BUS 4113: Financial Accounting 1
Fresh Bakery shop
Student Name/ ID :
Alia Ali AlDhaheri / H00329159
TOC o “1-3” h z u Company Description: PAGEREF _Toc531001886 h 2Transactions: PAGEREF _Toc531001887 h 5Chart of Accounts PAGEREF _Toc531001888 h 8General Ledger PAGEREF _Toc531001889 h 8General Ledger Trial Balance PAGEREF _Toc531001890 h 11Income statement PAGEREF _Toc531001891 h 12Balance sheet PAGEREF _Toc531001892 h 13Inventory Valuation report PAGEREF _Toc531001893 h 14
Company Description:The Fresh bakery shop was established in January 2018 with the goal of satisfying the ever-growing demand for affordable, reliable, and durable bakery in the United Arab Emirates. The initial investment in the company came in form of 500 common shares with each share having a value of 100AED. The Bakery has four suppliers and products, which was also the long-term assets bought by Fresh bakery shop . The company anticipates a fast and continuous growth from the initial year. Over the first year, the company shall deal with the following products:
product Selling price Cost price Supplier supplier 1 Red velvet cakeAED 1500 per unit AED 1000 per unit Modern general for trading 2 AED 120 per unit AED 50 per unit Cake of box’s 3 AED 150 per unit AED 90 per unit The French Bakery Istore 4 AED 50 per unit AED 25 per unit Italian food Master’s Sharaf DG In order to build a good foundation for the tremendous growth that is expected by the company, the management has established purchase terms for suppliers willing to do business with the company. The purchase terms are n/40 and the credit limit has been set at AED 70,000 each. This is to cause the suppliers to be committed when discharging their roles.
Fresh Bakery shop has three main customers namely:
Home & Bakery , terms 2/10, n/40 credit limit AED 70,000.
Switch chocolate ,terms 2/10, n/40 credit limit AED 70,000
Cake of House , terms 2/10, n/40 credit limit AED 70,000
Chart of Accounts:
code A/c Name A/C
code A/c Name
Current assets – (100-149) Equity – (300 -399)
100 Cash – (Cash) 300 Common Stock – (Equity-doesn’t close)
105 Accounts Receivable – (Accounts receivable) 301 Retained Earnings- (Equity-Retained earnings)
110 Inventory –(Inventory) 115 Office Supplies – (other current assets) 120 Store Supplies – (other current assets) Revenue (Income) – (400 – 499)
125 Prepaid Insurance –(other current assets) 400 Sales Revenue-(Income)
401 Sales Returns ; Allowances -(Income)
402 Sales discounts-(Income)
Fixed Assets –(150-199) Expenses-(500-599)
150 00Office Equipment –(Fixed Assets) 500 Cost of goods sold – (Cost of Sales)
151 Land- (Fixed Assets) 505 Utilities expense-(Expenses)
152 Building – (Fixed Assets) 510 Salaries expense-(Expenses)
153 Acc. Depreciation-Off.Eq. – (Acc. Depreciation) 515 Advertising Expenses
154 Acc. Depreciation- building. – (Acc. Depreciation) 516 Office Salaries Expenses
Current Liabilities – (200—249) 518 Insurance expense-(Expenses)
200 Accounts payable – (Accounts payable) 520 Office supplies expense-(Expenses)
525 Depreciation expense-(Expenses)
530 Depreciation building-(Expenses)
Telephone / water / electricity
Transactions:Jan 1 Issued 10,000 common shares for AED 50 each.
Jan 1 Paid AED 7,200 for the next six months’ rent of a part of a warehouse to Modern General Trading.
Check # 101 (Invoice # GSS1011)
Jan 2 Paid AED 24,000 for an insurance policy for a year to Emirates Insurance. Check # FF102
(Invoice # NI1010)
Jan 3 Purchased some office equipment for AED 32,000 cash from Cake Box – Check # FF103 (Invoice # OS2109).
The equipment has a useful life of 5 years and a salvage value of AED 2000. The company uses the straight-line depreciation method for this asset.
Jan 4 Purchased on credit 200 cakes of Red velvet cake at AED 8 per cake (invoice # 356), 100 cakes of Milk cake at AED16 per cake (invoice # 67), and 150 cakes of Oreo cheesecake at AED 12 per cake. (invoice # 2005)
Jan 5 Purchased office supplies for AED 4,000 cash from Cake Box. Check # FF104
(Invoice # SS2213)
Jan 5 Sold 110 cakes of Red velvet cake and 90 cakes of Oreo cheesecake on credit (invoice # 2018-1)
Jan 8 Sold 60 cakes of and 80 cakes of Oreo cheesecake on credit to Switch. (invoice # 2018-2)
Jan 9 Paid the amount owing to all four suppliers.
(Invoice # 356; Check # FF105)
(Invoice #67; Check # FF106)
(Invoice #2005; Check # FF107)
Jan 10 Purchased 250 cakes of Red velvet cake at AED 9 per cake. (invoice # 393) and 120 cakes of Milk cake at 16 per cake. (invoice #74).
Jan 11 Collect the amount owing from Switch chocolate check #667 and gave the discount.
Jan 14 Sold 200 cakes of Red velvet cake (invoice#2018-3), 50 cakes of Milk cake and 50 cakes of Oreo cheesecake to House of Cake. (invoice#2018-3)
Jan 19 Purchased 300 cakes of Red velvet cake at AED 9 per cake (invoice # 423), 100 cakes of Milk cake at AED 16 per cake (invoice # 79) and 200 cakes of Oreo Cheesecake at a reduced price of AED 10 per cake. (invoice # 2449)
Jan 20 Returned 50 cakes of Milk cake to the supplier. (invoice # 79)
—Debit note was issued (Debit note # VCRN1) (Peachtree calls Debit notes as vendor credit notes)
Jan 22 Collect the money owing from Home & Bakery (check #7361)
Jan 25 Sold 70 cakes of Red velvet cake and 140 cakes of Oreo cheesecake to Home & Bakery. (invoice #2018- 4)
Jan 28 Paid electric bill of AED 500 cash. Check # FF108
Jan 30 Paid salaries of AED 1,500 in cash. Check # FF109
Jan 30 Sold 60 kilos of Oreo cheesecake to House of cake (invoice #2018-5)
Jan 31 House of cake returned 20 cakes of Oreo cheesecake. (invoice #2014-5) (credit note #CRN1)
Jan 31 Journal entries at the end of the first month. Assume Office supplies on hand is AED 1,000.
Jan 31 Purchased 60 cakes of caramel cake at AED 8 per cake. (invoice #77).
Feb 2 Sold 50 cakes of caramel cake to House of cake (invoice #2018- 6)
Feb 4 Sold 40 cakes of Milk cake (invoice#2018-7), 10 cakes of Caramel cake (invoice#2018-7) and 20 cakes of Red Velvet cake to Switch on credit. (invoice#2018-7)
Feb 5 Switch returned 5 cakes of Milk cake. (invoice #2018-7)
—Credit note was issued (Credit note # CRN2)
Feb 6 Purchased 30 cakes of Caramel cake at AED 8 per kilo (invoice # 666), 70 cakes of Milk cake at AED 16 per cake (invoice #88) and 40 cakes of Ore cheesecake at a reduced price of AED 10 per cake. (invoice #99)
Feb 9 Returned 10 cakes of Oreo cheesecake to the supplier. (invoice #99)
—Debit note was issued (Debit note # VCRN2) (Peachtree calls Debit notes as vendor credit notes)
Feb 10 Purchased 5 cakes of Milk cake at AED 16 per cake (invoice # 444)
Feb 11 Sold 40 cakes of Milk cake and 20 cakes of Caramel cake to Home Bakery. (invoice #2018-8)
Feb 12 Paid electricity bill of AED 1,900 cash. Check # FF110
Feb 13 Paid salaries of AED 1,700 in cash. Check # FF112
Feb 14 Purchased 50 cakes of Ice cream cakes at a reduced price of AED 6 per cake. (invoice #76).
Feb 17 Purchased some office furniture’s for AED 9,000 cash from Cake of Box’s in Dubai– Check # FF113 (Invoice # OS2107).
The equipment has a useful life of 5 years and a salvage value of AED 2,500. The company uses the straight-line depreciation method for this asset.
Feb 20 purchased a building for AED 150,000 paying in cash to Emaar company.
Feb 22 Purchased a land for AED 200,000 from Emaar paying in credit to expand our company.
Feb27 Sold 60 cakes of cupcakes to Switch on cash (invoice #2014-9)
Feb 28 Collect the amount owing from Switch Chocolate . (invoice # 2014-9)
Chart of Accounts
General Ledger Trial Balance
Inventory Valuation report
How is the Accounting different for a merchandising company compared to a service company?
A merchandising company sells merchandise, which is tangible goods. On the other hand, a service company offers intangible products such as banking. In this regard, a merchandising company stocks its inventory while a service company does not stock inventory but may need to stock tools and other supplies that are essential to the delivery of its services.
Give at least 3 benefits to using a computerized accounting package with an inventory module to account for a merchandising company.
Accuracy. There are minimal calculations done manually since all computations are done automatically the data has been entered into the system. This reduces the chances of errors that occur due to wrong calculations.
Reliability. Since the results of the calculations obtained using the computerized accounting package are so accurate, the financial statements that result are highly reliable.
Speed. When using a software package, the process of preparing the accounting information becomes fast since most of the calculations are performed by the computer. The reports and statement can be generated immediately, which saves huge amounts of time if the process was done using a manual system.
What is the different between “Remit to and ship to”?
Remit refers to the destination of the invoice that is sent to a party. The details of the person or entity receiving the invoice are also recorded by the sender. On the contrary, “ship to” refers to the destination where the goods or products shall be delivered. Sometimes the “Remit to” and “ship to” addresses can be the same.
Which inventory methods can you choose in Peachtree?
Peachtree is suitable because of its application of the LIFO and FIFO inventory method. LIFO (last-in-first-out) is ideal for companies selling non-perishable goods or those that have long shelf lives. FIFO (first-in-first-out) uses more of a protocol system. Here, products are removed according to the day they were added. It is useful since it allows products with relatively little shelf life such as food and medicine to be removed and disposed of before they can spoil.
What decisions can managers make based on the information on the inventory valuation report?
Increasing or decreasing the amount of stock.
Propose and implement the expansion or construction of a new warehouse.
Reduction of the quantity of some products.
Adjusting the prices of products in the available stock.