Sample Accounting

 

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Make sure to incorporate this semester's rules for tender (Cash Only, No Receivables, No Payables allowed).  Also, the tabular report presented below is not suitable for presentation in Quiz #1, which specifically asks for The Tables as they will be populated after startup and a couple days' operation of your Enterprise.

Here is a startup scenario for a simple Enterprise such as you're encouraged to invent for this class. 

Bob Entre, a telephone guy who has been looking for an opportunity to get into business with an enterprising fellow, Norman Vestor, who has offered startup funding for a new Organization. They decide on a name, 'Cable iZ Us,' and set to the details during July. They work up a quick business plan, find good suppliers, and decide that $15,000 would be a good investment. Bob goes out and lines up some work for Harve' Benard to get started.

On August the 1st, N.Vestor gives $15,000 to be used as startup capital (Order 91).

The next day, Bob goes out to get a truck and tools. He finds a perfect truck at Trucks R Us (#92) and pays $7,500 cash for this new asset.

Later that day, he goes to Cabling Stuff and gets $1,750 worth of tools to add to the new Org's assets (#94). He also verifies that Harve' Benard is ready for his services the next day.

On the 3rd, he sets out to Harve' Benard with a stop by Cabling Stuff (#95) to pick up 15,000 feet of Cat 5 wire, connectors, and jumpers for the job. Since this is his first purchase of materials, they require cash payment. He picks up Able Helper and they start working, putting in three days to pull and connect the 60 drops.

On the 6th, he enters a sales order (#96), in which he bills out the materials and labor at a nicely marked up rate, and puts $6,984 on Harve' Benard's account receivable.

Also on the 6th, he enters purchase orders for Able Helper's hourly rate (#97) and to compensate his own efforts (#98). They both take cash and are happy to live in a state where taxes aren't required.

On the 7th, he gets word of work needed by Anew Customer, and finds that Able is available on the 9th to do this small job. On the 9th, he stops back at Cabling Stuff and is please to find that they let him take the goods on credit (#99). They do the work for Anew Customer, which is billed on #100. Orders #101 & 101 are to compensate Bob & Able.

The 'ledger details' for this activity would look like this:

OrderDate Id Entity Name      GS Name              Act LDet         Amount

8/ 1/97   91 Norman Vestor    Cash                 100 1000  $15,000.00
8/ 1/97   91 Norman Vestor    Equity               100 3000 ($15,000.00)
                                                                  $0.00

8/ 2/97   92 Trucks R Us      Truck                100 1030   $7,500.00
8/ 2/97   92 Trucks R Us      Cash                 100 1000  ($7,500.00)
8/ 2/97   94 Cabling Stuff, E Cabling Tools        100 1020   $1,750.00
8/ 2/97   94 Cabling Stuff, E Cash                 100 1000  ($1,750.00)
                                                                  $0.00

8/ 3/97   95 Cabling Stuff, E Connectors & Fitting 200 5000     $240.00
8/ 3/97   95 Cabling Stuff, E Cat 5 Jumpers, 10 ft 200 5000     $480.00
8/ 3/97   95 Cabling Stuff, E Cat 5 Cable, per foo 200 5000     $990.00
8/ 3/97   95 Cabling Stuff, E Cash                 200 1000  ($1,710.00)
                                                                  $0.00

8/ 6/97   96 Harve'  Benard   Accounts Receivable  200 1010   $6,984.00
8/ 6/97   96 Harve'  Benard   Cabling Services per 200 4010  ($2,784.00)
8/ 6/97   96 Harve'  Benard   Cat 5 Cable, per foo 200 4000  ($1,800.00)
8/ 6/97   96 Harve'  Benard   Connectors & Fitting 200 4000    ($960.00)
8/ 6/97   96 Harve'  Benard   Cat 5 Jumpers, 10 ft 200 4000  ($1,440.00)
8/ 6/97   97 Able Helper      Cash                 200 1000    ($456.00)
8/ 6/97   97 Able Helper      Cabling Services per 200 5010     $456.00
8/ 6/97   98 Bob Entre        Cabling Services per 200 5010     $600.00
8/ 6/97   98 Bob Entre        Cash                 200 1000    ($600.00)
                                                                  $0.00

8/ 9/97   99 Cabling Stuff, E Cat 5 Cable, per foo 200 5000      $84.00
8/ 9/97   99 Cabling Stuff, E Connectors & Fitting 200 5000      $21.00
8/ 9/97   99 Cabling Stuff, E Cat 5 Jumpers, 10 ft 200 5000      $45.00
8/ 9/97   99 Cabling Stuff, E Accounts Payable     200 2000    ($150.00)
8/ 9/97  100 Anew Customer    Cabling Services per 200 4010  ($1,120.00)
8/ 9/97  100 Anew Customer    Cash                 200 1000   $1,504.00
8/ 9/97  100 Anew Customer    Cat 5 Jumpers, 10 ft 200 4000    ($150.00)
8/ 9/97  100 Anew Customer    Cat 5 Cable, per foo 200 4000    ($144.00)
8/ 9/97  100 Anew Customer    Connectors & Fitting 200 4000     ($90.00)
8/ 9/97  101 Able Helper      Cabling Services per 200 5010     $180.00
8/ 9/97  101 Able Helper      Cash                 200 1000    ($180.00)
8/ 9/97  102 Bob Entre        Cash                 200 1000    ($200.00)
8/ 9/97  102 Bob Entre        Cabling Services per 200 5010     $200.00
                                                                  $0.00

If these are 'Journalized' and pumped along to a Ledger Engine the resulting financial statements, without the Activity Id, would look like this:

FINANCIAL STATEMENTS FOR CABLE IZ US AS OF 8/9/97

BALANCE SHEET

1000 Cash                     4,108.00
1010 Accounts Receivable      6,984.00
1020 Furniture & Eqt          1,750.00
1030 Vehicles                 7,500.00
                            ----------  
     Assets                 $20,342.00
2000 Accounts Payable                          150.00
                                           ----------
     Liabilities                               150.00 
3000 Stock                                  15,000.00
3999 Retained Earnings                       5,192.00
                                           ---------- 
     Equity                                $20,192.00
                                           ==========
     Liabilities + Equity                  $20,342.00

INCOME & EXPENSE

4000 Sales of Goods                          4,584.00
4010 Sales of Services                       3,904.00
                                            ---------
     Income                                 $8,488.00  
5000 Cost of Goods            1,860.00
5010 Cost of Services         1,436.00
                             ---------
     Expenses                $3,296.00
     (LOSS)      PROFIT                     $5,192.00

This isn't bad for a few days of operation, and when Harve' Benard pays their bill N. Vestor ought to be pleased with the tidy profit racked up from two jobs. After he and Bob see some more activity like this, they'll be encouraged to rent office space, hire somebody to answer the phone, and do the other things expected as an Organization matures.

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Last modified: Monday November 01, 2004.