Project: The Accounting Cycle

For this project, you will be setting up the accounting records of a start-up business using a
spreadsheet. The purpose of this project is to provide you with a valuable opportunity to
experience and understand the conceptual principles of the accounting cycle as applied to a
small service-oriented business. This activity should be done individually.

General Information

____________(Create your business name), a service business owned and managed by

(Business owner’s Name), provides tutorial services to bring out the potential in each individual.
Its service includes individualized instruction materials that attempt to share the joy of learning
and growth. Ms./Mr. ____________ was previously a regular employee and has been offering
tutorial services for friends and family 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 by quitting her job and putting up her own
business. After completing the business registration and other legal requirements,
_______(business name) Tutorial Center officially began its operations on November 8, 20x1 in
Iligan City.

Additional information

Mr./Ms. Name of Business owner is your aunt. He/She asked for your help in connection with
the bookkeeping needs of her new business. Although you are very young and inexperienced,
you saw this invitation as an opportunity to learn. So you gladly accepted the challenges offered.

Initially, no separate cash has been set up and Ms. Business owner has been paying some of
the business’ start-up expenditures straight from her own pocket.

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.

Business Name Tutorial Center 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.

After doing some careful research and thorough inquiries, you came up with a CHART of
ACCOUNTS, as given in the following section, which you decided to use in recording the
transactions of the business.
Chart of Accounts

Current Assets:

111 Cash on hand

112 Cash in bank - BPI

120 Accounts receivable

120A Allowance for doubtful accounts

130 Notes Receivable

140 Prepaid supplies

145 Prepaid rent

150 Prepaid insurance

Non-current Assets:

160 Furniture and Fixtures

160A Accumulated depreciation - Furniture and Fixtures

170 Office equipment

170A Accumulated depreciation - Office equipment

Current Liabilities:

210 Accounts payable

220 Interest payable

230 Unearned Income

240 Salaries payable

250 Accrued utility expenses

Non-current Liabilities:

260 Notes payable

Equity:

310 Owner’s Capital

 320 Owner’s Drawings

330 Income Summary

Income:

410 Service fees

420 Interest Income

430 Gains

Expenses:

510 Salaries Expense

515 Rent Expense

520 Utilities Expense

525 Supplies Expense

530 Bad debts expense

535 Depreciation Expense

540 Advertising Expense

545 Insurance expense

550 Taxes and licenses

555 Transportation and travel expense

560 Interest expense

565 Miscellaneous expense

570 Losses

The following transactions occurred during 20x1:

November

2 Ms. Business owner invested P2,000,000 to open the Business Name Tutorial Center.

2 Ms. Business owner opened a checking account with BPI. She made a deposit of
800,000. This deposit came from her personal savings and is considered an additional
investment.
3 Paid the business permits and licenses fees amounting to make a research on how
much would a business permit and licenses fee would be paid for new business (you
may use estimates) for the calendar year.

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. Business owner
'parents. The owners usually require the payment of one month's deposit and first two
months' rent before the occupancy. However, they allow Business Name Tutorial Center
to occupy the property after payment of the first two months’ rent which shall be made
not later than November 5, 20x1.

4 Purchased bookcases, chairs, desks, filing cabinets, and tables amounting to

P240,000 on account, with estimated useful life of 2 years.

4 Ordered a computer from SaviorTech for use in the business with a total cost of P72,000.
The computer has an estimated useful life of 12 months. 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 Business
Name Tutorial Center for the remaining 50%.

4 Ms. Business owner provides various office equipment valued at P400,000 in total, all
with a remaining useful life of approximately 2 years and a residual value of P16,000 to
the business.

5 Received 1 year advance payment from Student Y for P60,000.

5 Issued check No. 157001 for payment of rent in accordance with the lease agreement.

6 Hired Nikka as office assistant for a daily salary of P390.

9 The computer previously ordered for the business was delivered by SaviorTech. A
delivery receipt was signed by Business Name acknowledging receipt of the equipment.
SaviorTech issued an official receipt to Business Name for the 50% down payment and
Business Name Tutorial Center issued a 30-day note for the balance.

9 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.

12 Paid installation fees and telephone and internet service amounting to P1,500.

14 Paid Nikka her salary for services rendered from November 6 - November 15, 20x1,
equivalent to 10 working days.
17 Received P3,000 from Travis, Inc as 50% down payment for services to be completed
on or before November 25, 20x1.

29 Completed tutorial module for customers with a total amount of P60,000. The customers
all paid in cash.

29 Paid Nikka her salary for services rendered from November 15 - November 30 20x1,
equivalent to 15 working days.

December

2 Borrowed P80,000 from the bank. The 6 month loan carries an interest rate of 12%.

5 Completed tutorial services for Zid Company amounting to P20,000, the customer paid
in cash.

9 Payment for the 30-day note owed to SaviorTech was made.

12 Issued check No. 157002 payable to PLDT for P2,300 in payment for the telephone and
internet service for the month of November.

15 Received cash from services rendered to various customers, P200,000.

16 Paid Nikka her salary for services rendered for 15 days.

17 Cost of meals served during the year-end party P5,000, paid in cash.

25 Received a statement of Account from Grafix for the printing of supplies worth P12,000,
term: n/30.

28 Issued check No. 157004 for the personal expenses of Ms. Lori Business owner,
P80,000.

INSTRUCTIONS/TASKS.

General Instructions: Templates are provided in the spreadsheet. However, you may
make the necessary adjustments in the format (spacing, column width, height, font
colors, and the like) whenever you need to.

Open Business Name Tutorial Center’s google spreadsheet and make a copy of the
file. Rename the file, indicate your name in the file name. In order for you to work on it
offline, you may make the file available offline by setting it under the File menu.

1. JOURNALIZING. Journalize the above transactions in the General Journal (GJ), Cash
Receipts Journal (CRJ) or Cash Disbursements Journal (CDJ), whichever is appropriate.
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. From the respective journals, post the 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 (refer to the template provided) 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, 20x1

3. Prepare the Unadjusted Trial Balance as of December 31, 20x1. (Please refer to the
template provided in the sheet labelled “UTB”..)

4. ADJUSTING ENTRIES. Below are the adjustments information at the end of December
20x1. Journalize the necessary adjusting entries in the General Journal. Post the
adjusting entries into the respective accounts in the General Ledger and complete the
cross-referencing.
a. Recognition of the incurred portion of the office space rental previously paid.
b. Recognition of depreciation expense. Depreciation method to be used is the
straight line method.
c. Based on physical count conducted at the end of the month, P4,500 worth of
office supplies remains unused.
d. Recognition of the expired portion of the property insurance.
e. Nikka’s salary for services rendered from December 16-31, 20x1, which is
equivalent to 15 working days, actually paid on the next working day.
f. Received Statement of Account for telephone, internet services and electricity,
Utilities expense for the month of December amounting to P12,300.

5. Prepare the company’s ten-column worksheet.

 6. Prepare the company’s Statement of Comprehensive Income.
7. Prepare the company’s Statement of Financial Position.
8. Journalize and post all adjusting entries and check if the ledger corresponds to the
Adjusted trial balance columns of the worksheet.
9. Journalize and post all closing entries.
10. Prepare a post-closing trial balance.
11. Prepare the reversing journal entries. Use the General Journal. Those entries are dated
January 1, 20x2. Post the reversing entries to the General Ledger.
12. Submit the file in the submission bin provided in our MOLE Classroom not later than
November 6, 2024.

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