accounting project mihaaa

8/3/2019 Accounting Project Mihaaa.

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ACCOUNTING PROJECT

Chapter 1. The balance sheet

1.1 Theoretical considerations

A balance sheet is one of the main essential financial statements of any company. It is used toview the company's financial standpoint at any given time. It keeps the current financial records ofthe given fiscal year or quarter, depending on how the company sets their year. Unlike an incomestatement, which contains temporary accounts such as revenues and expenses, a balance sheetcontains the permanent financial records.

The balance sheet reports the financial position of a company at a point in time, usually at theend of year. The balance sheet (sometimes called the statement of financial position) reflects afirm's solvency while the income statement shows profitability.

A balance sheet lists the firm's assets, liabilities and owner equity at a specific moment intime. The balance sheet provides information about an entity's assets, liabilities, and equity and theirrelationship to one another at a particular time.

The balance sheet has two parts:

on the left side are the assets

on the right side are the liabilities and owner's equityBoth parts of the balance sheet must be in balance.Assets and liabilities are listed in a specific order. The assets are listed in order they can be

converted in cash and the liabilities in order they must be liquidated.Assets = Liabilities + Owner's EquityAssets are known as resources and include such items as cash, land and buildings. In

accounting the resources of business organization are called assets.Liabilities are debts owed by a firm and usually must be paid by a specific date. Liabilities

include amounts owed suppliers for goods purchased with a promise to pay the amount owed at alater date.

Owner's equity reflects the owner's interest in the business. Owner's equity is equal to assetsminus liabilities.

The structure of the balance sheetThe assets of a European company are usually divided into two categories: fixed assets and

current assets.

Fixed assetsFixed assets are materials, goods, services and land used in the production of a company's

goods. Are long term assets acquired for use in business operation. Fixed assets are used in a periodlonger than one year.

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Are divided into three categories: intangible assets, tangible assets and financial assets.

I Intangible assets

Are defined as identifiable non-monetary assets that cannot be seen, touched or physicallymeasured, which are created through time and/or effort and that are identifiable as a separate asset.They include: formation expenses, development costs, concessions, patents, licenses, trade markand similar right, goodwill, other intangible assets, intangible assets in progress, payment onaccount.

II Tangible assets

Tangible assets are assets having a physical existence such as: land, buildings, plant,machinery, furniture, motor vehicles, other tangible assets, tangible assets in progress.

III Financial assets

Financial assets include: security investment (shares, bonds), long term loans, receivablesimmobilized, etc. Security investment is shares held in the capital of the other companies that giveright to dividend and control over the company which issued.

Current assets

Current assets are used by a company in a period of one year. Can be converted into cash in ashort period of time. Include: stocks, debtors (claims), investments, cash at bank and in hand.

Liabilities

Liabilities are legal obligation, are divided into two categories: short term liabilities and longterm liabilities. Kinds of liabilities: suppliers, bills of exchange payable, sundry creditors, loans andsimilar debts.

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1.2 The Balance Sheet for Company SC.STANLEY DESIGN.SA

SC.STANLEY DESIGN.SA is an active and diversified furniture firm which providesprofessional services for its costumers. The firm is capable of working with diverse projectsfrom furniture design and hand painted furniture to antique furniture restauration. Our

philosophy has always been to combine design excellence with technical know-how.SC.STANLEY DESIGN.SA was founded in the early stages of 1997 and until now it hasdeveloped and raised its number of employees.

Stanley Design company activity is production of furniture.

Balance Sheet of company SC. STANLEY DESIGN.SA at 30.06.2009

Assets Amount Owners equity+Liabilities Amount

Land 15000 Subscribed capital 25000Buildings 20000 Other reserves 15000

Finished goods 6000 Profit for the financial year 12000

Consumables 1000 Long term bank loan 18000

Raw materials 3000 Suppliers 11000

Merchandise 2000 Advance receipts from customers 5000

Bills of exchange receivable 3000 Dividends payable 2000

Customers 10000 Salaries payable 7000

Cash at bank 20000

Cash in hand 15000

TOTAL 95000 TOTAL 95000

1.3 The analytical structure

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I Fixed Assets

1. Intangible assets:

formation expenses cont no.201

development costs cont no.203

purchased concessions, patents, licenses, trademarks and similar cont no. 2051

2. Tangible assets:

land cont no. 2111

buildings cont no.212

plant and machinery cont no.2131

fixtures and fitting cont no.2143.Fianancial assets:

Investments in subsidiaries cont no.261

Investments in companies excluded from consolidation cont no.262

Strategic investments within the group cont no.2635

Strategic investments excluded from consolidation- - cont no.2636

Other long term receivables cont no.2678

II Current assets

1. Stocks

Raw materials cont no.301

Auxiliary materials - cont no.3021

Other consumables - cont no.3028

Packaging materials - cont no.3023 Work in progress- cont no.331

Semi-finished goods- cont no.341

Finished goods- cont no.3452.Cash at bank and in hand

Cash in bank and in hand cont no. 5121

III Liabilities and owners equity

Subscribed and paid in share capital cont no.1012

Other reserves cont no.1068

Suppliers cont no.401

Bills of exchange payable cont no.403

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Chapter 2. The account


The account is the detailed record of any component of the patrimony - asset, liability,

owners' equity, revenue or expense resulted after economic transactions in an economic entity. Account isthe detailed record of a particular asset, liability, owners' equity, revenue or expense.

The account may take many possible forms, and accounting practice commonly usesseveral. Perhaps the most useful form of the account for textbooks, problems, and examinations isthe T-account. Actual practice doesnt use this form of the account, except perhaps formemoranda or preliminary analyses. However, the T-account satisfies the requirement of anaccount and is easy to use. As the name indicates, the T-account looks like the letter T, with ahorizontal line bisected by a vertical line. The name or title of the account appears on thehorizontal line. One side of the space formed by the vertical line records increases in the item andthe other side records decreases. Dates and other information can appear as well.

Each account has a left side (called the debit side) and a right side (called the credit

side). Recording an amount on the debit side of the account is called debiting theaccount, debit, or debit entry.

Recording an amount on the credit side of the account is called crediting theaccount, credit, or credit entry.

Assets Liabilities+ Owners equity

Thegoal of Taccounts isfor debitentries toequal credit

entries, i.e. total assets to equal total liabilities and equity. For every adjustment made to the leftside of a T, there must be one or more adjustments made to the right side of one or more Ts so thatthe net entries balance.

T accounts allow you to visualize how the debits and credits of a particular entry work andhow they impact the financial statements. T accounts are a time tested tool in helping to analyze

and decipher accounting entries. T accounts work because they are visually effective and simple tounderstand.

Example:Receiving a bank loan of $100 would require two postings in a general ledger, and, if drawn

on T accounts, two postings on T accounts. The $100 cash received would be listed as an asset onthe left side of a T account labeled 'Cash', and the $100 owed to the bank would be listed as aliability on the right side of a T account labeled 'Bank Loans'. The entries balance.

+DEBIT

-CREDIT

-CREDIT

+DEBIT

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If you are only trying to figure out how some journal entries should be written, then it is notnecessary to summarize the T-Accounts for the ending account balance. However, there aretimes when you may want to know the ending balance of an account in order to compare it withthe account balance found on a financial statement or general ledger.

Using T-Accounts to help solve accounting problems is one of your most valuable tools.

2.2 Accounting records in July 2009

1. Purchasing of raw materials from the supplier , at an acquisition cost of 2000 with VATDeductible of 19%.

We are using the following accounts:

401 suppliers P + (C)

301 raw material A + (D)

4426 VAT Deductible A + (D)

The accounting formula will be:

% = 401 / 2380301 / 20004426 / 380

2. Obtaining of finished goods such as: chairs: 30 pieces x 30 lei and furniture: 10 pieces x100 lei (transfer goods no.23)


345 finished goods A + (D)

711 variation of inventory P + (C)The accounting formula will be:

345 = 711/19003. Stanley Design sales the finished goods to the Azora Design SRL; sales:

chairs-20 x 35 lei and furniture 7 x 110 lei , with VAT Collected of 19%.( invoice no.201)

a) Selling the finished goodsWe are using the following accounts:

4111 customers A + (D)

701 sales of finished goods P + (C) 4427 VAT collected P + (C)


4111 = % / 1750701 / 1470

4427 / 280

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b) Removing the finished goodsWe are using the following accounts:

711 variation of inventory P (D)

345 finished goods A (C)


711 = 345 / 1900

4. Stanley Design receipt in cash in hand from Azora Design 1500 amounts(formal receiptno.133)

Receiving cash in handWe are using the following accounts:

5311 cash in hand A + (D)

4111 customers A ( C )The accounting formula will be:

5311 = 4111 / 1500

5. Acquisition of consumables for 3000, from the suppliers, with VAT Deductibleof 19%( invoice no.347)


302 consumables A + (D)

4426 - VAT Deductible A + (D)

401 - Suppliers P + (C)The accounting formula will be:

% = 401 / 3570302 / 30004426 / 570

6. Give to consumption ( consumer goods no.1200) the above mentioned consumablesWe are using the following accounts:

302 - consumables A- (C)

602 expenses with consumables A + ( D )The accounting formula will be:

602 = 302 / 3000

7. Payment of the suppliers for 1000 lei (OP warrant of payment no.17)We are using the following accounts:

401 suppliers P ( D)

5121 cash at bank A (C )The accounting formula will be:

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401 = 5121 / 10008. Selling merchandise to the customers at a price of 3500 with VAT collected of 19%.


4111 customers A + (D)

707 sale of goods purchased for resale P + (C)

4427 VAT collected P + (C)The accounting formula will be:

4111 = % / 4165707 / 35004427 / 665

9. Record the gross salaries 15000 amount (payroll no.5)We are using the following accounts:

641 expenses with salaries A + (D)

421 employees salaries payable P + (C)The accounting formula will be:

641 = 421 / 15000

10. Receipt of interest of 4000 leiWe are using the following accounts:

5121 cash at bank A + (D)

766 interest income P + (C)The accounting formula will be:

5121 = 766 / 4000

11. Receipt of advance from client 3000 through bank.We are using the following accounts:

5121 cash at bank A + (D)

419 advance payments from customers P + (C)The accounting formula will be:

5121 = 419 / 3000

12.Acquisition of merchandise for 1500 lei ,with VAT deductible (invoice no.150)We are using the following accounts:

371 merchandise A + (D)

4426 VAT deductible A+(D)

401 suppliers P + (C)The accounting formula will be:

% = 401 /1785

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371 /15004426 /285

2.3Closing the revenues and expenses account at the end of 31.07.2009

1. Closing the revenues accounts:

121 = % / 18000602 / 3000641 / 15000

2. Closing the expenses accounts:

% = 121 / 8970701 / 1470707 / 3500

766 / 4000

The T Account

D 1012(Subscribed capital) C D 1068 (Other reserves) C

Si: 25000

SfC: 25000

D 1621( LTBL) C D 2111( Land) C

Si: 2000

SfC: 2000

Si: 15000

Sf C: 15000

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D 212( Buildings) C D 301( Raw material) C

D 345 ( Finished goods) CD 302( Consumables) C

Si: 10003000

TSD: 4000

SfD: 1000

3000

TSC: 3000

D 371 ( Merchendise) C D 401(Suppliers) C

Si: 15000

SfC: 15000

Si: 20000

SfD: 20000

Si: 3000

SfD: 3000

Si: 6000

SfD: 6000

1000

TSD: 1000

SiD: 40003355

TSC: 7355

SfC: 6355

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Si: 20002000

TSD: 4000

SfD: 500

15001000

TSC: 2500

D 4111 (Customers) C D 413( Bills of exchange receivable) C

SiD: 100005915

TSD: 15915

SfD: 14415

1500

TSC: 1500

D 5121(Cash at bank) C D 641(Salaries payable) C

Si: 3000

SfD: 3000

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SiD: 200007000

TSD: 27000

SFD: 26000

1000

15000

SfD: 8000

SiC: 7000

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Chapter 3. The Trial Balance


In accounting, the trial balance is a worksheet listing the balance at a certain date, of eachledger account in two columns, namely debit and credit. Under the double-entry system, in anytransaction the total of any debits must equal the total of any credits, so in a Trial Balance thetotal of the debit side should always be equal to the total of the credit side. The trial balance thusserves as a tool to detect errors, which can result in the totals not being equal. Often credits willbe represented as a negative, in which case the total of the trial balance should be 0.

A balanced trial balance does not guarantee that there is no error. The following are themain classes of error that are not detected by the trial balance:

An error of original entry is when both sides of a transaction include the wrongamount. For example, if a purchase invoice for 21 is entered as 12, this will result in anincorrect debit entry (to purchases), and an incorrect credit entry (to the relevant creditoraccount), both for 9 less, so the total of both columns will be 9 less, and will thus balance.

An error of omission is when a transaction is completely omitted from theaccounting records. As the debits and credits for the transaction would balance, omitting it wouldstill leave the totals balanced.

An error of reversal is when entries are made to the correct amount, but withdebits instead of credits, and vice versa. For example, if a cash sale for 100 is debited to theSales account, and credited to the Cash account. Such an error will not affect the totals.

An error of commission is when the entries are made at the correct amount, and

the appropriate side (debit or credit), but one or more entries are made to the wrong account ofthe correct type. For example, if fuel costs are incorrectly debited to the postage account (bothexpense accounts). This will not affect the totals.

An error of principle is when the entries are made to the correct amount, and theappropriate side (debit or credit), as with an error of commission, but the wrongtype of accountis used. For example, if fuel costs (an expense account), are debited to stock (an asset account).This will not affect the totals.

Compensating errors are multiple unrelated errors that would individually lead toan imbalance, but together cancel each other out.

A Transposition Error is a Computing error caused by switching the position of two

adjacent digits. Since the resulting error is always divisible by 9, accountants use this fact tolocate the misentered number. For example, a total is off by 72, dividing it by 9 gives 8 whichindicates that one of the switched digit is either more, or less, by 8 than the other digit. Hence theerror was caused by switching the digits 8 and 0 or 1 and 9. This will also not affect the totals.

The Trial Balance at 31.07.2009

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Symbolof acc.

Accountname

Initial soldD C

RulajeD C

Total sumD C

Final soldD C

1012Subscribedcapital

___

25000___ ___ ___

25000___ 25000

1608Otherreserves

___15000

___ ___ ___ 15000

___15000

1621Long termbank loans

___

18000___ ___ ___

18000___

18000

2111 Land 15000___ ___ ___

15000___

15000___

212 Buildings 20000___ ___ ___

20000___

20000___

301Rawmaterials 3000

___ ___ ___

3000___

3000___

302 Consumable 1000

___

3000 3000

4000

3000 1000

___

345Finishedgoods 6000

___ ___ ___6000

___ 6000

___

371 Merchandise 2000___ ___

1500 2000 1500 500___

401 Suppliers___

4000

1000 3355 10007355

___6355

4111 Customers 10000___

5915 1500 15915 1500 14915___

413Bills of Ex.Receivable 3000

___ ___ ___ 3000

___

3000___

457Dividendspayable

___2000

___ ___ ___ 2000

___2000

5121Cash atbank 20000

___

7000 1000 27000 1000 28000___

5311Cash inhand 15000

___

1500___

16500___

16500___

641Salariespayable

___7000 15000

___

15000 7000

8000___

TOTAL

73355

TOTAL

73355

Chapter 4. The Accounting Documents


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Original records which evidence a financial transaction, such as debit/credit memos,invoices, receipts, orders, and vouchers.

An invoice orbill is a commercial document issued by a seller to the buyer, indicatingthe products, quantities, and agreed prices for products or services the seller has provided thebuyer. An invoice indicates the buyer must pay the seller, according to the payment terms.

In the rental industry, an invoice must include a specific reference to the duration of thetime being billed, so rather than quantity, price and discount the invoicing amount is based onquantity, price, discount and duration. Generally speaking each line of a rental invoice will referto the actual hours, days, weeks, months etc being billed.

From the point of view of a seller, an invoice is asales invoice. From the point of view ofa buyer, an invoice is apurchase invoice. The document indicates the buyer and seller, but theterm invoice indicates money is owed orowing. In English, the context of the term invoice isusually used to clarify its meaning, such as "We sent them an invoice" (they owe us money) or

"We received an invoice from them" (we owe them money).

A receipt is a written acknowledgement that a specified article or sum of money has beenreceived as an exchange for goods or services. The receipt acts as the title to the propertyobtained in the exchange.

In English speaking countries the term most frequently applies to the printed record givento a customer at checkout that lists the purchases made, the total amount of the transactionincluding taxes, discounts and other adjustments, the amount paid and the method of payment.Increasingly, these receipts may also include messages from the retailer, warranty or returndetails, special offers, advertisements or coupons. Receipts may also be provided for non-retailoperations such as banking transactions.

Printed receipts are usually produced by thermal printing on rolls of narrow paper tape,although dot-matrix technology is also used. Recent innovations have led to multi-coloredthermal printing technology and the ability to print double-sided receipts.

A voucher is a bond which is worth a certain monetary value and which may only be spentfor specific reasons or on specific goods. Examples include but are not limited to housing,travel and food vouchers. The term voucher is also a synonym for receipt, and is often used to referto receipts used as evidence of, for example, the declaration that a service has been performed orthat an expenditure has been made.

The term is also commonly used for education vouchers which are somewhat different.

References

1. Accounting- theory and practice

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Authors: Michel William EdgardBrian Underdown

House publishing: Pitman PublishingYear of publishing: 2001

2. Accounting and financeAuthors: Peter AtrillEddie Mclaney

House of publishing: Prentice HallYear of publishing: 2003

3. Contabilitate- Manual pentru clasa a 10-a

Autor: Violeta IsaiHouse of publishing: ALLYear of publishing: 2005

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