help with accounting...

Discussion in 'Starting a Lawn Care Business' started by Holly, Feb 11, 2006.

  1. Holly

    Holly LawnSite Member
    Posts: 11

    hi can any of u help me with an income statement that i have to prepare of Grant's Lawn Service for the four months May through August for this situation:


    Aaron Grant formed a lawn service business as a summer job. To start the business on May 1, he deposited $1,000 in a new bank account in the name of the proprietorship. The $1,000 consisted of a $600 loan from his father and $400 of his own money. Aaron rented lawn equipment, purchased supplies, and hired other students to mow and trim customers' lawns.
    At the end of each month, Aaron mailed bills to his customers. On August 31, he was ready to dissolve the business and return to Blue Mountain Community College. Because he was so busy, he kepy few records other than his checkbook and a list of receivables from customers.
    At August 31, Aaron's checkbook shows a balance of $2,000, and his customers still owe him $500. During the summer, he collected $5,500 from customers. His checkbook lists payments for supplies totaling $400, and he still has gasoline, weedeater cord, and other supplies that cost a total of $50. He paid his employees $1,800, and he still owes them $300 for the final week of the summer.
    Aaron rented some equipment from Ludwig's Machine Shop. On May 1, he signed a six-month lease on mowers and paid $600 for the full lease period. Ludwig's will refund the unused portion of the prepayment if the equipment is in good shape. In order to get the refund, Aaron has kept the mowers in excellent condition. In fact, he had to pay $300 to repair a mower.
    To transport employees and equipment to jobs, Aaron used a trailer that he bought for $300. He figures that the summer's work used up one-third of the trailer's service potential. The business checkbook lists a payment of $500 for cash withdrawls by Aaron during the summer. Aaron paid his father back during August.



    please help if u know how i am confused on how to prepare an income statement for this. thank you!!:)
     
  2. PMLAWN

    PMLAWN LawnSite Gold Member
    Posts: 3,535

    Is this a school project??
    You would not be wanting us to do your homework:p

    Balance the checkbook-Do you know how to do that.

    Expenses on one side and income on the other.
    How do you need to break it down.
     
  3. Holly

    Holly LawnSite Member
    Posts: 11

    no i don't know how to do that!
    but yea it has to be expenses on one side and income on the other side
    can u help??
     
  4. eshreve1234

    eshreve1234 LawnSite Member
    Posts: 184

    I have several questions about this:

    Is this for real?

    You have balance sheet and income statement items intermingled in your story. Which do you want? Also to prepare the income statement, I need to know if Aaron is a cash or accrual basis tax payer? I will assume cash basis for right now.


    Also for the fixed assets (equipment) we need the purchase price and such. What Aaron figures is the useful life does not matter as there are rules for depreciating assets. Are the mowers his? How did he get the trailer from Point A to Point B?


    Here is a very rough idea of the income statement:

    Sales: $5500 (assuming the other 500 is in addition to, not included in this figure) If the 500 outstanding is in the number sales becomes 5000 since he has not received the cash, the sale is not valid.


    Supplies: $450
    Wages: $1800 (same as sales, can not take expense until cash is paid)
    Rents: $600
    Repairs: $300
    Depreciation: ?

    Profit (loss) $2,350


    If you need more help let me know.
     
  5. 1MajorTom

    1MajorTom Senior Moderator
    Posts: 6,073

    Hey, you're at the library aren't you? Smart thinking on your part to think about posting that question here. Btw, welcome to Lawnsite.
     
  6. Holly

    Holly LawnSite Member
    Posts: 11


    yes this is for real. well i need to do both. i need to prepare an income statement for the four months May through August..and than i need to make the classified balance sheet at August 31. Also, it is a cash basis. he leased the mowers i guess for 6 months and paid them. i duno .,this is all i know as much as i written down. but thi sis what i got so far..can u tell me if this sounds correct:

    1000 to start plus 2000 extra in the check book plus 500 owed by customers=3500. plus 5500 from customers minus 400 for supplies. also minus 50 for gas and 2100 for employees salaries. minus 600 for equipment lease, 300 for mower repair and 300 for trailer. minus 500 for cash withdrawals.
    the total is $5050
     
  7. Holly

    Holly LawnSite Member
    Posts: 11

    thanks eshreve for trying to help me!
     
  8. Holly

    Holly LawnSite Member
    Posts: 11

    is the balance sheet the same thing?
     
  9. Holly

    Holly LawnSite Member
    Posts: 11

    can u help me with the balance sheet at august 31
     
  10. eshreve1234

    eshreve1234 LawnSite Member
    Posts: 184

    Fisrt off, I hope you are a student, so I will help you with what you need for a textbook answer.

    First off, you know what a debit and a credit is correct?

    For short we will use debit = DR credit = CR

    Now we need to set up a chart of accounts

    100s = assets
    200s = liabilities
    300s = capital
    400s = revenue
    500s = expenses

    The very first line is a 1000 deposit

    DR A/N 100 Cash $1000
    CR A/N 200 Loans $600
    CR A/N 300 Capital $400


    Now we have supplies used/purchased

    DR A/N 500 supplies $350
    DR A/N 105 Inventory $50
    CR A/N 100 Cash $400


    For sales:

    DR A/N 100 Cash for $5,500
    CR A/N 400 Sales for $5,500

    For Wages:

    DR A/N 505 Wages $1,800
    CR A/N 100 Cash for $1,800

    For Rental

    DR A/N 510 Rental $600
    CR A/N 100 Cash $600

    For Repairs

    DR A/N 515 Repairs $300
    CR A/N 100 Cash $300

    For the trailer:

    Dr 110 equipment $300
    CR 100 cash $300

    Dr 520 depreciation $100
    CR 110 equipment $100

    loan repay

    Dr 200 loans $600
    CR 100 cash $600


    Dr 300 capital $500
    Cr 100 cash $500


    This should get you almost there. Set up your journal for each acct number and what ever is left over is the answer you are looking for.


    Let me know how you do.

    Eric
     

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