L7: Completing the Accounting Cycle:

Service Concern

SUBJECT- DESCRIPTIVE TITLE

SUBJECT - CODE

PREPARED BY:
[INSTRUCTOR’S NAME]

Module No. 1 SCHOOL NAME

 LEARNING OBJECTIVES

⚫ Preparation of the Financial Statements

⚫ Understanding the importance of the Financial
Statements
⚫ The use of Worksheet in preparing financial
statements (optional)

Module No. 1 Title of Your Presentation

 (AJPUAFCPR) Step 6 - Financial Statements preparation

Bull Kit Vulcanizing Shop Financial Statements:

Adjusted Trial Balance
For the month ended January 31, 20202

Account Titles Debit Credit ⚫ Statement of Financial Performance (in higher

Cash P67,000
accounting, this would become Statement of
Accounts receivable 7,000 Comprehensive Income)
Allowance for doubtful accounts P1,400
Supplies 12,000
Equipment 25,000
Accumulated depreciation 500 ⚫ Statement of Changes in Owner’s equity
Accounts payable 15,000
Unearned service revenue 8,000
Higantes, Capital
Higantes, Drawings 3,500
80,000
⚫ Statement of Financial Position
Service Revenue 37,000
Salaries expense 5,000
Permits and Licenses 3,000 ⚫ Statement of Cash flows
Utilities expense 2,000
Rent expense 7,500
Doubtful accounts 1,400
Supplies expense 8,000 ⚫ Notes to Financial Statements (summary of
Depreciation expense 500
significant accounting policies and other
Balance P141,900 P141,900 explanatory information)
 Step 6 – (a) Statement of Financial Performance
Bull Kit Vulcanizing Shop Bull Kit Vulcanizing Shop
Adjusted Trial Balance
For the month ended January 31, 20202 Statement of Financial Performance
Account Titles Debit Credit For the month ended January 31, 2020
Cash P67,000
Accounts receivable 7,000
Allowance for doubtful accounts P1,400
Supplies 12,000 Service Revenue P37,000
Equipment 25,000
Accumulated depreciation 500 Less Expenses:
Accounts payable 15,000
Unearned service revenue 8,000 Salaries expense P5,000
Higantes, Capital 80,000
Higantes, Drawings 3,500
Permits and licenses 3,000
Service Revenue
Salaries expense 5,000
37,000 Utilities expense 2,000
Permits and Licenses 3,000 Rent expense 7,500
Utilities expense 2,000
Rent expense 7,500 Doubtful accounts 1,400
Doubtful accounts 1,400
Supplies expense 8,000 Supplies expense 8,000
Depreciation expense 500 Depreciation expense 500 27,400
Balance P141,900 P141,900 Net Income/ (Net Loss) P9,600
 Step 6 – (b) Statement of Changes in Owner’s Equity

Higantes, Capital account after Bull Kit Vulcanizing Shop

closing journal entries (Step 7) Statement of Changes in Owner’s Equity
For the month ended January 31, 2020

(P) - HIGANTES, CAPITAL 70 Higantes, Capital 1/1/2020 -P0-

Date Explanation Ref. Debit Credit Balance
Add:
Initial investment 80,000
1/2/2020 Cash Investment J1   80,000  80,000 Net income 9,600
1/31/2020 Balance       80,000 Total 89,600
Closing of Income and expense
1/31/2020 summary J1   9,600  89,600

Less:
1/31/2020 Closing of Drawings J1 3,500    86,100

1/31/2020 Balance after Closing entries       86,100

Personal withdrawals 3,500
Higantes, Capital 1/31/2020 P86,100

Module No. 1 Title of Your Presentation

 Step 6 – (c) Statement of Financial Position
Bull Kit Vulcanizing Shop Bull Kit Vulcanizing Shop
Adjusted Trial Balance Statement of Financial Position
For the month ended January 31, 20202 As of January 31, 2020

Account Titles Debit Credit ASSETS

Cash P67,000
Cash P67,000
Accounts receivable 7,000
Allowance for doubtful accounts P1,400
Accounts receivable P7,000
Supplies 12,000 Allowance for doubtful accounts (1,400) 5,600
Equipment 25,000 Supplies 12,000
Accumulated depreciation 500 Equipment 25,000
Accounts payable 15,000 Accumulated depreciation (500) 24,500
Unearned service revenue 8,000 Total Assets P109,100
Higantes, Capital 80,000
Higantes, Drawings 3,500 LIABILITIES AND CAPITAL
Service Revenue 37,000
Salaries expense 5,000
Accounts payable P15,000
Permits and Licenses 3,000
Utilities expense 2,000 Unearned service revenue 8,000
Rent expense 7,500 Total Liabilities P23,000
Doubtful accounts 1,400
Supplies expense 8,000 Higantes, Capital 86,100
Depreciation expense 500 Total Liabilities and Capital P109,100

Balance P141,900 P141,900

 Bull Kit Vulcanizing Shop Bull Kit Vulcanizing Shop
Statement of Financial Performance Statement of Financial Position
For the month ended January 31, 2020
As of January 31, 2020

Service Revenue P37,000 ASSETS

Less Expenses:
Salaries expense P5,000
Permits and licenses 3,000 Cash P67,000
Utilities expense 2,000 Accounts receivable P7,000
Rent expense 7,500 Allowance for doubtful accounts (1,400) 5,600
Doubtful accounts 1,400
Supplies 12,000
Supplies expense 8,000
Depreciation expense 500 27,400 Equipment 25,000
Net Income/ (Net Loss) P9,600 Accumulated depreciation (500) 24,500
Total Assets P109,100

Bull Kit Vulcanizing Shop LIABILITIES AND CAPITAL

Statement of Changes in Owner’s Equity
For the month ended January 31, 2020 Accounts payable P15,000
Unearned service revenue 8,000
Higantes, Capital 1/1/2020 -P0-
Total Liabilities P23,000
Add:
Initial investment 80,000
Net income 9,600 Higantes, Capital 86,100
Total 89,600 Total Liabilities and Capital P109,100

Less:
Personal withdrawals 3,500
Higantes, Capital 1/31/2020 P86,100
Step 7:
Closing of temporary accounts (income, expense, and drawing accounts) to the Capital account

Date Account titles F Debit Credit

Jan. 2020        
31 Service revenue 80 37,000  
  Income and expense summary 200    37,000
         
31 Income and expense summary 200  27,400  
  Salaries expense 100   5,000
  Permits and licenses 104   3,000
  Utilities expense 101   2,000
  Rent expense 113   7,500
  Doubtful accounts expense 118   1,400
  Supplies expense 114   8,000
  Depreciation expense 119   500
         
31 Income and expense summary 200  9,600  
  Higantes, Capital 70   9,600
         
31 Higantes, Capital 70 3,500  
  Higantes, Drawings 71   3,500
 Step 7:
(a) Posting of Closing journal entries to the General Ledger

(I) - SERVICE REVENUE 80 (E) - RENT EXPENSE 113

Date Explanation Ref. Debit Credit Balance Date Explanation Ref. Debit Credit Balance
1/9/2020 Cash J1   18,000  18,000 1/25/2020 Cash Payment J1 7,500    7,500
1/12/2020 Credit J1   12,000  30,000 1/31/2020 Balance       7,500
1/27/2020 Rendered unearned services J1   7,000  37,000 1/31/2020 Closed to Income and expense summary J1   7,500  0
1/31/2020 Balance       37,000 1/31/2020 Balance after Closing entries       0
1/31/2020 Closed to Income and expense summary J1 37,000    0
1/31/2020 Balance after Closing entries       0 (E) - DOUBTFUL ACCOUNTS 118
Date Explanation Ref. Debit Credit Balance
(E) - SALARIES EXPENSE 100 1/31/2020 Monthly adjustments J1 1,400    1,400
Date Explanation Ref. Debit Credit Balance
1/31/2020 Balance       1,400
1/18/2020 Cash payment J1 5,000    5,000
1/31/2020 Closed to Income and expense summary J1   1,400  0
1/31/2020 Balance       5,000
1/31/2020 Balance after Closing entries       0
1/31/2020 Closed to Income and expense summary J1   5,000  0
1/31/2020 Balance after Closing entries       0 (E) - SUPPLIES EXPENSE 114
Date Explanation Ref. Debit Credit Balance
(E) - PERMITS AND LICENSES 104
1/31/2020 Monthly adjustments J1 8,000    8,000
Date Explanation Ref. Debit Credit Balance
1/31/2020 Balance       8,000
1/18/2020 Cash payment J1 3,000    3,000
1/31/2020 Closed to Income and expense summary J1   8,000  0
1/31/2020 Balance       3,000
1/31/2020 Balance after Closing entries       0
1/31/2020 Closed to Income and expense summary J1   3,000  0
1/31/2020 Balance after Closing entries       0 (E) - DEPRECIATION EXPENSE 119
Date Explanation Ref. Debit Credit Balance
(E) - UTILITIES EXPENSE 101 1/31/2020 Monthly adjustments J1 500    500
Date Explanation Ref. Debit Credit Balance 1/31/2020 Balance       500
1/18/2020 Cash Payment J1 2,000    2,000 1/31/2020 Closed to Income and expense summary J1   500  0
1/31/2020 Balance       2,000 1/31/2020 Balance after Closing entries       0
1/31/2020 Closed to Income and expense summary J1   2,000  0
1/31/2020 Balance after Closing entries       0
 Step 7: (b) Posting of Closing journal entries to the General Ledger
Step 8: Post-Closing Trial Balance preparation

INCOME AND EXPENSE SUMMARY 200

Bull Kit Vulcanizing Shop
Date Explanation Ref. Debit Credit Balance Post-Closing Trial Balance
1/31/2020 Closed service revenue account J1   37,000  37,000 January 31, 20202
1/31/2020 Closed all expense account J1 27,400    9,600
1/31/2020 Balance       9,600
1/31/2020 Closed to Capital account   9,600    0 Account Titles Debit Credit
1/31/2020 Balance after Closing entries       0

Contra (P) - HIGANTES, DRAWINGS 71 Cash P67,000

Date Explanation Ref. Debit Credit Balance Accounts receivable 7,000
1/31/2020 Cash withdrawal J1 3,500   3,500
Allowance for doubtful accounts P1,400
1/31/2020 Balance       3,500
1/31/2020 Closed to Capital account J1   3,500  0 Supplies 12,000
1/31/2020 Balance after Closing entries       0 Equipment 25,000
(P) - HIGANTES, CAPITAL 70 Accumulated depreciation 500
Date Explanation Ref. Debit Credit Balance Accounts payable 15,000
1/2/2020 Cash Investment J1   80,000  80,000
1/31/2020 Balance       80,000
Unearned service revenue 8,000
1/31/2020 Closing of Income and expense summary J1   9,600  89,600 Higantes, Capital 86,100
1/31/2020 Closing of Drawings J1 3,500    86,100 Balance P111,000 P111,000
1/31/2020 Balance after Closing entries       86,100
 SUMMARY

Module No. 1 Title of Your Presentation