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Complete Accounting Cycle Journalizing

Tuft It Out is a new carpet & furniture cleaning business started by Tony Ufton. The business will clean
carpets and upholstered furniture for residential and commercial clients. Tony officially started the
business as of December 1, 2012.
For the last couple of weeks of November, Tony had been setting up the business and had done a
couple of jobs for some of his friends and businesses owned by friends. Tony had taken an introductory
course in accounting and had set up a chart of accounts that he wanted to use as a starting point.

Chart of Accounts proposed by Tony
As you journalize, jot new accounts in the blanks below, if you need more space to jot them to the right of the chart.

100 Cash 210 Accounts Payable Acme
105 A/R Proper T Realty Ltd. 250 Bank Loan
130 Office Supplies 300 T. Ufton Capital
135 Cleaning Supplies 400 Carpet Cleaning
150 Office Furniture 410 Upholstery Cleaning
160 Cleaning Equipment 502 Wages
165 Office Equipment 505 Supplies Expense
170 Work Vehicles 510 Rent Expense
515 Repair & Maintenance
520 Advertising Expense
530 Utilities Expense
590 Miscellaneous Expenses










Start-up
In an effort to be ready to go, Tony had purchased some cleaning equipment ($5,500) and some
cleaning supplies ($450) and some letterhead, blank invoices, etc. ($225). The supplies he purchased
from Periodic Chemical Cleaners and Word Press Printing with his own debit card. An invoice was
received from Acme Industrial Suppliers (A7420) for the cleaning equipment.
When applying for a business loan, Tony had opened a business bank account and transferred $20,000
of his funds into the account.
Proper T Realty was a business owned by Tonys friend Kate. Tony is going to rent some
warehouse/office space from her business. Tony had completed a cleaning of the Kates offices and
made out the first invoice (TIO-0001) for $1,085 $800 carpet cleaning and $285 for cleaning of
furniture in the reception area.

MEMO: Re: Start-up
From the start-up transactions I completed, the business will begin with:
Cash $20,000 Office Supplies $225 Cleaning Supplies $450
Cleaning Equipment $5,500 A/R Proper T $1085 A/P Acme $5,500
Carpet Cleaning $800 Upholstery Cleaning $285
Thanks - Tony
Journalizing:
Whilst you journalize the entries it might be a good idea to jot down (with the Chart
of Accounts on 1
st
page) the new accounts required (with numbers). If you do this
before you setting up the ledger for posting, then it easier to set up the journal pages and keep
accounts in the proper groupings.

1. Record an opening entry in the general journal per the memo on start-up from Tony.
2. Journalize the following entries for the first month of operations.
Dec. 1 Cheque issued to Proper T Realty ($3,800) as initial rent payment on warehouse/office
space rented the payment was rent for the first six months plus a security deposit. Memo
from Tony attached indicating that this payment should be placed in a new current asset
account called Prepaid Rent which will represent unused rent and should be listed
between A/R accounts and the supplies accounts.
2 Purchase invoice from Shylock Automotive for the purchase of 2 used utility vans. Invoice
indicated receipt of a funds transfer from the business account ($18,000) and an
outstanding balance of $20,000 that was financed through an auto loan.
4 Cheque issued to Manulife Financial ($2,520) for business insurance policy. This was a
multi-year policy (effective December 1, 2012). Similar to the rent above, record this in an
asset account called Prepaid Insurance which will appear above the Prepaid Rent
account from the above transaction.
5 Tony placed ads with the local newspaper ($175) and radio stations ($240). All were paid
with company debit card and receipts (KWR-2398 and KFM1498) were submitted.
6 Memo from Tony indicating that his personal computer, printer, router, etc. were now in the
office and being used solely for the business purposes. Originally purchased for $2,580
but now valued (by Carbon Computing) as $1,350.
8 Invoices (TOI-002, TOI-003 and TOI-004) issued to Sysco Ltd. ($1,350), Schluter
Automotive ($595) and Manulife Financial ($2,830). Breakdown was $3,950 for carpet
cleaning and $825 for furniture cleaning.
8 Invoice received from Sunar Furniture ($1,897) for desk, table, chair, room divider and file
cabinet to be use in the office area.
9 Cheque issued to Acme ($5,500) as payment for equipment purchased at start-up (A7420).
10 Debit memo (DM-773) received from bank indicating that the loan funds ($15,000) had
been deposited in the business account. Tony had called the bank manager who
apologized for not having the funds in earlier and indicated that there would not be any
charges if the account had been in an overdraft position as a result.
10 Cheque issued to B. Taylor ($95) as an allowance complaint about stains which were not
removable. Tony would like all discounts and allowances given to be kept track of by the
accounting system. Create an account called Sales Discounts (#450) which will be what
is called a contra-revenue account it will be in the revenue section but will have a debit
balance which will be subtracted from the 2 revenue accounts to give Net Sales.
10 Invoice (MB-7093) received from McBean Machines for purchase of industrial carpet
cleaner ($3,190) a second smaller carpet cleaner ($1,260) and 5 boxes of disposable
cleaning pads used with carpet cleaners ($675).
11 Invoice received from Sign Age ($350) for rental of lit signs announcing the new business
and location.
12 Cheque issued ($510) to Tony for expense report submitted showing expenditures on
gas/oil etc. for vans ($230), office supplies ($200) and miscellaneous expenses ($80).
14 Cheque issued to McBean Machine ($4,920) as payment for invoice MB-7093 less a 4%
discount for early payment.

14 Tony purchased a new computer & peripherals at Carbon Computing ($2,643). The
computer was for Tony and his family (replacing his old computer now used by the
company). The invoice submitted by Tony indicated that $500 had been paid with the
company debit card and the remainder was due in 9 months. The balance owing will be
paid by Tony personally.
15 Cash receipts summary for first 2 weeks of December (deposits are made daily but will be
recorded in the accounting records every 2 weeks):
Cash customers carpet $7,947
Cash Customers furniture 3,775
Proper T Realty (TOI-001) 1,085
Schluter Automotive (TOI-003) 577 ($595 less $18 discount)
Total $13,384

17 Invoice received from Word Press ($800) for purchase of promotional flyers (2,500) to be
distributed to customers and potential customers.
19 Invoices (TOI-005 to TOI-008) issued to Sysco Ltd. ($990), 303 Logistics ($1,475),
Bingemans Entertainment ($3,065) and Manulife Financial ($1,790). Breakdown was
$5,845 for carpet cleaning and $1,475 for furniture cleaning.
23 Invoice received from BRE Automotive ($367) for repairs to company vehicle.
23 Credit invoice issued to Bingemans Entertainment ($250) as a discount for them signing a
1-year contract for regular cleaning of conference and entertainment complexes.
Additional work will be completed as required/requested.
28 Invoice received from Conestoga Mall Ltd. ($425) for rental of space in mall. Tony had a
display booth set-up in the mall to promote the new business. Customers of the mall could
bring in a small area carpet or piece of furniture in and employees would demonstrate the
equipment and clean the item for free.
29 Cash receipts summary for last 2 weeks of December:
Cash customers carpet $9,495
Cash Customers furniture 4,533
Sysco (TOI-002 & 005) 2,246 ($1,350+$990 less $94 discount **)
Manulife Financial (TOI-00) 2,717 ($2,830 less $113 discount)
Total $18,991

** discount taken on TOI-002 ($94) was too late and will not be allowed; a statement showing
the outstanding balance will be sent to Sysco Ltd.

30 Direct Deposit Summary indicates transfer of funds to employees ($3760) for the first 2
weeks of work and what will be a regular transfer to Tony ($2,100).

Month-end / Year-end
The business has only been in operation for 1 month but this is also the end of a month and as
such year-end procedures must be completed. Make a list of questions you might ask Tony so
that you can make accruals and adjustments for the year-end.

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