number of the journal where the entry is located to the journal
reference (J.R.) column of the ledger (e.g. GJ-1, which means that the entry is
recorded in the General Journal- Page 1. You may try to locate the page number
through print preview)
c. Post the debit and credit figures from the journal to the general ledger.

In addition, you may use a subsidiary ledger for the receivable and payable
accounts for easier tracking of each of the customer’s or creditor’s balance, but
this is optional.

d. Enter the account number in the posting reference column of the appropriate
journal once the figure has been posted to the ledger.
 e. Determine the balance of each of the accounts in the general ledger as of
December 31, 2020.

3. Prepare the unadjusted trial balance columns of the December 31, 2020 Worksheet.
Please refer to the template provided in this file.

4. ADJUSTING ENTRIES. Below are the adjustments information at the end of December
2020. Prepare the year-end adjusting entries.
a. Recognition of the incurred portion of the office space rental previously paid.
b. Recognition of depreciation expense for the month.
c. Based on physical count conducted at the end of the month, P3,170 worth of
office supplies are on hand.
d. Recognition of the expired portion of the property insurance.
e. Although no bill has been received yet, Glorious Graphix wants to accrue P4,300
for unpaid electricity, telephone and internet services used from December 1-30,
2020

5. Prepare the closing entries and complete the remaining columns of the December 31,
2020 worksheet up to the post-closing trial balance columns.

6. Prepare the 2020 statement of financial position (balance sheet) and statement of profit
or loss (income statement).

------END OF MODULE 2 TASKS-----