Complete a 3-part assignment in which you create journal entries for a variety of business events, test your recall of accounting fundamentals by answering a series of questions, and identify and prepare entries for the corporate ownership business type.
Although many small businesses might operate on a cash basis, most of the larger ones use the accrual basis to record business events in the general journal. Learning the language of business is very challenging. There are so many terms, procedures, processes, and dos and do nots that keeping track of all of them requires a separate space in one’s brain. There are three business ownership types: (1) proprietorship, (2) partnership, and (3) corporation. Many of their accounting transactions are similar. However, there are some business events that require special transaction handling in accounting entries.
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:
- Competency 1: Define accounting and its application to accounting principles.
- Apply knowledge of business accounting terminology by describing each term.
- Describe the internal and external users for accounting data.
- Describe the role ethics has in the operation of an accounting system.
- Describe the purpose of accounting conventions prescribed by law, regulators and accounting.
- Describe the main financial statements used in an accounting system.
- Discuss the role of debit and credit as applied in accounting.
- Competency 3: Prepare financial statements from accounting system data.
- Prepare a general journal for a company using appropriate financial data.
- Prepare a general journal for a corporate ownership business using appropriate financial data.
This assignment includes three parts. Use the template provided for each part to complete the assessment. The templates are linked in the Resources under the Required Resources heading.
Part 1: Proprietorship Business Transactions
Although many small businesses might operate on a cash basis, most of the larger ones use the accrual basis to record business events in the general journal. In this assessment, apply your knowledge of various business events that require journal entries to be made.
For this part of the assessment, use the assignment 4, Part 1 Template to create journal entries for each of the following business events for Magnolia Greens Frisbee Golf Course:
- May 1: Invested $20,000 cash in the golf course business.
- May 3: Purchased Hampstead Golf Land for $15,000 cash. The price includes land $12,000, shed $2,000, and equipment $1,000.
- May 5: Paid advertising expenses of $700.
- May 6: Paid cash $600 for a 1-year insurance policy.
- May 10: Purchased golf discs and other equipment for $1,050 from Discs Are Us, payable in 30 days.
- May 18: Received $1,100 in cash for golf fees earned (service revenue).
- May 19: Sold 150 coupon books for $10 each. Each book contains four coupons that enable the holder to play one round of golf.
- May 25: Withdrew $800 cash for personal use.
- May 30: Pay salaries for part-time employees $250.
- May 30: Paid Discs Are Us the full amount due.
- May 31: Received $2,100 cash for fees earned.
Accounts to be used are given below:
- Prepaid insurance.
- Accounts payable.
- Unearned service revenue.
- Owner’s capital.
- Owner’s drawings.
- Service revenue.
- Advertising expense.
- Salaries and wages expense.
Part 2: Accounting Knowledge Transfer
This part of the assignment allows you to demonstrate and reinforce your knowledge of business accounting terminology by transferring what is in your head onto paper.
For this assessment, use the assignment 4, Part 2 Template to record your answers to the following short-answer questions designed to test your recall of accounting fundamentals.
- Define the internal and external users of accounting data. What data would each group most likely want to review? Provide examples of each user type.
- Describe the role ethics plays in the operation of an accounting system. Include a couple of examples.
- Select three among the several accounting conventions prescribed by law, regulators, and accounting organizations. For each selection, describe its purpose and provide an example of how it would be applied to an accounting system.
- Describe each of the three main financial statements—the end products of the work that takes place in an accounting system over a period of time—studied in the course. What does each statement present? Why is it important to prepare these? Who uses the information in the statements? Describe the interrelationship among the three statements.
- Discuss the rules of debit and credit as apply to each of the account types that would appear on a company’s balance sheet and income statement. Identify the normal balance for each account type and provide an example event for each. Analyzing business events requires the accountant to make several judgments about the facts contained in the event.
Part 3: Corporate Business Transactions
There are three business ownership types: (1) proprietorship, (2) partnership, and (3) corporation. Many of their accounting transactions are similar. However, there are some business events that require special transaction handling in accounting entries.
For this part of the assessment, use the assignment 4, Part 3 Template to identify and prepare entries for the corporate ownership business type.
Imagine you are an accountant for J. Malone’s Law Firm, Inc. The accounts and transactions of the firm are listed below. Analyze each transaction. Identify the account or accounts to be debited and credited and, using the provided template, prepare a journal entry for each in the proper format.