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Principle of Accounting 101 Your first investment on capital at Jan 1, 2024 is: 175,000 (included by 150,000 cash and by land valued 25,000) Period: From Jan 01, 2024 to Jan 31, 2024 (one month) Following the ongoing activites, your company has at least 3545 transactions for a month, including: 1. Purchasing supplies: By cash and by credit. 2. Purchasing inventories: By cash and by credit. 3. Purchasing service (ex: Repair, insurance, advertising, …): By cash and by credit. 4. Transactions of revenues : (ex: Consulting, rental, service, selling merchandises …): By cash and by receivable accounts. 5. Acquisition of non currentassets and depreciation. 6. Withdrawal capital 7. Payment of salary, bank loan or suppliers.
Individual Assignment Subject: Principle of Accounting (ACC101) Class: Lecturer: Name Student ID Table Of Content 1|Page I INTRODUCTION .3 General NDA Store information NDA Store items, import prices and selling prices .3 II CONTENTS 2.1 Transaction Description 2.2 Accoungting Equation .5 2.3 Worksheet .6 2.4 General Ledger .10 2.4.1 Trial balance .11 2.4.2 Closing entries 12 2.5 Income Statement 13 2.6 Owner's Equity .13 2.7 Balace Sheet 14 2.8 Cash Flow Statement 15 III CONCLUSION .17 I INTRODUCTION General NDA Store information 2|Page Realizing the increasing demand for fashion in the late 2023 and early 2024 period with fashion items in general and footwear in particular In the current Vietnamese market, choosing and buying genuine shoe models is very difficult because counterfeit goods are rampant in the market With the motto "GENUINE - PRESTIGE - QUALITY", NDA store was born to bring customers quality products at the best prices Coming to NDA Store, customers can choose new, hot trending, easy-to-wear shoe colors that bring customers not only beauty but also the feeling when wearing those shoes NDA Store opens on January 10, 2024 and begins business transactions on January 1, 2024 NDA Store items, import prices and selling prices No Import prices Selling prices Adidas SAMBA OG $90 $100 Adidas SUPERSTAR XLG $100 $110 Adidas FORUM $85 $95 II Name CONTENTS 2.1 Transaction Description After several months of planning, NDA Store opened for business The following events occurred during the first month of business (January 2024) 3|Page Date 7 8 10 11 13 14 16 17 18 19 20 21 21 21 22 23 23 24 24 25 Short transaction description Company decided to Invest $150.000 in cash and land value $25.000 NDA Store paid $4000 for equipment (by credit card) Purchased $800 worth of furniture and decorations Buy 30 models of SAMBA OG SHOES for $90/product and pay $2700 cash Buy 30 more models of SUPERSTAR XLG SHOES for $100/product and pay $3000 Sell the first orders of SAMBA OG shoes, total revenue is $500 (payable in installments) Get $500 on deals that took place on January Payment ($4000) for equipment purchased on January Buy 30 more ADIDAS FORUM SHOES models for $85/product with $2550 credit, credit limit 10/2, n/30 Pay $1000 in cash to advertise products on websites, store information on e-commerce products such as: Shopee, Lazada, Pay $1000/month rent Sell SUPERSTAR XLG models to customers at the door and receive $550 cash The owner withdrew $800 in cash for personal expenses Pay for all shoe models due and receive 2% discount Semi-monthly salary of $600 for sales staff ($300/employee) Selling SAMBA OG SHOES for $95/product and SUPERSTAR XLG SHOES for $105/product for customers who buy in bulk Total $1180 (installment payment) Estimated depreciation for equipment $300 Customer return SAMBA OG SHOES with price of $95/product sold on January 16 Get $1180 off product sold on January 16 Sold SUPERSTAR XLG SHOES total value 550$ (installment payment) Pay $1800 for 12 months of store insurance Buy 20 SUPERSTAR XLG SHOES at $100/product, $2000 total (credit) Get $550 on January 20 sale Hiring fast delivery staff with credit $ 200 and salary will be paid on the 29th Paying $2000 cash for January 21 Transaction Sold 15 ADIDAS FORUM SHOES to retail customer and get $1425 cash Sold 10 ADIDAS FORUM SHOES total value of $950 (installment payment) Salary payment starts from salary recognition from January 24th and paying salary on January 30th Get $950 cash on January 24 trading 4|Page 25 26 26 28 29 30 31 Sell 10 SAMBA OG SHOES to retail customer and get $1000 Bought SAMBA OG SHOES at $90/piece and SUPERSTAR XLG SHOES at $100/piece, totaling $950 and prepaid $500, remaining $450 due on January 28 Returned pairs of SAMBA OG SHOES (due to sole glue error) to supplier, total value $180 Make a payment of $450 for the sale that took place on January 26 Paid $200 in wages to express delivery workers on January 21 Electricity and water bill paid $50 Make payment of $600 semi-monthly salary to employees 2.2 Accoungting Equation The basic accounting equation represents the relationship between the assets, liabilities, and equity of an individual or business It is the foundation for the double-entry bookkeeping system For each transaction, the total debit amount equals the total credit amount In the NDA Accounting Equation table above, there are 36 transactions in January that are fully balanced through each specific transaction On the board, everyone can see details of NDA Store transactions, the increase or decrease for each transaction Thanks to that, viewers can easily track the company's transaction amount that month 2.3 Worksheet 5|Page WORKSHEET NDA STORE Period: From Jan 01, 2024 to Jan 31, 2024 (one month) Entry Date Account Title Debit Credit NDA Store invests money and assets to start business on January 1, 2024 with $175,000 Company decided to Invest $150.000 in cash and land value $25.000 01/01/2024 Cash 150000 Land 25000 NDA Store Captial 175000 NDA Store paid $4000 for equipment (by credit card) 02/01/2024 Equipment 4000 Account payable 4000 Purchased $800 worth of furniture and decorations 03/01/2024 Furniture 800 Cash 800 Buy 30 models of SAMBA OG SHOES for $90/product and pay $2700 cash 04/01/2024 Merchandise Inventory 2700 Cash 2700 Buy 30 more models of SUPERSTAR XLG SHOES for $100/product and pay $3000 05/01/2024 Merchandise Inventory 3000 Cash 3000 Sell the first orders of SAMBA OG shoes, total revenue is $500 (payable in installments) Account receivable 06/01/2024 500 Revenue COGS 500 450 Merchandise Inventory 450 Get $500 on deals that took place on January 07/01/2024 Cash 500 Account receivable 500 Payment ($4000) for equipment purchased on January 07/01/2024 Account payable 4000 Cash 4000 Buy 30 more ADIDAS FORUM SHOES models for $85/product with $2550 credit, credit limit 10/2, n/30 08/01/2024 Merchandise Inventory 2550 Account payable 2550 Pay $1000 in cash to advertise products on websites, store information on e-commerce products such as: Shopee, Lazada, 10 08/01/2024 Expense 1000 Cash 1000 Pay $1000/month rent 11 09/01/2024 Expense 1000 Cash 1000 Sell SUPERSTAR XLG models to customers at the door and receive $550 cash 12 10/01/2024 Cash 550 Revenue 550 6|Page COGS 500 Merchandise Inventory 500 The owner withdrew $800 in cash for personal expenses 13 11/01/2024 Withdrawal 800 Cash 800 Pay for all shoe models due and receive 2% discount 14 Account payable 2550 13/01/2024 Cash 2499 Merchandise Inventory 51 Semi-monthly salary of $600 for sales staff ($300/employee) 15 14/01/2024 Expense 600 Cash 600 Selling SAMBA OG SHOES for $95/product and SUPERSTAR XLG SHOES for $105/product for customers who buy in bulk Total $1180 (installment payment) Account receivable 16 16/01/2024 1180 Revenue COGS 1180 1120 Merchandise Inventory 1120 Estimated depreciation for equipment $300 17 17/01/2024 Depreciation expense 300 Accumulated depreciation 300 Customer return SAMBA OG SHOES with price of $95/product sold on January 16 Sales return 18 18/01/2024 380 Account receivable Merchandise Inventory 380 360 COGS 360 Get $1180 off product sold on January 16 19 19/01/2024 Cash 1180 Account receivable 1180 Sold SUPERSTAR XLG SHOES total value 550$ (installment payment) Account receivable 20 20/01/2024 550 Revenue COGS 550 500 Merchandise Inventory 500 Pay $1800 for 12 months of store insurance 21 21/01/2024 Prepaid Insurance 1800 Cash 1800 Buy 20 SUPERSTAR XLG SHOES at $100/product, $2000 total (credit) 22 21/01/2024 Merchandise Inventory 2000 Account payable 2000 Get $550 on January 20 sale 23 24 21/01/2024 Cash 550 Account receivable 550 Hiring fast delivery staff with credit $ 200 and salary will be paid on the 29th 7|Page 22/01/2023 Expense 200 Account payable 200 Paying $2000 cash for January 21 Transaction 25 23/01/2024 Account payable 2000 Cash 2000 Sold 15 ADIDAS FORUM SHOES to retail customer and get $1425 cash Cash 26 23/01/2024 1425 Revenue COGS 1425 1275 Merchandise Inventory 1275 Sold 10 ADIDAS FORUM SHOES total value of $950 (installment payment) Account receivable 27 24/01/2024 950 Revenue COGS 950 850 Merchandise Inventory 850 Salary payment starts from salary recognition from January 24th and paying salary on January 30th 28 24/01/2024 Expense 600 Account payable 600 Get $950 cash on January 24 trading 29 25/01/2024 Cash 950 Account receivable 950 Sell 10 SAMBA OG SHOES to retail customer and get $1000 Cash 30 25/01/2024 1000 Revenue COGS 1000 900 Merchandise Inventory 900 Bought SAMBA OG SHOES at $90/piece and SUPERSTAR XLG SHOES at $100/piece, totaling $950 and prepaid $500, remaining $450 due on January 28 Merchandise Inventory 31 26/01/2024 500 Cash Merchandise Inventory 500 450 Account payable 450 Returned pairs of SAMBA OG SHOES (due to sole glue error) to supplier, total value $180 COGS 32 26/01/2024 180 Merchandise Inventory Account payable 180 180 Sales return 180 Make a payment of $450 for the sale that took place on January 26 33 28/01/2024 Account payable 450 Cash 450 Paid $200 in wages to express delivery workers on January 21 34 35 29/01/2024 Account payable 200 Cash 200 Electricity and water bill paid $50 8|Page 30/01/2024 Expense 50 Cash 50 Make payment of $600 semi-monthly salary to employees 36 31/01/2024 Expense 600 Cash 600 Accounting spreadsheets help simplify the process of preparing financial reports for each accounting period Additionally, for financial statements that have already been prepared, accounting spreadsheets can be used to investigate why they may not be in balance It serves as an analytical and summarizing tool to reflect how accounts are initially posted, adjusting entries are made, and final presentation as financial statements Using accounting spreadsheets is a reliable process to determine the financial position of NDA Store even before preparing financial statements 2.4 General Ledger 9|Page The general ledger is an accounting record of all the financial transactions of the NDA This includes debits (money leaving your business) and credits (money entering your business) These transactions can occur across areas such as revenue, expenses, assets, and liabilities Common general ledger types include accounts receivable, accounts payable, and equity The general ledger is used to prepare important financial reports, such as the income statement and balance sheet, which detail the financial position of NDA Store 2.4.1 Trial balance Unadjusted Trial Balance Account title Dr Cash Cr Adjustments Adjusted Trial Balance Dr Dr Cr 134156 A/R Cr 134156 380 Prepaid Insurance 380 1800 Furniture Land Equipment 53 1747 800 800 25000 25000 4000 4000 Accumulated depreciation 300 MI 5434 A/P 5434 120 120 0 Unearned revenue Sales return 200 Capital 300 200 175000 175000 Sales revenue 2975 2975 Expected revenue 3180 3180 COGS 4915 4915 Expense 4550 4550 800 800 Withdrawal Depreciation Expense 300 300 53 53 Insurance Expense Furniture Expense 181655 181655 353 353 181955 181955 Note: Insurance Expense: 1800/12 month= $150 so 150/31 days = 4.8 Conclusion: 4.8 x 11 months= $53 A trial balance is an accounting spreadsheet in which the balances of all ledgers are aggregated into an equal total of debit and credit account columns The general purpose of creating a trial balance is to ensure that the entries in NDA Store's accounting system are 10 | P a g e mathematically correct A trial balance is a spreadsheet with two columns, a debit column and a credit column, to ensure a company's accounting records are mathematically accurate Debit and credit accounts include all of a company's business transactions during a given period, including total accounts such as assets, expenses, liabilities, and revenue The Debits and Credits of the trial balance must be counted to ensure there are no mathematical errors, but errors can still occur in the accounting system 2.4.2 Closing entries Date CLOSING ENTRIES 31/01/2023 Revenue Income summary 31/01/2023 Income summary Sale return Supplies expense Depreciation expense Insurance expense Expense COGS 31/01/2023 Retaining Earning Income summary 31/01/2023 Capital Withdrawal Debit Credit 6155 6155 10098 200 80 300 53 4550 4915 3943 3943 800 800 20996 20996 A closing entry is a journal entry made at the end of an accounting period that involves transferring data from a temporary account on the income statement to a permanent account on the balance sheet Temporary accounts include revenue, expenses and dividends and these accounts must be closed at the end of the accounting year A period-end entry is a journal entry made at the end of an accounting period It involves transferring data from temporary accounts on the income statement to permanent accounts on the balance sheet All balances in the final income statement will be transferred to retained earnings 2.5 Income Statement Revenues Sales Revenues Expected revenue 2975 3180 11 | P a g e Total Revenues 6155 Expenses Depreciation expense Insurance expense Investment expense Rent expense Salary expense Utilities expense Total Expenses Net Income (Profit) 300 53 800 1000 2400 50 4603 1552 The income statement is one of three key financial statements used to report the financial performance of NDA Store during a specific accounting period The income statement focuses on the revenue, expenses, profits, and losses reported by a company during a specific period of time Also known as the profit and loss statement (P&L) or revenue and expense statement, the income statement provides valuable insights into a company's operations, management effectiveness, and areas of underperformance The company's efficiency and performance compared to other companies in the same industry The income statement reports a company's financial performance during a specific accounting period The income statement focuses on a company's revenue, expenses, profits, and losses over a specific period of time The earnings report provides valuable insights into NDA Store's operations, management effectiveness, underperforming areas, and how the company is performing compared to its peers 2.6 Owner's Equity NDA Store, Capital January 01, 2024 Investment by owner 175000 Net Income (Profit) 1552 176552 Total 176552 Less: Withdrawal by owner 800 NDA Store, Capital Jan 31, 2024 175752 Equity is the portion of a company's assets that can be claimed by the owners; it is what is left after subtracting a company's liabilities from its assets Equity is listed on a company's balance sheet Equity increases when owners increase investments or the company increases profits Negative equity often indicates a company has more liabilities than assets and can 12 | P a g e spell trouble for the business However, a positive NDA Store shows that the company's operations during the month were somewhat effective 2.7 Balace Sheet Assets Current Assets Cash Accounts receivable Inventory Prepaid expenses Furniture …………… Total current assets Fixed (Long-Term) Assets Property, plant, and equipment (Less accumulated depreciation) 134156 -380 5434 1800 800 Total fixed assets 3700 141810 4000 300 Other Assets Land 25000 Total Other Assets Total Assets Liabilities and Owner's Equity Current Liabilities Accounts payable Sales Return Unearned revenue Short-term loans Income taxes payable Accrued salaries and wages Total current liabilities Long-Term Liabilities Long-term debt Deferred income tax Other Total long-term liabilities 25000 170510 120 -200 -80 $0 13 | P a g e Owner's Equity Owner's investment Retained earnings COGS Withdrawal Insurance expense Total owner's equity 175000 1552 4915 800 53 170590 Total Liabilities and Owner's Equity 170510 Balance sheet refers to a financial statement reporting the assets, liabilities and shareholders' equity of NDA Store for the month of January 2024 The balance sheet provides the basis for calculating profit margins for investors and evaluate the company's capital structure It provides an overview of the company's financial position (what it owns and owes) as of its inception date The balance sheet follows an equation that equates assets with total liabilities and equity 2.8 Cash Flow Statement Operations Cash receipts from Sales revenue (1) Return product (12) Return expired good (13) Cash paid for 6155 560 180 Return Profit Equipment expense (2) 160 -4000 Inventory purchases (4) Prepaid Insurance (5) Salary expenses (6) -11149 -1800 -2000 Furniture Advertising Expense (9) Withdraw(10) Rent land (14) Accumulated depreciation (15) Making loans to other entities (16) -800 -1000 -800 -1000 -300 -50 14 | P a g e Net Cash Flow from Operations -15844 Investing Activities Cash receipts from Sale of property and equipment Collection of principal on loans Sale of investment securities Cash paid for Purchase of property and equipment Making loans to other entities Purchase of investment securities Net Cash Flow from Investing Activities $0 Financing Activities Cash receipts from Issuance of stock Borrowing Cash paid for Repurchase of stock (treasury stock) Repayment of loans Dividends Net Cash Flow from Financing Activities Net Increase in Cash Cash Beginning balance Net Cash Balance $0 -15844 150000 134156 A cash flow statement is a financial statement that provides aggregate data on all the cash inflows a company receives from ongoing operations and external investment sources It also includes all cash flows for business and investment activities over a given period of time The cash flow statement includes cash generated by NDA Store through operations, investments and financing - this total is called net cash flow The first part of the cash flow statement is cash flow from operations, which includes transactions from all operating businesses Cash flow from investing is the second part of the cash flow statement and is the result of investment gains and losses Cash flow from financing activities is the final section, providing an overview of cash used from debt and equity Cash inflow - cash outflow < 0, this shows that NDA is in a difficult situation However, this is still a good index because NDA Store's business is in the early stages and aims to grow in the following months 15 | P a g e III CONCLUSION Conclusion After three analysis tables namely trial balance, income statement and balance sheet analyzed the transactions that took place from January to end of January 2024 of NDA From the Income Statement, the company has a Net Income of $1552, which shows that the company has been profitable since its first month of operations This is what kicks off the success of any startup After one month of operation of NDA Store, the company's total assets are $170,510 The company's operations in the first month went quite smoothly with stable revenue to maintain the next round of funding for the next month 16 | P a g e