Fluent Essays

Complete a two-part assessment in which you will identify accounting conventions and complete five exercises that reflect the steps of a business accounting cycle. Introduction Note: An accounting cycle requires specific steps that need to be executed in a particular sequence. The assessments in this course are likewise sequenced, and should be completed in the order in which they are presented. Demonstrating your understanding of the financial accounting theories behind various financial accounting practices helps you support your professional work and gain credibility. Imagine you are the captain of a large sailing vessel, hundreds of miles away from land. You have no maps, charts, or navigation equipment to show you where you have been, where you are, or where you should be going. Further, you have no means of communicating with the outside world to let them know the results of your journey. If this scenario is a bit daunting, picture a business organization with no means of measuring past, present, or future operating results and no language for communicating its position in an industry. This scenario helps you understand why an accounting information system is important and known as the lifeblood of any business organization. This complex system collects and processes business information and communicates the results to interested parties. Much like navigation equipment on a ship, accounting information charts show where the business organization has been financially and put the organization on a course toward achieving its stated purpose or vision. Preparation The following resources are required to complete the assessment. Accounting Cycle Steps Preparation Data Sheet [DOC]. Assessment 1 Template [DOC]. Overview Note: An accounting cycle requires specific steps that need to be executed in sequence. The assessments in this course are presented in sequence and must be completed in the order presented. There are two parts to this assessment. Part 1: Accounting Conventions Accounting conventions are common guidelines and practices—principles, assumptions, and constraints—followed by accounting professionals when recording business transactions. These accounting conventions are standards used by all business organizations, so it is important to understand what they are and how to apply them. For Part 1 of the assessment, define each of the following accounting conventions and provide an example of how they are applied in the world of business, and in particular in accounting. Provide your answers in a 3-4-page Word document. Economic entity assumption. Going concern assumption. Periodicity assumption. Monetary unit assumption. Historical cost principle. Conservatism. Matching principle. Full-disclosure principle. Materiality. Revenue recognition. Cost effectiveness. Additional Requirements Part 1 of your assessment should meet the following requirements: Written communication: Written communication should be clear, well-organized, and support a central idea, with no technical writing errors, as expected of a business professional. References: References and citations should be formatted using current APA style and formatting guidelines. Length: 3-4 typed, double-spaced pages. Font and font size: Times New Roman, 12-point. Part 2: The Accounting Cycle Part 2 of this assessment walks you through the basic steps of the accounting cycle to produce financial statements for stakeholders. This assessment has five sections; each section of the assessment is a continuation of the previous part. For this part of the assessment, complete the following: Read the scenario below. Read the Accounting Cycle Steps Preparation Data Sheet, linked in the Resources under the Required Resources heading. This document provides the basis for all five sections of this assessment. Save the Assessment 1 Template, linked in the Resources under the Required Resources heading. Use this template to record your responses to the five sections below and to submit your assessment. Scenario Imagine after working with an accounting firm for one year, you are striving for a promotion. To earn a promotion, you must seek recognition from managers within your firm, from colleagues, and from clients. You strategize ways to be a sound resource for financial answers within your firm and for your clients. Demonstrating your understanding of the financial accounting theories behind various financial accounting practices helps you support your professional work and gain credibility. Your boss just assigned you numerous accounts that have a wide range of accounting needs. These new accounts are the final test for the promotional track. Your client Dorothy Young, the owner of a dress shop, has recently died. Her daughter, Tanya, is the executor of the estate but has never been involved in running the business. The beneficiaries want to sell the business and divide the proceeds. The business broker Tanya hired needs current financial statements to determine the value of the business and put it on the market. You must complete the accounting cycle for the business and produce the necessary financial statements for the beneficiaries and the business broker. Instructions Using the information in the Accounting Cycle Steps Preparation Data Sheet, complete the following five parts in the Assessment 1 Template. Each part builds on the previous part. Where appropriate, show the calculations leading to the final solution. A: Adjusting Entries Adjusting entries are necessary to prepare a companys financial information according to the matching and revenue recognition principles. Certain account balances must be adjusted at the end of each accounting period for all revenue and expense accounts to be reported with the correct balances. Journalize the adjusting entries for Dorothys Young Fashions. B: Adjusted Trial Balance Income The adjusted trial balance is prepared to assure us that debits equal credits after the adjusting entries have been posted to the general ledger. Prepare an adjusted trial balance for Dorothys Young Fashions. C: Multiple-Step Income Statement The multiple-step income statement is used to disclose the operating and nonoperating activities of a company separately. This income statement format organizes the operating expenses and nonoperating expenses into separate areas of the income statement and matches costs and expenses with revenues for the period. Prepare a multiple-step income statement for Dorothys Young Fashions. D: Closing Entries The closing process takes the balance of temporary or nominal accounts to zero to prepare the accounts for a new accounting period. At each year end, the income statement accounts and withdrawal or dividend accounts must be closed so that the balances will reflect only activity for the current accounting period, similar to an individuals paycheck information. At the end of each year, employers prepare a W-2 for each employee and close the payroll accounts for the year. Zero balances begin the next year. Prepare a closing entry statement for Dorothys Young Fashions. E: Post-Closing Trial Balance The post-closing trial balance is prepared to show us that debit account balances are equal to credit account balances after all of the closing entries have been posted to the general ledger. Once the post-closing trial balance has been prepared, verified, and balanced, we are ready to start recording transaction for the next year. This is the last step in the accounting cycle. Prepare a post-closing trial balance statement for Dorothys Young Fashions. Competencies Measured By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria: Competency 1: Define financial accounting conventions to support practice as a professional in the field. Define financial accounting conventions to support practice as a professional in the field. Competency 3: Evaluate economic resources of a business enterprise. Journalize the adjusting entries. Prepare an adjusted trial balance. Prepare a multiple-step income statement. Prepare closing entries and a post-closing trial balance. Competency 5: Communicate in a manner that is professional and consistent with expectations for professionals in the field of accounting. Communicate in a manner that is professional and consistent with expectations for professionals in the field of accounting.Assessment 1 Part 1: Accounting Conventions Date Account Title Debit Credit Part 2: The Accounting Cycle A. Adjusting Entries DOROTHY’S YOUNG FASHIONS Adjusted Trial Balance July 31, 2018 Dr. Cr. Cash Accounts receivable Merchandise inventory Store supplies Store equipment Accumulated depr.—store   Equipment Delivery equipment Accumulated depr.—delivery   Equipment Notes payable Accounts payable Common stock Retained earnings Sales Sales returns and allowances Cost of goods sold Salaries expense Advertising expense Utilities expense Repair expense Delivery expense Rent expense Store supplies expense Depreciation expense—store equipment Depreciation expense—delivery equipment Interest expense Interest payable Totals B. Adjusted Trial Balance Income DOROTHY’S YOUNG FASHIONS Income Statement For the Year Ended July 31, 2018 Sales revenue Sales Less: Sales returns and allowances Net sales Cost of goods sold Gross profit Operating expenses Selling expenses Salaries expense Advertising expense Rent expense Delivery expense Utilities expense Depr. exp.—store equipment Depr. exp.—deliv. equipment Stores supplies expense Total selling expenses Administrative expenses Salaries expense Repair expense Accounting Cycle Steps Preparation Data Sheet The trial balance of Dorothy’s Young Fashions contained the following account balances on July 31, 2018, the end of the company’s fiscal year: Dorothys Young Fashions Trial Balance July 31, 2018 Debit Credit Cash $14,685 Accounts Receivable 18,535 Merchandise Inventory 24,750 Store Supplies 3,025 Store Equipment 46,750 Accumulated Depreciation - Store Equipment $9,900 Delivery Equipment 26,400 Accumulated Depreciation - Delivery Equipment 3,300 Notes Payable 28,050 Accounts Payable 26,675 Common Stock 49,500 Retained Earnings 4,400 Sales 416,460 Sales Returns and Allowances 2,310 Cost of Goods Sold 273,570 Salaries Expense 77,000 Advertising Expense 14,520 Utilities Expense 7,700 Repair Expense 6,655 Delivery Expense 9,185 Rent Expense 13,200   $538,285 $538,285 Adjusting Information a) Stores Supplies on hand totaled $1,925. b) Depreciation was $4,950 on the Store Equipment and $3,850 on the Delivery Equipment. c) Interest of $6,050 is accrued on Notes Payable at July 31, 2018. Additional Information a) Salaries Expense is 70\% selling expense and 30\% administrative expense. b) Rent Expense and Utilities Expense are allocated 80\% to selling expenses and 20\% to administrative expenses. c) $16,500 of the Notes Payable will be due for payment during the next year. d) Repair Expense is 100\% administrative. 2