Accompanying material for the ebook Introduction to Financial Accounting in the 21st
Century – Gaber & Porporato, 5th Edition McGrawHill
Term Project: Part C
Bookkeeping for a small business organization
Bob has just retired in his early 50’s and has plenty of time in his hands. Bob used to be a
maintenance supervisor in the manufacturing sector. Bob had a great reputation as the employee
that can fix any machine, pipe or panel. Unfortunately, the manufacturing sector in Ontario has
been declining and he was eventually offered a generous package to accept an early retirement.
One day, his next-door neighbor asked him if he could fix a leaking pipe and he did it. But while
at the house of the next-door neighbor, he noticed minor repairs needed everywhere. It took Bob
several short visits to fix all that needed to be fixed, but since they are minor things the neighbour
did not considered it was worthy to call a repairman. In his daily visits to make the small repairs he
met several friends and relatives of the neighbour who shared with him that their houses were in
need of non-urgent small repairs, but they never seem to have the time or energy to do them. One
day Bob decided to do a set of small fixes in other neighbor’s houses and by the end of the month
he was enjoying a different fixing challenge almost every day.
The next-door neighbour invited him for dinner, another gave him a present (a bottle of good
Niagara icewine) and another offered him to pay. At that point, the end of March, Bob realized that
he would convert his recently discovered passion into a side business, which would generate some
extra money while channeling all his energy and fostering his social life as a young retiree.
Bob Thoron contacted a lawyer for advice about incorporating. The legal firm The 6 Law provided
the necessary legal advice and did all the necessary paper work to incorporate as a Canada Business
Corporation. Initial capitalization allowed for 100 no par value shares. Bob and his life partner were
named Directors of the Corporation which was called “Bob Fix-it-All Ltd.” The lawyers also
checked that the name was not already registered and register his Internet domain website URL as
www.bobfixitall.ca for a small fee.
Bob had accumulated savings and his life partner, who is still working full time, offered to match
his contribution to the firm in the form of a loan with an interest rate of 1% per month payable on
the New Year day of the following year. Bob contributed his savings (cash) in exchange for 50 of
the shares (first 50 shares were issued). This was deposited into a new corporate bank account Bob
had set up with AMD Bank Canada. The bank account, a standard commercial chequing account
that gave cheques returned with monthly statements for a monthly fee, can have overdrafts at a
fixed cost per day the account is in red.
1
Bob interest was to help good people by fixing and repairing things in their houses, not keeping
tabs on his accounts; therefore, he hired you to be his accountant. You have explained your fee and
Bob has agreed to retain you. You have prepared a document with the terms of engagement and
payment on it.
You, the accountant, informed Bob that if his company would use part of his house to conduct
business (storage of equipment and material and communications with clients); the company can
pay rent to Bob for its use. The rent shall be reasonable for the Canada Revenue Agency.
In his first day of providing services under the company’s name realized his company needed some
sort of third party liability insurance just in case a repair went rouge and caused damage. He
contacted an old acquaintance of him that works for an insurance company and asked for advice.
His friend suggested a product that was just for his needs, it was not expensive, so Bob signed off
on an annual contract. His friend also pointed out that Bob could only do repairs that are not
regulated under a specific trade in the province. In essence, he can do small jobs that cannot produce
structural damage to properties. This advice was in line with the scope delineated by the lawyers
for Bob’s company.
Fixing things in homes do not need any large equipment, but an industrial quality drill with
accessories and a welding gun would simplify his work and decided to buy them. He estimates all
the equipment will last 2 years and will have no residual value at all.
As soon as operations started, Bob purchased some office supplies that would allow him to keep a
paper trail of each service provided. A small inventory of supplies typically used to do small repairs
was needed and he bought some also in the first week of operations.
In a couple of occasions Bob faced a tricky electrical issue, so to be on the safe side he would call
his good friend Tracy who is a certified electrician to ask for advice. Bob pays Tracey a flat fee per
call; however, if the call involves a video call or extends beyond 15 minutes it is double the fee.
Homeowners are extremely pleased with this approach and thank Bob for being proactive in
involving experts.
Most of Bob’s customers are to busy to perform the small repairs needed and have little to no
knowledge of how to clean or properly maintain the mechanisms in the house. Bob saw a great
opportunity here and decided to buy in bulk the most common items needed in a house such as: oil
with application device to maintain windows, door hinges and simple mechanisms. The terms of
sale were 50% cash on delivery and the other 50% in 60 days. He did a very good job at sourcing
those products, allowing him to have a large gross margin and still be competitive matching the
prices of local stores.
2
Seeing how well his activity was going and how happy he was with his new enterprise, Bob decided
to make his presence more noticeable by printing flyers to be left in stores and colorful posters to
be placed in the announcement section of the condo buildings where many of his customers reside.
Under the company name, Bob signed a 2 years contract for a new phone. His use was intensive
because some of the customers would call him to ask for advice on how to attempt the fix by
themselves. All payments made by the company Bob fix-it-all were done through cheque to make
sure all business-related expenses were accounted for.
At the end of the month when you the accountant had an idea of Bob’s business size, you’ve
estimated the income tax liability of the month. To keep things simple, you have sent him an e-mail
with the estimated amount.
Bob knew all his customers and was comfortable in collecting his service fees in cash or cheque at
the end of the service or within a month. Every two weeks he would prepare a summary note of
services rendered, merchandising delivered, and cash collected from the customers. Some
customers were so pleased with his job that paid him in advance. One gentleman considered the
bank charged too much for transactions, so he made a lump sum payment to Bob on account for
future services. Bob received it and at the end of each service he would show the customer how
much is the balance left given the services consumed so far. The customer was happy.
Reading the news, Bob realized that the manufacturer of the silicon sealant he has been using in his
clients’ bathrooms has recalled a large batch of products that were deemed to be defective. A
component of the sealant reacts with water and its acidic nature erodes tiles that crack under
pressure. Bob made 17-bathroom repairs using that sealant, if the product he actually used was part
of the batch recalled he is seriously thinking of removing the sealant applied in those 17 bathrooms
and apply new product; however, he does not remember exactly where he applied the sealant in
each bathroom. He is unsure on what to do and consulted The 6 Law who indicated he will be liable
for damaged cause by the use of failed material. However, the liability will be conditional to the
actual damage emerging in the client’s bathrooms.
Due to the uncertainty of the potential recall, Bob decided to declare dividends for 50% of the
maximum amount possible. You, the accountant, explained to him that only net income that
accumulates in Retained Earnings can be distributed as dividends. Bob understood and decided to
distribute up to 50% if possible while the other half would be maintained within the company.
In terms of setting up the accounting system you (the accountant) together with Bob (your client)
decided on the following records:
 Chart of Accounts
 General Journal
 Sales Journal
 Disbursements Journal
3
Required: Prepare the accounting records
for Bob fix it all
Note: this task is based on the analysis of very extensive narrative and detailed project documents.
The next pages have all the documents that Bob brought to you, the accountant, in a shoebox so
you can prepare the financial statements of his company (use 2 decimal places, if needed round up
the figures to the next cent). Students with the last digit being 0 (zero), must use 1 as if it were the
last digit for all transactions in this part C of the term project.
1.
2.
3.
4.
Check and use the Chart of Accounts provided (do not create new accounts).
Prepare the General Journal for the month (all journal entries including AJE)
Post all transactions to the T-accounts and prepare a trial balance
Prepare the Financial Statements in good form including contingency disclosures that are
exclusive of the transactions of this case (do not include general notes).
5. Each General Journal entry should have a brief explanation under.
6. Based on all the information provided in this project, prepare a memo to Bob where you
as a professional accountant evaluate the business. Specifically address his concerns:
a) How much can be paid in dividends?
b) With the data of the financial statements that you have completed, is the business
sustainable?
c) Make one clear and executable suggestions of how the business can improve its bottom
line?
Submission specific guidelines are provided by your course and professor. Make sure to
follow them.
4
The 6 LAW- Barristers & Solicitors
INVOICE
To: Bob fix-it-all
From: Perry Mason
Terms Due April 1, 201X
Date: April 1, 201X
Re: Professional Services
Paid with Cheque # 1
For services rendered in connection with the incorporation of Bob fix-it-all
Service Ltd. including but not limited to:

Filing application for articles of incorporation as a Canada
Business Corporation

Securing trademark protection on the name Bob fix-it-all

Filing necessary documents with the Canadian Registrar of
Companies

Filing appropriate documents as required under the Ontario
Directors’ Act to name corporate directors

Registering the Internet domain name ( www.bobfixitall.ca)

Various legal advice on these and other matters
The amount of (1)
(1) The amount must be equal to 100 times the last digit of your student number (lawyer)
5
The 6 LAW- Barristers & Solicitors
Certified Document
To: Bob fix-it-all
From: Perry Mason
Date: April 1, 201X
Re: Initial contribution
Hereby I certify the following items were agreed and happened with me as a
witness:

Bob fix-it-all Service Ltd. has issued 100 shares.

Mr. Bob Thoron contributed in cash the amount of (2) in
exchange for 50 shares of the company.

The contribution was made in cash and deposited in the bank
account of the company.

Mr. Charles Hop commits to offer a revolving term loan to the
company for the amount (3).

The revolving loan will be renovated at the end of each year.
Interest of 12% per annum applies and will be paid in cash on
January 2nd of the following year. Interest is to be calculated
proportional to the days in which money was outstanding.
(2) The amount must be equal to 1,000 times the last digit of your student number (Bob’s
contribution)
(3) The amount must be equal to 1,000 times the last digit of your student number (loan)
6
Bank AMD Canada
Statement of Account
Account 3061-001-33478
Chequing Account
Statement Date
April 30, 201X
2594 Dimple Crescent
Toronto ON M3J 1P7
Branch
Date
3061
Bob fix-it-all
9709 Keele St. - Unit 14
Maple ON
Description
April 1
April 1
April 1
April 1
April 1
April 1
April 1
April 1
April 1
April 1
April 17
April 17
April 30
April 1-30
April 30
DEPOSIT
CHEQUE #1
CHEQUE #2
CHEQUE #3
CHEQUE #4
CHEQUE #5
CHEQUE #6
CHEQUE #7
CHEQUE #8
CHEQUE #9
FEE BANK OVERDRAFT April 2 to 16
DEPOSITs
CHEQUE #10
DEPOSITs
MONTHLY SERVICE CHARGE
Debits
Credits
Balance
(2)
(1)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(17)
(13)
(12)
(13)
(18)
TOTALS
Notes:
(1) The amount must be equal to 100 times the last digit of your student number (lawyer)
(2) The amount must be equal to 1,000 times the last digit of your student number (Bob’s
contribution)
(4) The amount must be equal to 60 times the last digit of your student number (rent)
(5) The amount must be equal to 300 times the last digit of your student number (insurance)
(6) The amount must be equal to 360 times the last digit of your student number (equipment)
(7) The amount must be equal to 50 times the last digit of your student number (office supplies)
(8) The amount must be equal to 20 times the last digit of your student number (inventory)
(9) The amount must be equal to 50 times the last digit of your student number (promotion)
(10) The amount must be equal to 50 times the last digit of your student number (publicity)
(11) The amount must be equal to 60 times the last digit of your student number (supplies)
(12) The amount must be equal to 110 times the last digit of your student number (electrician fees)
(13) There were two deposits made. The total of both deposits is an amount equal to 400 times the
last digit of your student number is revenue collected in cash for services plus 50 times the last digit
of your student number is revenue collected in cash for the sale of inventory plus 50 times the last
digit of your student number is for prepaid revenues (money collected but services not provided
yet).
(17) The amount must be equal to 80 times the last digit of your student number (bank overdraft
fee)
(18) The amount must be equal to 10 times the last digit of your student number (bank fee)
7
Bob Thoron representing Bob fix-it-all Ltd.
Agrees to pay Bob Thoron (the individual
owner of the property where commercial
activities are developed by Bob fix-it-all) the
sum of (4) for the months of April, May and
June.
This document acts as a receipt to both
parties that the service has been agreed and
paid in advance.
Bob Thoron
Paid with Cheque # 2
(4) The amount must be equal to 60 times the last digit of your student number (rent)
8
The RiskIt Insurance Group
120 North Town Centre Blvd.
Markam, ON W6G 1C5
Ask For:
INVOICE
ACCT:
Date:
TERM
POLICY
Tony Tavalla
expires on March 30th, 201X+1
89245-15
Coverage: All perils third party liability
Limit of Liability
98074
Bob fix-it-all
April 1st, 201X
EFFECTIVE
PREMIUM
April 1st, 201X
(5)
$2,000,000
YOUR PREMIUM IS DUE AND PAYABLE ON EFFECTIVE DATE OF POLICY
Coverage is cancelled if not paid within 30 days
Paid with Cheque # 3
(5) The amount must be equal to 300 times the last digit of your student number (insurance)
9
Paid with Cheque # 4
105 lakeshore drive
Toronto, ON M3S T2T
phone: 416-878-9532
fax: 416-878-9533
CT 6978
April 1, 201X
Due upon delivery of equipment
Invoice #
Invoice Date
Terms:
Quantity
1
Description
20V Cordless Drill and Impact Driver Combo kit, 1.3 Ah
Amount
(6a)
1
Cut Welder kit including: brass torch handle, cutting
attachments and acetylene cylinder
(6b)
Previous
Balance
$0
terms:
Payments and
Adjustments
$0
Overdue
Balance
New
Charges
$0
(6)
Total
Amount Due
(6)
Payable in cash or cheque upon delivery
No return accepted without prior written authorization.
All claims must be made within 5 days following receipt of Goods
INVOICE/FACTURE
(6) The amount must be equal to 360 times the last digit of your student number (equipment)
(6a) Cordless Drill: The amount must be equal to 120 times the last digit of your student number
(drill)
(6b) Welder Kit: The amount must be equal to 240 times the last digit of your student number
(welder kit)
10
Quantity
Price
Total
Value of supplies available at:
April 30
(7a)
Office Supplies
Paper and Pads
Pens, correctors, markers
Binders
Paid with Cheque # 5
Labels and plastic tags
Stapler, Puncher
Scissors
Total
(7)
Store 2015
HW7 & Weston
1-877-360-8500
April 01, 201X
18:36:05
(7) The amount must be equal to 50 times the last digit of your student number (office supplies)
(7a) The amount of office supplies left (still at hand) by the end of the Month must be equal to 30
times the last digit of your student number (office supplies)
11
Hunting Gear Bulky Depot
Where cheap and good hunting gear is available
Bill To:
Bob fix-it-all
Invoice #
Invoice Date
April 1, 201X
Quantity
10
10
20
1010
Description
Crud Cutter Cleaner/Degreaser
Lubricating Gun Oil
WD-40 Specialist Dirt and Dust Resistant Dry
Lube PTFE Spray
Amount
Balance Due
(8)
Payment conditions: 50% when ordering, the rest within 60 days of time of delivery
Please make cheque payable to:
Inventory paid (50%)
with Cheque # 6
Hunting Gear Bulky Depot
4009 Keele St - Unit 11
Toronto ON M3J 1P3
Value of inventory of goods
available for sale at:
April 30
(9a)
(8) The amount must be equal to 40 times the last digit of your student number (inventory)
(8a) The amount must be equal to 20 times the last digit of your student number (inventory)
12
INSTAPRINT
Bill To:
Bob fix-it-all
Invoice #
Invoice Date
TOR0230
April 1, 201X
Quantity
50
Description
Amount
Flyers
Balance Due
(9)
Payment conditions: 10% when ordering, the rest at time of delivery
Please make cheque payable to:
InstaPrint
48 Burgess Ave.
Scarborough, ON
M7Z 1W9
Paid with Cheque # 7
Delivery: the flyers will be ready to pick up on April 1, 201X.
Number of flyers distributed in each month:
April
10 flyers
(9) The amount must be equal to 50 times the last digit of your student number (promotion)
13
INSTAPRINT
Bill To:
Bob fix-it-all
Invoice #
Invoice Date
TOR0231
April 1, 201X
Quantity
10
Description
Amount
Colorful posters
Balance Due
(10)
Payment conditions: 10% when ordering, the rest at time of delivery
Please make cheque payable to:
InstaPrint
48 Burgess Ave.
Scarborough, ON
M7Z 1W9
Delivery: the posters will be ready to pick up on April 1, 201X.
Paid with Cheque # 8
5 were distributed in April
(10) The amount must be equal to 50 times the last digit of your student number (publicity)
14
All were used in April except for 1
Durabond worth 11a
Paid with Cheque # 9
105 lakeshore drive
Toronto, ON M3S T2T
phone: 416-878-9532
fax: 416-878-9533
CT 6978
April 1, 201X
Due upon delivery of equipment
Invoice #
Invoice Date
Terms:
Quantity
1
1
1
1
2
Description
Anti-Siphon Toilet Tank Ballcock 10-in
Toilet Tank Lever 8-in
Push Nut Assortment 10-pk
Handle, 1-pk
Durabond 90 Repair Compound
Previous
Balance
$0
terms:
Payments and
Adjustments
$0
Amount
Overdue
Balance
New
Charges
$0
Total
Amount Due
(11)
(11)
Payable in cash or cheque upon delivery
No return accepted without prior written authorization.
All claims must be made within 5 days following receipt of Goods
INVOICE/FACTURE
(11) The amount must be equal to 60 times the last digit of your student number (supplies)
(11a) The amount must be equal to 20 times the last digit of your student number (durabond)
15
Tracy Sparks
Your cottageelectricianspecialist
Note: during April there were 3 short phone calls and one long and complex video call.
Previous
Balance
$0
Payments and
Adjustments
$0
Overdue
Balance
$0
New
Charges
(12)
Total
Amount Due
(12)
Paid with Cheque # 10
(12) The amount must be equal to 110 times the last digit of your student number (electrician fees)
16
Bob fix-it-all Invoice/Payment Summary April 30, 201X
Invoice
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Date
Customer
April
Amdjadi
April
Matteo
April
Castelli
April
Flora
April
Garvey
April
Herman
April
Marjam
April
Dr. Kwan
April
Lucy
April
Xie
Summary first half of the month
April
Zeliko
April
McIntosh
April
Qian
April
Chu
April
Lorne
April
Masterlitz
April
Hira
April
Bar
April
Miguel
April
Ho
April
Kanner
April
Stanley
April
Perri
Summary second half of the month
Totals
Amount
Deposit
Date
Subtotal
April 17th
Subtotal
April 30th
Amount
Paid
Balance
Due
(13)
(13) The amount must be equal to 600 times the last digit of your student number and the amount
breaks down as follows:
400 times the last digit of your student number is revenue collected in cash for services
100 times the last digit of your student number is revenue still not collected but services have been
provided
50 times the last digit of your student number is revenue collected in cash for the sale of inventory
50 times the last digit of your student number is for prepaid revenues (money collected but services
not provided yet)
17
Bob Thoron has agreed to retain YOU as the
accountant for his firm. Given the services
agreed to be provided, the fee of (14) for the
whole first year of operations has been
agreed upon.
This document acts as a receipt to both
parties that the professional accounting
services has been retained for 12 months and
will be paid in full by the end of the 11th
month.
Bob Thoron
You
(14) The amount must be equal to 120 times the last digit of your student number (accountant)
To: bob@bobfixitall.ca
From: your@theaccountant.ca
Subject: estimated income tax for April 201X
Date: April 30th 11:59pm
Bob,
The purpose of this e-mail is to inform you that I have estimated your income tax
liability for the operations of the month of April to be (15). Please account for it.
Thanks.
The Accountant
(15) The amount must be equal to 50 times the last digit of your student number (income tax)
18
BelTel
your communication partner
Account Summary for Bob Fix-it-All
April 1, 201X
Account #
1244830/4
Previous amount due - New Account $0.00
Payment Received - Thank you
0.00
Current charges - per details below
Total Amount
Due
(16)
(16)
pre-authorized payment May 4, 201X
1% per month, plus a $50 collection fee, will be
charged if insufficient funds at payment date
Current Charges - Detail
Monthly Basic Service Charges for April :
(16)
Total Charges
(16)
(16) The amount must be equal to 35 times the last digit of your student number (total of phone
bill)
19
Chart of Accounts
ASSETS
Accounts Receivables
Accumulated Depreciation Drill
Accumulated Depreciation Welder Kit
Cash
Equipment – Drill
Equipment – Welder Kit
Inventory
Organizational Costs
Prepaid Insurance
Office Supplies
Prepaid Promotion (flyers)
Prepaid Publicity (posters)
Prepaid Rent
Supplies (durabond)
Shareholders’ Equity
Shareholders’ Equity
Retained Earnings
Revenue
Revenue
Dividends
Liabilities
Accounting Services Payable
Accounts Payable
Advances from Customers
Dividends Payable
Loan Payable
Income Tax Payable
Interest Payable
Phone Payable
Expenses
Accounting Services Expenses
Bank Fees Expense
Bank Overdraft Fees
Cost of Goods Sold
Depreciation Expense Drill
Depreciation Expense Welder Kit
Electrician Services Fee
Income Tax Expense
Insurance Expense
Office Supplies Expense
Phone Expense
Promotion Expense (flyers)
Publicity Expense (posters)
Rent Expense
Supplies Expense
Interest Expenses
Web Expenses
20
General Journal
(assuming the last digit of your student number is 1)
order
role
1 Dr
1 Cr
Account
Cash
Shareholders’ equity
Dr
Cr
1,000.00
1,000.00
2 Dr
2 Cr
Organizational costs
Cash
100.00
3 Dr
3 Cr
Prepaid Rent
Cash
60.00
4 Dr
4 Cr
Prepaid Insurance
Cash
5 Dr
5 Cr
Office Supplies
Cash
100.00
60.00
300.00
300.00
50.00
50.00
…………………
21
Disbursements Journal
Disbursement mode
CHEQUE
1
CHEQUE
2
CHEQUE
3
CHEQUE
4
CHEQUE
5
CHEQUE
6
CHEQUE
7
CHEQUE
8
CHEQUE
9
Bank debit
CHEQUE
10
Bank debit
Amount
(1)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(17)
(12)
(18)
Reason
Lawyer
Rent (3 months)
Insurance (1 year)
Equipment: drill and welding kit
Office supplies
Inventory
Promotion (flyers)
Publicity(posters)
Supplies (durabond)
Bank Overdraft Fee
Electrician services
Bank fee
(1) The amount must be equal to 100 times the last digit of your student number (lawyer)
(4) The amount must be equal to 60 times the last digit of your student number (rent)
(5) The amount must be equal to 300 times the last digit of your student number (insurance)
(6) The amount must be equal to 360 times the last digit of your student number (equipment)
(7) The amount must be equal to 50 times the last digit of your student number (office supplies)
(8) The amount must be equal to 40 times the last digit of your student number (inventory)
(9) The amount must be equal to 50 times the last digit of your student number (promotion)
(10) The amount must be equal to 50 times the last digit of your student number (publicity)
(11) The amount must be equal to 60 times the last digit of your student number (supplies)
(12) The amount must be equal to 110 times the last digit of your student number (electrician fees)
(17) The amount must be equal to 80 times the last digit of your student number (bank overdraft
fee)
(18) The amount must be equal to 10 times the last digit of your student number (bank fee)
22