Celebration Experts Inc.(Main)

Celebration Experts Inc.(Main) - The Hong Kong Polytechnic...

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Unformatted text preview: The Hong Kong Polytechnic University School of Accounting and Finance AF2108 Financial Accounting - Project Assignment 2007/2008 Semester 1 1. Business background Celebration Experts Inc. Celebration Experts Inc. is a US company specializing in planning special occasions and selling the serving pieces, paper goods, and linens needed for the related celebrations. All credit sales have terms of 2/10, n/30. Sales also are conducted on the retail level to the general public. The company uses the perpetual inventory system. The company currently has 1,000 shares of $10 par value common stock outstanding. There are 10,000 shares authorized at the beginning of the year. 2. Accounting Procedures and Records Christine Butler, the accounting manager is responsible for maintaining all the accounting records. At the end of each day Christine and her colleagues collate information from the days transactions and records them in the appropriate journals. The list of journals and their purpose is described below: Sales journal (S) used to record all sales of merchandize inventory on account. Purchases journal (P) used to record all purchases of merchandize inventory on account. Cash receipts journal (CR) used to record all receipts of cash. Cash payments journal (CP) used to record all payments made on the business current account. General journal (G) used to record any other transactions which cannot be recorded in special journals, including adjusting and closing entries. The following ledgers will be maintained: General ledger separate accounts are maintained for each asset, liability, owners equity, revenue, and expense accounts as in the chart of accounts. Subsidiary ledgers separate ledgers are maintained for accounts receivable and accounts payable. Celebration Experts Inc. prepares financial statements on an annual basis with the financial year runs from 1 January to 31 December each year. Information from the journals is posted to the general ledger at the end of each month. No closing adjustments will be recorded at the end of each month. It is the companys policy to update individual accounts receivable and accounts payable at the end of each month, thus enabling management to maintain tighter control over business operations. These subsidiary ledgers are then reconciled against the relevant General Ledger Account at the end of each month and any difference is immediately investigated. All other journal entries (except closing entries) are posted at the end of the month. At the year end, Christine uses a worksheet in the adjustment process as well as the preparation of financial statements....
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Celebration Experts Inc.(Main) - The Hong Kong Polytechnic...

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