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Financial Accounting Assignment - MID

The document outlines a mid-term assignment for a financial accounting course at AIUB, focusing on a case study of Natalie Koebel who plans to start a cookie-making school called 'Cookie Creations.' It includes questions about business organization types, accounting information needs, and specific transactions related to her event management firm, Creation Events. Additionally, it covers journal entries, ledger postings, and the relationship between accounting components, emphasizing the importance of financial accounting for business sustainability.

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2 views

Financial Accounting Assignment - MID

The document outlines a mid-term assignment for a financial accounting course at AIUB, focusing on a case study of Natalie Koebel who plans to start a cookie-making school called 'Cookie Creations.' It includes questions about business organization types, accounting information needs, and specific transactions related to her event management firm, Creation Events. Additionally, it covers journal entries, ledger postings, and the relationship between accounting components, emphasizing the importance of financial accounting for business sustainability.

Uploaded by

inan6082
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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AMERICAN INTERNATIONAL UNIVERSITY – BANGLADESH (AIUB)

Faculty of Business Administration


Department of Accounting

Financial Accounting
Assignment – Mid term

Question 1:

Case study –

Natalie Koebel spent much of her childhood learning the art of cookie-making from her
grandmother. They passed many happy hours mastering every type of cookie imaginable and
later creating new recipes that were both healthy and delicious. Now at the start of her second
year in college, Natalie is investigating various possibilities for starting her own business as part
of the requirements of the entrepreneurship program in which she is enrolled.

A long-time friend insists that Natalie has to include cookies in her business plan. After a series
of brainstorming sessions, Natalie settles on the idea of operating a cookie-making school. She
will start on a part-time basis and off er her services in people’s homes. Now that she has started
thinking about it, the possibilities seem endless. During the fall, she will concentrate on holiday
cookies. She will offer individual lessons and group sessions (which will probably be more
entertainment than education for the participants). Natalie also decides to include children in her
target market.

The first difficult decision is coming up with the perfect name for her business. Natalie settles on
“Cookie Creations” and then moves on to more important issues.

Instructions

(a) What form of business organization—proprietorship, partnership, or corporation—do


you recommend that Natalie use for her business? Discuss the benefits and weaknesses
of each form and give the reasons for your choice.

(b) Will Natalie need accounting information? If yes, what information will she need and
why? How often will she need this information?

(c) Identify specific assets, liabilities, and equity accounts that Cookie Creations will likely
use to record its business transactions.
Question 2:

After much consideration, Natalie Koebel started an event management firm, Creation Events, for
gathering the money for her cookies business on December 1, 2022. The following transactions
occurred during the month of December.

Dec 1 Natalie invested $20,000 cash in the business in exchange for ordinary shares.

2 Paid $1,000 for office rent for the month.

3 Purchased $1,200 of supplies on account.

5 Paid $500 to advertise in the People’s News.

9 Received $5,000 cash for services performed.

12 Declared and paid a $1,500 cash dividend to the shareholders.

15 Performed services worth $3,500 on account.

17 Paid $2,000 for employee salaries.

20 Paid for the supplies purchased on account on Dec 3.

23 Received a cash payment of $2,000 for services performed on account on Dec 15.

26 Borrowed $5,000 from the bank on a note payable.

29 Purchased office equipment for $2,300 on account.

30 Paid $500 for utilities.

Instructions:

(a) Show the effects of the above transactions on the accounting equation using the following
format.

(b) Prepare an income statement and retained earnings statement of Creation Entertainment for
the month ended Dec 31, 2022.
Question 3:

Natalie Koebel gathered enough capital after running her event management business for 2 years.
After researching the different forms of business organization, Natalie decides to operate “Cookie
Creations” as a corporation. She then starts the process of getting the business running. In
November 2024, the following activities take place.

November 1 – Natalie invested $20,000 cash to start the business along with other shareholders
in exchange of ordinary shares.

November 11 – Natalie pays $650 to have advertising brochures and posters printed. She plans
to distribute these as opportunities arise. (Hint: Use Advertising Expense)

November 13 – She buys baking supplies, such as flour, sugar, butter, and matcha, for $1,500
cash.

November 14 – She purchased some baking equipment worth $3,000 to take with her when
teaching the cookie classes.

November 16 – Natalie realizes that her initial cash investment is not enough. So, she borrowed
another $5,000 cash from the bank on a note payable.

November 17 – She buys more baking equipment for $900 and will pay the money next month.

November 20 – She teaches her first class and collects $750 cash (Hint: Use service revenue).

November 22 – Natalie books a second class for December 4. She receives $30 cash in advance as
a down payment.

November 26 – Natalie pays $1,320 for a one-year insurance policy that will expire on December
1, 2025.

November 30 – She made a payment of 60% of the note payable taken on November 16.

Instructions

(a) Prepare journal entries to record the November transactions.

(b) Post the journal entries to the following ledger accounts:

(i) Cash ledger

(ii) Note payable ledger

(iii) Equipment ledger

(iv) Service revenue ledger


Question 4:

Discuss the relationship between the journal, the ledger, and the trial balance in maintaining the
double-entry accounting system. How does this system ensure that financial statements are
accurate and reliable?

Question 5:

Explain the role of financial accounting in the sustainability of a business.

[N.B: Don’t just copy from the internet or any AI tools. Try to write in human language].

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