Henri Martin and Wes Corbett have decided to go into business together and have chosen the name KBC Decorating Co. Their business will have two main divisions: a retail department to sell paint, wallpaper, and related interior decorating supplies; and a service department to do painting and decorating of office buildings, apartment blocks, and private homes. Martin and Corbett were previously in this same type of work but operated separate businesses. KBC Decorating Co. is located in Paris, Ontario, about an hour from Toronto. Martin and Corbett found a suitable location from which to operate their business, renting half of a warehouse building owned by Frank Bailes. Their space includes an office, retail space, and warehouse space. Your job is to keep the books for KBC Decorating Co. for the first calendar year (January to December). As you progress through these chapters, you will learn and do. Each chapter will introduce new concepts that you will incorporate into the regular bookkeeping activities of KBC Decorating Co. Just as in any new job, each step will be explained and practiced before you are asked to apply it to KBC’s activities. You will be learning on the job. All the supplies necessary for keeping the books for KBC Decorating Co. are found in the package of working papers available with this textbook. All ledger accounts are preprinted with the appropriate account names and account numbers. Be sure these ledger account pages remain in the order given. This will ensure that the ledger is organized and that the accounts are easy to locate. The chart of accounts for this ledger has been printed at the end of the textbook for easy reference (see Appendix C). JANUARY TRANSACTIONS You will begin by recording the transactions for the first half of January. Select a General Journal sheet from your supplies and give it the page number GJ1. Continue numbering the journal pages as you start each new page (GJ2, GJ3, etc.). All entries should be recorded in proper format with suitable explanations. As you continue with this case study in later chapters, you will be referring to this first journal page again, so keep it handy. (a)Begin now by recording these transactions in the General Journal: 20—Jan. 2 The owners started their new business by investing the assets shown here. Notice from the chart of accounts that each owner has his own Capital account. (You will record two compound entries for these investments, one for each owner.) Henri Martin: Cash $22,000 Furniture & Equipment 8,000 $30,000 Wes Corbett: Cash $15,000 Vehicle (used van) 15,000 $30,000 2 Issued Cheque #1 for the January rent, $2,500. 2 Issued Cheque #2 for advertising in the newspaper, $610.20. (Debit Advertising Expense.) 4 Bought office supplies, $305.10. Issued Cheque #3. (Debit Office Supplies Expense.) 4 Issued Cheque #4 for the installation of our new phone line, $165. (Telephone Expense). 5 Bought merchandise as follows: paint and supplies, $10,000; wallpaper, $5,000. Issued Cheque #5. (Notice on the chart of accounts that there are separate Purchases accounts for these goods. Record this as a compound entry.) 9 Bought a paint mixer and colour dispenser from Rainbow Supplies Co., $1,620. Issued Cheque #6. (Tools & Equipment). 10 Cash sales: paint and supplies, $3,000; wallpaper, $1,000. (Notice that there are separate Sales accounts for these goods.) 15 Cash sales: paint and supplies, $6,000; wallpaper, $2,000. (b)Post the journal entries to the ledger accounts. (All ledger accounts for KBC Decorating Co. should be kept separate from your Practice Exercise material and should be neatly arranged in a binder or file so you can access them easily. Do not change the order of the ledger pages.) (c)After completing the posting, prepare a trial balance on January 15. If you are using the working papers available with this textbook, prepare your trial balance on Form TB-KBC. If your trial balance does not balance on the first attempt, use the steps for locating errors as described in this chapter.

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The process by which financial transactions of the business are recorded and communicated with the end users is termed as accounting The financial data is analyzed summarized and reported to the users ... View the full answer