Question

Prepare "T" Accounts in ACCRUAL and CASH basis the Income statement, Statement of Retained Earnings and Balance Sheet, after reading the following information below.

Richard Brandt graduated from York University with his BAS although he spent more time in the gym than in the classrooms and libraries. His parents and grandparents were very proud and happy of this achievement. As a graduation gift, Richard's Grandparents gave him $20,000 to start his own business.

So, on September 1, 2015, Richard started a small business called "Ricky Rock Wrestling for Fun". "Ricky Rock" offers a party package designed for active kids, teen and adults that want to learn and practice wrestling activities for fun by learning how to perform headlocks, leg scissors and other tricks.

As a student, he learned and practiced Greco-Roman wrestling and built an impressive body. Now graduated from university he has decided to continue with his passion of wrestling but added a spin to make money. In one tournament in 2013 Richard meet Linda who was competing for a US university team and she mentioned that she was working on girls birthday parties focused on wrestling. In June 2015 Richard contacted Linda and told her about his idea and Linda shared with him all documentation she has prepared in these years including: brochure to be distributed to potential customers, personal cards, party themes, parties activities, schedules and agendas, etc. During August Richard has completed his business plan and was ready to launch 'Ricky Rock Wresting for Fun' in the GTA.

The following is a list of transactions that occurred during the first month of operations:

September 1st Opened a business bank account with the $20,000 received as a gift from the Grandparents $20,000.

September 1st Signed 12 month commercial insurance contract for any liability that might emerge from the activity, $600 per month for 1 year.

September 2nd Purchase in cash costumes of famous wrestlers to wear at parties. The costumes can last one full year $600.

September 3rd Paid in cash the set up of the web site. It expects to last the whole life of this business $2,000.

September 4th Collected the brochures and presentation cards to be used in promoting the business. One third is paid in cash while the rest will be paid on October 5th $450.

September 5th First event organized and delivered. Birthday party for a 5 years old boy. Received the payment in cash $1,000.

September 6th Second event organized and delivered as part of a series of activities organized by a charity to raise funds. One third is paid in cash while the rest will be paid by the Charity Organization on October 5th $3,000.

September 8th Labour day, no events, no work so Richard goes to the gym and does a double routine (the rest of the days he just does a simple routine of 2.5 hours).

September 12th Third event organized and delivered. Birthday party for a 7 years old boy. Parents promise to pay in a few days $1,000.

September 15th Pays first 2 months of insurance $1,200.

September 19th & 20th Fourth event organized and delivered. Provided one of the activities of a corporate team building extravaganza weekend. The contract signed says the payment will be effective in 30 days with a cheque $2,000.

September 23rd Paid the gym membership for September, October, November and December $2,000.

September 24th Telephone bill for $200 was received for the month of September, payment due October 5th $200.

September 26th Fifth event organized and delivered. Birthday party for a 4 years old boy. Received payment in cash $1,000.

September 26th One of the parents at the birthday party for a 4 years old boy hires him for his son's birthday party on October 10th. Received payment in cash $500.

September 27th Sixth event organized and delivered. Birthday party for a 6 years old boy. Received payment in cash $1,000.

September 29th Received the payment for the birthday party for the 7 years old boy of September 12th $1,000.

September 30th Richard pays to his parents a rent for using the car for business purposes and to go and come back from the gym $200.

September 30th Richard promised to pay on October 6th to his parents the extra charge that comes in the insurance premium of their cars for having him as an additional driver (male under 25) $800.

Additional information: September 30th Inventory of brochures and cards showed that two thirds of them are still available (not used) $300.

ACCRUAL accounting:

Revenues	Cash
Telephone Expense	Brochures
Car Rent Expenses	Accounts Receivables
Car Rent Insurance Expense	Prepaid Insurance
Costumes Expense	Prepaid Gym Membership
Brochures Expense	Costumes
Gym Membership Expense	Accumulated Depreciation Costumes
Insurance Expense	Web Site (intangible asset)
Advances From Customers	Accounts Payable
Owner's Equity	Costumes Depreciation Expense
	Telephone Payable

CASH accounting:

Revenue	Expense on Web site
Car rent expenses	Insurance Expense
Car Rent Insurance Expense	Gym Membership Expense
Costumes Expense	Brochures Expense
Telephone Expense	Cash
Owner's equity	Costumes Depreciation Expense
Advances From Customers	Accounts Payable

Answer 1

SOLUTION : FOR UNDERSTANDING PURPOSE I DO JOURNAL ENTRIES ALSO

DATE	JOURNAL ENTRY AND EXPLANATION	DEBIT	CREDIT
Sept 1	Cash	20,000
	owner equity		20,000
	(to record the investment)
Sept2	Costumes Expense	600
	cash		600
	(to record the purchase of costumes.)
Sept 3	website	2000
	cash		2000
Sept 4	Brochures	450
	cash		150
	Accounts payable		300
	to record the collection of brochures.)
Sept 5	Cash	1000
	Revenue		1000
	(to record the revenue.)
sept 6	Cash	1000
	Accounts Receivable	2000
	Revenue		3000
	(to record the second event organized.)
Sept 12	Accounts Receivable	1000
	Revenue		1000
	(to record the third event organized.)
sept 15	Prepaid insurance	1200
	cash		1200
	(to record the payment of insurance)
Sept 19&20	Accounts Receivbale	2000
	Revenue		2000
	(to record the fourth event organized)
Sept 23	Prepaid Gym Membership	2000
	cash		2000
	(to record the payment of membership.)
sept 24	Telephone Expenses	200
	Telephone payable		200
	(to record the bill of telephone)
Sept 26	Cash	1000
	Advance from customers		1000
	(to record the service to be performed in October 5)
Sept 29	Cash	1000
	accounts Receivable		1000
	(to record the receipt of payment)
Sept 30	Car Rent Expenses	200
	cash		200
	(to record the rent for car)
Sept 30	car rent insurance expenses	800
	car rent insurance payable		800
	(to record the extra charge.)
Sept 30	Brochures Expense	150
	Brochures		150
	(to record the brochures expense)
	Adjusting Journal Entry:
	insurance expenses	600
	prepaid insurance		600
	(to adjust the insurance)
	Gym Membership Expense	500
	Prepaid Gym Membership		500
	(to adjust the membership)

T accounts

CASH
DATE	PARTICULARS	AMOUNT	DATE	PARTICULARS	AMOUNT
SEPT 1	owner equity	20,000	SEPT 2	Costumes Expense	600
SEPT5	Revenue	1,000	SEPT 3	WEBSITE	2000
SEPT6	Revenue	1,000	SEPT4	Brochures	150
SEPT26	Advance from customers	1,000	SEPT15	Prepaid insurance	1200
SEPT29	accounts Receivable	1,000	SEPT23	Prepaid Gym Membership	2000
			SEPT30	Car Rent Expenses	200
			SEPT30	BALANCE C/D	17,850
owner equity
			SEPT 1	BY CASH	20,000
SEPT 30	BALANCE C/D	20,000
Costumes Expense
SEPT2	CASH	600	SEPT 30	INCOME SUMMARY	600
WEBSITE
SEPT3	CASH	2,000	SEPT 30	INCOME SUMMARY	2000
Brochures
SEPT 4	CASH	150	SEPT30	Brochures Expense	150
	ACCOUNTS PAYABLE	300	SEPT30	BALANCE C/D	300
ACCOUNTS PAYABLE
SEPT 30	BALANCE C/D	300	SEPT 4	Brochures	300
REVENUE
SEPT 30	INCOME SUMMERY	7000	SEPT5	CASH	1000
			SEPT6	Cash	1000
				Accounts Receivable	2000
			SEPT12	Accounts Receivable	1000
			SEPT19,20	Accounts Receivable	2000
Accounts Receivable
SEPT6	REVENUE	2000	SEPT29	CASH	1000
SEPT12	REVENUE	1000	SEPT 30	BALANCE C/D	4000
SEPT19,20	REVENUE	2000
Prepaid insurance
SEPT15	CASH	1200	SEPT 30	INSURANCE EXP	600
				BALANCE C/D	600
Prepaid Gym Membership
SEPT23	CASH	2000	SEPT 30	Gym Membership Expense	500
				BALANCE C/D	1500
Telephone Expenses
SEPT 24	Telephone payable	200	SEPT 30	INCOME SUMMERY	200
Telephone payable
SEPT 30	BALANCE C/D	200	SEPT 24	Telephone Expenses	200
Advance from customers
SEPT 30	BALANCE C/D	1000	SEPT 26	CASH	1000
Car Rent Expenses
SEPT 30	CASH	200	SEPT 30	INCOME SUMMARY	200
car rent insurance expenses
SEPT 30	car rent insurance payable	800	SEPT 30	INCOME SUMMARY	800
car rent insurance payable
SEPT 30	BALANCE C/D	800	SEPT 30	car rent insurance expenses	800
Brochures Expense
SEPT 30	Brochures	150	SEPT 30	INCOME SUMMARY	150
INSURANCE EXPENSES
SEPT 30	prepaid insurance	600	SEPT 30	INCOME SUMMARY	600
Gym Membership Expense
SEPT 30	PREPAID GYM MEMBERSHIP	500	SEPT 30	INCOME SUMMARY	500