Posted: April 14th, 2022

Computer Simulation Project

Champion Wave Surf, Inc.

1st Version

Computer Simulation Project

STUDENT’S MANUAL

Tailored by Richard E Fleishman, MBA

From the unique by

Stacey R. Adams, CPA

Champion Wave Surf, Inc.

Preface

Champion Wave Surf, Inc. is a computerized accounting venture designed for college kids taking Monetary Accounting. The venture is meant to strengthen ideas taught in Monetary Accounting programs, whereas permitting college students the usage of Wave Accounting software program to Help of their understanding of computerized accounting.

The venture shouldn’t be supposed to show Wave Accounting, however merely makes use of Wave in a restricted capability to provide college students the chance to know the usefulness of computer systems and software program within the accounting world, however nonetheless compelling them to completely comprehend every accounting transaction and the accounting course of.

Introduction

Background

Champion Wave Surf, Inc. is a small company, operated by Max Kolbe, the bulk stockholder. The enterprise opened on January 1, 2007, at its lovely location in Morro Bay, California. Champion Wave has been profitable in its first two months of operations, gaining recognition among the many locals and vacationers on the Central Coast. Along with promoting surfboards, equipment and attire, Champion Wave additionally gives surfboard restore providers and affords non-public browsing classes.

As the brand new accounting intern for the corporate, you have got been requested to finish the accounting for the final two weeks of March, put together the monetary statements and shut the books on the finish of the primary quarter, March 31, 2007. This can require that you just submit all accounting transactions for the final two weeks of the month of March, reconcile the checking account, submit any adjusting entries, print and analyze the monetary statements, and, lastly, submit the closing entries. In the course of the course of, you’re anticipated to audit your personal work and make any correcting entries as you go. Max has supplied you with the accounting information which have been accomplished by means of March 17, 2007.

Earlier than you start recording the transactions, it can be crucial that you just change into accustomed to Champion Wave’s chart of accounts and also you completely perceive the corporate’s accounting procedures. Max has supplied you with the entire chart of accounts together with some detailed info from his CPA that it is best to Assessment.

Chart of Accounts

Abstract

ASSETS

101

Money

102

Petty Money

115

Certificates of Deposit

120

Accounts Receivable

125

Credit score Playing cards Receivable

130

Curiosity Receivable

150

Merchandise Stock

160

Pay as you go Promoting

161

Pay as you go Insurance coverage

162

Pay as you go Hire

170

Retailer Provides

180

Gear

181

Accrued Depreciation, Gear

185

Furnishings & Fixtures

186

Accrued Depreciation, Furnishings & Fixtures

LIABILITIES

201

Accounts Payable

210

Dividends Payable

220

Curiosity Payable

240

Gross sales Tax Payable

250

Wages Payable

260

Unearned Income

280

Notes Payable

STOCKHOLDERS’ EQUITY

310

Frequent Inventory

320

Retained Earnings

390

Dividends

REVENUE

401

Gross sales Income

410

Lesson Income

420

Restore Income

COST OF GOODS SOLD

501

Price of Items Bought

EXPENSES

601

Promoting Expense

605

Financial institution Costs

607

Money Over / Brief

610

Credit score Card Processing Expense

612

Supply Expense

615

Depreciation Expense, Gear

616

Depreciation Expense, Furnishings & Fixtures

620

Insurance coverage Expense

625

Skilled Charges

630

Hire Expense

635

Repairs & Upkeep

650

Salaries & Wages Expense

660

Retailer Provides Expense

665

Phone Expense

667

Utilities Expense

OTHER INCOME & EXPENSES

700

Curiosity Revenue

750

Achieve on Disposal of Asset

800

Curiosity Expense

850

Loss on Disposal of Asset

Element for Chosen Accounts

ASSETS

101

Money

This account is used for all money and test transactions and consists of quantities within the checking account and available on the retailer.

102

Petty Money

This account is used for the small petty money fund the corporate has established. The petty money fund is $100 and is maintained on the imprest foundation.

115

Certificates of Deposit

This account is used to document the corporate’s funding within the Certificates of Deposit (CD). The corporate put $eight,00zero into the CD on February 1, 2007. The CD has a 6% annual price of curiosity and an 18 month time period to maturity.

120

Accounts Receivable

This account is used to document quantities due from prospects.

125

Credit score Playing cards Receivable

This account is used to document quantities due from the bank card processing firm when a buyer pays through bank card. Roughly 2-Three days after a buyer pays with a bank card, money is acquired into the checking account, at which period the receivable needs to be relieved and the receipt of the money needs to be recorded. The bank card processing firm prices a 2.5% price on every transaction and deducts the price from the quantity deposited to the checking account.

130

Curiosity Receivable

This account is used to document curiosity because of the firm however not but acquired.

150

Merchandise Stock

This account is used to document the entire retailer’s stock, together with surfboards, equipment and attire. All product prices, together with transportation-in go into this account. The account is debited for purchases of stock and credited following the sale of stock. (See additionally: Price of Items Bought.)

160

Pay as you go Promoting

This account is debited when promoting prices are paid multiple month prematurely. The account is adjusted on the finish of every month. Promoting providers for the 12 months have been paid prematurely, totaling $1,500.00.

161

Pay as you go Insurance coverage

This account is debited when insurance coverage premiums are paid multiple month prematurely. The account is adjusted on the finish of every month.

Insurance coverage premiums for all the 12 months totaling $1,920.00 have been paid prematurely in January.

162

Pay as you go Hire

This account is debited when lease is paid for a future month. The account is adjusted on the finish of every month. Hire totaling $5,400.00 was paid in January for the primary quarter of 2007.

170

Retailer Provides

This account is used for the acquisition of all retailer provides. The account is adjusted on the finish of every month to mirror the quantity of provides available and expense the provides which were consumed.

180

Gear

This account is used to document the acquisition of fastened property. The corporate bought $5,360.00 of kit on January 1, 2007. The tools has an anticipated lifetime of 5 years. The salvage worth is estimated to be $800.00.

185

Furnishings & Fixtures

This account is used to document the acquisition of fastened property. The corporate bought $four,532.00 of kit on January 1, 2007. The furnishings & fixtures have an anticipated life of seven years. The salvage worth is estimated to be

$500.00.

LIABILITIES

210

Dividends Payable

This account is used for dividends which can be declared however not but paid to stockholders.

240

Gross sales Tax Payable

This account is credited for gross sales tax collected from prospects on all merchandise gross sales (surfboards, equipment and attire). The gross sales tax price is 7.75%. Gross sales tax shouldn’t be charged for restore providers or classes. Gross sales tax stays payable till remitted to the State Board of Equalization at a later date.

260

Unearned Income

This account is used document funds from prospects for classes earlier than income has been earned. When the income is earned, it needs to be debited from this account and acknowledged within the acceptable income account.

280

Notes Payable

This account is used to document quantities borrowed from the financial institution and different sources of financing from collectors. The corporate borrowed $30,00zero.00 at eight.5% from Central Coast Credit score Union on January 1, 2007.

REVENUE

401

Gross sales Income

This account is used to document the sale of merchandise (surfboards, equipment or attire) to prospects.

410

Lesson Income

This account is used to document income from educating browsing classes. Clients are charged a price of $50.00 per hour for classes. Clients pays prematurely for 10 hours of classes for less than $450.00. Income shouldn’t be acknowledged till it’s earned.

420

Restore Income

This account is used to document income from surfboard repairs.

COST OF GOODS SOLD

501

Price of Items Bought

This account is debited for the price of merchandise bought. All merchandise is bought at a 100% mark-up over its value. Every merchandise gross sales transaction needs to be adopted by an entry debiting this account and crediting Merchandise Stock.

EXPENSES

601

Promoting Expense

This account is used for promoting bills incurred within the present month. Promoting prices paid prematurely needs to be debited to Pay as you go Promoting.

607

Money Over / Brief

This account is used for small, immaterial discrepancies, often arising in relation to petty money transactions.

610

Credit score Card Processing Expense

This account is used to document charges associated to accepting cost from prospects through bank card. The bank card processing firm prices a 2.5% processing price on every transaction, which is deducted from the quantity deposited to the checking account. There’s a further month-to-month price that will get recorded on the finish of the month from information on the financial institution assertion.

612

Supply Expense

This account is used to document prices incurred when transport merchandise to prospects. This may be referred to as “transportation-out.”

615

Depreciation Expense, Gear

This account is used to document depreciation changes. Depreciation expense is calculated utilizing the straight-line methodology and is recorded month-to-month.

616

Depreciation Expense, Furnishings & Fixtures

This account is used to document depreciation changes. Depreciation expense is calculated utilizing the straight-line methodology and is recorded month-to-month.

620

Insurance coverage Expense

This account is used to document changes for insurance coverage expiring within the present month. Insurance coverage premiums paid prematurely needs to be debited to Pay as you go Insurance coverage.

630

Hire Expense

This account is used for lease within the present month. Hire paid prematurely needs to be debited to Pay as you go Hire.

Accounting Strategies

Accrual Foundation

The corporate makes use of the accrual foundation of accounting. Adjusting entries are made month-to-month in an effort to acknowledge revenues and bills within the acceptable month.

Depreciation

The corporate depreciates property utilizing straight-line depreciation. Depreciation is recorded month-to-month.

Stock

The corporate makes use of the perpetual stock methodology, updating the Merchandise Stock and Price of Items Bought accounts after every gross sales transaction. Stock is bought at a 100% mark- up over its value. Every merchandise gross sales transaction needs to be adopted by an entry debiting Price of Items Bought and crediting Merchandise Stock (for 50% of the quantity of the sale).

Buy Reductions

The corporate makes use of the gross methodology to document buy reductions, that means that it information stock purchases on the gross worth (record worth). If the corporate doesn’t make cost to the seller in time to obtain the low cost, there isn’t any further entry or calculation mandatory. Nonetheless, if the corporate makes cost inside the low cost interval, the Stock and Accounts Payable accounts every needs to be diminished for the quantity of the low cost.

Returns & Allowances

The corporate does enable gross sales returns now and again. Gross sales returns are debited from the associated gross sales account straight and Gross sales Tax Payable will get adjusted. The merchandise then must be acquired again into stock and faraway from Price of Good Bought (as it’s now not bought!). Simply as there are two journal entries mandatory when recording the sale of

merchandise, there will likely be two entries wanted to reverse the sale.

Champion Wave Surf, Inc.

Set-up & Directions

1. Open your browser and go to www.waveapps.com. In the course of the web page you will notice a “Begin Now” button. This can take you into the registration and obtain course of.

2. On the opening web page you may be requested to provide your title, enterprise title, and what your enterprise does. Your enterprise is Champion Wave, Inc and it’s a retailer.

Three. Select “Handle your accounting”.

four. You at present do your accounting manually, by yourself, don’t must run payroll, you’re a Sole Proprietor.

5. At this level select “Handle Transactions” and you’re prepared to start out.

6. You could have so as to add an account or two as you go. To do that:

a. Click on on Accounting>Chart of Accounts

b. Choose “Add A New Account” within the higher proper nook

c. Fill out the data and click on “Save”

Knowledge Entry

In Wave Accounting, you’ll solely be getting into Common Journal Entries (referred to as “transactions” in Wave) to submit information. Whereas there are different strategies of entry within the software program, the aim of your accounting internship with Champion Wave Surf, Inc. is to show your information of accounting, which is finest achieved by means of posting journal entries for every transaction and adjustment.

1) To start, with the corporate file open, click on on “Accounting” from the menu bar down the left aspect of the display screen, then choose “Transactions.” This can open the transactions display screen that may present the entire transactions which were entered.

2) Within the higher right-hand nook click on on “Extra”, then “Add journal transaction”. Use the tab key to maneuver from discipline to discipline.

Three) A window will open on the proper enter a quick description together with the quantity in BOLD included within the directions, then the date.

four) Subsequent are two fields for the debits/credit of the transaction. Every description discipline has a drop-down menu in an effort to enter the suitable account. In case you enter the primary few letters of the account you need, it should present within the window. Tab to enter the quantity of the debit. Tab once more for the credit score. When you have multiple debit or credit score, there are two buttons beneath the transactions, one so as to add a debit one other for a credit score. Add as many as you want. Within the description discipline enter a easy description of the rationale for the entry. When all is nice, click on on save and transfer to your subsequent entry.

5) The primary entries are the ending balances for February 28, 2007. You’ll discover these on the following web page.

6) Subsequent, enter the adjustment for March 17, 2007 Which follows the earlier entry. You now have a tied-out stability by means of March 17th. Your job is to enter the remaining entries for the third and fourth weeks.

7) If a transaction refers to a previous entry from week one or two, you’ll have to look within the directions, discover the entry, and calculate the info you want for the transaction. There aren’t many, fortunately.

eight) You at the moment are prepared to start the week three transactions.

Corrections

1) Start by figuring out the journal entry that must be corrected. You’ll need to fully reverse that entry, so it’s possible you’ll wish to write down or print out the small print of the transaction (account(s) debited / credited and respective quantities).

2) Begin a brand new journal entry and submit the “reversal” of your incorrect entry. Utilizing the date of the unique entry, you’ll debit the account(s) you initially credited and credit score the account(s) you initially debited. It’s best to embody “Reversal of ERROR” within the memo discipline.

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