Overview
Case Study: The Accounting Cycle in Action
Module 1: Introduction to Accounting and Business, and Analyzing Transactions, and Module 2: The Adjusting Process and The Accounting Cycle
Overview:
You are the accountant for Harper’s Custom Furniture, a small business specializing in handmade wooden furniture. The company started operations on January 1, 2025. Your task is to record transactions, prepare financial statements, and complete the accounting cycle for the first month of operations.
Company Information
Company Name: Harper’s Custom Furniture Owner: Alex Harper Accounting Period: January 1–31, 2025
Transactions for January 2025
- Jan 1: Alex Harper invested $50,000 in cash to start the business.
- Jan 2: Purchased woodworking equipment for $18,000 cash.
- Jan 4: Bought supplies on account from Timberline Co. for $3,200.
- Jan 7: Completed a custom furniture order and received $6,000 in cash.
- Jan 10: Paid $1,200 for January rent.
- Jan 14: Received an invoice for advertising expenses totaling $800, to be paid in February.
- Jan 18: Provided services on account for a customer totaling $4,500.
- Jan 25: Paid Timberline Co. $1,500 on account.
- Jan 28: Received $2,000 from a customer for work previously billed.
- Jan 31: Paid employee wages of $2,600 for the month.
Assignment Requirements
Part 1 – Journal Entries Record each transaction in the general journal using proper debit and credit format.
Part 2 – Posting to the Ledger Post the journal entries to T-accounts or ledger accounts, showing ending balances.
Part 3 – Trial Balance Prepare an unadjusted trial balance as of January 31, 2025.
Part 4 – Adjusting Entries Make the following adjusting entries:
- Supplies on hand at the end of January total $2,000.
- Equipment depreciation for the month is $300.
- Accrued wages of $400 have not yet been paid.
Part 5 – Adjusted Trial Balance Prepare the adjusted trial balance after posting the adjusting entries.
Part 6 – Financial Statements
Prepare the following:
- Income Statement for the month ended January 31, 2025
- Statement of Owner’s Equity
- Balance Sheet as of January 31, 2025
Part 7 – Closing Entries Journalize the closing entries for the period.
Part 8 – Post-Closing Trial Balance Prepare a post-closing trial balance to verify the ledger is ready for the next period.
Deliverables
- A typed report or spreadsheet including all steps above.
- Use proper accounting formatting and account titles.
- Include a short written reflection (150–200 words) explaining:
- What you learned about the accounting cycle
- Why each step is important for accurate financial reporting