COOKIE CREATIONS ADJUSTED JOURNAL ENTRIES Number Date Account Titles 1 30-Nov Supplies Expense Accounts payable 2 30-Nov Depreciation Expense Accumulated depreciation 3 16-Nov Interest Expense Interest payable 4 30-Nov Account Receivable Service Revenue 5 30-Nov Utility Expense Utility Payable Cash Supplies Prepaid Insurance Equipment Unearned service revenue Note payable Owner's capital Service Revenue Advertising Expense TOTAL Ref no. Debit ($) 35 50 5 300 45 COOKIE CREATIONS Unadjusted trial balance As at 30 November, 2019 Debit ($) Credit ($) 245 125 1320 1200 30 2000 800 125 65 2955 2955 COOKIE CREATIONS Adjusted Trial Balance As at 30 November, 2019 Cash Supplies Expense Accounts payable Prepaid Insurance Equipment Depreciation Expense Accumulated depreciation Unearned service revenue Account receivable Note Payable Interest expense Interest payable Utility Expense Utility Payable Owner's capital Service Revenue Advertising revnue Debit ($) 245 160 TOTAL Credit ($) 35 1320 1200 50 50 330 300 2000 5 5 45 45 800 125 65 3390 NET INCOME Total Revenues= 35+50+330+5+45+125 590 Total Expenses= 160+1320+50+300+5+45+65 1945 Net Income= Total revenues-Total expenses 590-1945= -1355 Thus, Cookie's net loss for the month of Novermber 2019 is $ 1355 3390 Credit (Cr) 35 50 5 300 45 Calculations Cost of depreciation: Assumption: depreciation rate is 6% (750-300)/5=90 Dep. Cost=(2000*0.06*5) 600 Monthly depreciation cost: 600/12= 50 Annual interest i=(P*R*T) (2000*6*1)/100 120 Half month's interest: (120/12)/2 5 COOKIE CREATIONS INCOME STATEMENT For 2 months ended December 31, 2019 Revenues Service revenue 4515 Supplies expense Salaries and Wages expense Utilities expense Advertising expense Depreciation expense Inusrance expense Interest expense 1025 1006 125 165 40 110 15 Expenses Net profit 2029 CCOKIE CREATIONS STATEMENT OF OWNER'S EQUITY FOR 2 MONTHS ENDED DECEMBER 31, 2019 Owner's capital Net Income Subtotal Owner's drawings 800 2029 2829 500 COOKIE CREATIONS, CAPITAL, DECEMBER 31, 2019 2329 COOKIE CREATIONS Classified balance sheet As of 31 December, 2019 Assets Fixed assets Equipment Liability and Capital Liabilities 1200 Current liabilities Accounts payable 75 Interest payable 56 Wages and salaries payable 15 Current Assets Cash Accounts receivable Supplies Prepaid insurance Total current assets Unearned service revenue 300 Notes payable 2000 Accumulated depreciation 40 1180 875 350 1210 Total current liabilities 2486 3615 Capital Owner's equity Net profit (less) drawings 800 2029 500 Net capital TOTAL ASSETS S.No 2329 4815 TOTAL LIABILITIES AND CAPITAL 4815 COOKIE CREATIONS POST CLOSING ENTRIES For 2 months ended 31 December, 2019 Account Titles Debit Credit 1 Service Revenue 4515 Income Summary 4515 2 Income Summary Supplies expense Salaries and wages expense Utilities expense Advertising expense Depreciation expense Insurance expense Interest expense 2486 3 Income Summary Owner's capital 2029 4 Owner's capital Owner's drawings 1025 1006 125 165 40 110 15 2029 500 500 Account Titles Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated Depreciation Accounts payable Salaries and wages payable Interest payable Unearned service revenue Notes payable Owner's capital TOTAL COOKIE CREATIONS Post-closing trial balance For 2 months ended December 31, 2019 Debit ($) Credit ($) 1180 875 350 1210 1200 40 75 56 15 300 2000 2329 4815 4815 COOKIE CREATIONS GENERAL JOURNAL Date ( November Account2019) Title and Description 8th Bank Capital To record cash transfer from personal account to the business account 11th Advertising Bank To record advertising of the business, its products and services 13th Supplies Bank To record the purchase of supplies 14th Food processor and Mixer Capital To record investement of the equipment on the business 16th Bank Note Payable (As last liability) To record debt accrued to the business 17th Baking Equipment Bank To record the purchase of baking equipment 20th Bank Teaching To record money collected from teaching services 25th Bank Teaching To record downpayment from booked class 25th Account receivable Teaching To record amount from booked teaching class 30th Insurance Bank To record a one-year insurance policy COOKIE CREATIONS GENERAL LEDGER Dr. Date Nov-08 Nov-16 Nov-20 Nov-25 ParticularsJ.F Capital A/c Note Payable A/c Teaching A/c Teaching A/c Bank Account Amount Date 500 Nov-11 2000 Nov-13 125 Nov-17 30 Nov-30 ParticularsJ.F Advertising A/c Supplies A/c Baking eqp. A/c Insurance A/c Balance c/d Balance b/d Dr. Date ParticularsJ.F Balance c/d Dr. Date ParticularsJ.F. Nov-11 Bank A/c Balance b/d 2655 245 Cr. Amount 65 125 900 1320 245 2655 Capital Account Cr. Amount Date ParticularsJ.F Amount Nov-08 Bank A/c 500 Nov-14 Processor & mixer A/c 300 800 800 800 Balance b/d 800 Advertising Account Amount Date PartuclarsJ.F 65 Balance c/d 65 65 Cr. Amount 65 65 Dr. Date ParticularsJ.F Nov-13 Bank A/c Supplies Account Amount Date 125 Partuculars J.F Cr. Amount Balance c/d Balance b/d Dr. Date ParticularsJ.F Nov-14 Capital A/c Balance b/d Dr. Date ParticularsJ.F Balance c/d Dr. Date ParticularsJ.F Nov-17 Bank A/c Balance b/d Dr. Date ParticularsJ.F Balance c/d 125 125 125 125 Food Processor and Mixer Account Amount Date ParticularsJ.F 300 Balance c/d 300 300 Cr. Amount Note Payable Account Amount Date ParticularsJ.F Nov-16 Bank A/c 2000 2000 Balance b/d Cr Amount 2000 Baking Equipment Account Amount Date ParticularsJ.F 900 Balance c/d 900 900 Cr. Amount Teaching Account Amount Date Nov-20 Nov-25 275 Nov-25 Cr. Amount 125 30 120 ParticularsJ.F Bank A/c Bank A/c Acc. Receivable 300 300 2000 2000 900 900 275 275 275 Balance b/d Dr. Account Receivable Cr. Date ParticularsJ.F Nov-25 Teaching A/c Amount Date 120 ParticularsJ.F Amount Balance c/d Balance b/d Dr. Date ParticularsJ.F Nov-30 Bank A/c Balance b/d General Ledger Accounts Cash at Bank Capital Advertising Supplies Food Processor and Mixer Note payable (Last Liability) Baking Equipment Teaching Account Receivable Insurance TOTAL 120 120 120 120 Insurance Account Amount Date ParticularsJ.F 1320 Balance c/d 1320 1320 TRIAL BALANCE COOKIE CREATIONS As at 30th November 2019 Debit (Dr.) 245 Cr. Amount 1320 1320 Credit (Cr.) 800 65 125 300 2000 900 275 120 1320 3075 3075 Ref. Debit ($) Credit ($) 500 500 65 65 125 125 300 300 2000 2000 900 900 125 125 30 30 120 120 1320 1320 1 Cookie Creations Ben Hill Columbia Southern University 8/6/2020 2 Question 1 Deciding the form of business organization under which operations will be executed is a critical step. Natalie has three choices; sole proprietorship, partnership, and corporation forms of business. Being a sole proprietor, Natalie controls her destiny and enjoys the freedom of being the boss. Being a highly flexible form of business, a proprietorship will enable Natalie to work at her convenience. Moreover, as the business grows, will her potential income. However, a sole proprietorship imposes many responsibilities and workloads that may be difficult to manage. Furthermore, it is highly risky, since Natalie needs to use her time, savings, and efforts to get the business running. With a partnership, Natalie will obtain extra help from partners, added knowledge and skills to the business, and reduced financial burdens. Moreover, a company involves less legal formalities and fewer tax forms. Nevertheless, Natalie will have less independence, freedom, and control over the business. Additionally, conflicts are inevitable in partnerships that may reduce efficiency. Natalie will have to divide all the profits to partners, limiting her financial capability. A corporation will protect Natalie from legal liability. Moreover, she will have a larger pool to draw financial and managerial resources. However, the capital required to start a corporation is relatively high. Many legal formalities are necessary, and the business has the potential for tax liability. After these considerations, Natalie should opt for a sole proprietorship. This will give her absolute control, power, and freedom to manage her business as she pleases. Moreover, the business requires less capital and few legal formalities, making it easier to create. Question 2 3 Natalie will undoubtedly need accounting information, which provides a clear picture of the business's success. This information will enable her to determine the business' profitability and understand how well she uses assets to generate revenue (Hermanson & Edwards, 2010). Additionally, the information helps keep track of budget expenses such as hiring employees, purchasing inventories, and stocks. Natalie's type of accounting information will need to forecast financial estimates, Pro-forma balance sheets, Pro-forma income statements, and cash flow statements. This information will be required quarterly (after every three months). Question 3 Recording assets, liabilities, and owner's equity is critical to determine the business' financial position. Natalie will specifically require an income statement and a balance sheet. An income statement is a form of financial statement used to report the business' expenses, revenues, and net income (Weygandt et al., 2015). This statement explains changes in owner's equity during a specific period. On the other hand, a balance sheet shows the accounting equation; reports the business' liabilities, assets, and owner's equity at a certain point in time. Question 4 Natalie should open and operate a separate bank account for the business. This is because companies are usually taxed separately from personal finances. Moreover, having a separate bank account will enable Natalie to know and track the financial performance (Weygandt et al., 2015). Lastly, it isn't easy to audit business finances when they are not distinct from personal finances. 4 References Hermanson, R. H., & Edwards, J. D. (2010). Accounting principles. Endeavour International Corporation, Houston, Texas, USA. Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Accounting principles. John Wiley & Sons. 
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