Abstract The following is on a new merchandising corporation showing the chart of accounts and cash flow statement, along with information on the type of company the corporation is. In addition there is information regarding what internal controls the company has, how many employees the company has hired. The first month’s transactions are journalized and each account journalized is in the chart of accounts.
The Chart of Accounts is used in accounting for companies to track all the monies of a company by developing accounts where the monies come in and go out of. In addition, the accounts also follow assets other than cash and follow the owner’s equity of the company (Horngren, C.T., Harrison, W.T., & Oliver, M.S., 2009). Accounting is for tracking all the money in a company and there are ethical considerations on the professional conduct of accounts because of the money factor. The Chart of Accounts is the key to tracking where and how the money is earned and spent in a company.
To reduce theft and dishonesty, management accountants are bound by the Standards of Ethical Conduct for Management Accountants. Professional accountants are members of the AICPA and must abide by their codes of conduct (Horngren, C.T., Harrison, W.T., & Oliver, M.S., 2009). To be an accountant one must be able to resist greed and greediness (Love, V.J., 2008). Accounts need to be honest, and personally know right from wrong, and not steal. Chart of Accounts-Express Yourself Novelty Shirts | Assets | Liabilities | Owner’s Equity | 101 Cash | 201 Accounts Payable | 301 Express Yourself Novelty Shirts, Capital | 111 Accounts Receivable | 211 Unearned Sales Revenue | 311 Express Yourself Novelty Shirts, Withdrawals | 121 Inventory | 221 Salary Payable | | 141 Supplies | 231 Sales Tax Payable | | 151 Equipment | 241 Withheld Income Tax Payable | | 171 Computers | | | 181 Misc. Electronics (copiers, fax machine, etc.) | | | Income Statement Accounts(Part of Owner’s Equity) | | | Revenues | Expenses | | 410 Sales Revenue | 501 Rent Expense | | | 511 Salary Expense | | | 521 Supplies Expense | | | 525 Cost of Goods Sold | | | 531 Advertising Expense | | | 541 Insurance Expense | | | 551 Income Tax Expense | | | 561 Sales Tax Expense | | | 571 Depreciation Expense | | | 581 Utilities Expense |
Express Yourself Novelty Shirts is a Limited Liability Corporation (LLC) and has Owner’s Equity by which the owner, Billy Squire invested her retirement by cashing in her 401k to open and start the business or give the business capital; and therefore the structure of the company is equity based. This is a risky investment for the owner to have cashed in her retirement savings to start a new business that may not be successful. The company was formed in May 2011. However, other choices for gaining capital would have been going into debt and having a long term notes payable by borrowing money from a bank and paying interest. If the owner would have taken out a loan from the bank, the owner would remain the decision maker of the company and have to pay monthly interest and principle payments regardless of the company revenues. Another option would have been to sell shares or bonds to investors and pay interest on the bonds until maturity where the principal is paid back. When shares are sold, the owners of the shares become shareholders and have decision making rights to the company. Luckily, Express Yourself Novelty Shirts is successful and profiting money consistently.
If the company should require financing for any reason then selling shares would be the preferred method because companies backed by shareholders are a stronger company in my opinion. Having the business as a LLC company protects the owner by removing the personal liability of the business’s debts from the owner or also known as a member (Horngren, C.T., Harrison, W.T.,…