HIGHER COLLEGES OF TECHNOLOGY

Project Cover Sheet

Course Name
Project Title

Section

CIB 3203

Faculty Name

M.Kamran Lakhani

Accounting for
Managers

Due Date

Part1 Report
Part2 Oral Defense

Date Submitted

CIB-21

Student Name

Bayan Mohammed

Student ID

H00257942

This assessment will assess the following Learning outcomes:

HIGHER COLLEGES OF TECHNOLOGY

Assessment Cover Sheet
Accounting for Managers - CIB 3203
Teacher Name:

Semester 5, 2015

Muhammad Lakhani
Student Name:

Bayan Mohammed H00257942

Date Submitted: [2.May.2015]

1

Contents
Accounting for Managers - CIB 3203..........................................................................3
The Business Case:..................................................................................................... 5
Importance of the Accounting to the Business:.......................................................5
Chart of Account:..................................................................................................... 5
Accounting Equation:.............................................................................................. 6
Financial Statement:................................................................................................... 7
General Ledger Entries:........................................................................................... 8
General Journal...................................................................................................... 12
Trail Sheet............................................................................................................. 16
Owner's Equity Statement and Income Statement................................................17
Balance Sheet....................................................................................................... 18
Accounting cycle................................................................................................... 19
Budgeting:................................................................................................................ 19
Importance of budgeting to this business:............................................................19
Cash Budget.......................................................................................................... 21
Cost Volume Profit:................................................................................................... 24
Importance of managerial accounting to the business:.........................................24
CVP income statement:......................................................................................... 24
CVP analysis............................................................................................................. 26
REFRENCES:............................................................................................................. 27

The Business Case:

Ahmed Alaozali Law Firm and legal Consultants is consider as service business. Also,
it is considered as sole proprietorship which is a business owned by one person, on
this type of businesses the owner often be the manager/ operator of the business. In
addition, it is considered as small business where the owner receives any profits,
suffers any losses, and is personally liable for all debts of the business (Jerry J.
Weygandt, 2013). It is provide services for people who need legal services and
consultant for both genders. Ahmed Alaozali Law Firm and legal Consultants is
located in Abu Dhabi, Al Nahyan military camp. This office has two employees and
Ahmed invested 500,000 in his office.

Importance of the Accounting to the Business:

Accounting helps the business to identify, record and communicate the economic
events of the business to interested users (Jerry J. Weygandt, Paul D. Kimmel,
Donald E. Kieso, 2013). In addition, to give the owner clear view of the revenues
and expenses. Moreover, in accounting we prepare the trail balance, income
statement and financial statement which used by the investor. Also, it helps to
improve the business performance.

Chart of Account:
Chart of account is a way to list all accounts and account numbers to identify their
locations in the ledger.
Ahmed Alaozali Law Firm and legal Consultants
Chart of Account
A000
1
A000
2
A000
3
A000

Assets
Cash
Account receivable
Supplies
Office
3

4
A000
5
A000
6
A000
7
L000
1
L000
2
L000
3
L000
4
OE0
01
OE0
02
R000
1
E000
1
E000
2
E000
3
E000
4
E000
5
E000
6
E000
7

Maintenance
Equipment
Furniture
Liabilities
Accounts Payable
Notes Payable
Unearned Revenue
Bank Loan
Owner's Equity
Owner's Capital
Owner's Drawing
Revenues
Counselling Fees
Expenses
Advertising Expenses
Legal Utilities
Salaries
Water Bill
Electricity Bill
Maintenance Expense
Travel Expense

Accounting Equation:
Assets = Liabilities + Owner's Equity. This equation is summarize all the economic
events. Also, we will use it with the balance sheet, by collect all the liabilities and
4

owner's equity to be equal to all the assets. Moreover, all the quarterly and annual
reports of the company are depend on the accounting equation. In addition, this
equation is used in double entry bookkeeping to ensure that the company's
accounts are balanced.

Financial Statement:
Jun
e

0
1
0
2
0
2
0
3
0
4
0
5
0
6
0

Borrow 500,000 to begin the business- payable in 11 moths

Ahmed invested 500,000 cash to his counselling office
Purchased office for 250,000. Paid 100,000 cash and balance by
signing a note payable
Paid AED 5,000 for legal utilities expense
Purchased furniture AED 30,000 for cash
Purchased office supplies AED 30,000 cash
Purchased office equipment AED 50,000 paid cash 20,000 and
balance by signing a note payable
Advertising expense AED 5,000 Cash
5

July

7
0
8
1
7
1
7
1
8
1
8
1
9
2
7
2
8
0
1
0
3
0
4
0
5
0
6
0
7
0
8
0
8
1
0
1
5
1
8
2
0
2
5
2
8

Paid AED 2,000 for internet service

Billed completed for services AED 70,000
AED 10,000 cash has been received for services that will be
perform next month
Purchased office entertainment equipment cash for AED 9,000
Received AED 10,000 cash for counselling services
Received cash AED 50,000 for services to be performed next
month
Withdrew AED 40,000 cash for personal use
Paid June salaries to the assistants AED 37500
Received AED 10,000 for service has been provided
Paid AED 10, 00 cash for electricity bill
Paid 5,000 cash for water bill
Received AED 15,000 cash for consulting service
Purchased office supplies for AED 3,000 cash
Received AED 20,000 cash for service
AED 15,000 cash received for consultation has been completed
Received cash AED 20,000 for services to be performed next
month
Withdrew 25,000 cash for personal use
Received full amount from customer on 17 June
Purchased office extra furniture for AED 15,000 cash
Travel expense to Dubai AED12,000
Receive AED 20,000 cash for consulting service
Paid salaries AED 37,500 for assistances

General Ledger Entries:

DATE

Transaction

01/06/201

Borrow

DEBIT ( + )

CREDIT ( )
500,000.
00

4
Cash
02/06/201

500,000.00

Capital

500,000

4
Cash
02/06/201

Office

500,000
250,000

4
Cash

100,000

Note payable
03/06/201

Legal utilities expense

150,000.
00
5000.00

4
Cash
04/06/201

office furniture

5000.00
30,000.00

4
Cash
05/06/201

Office supplies

30,000.0
0
30,000.00

4
Cash
06/06/201

Office equipment

30,000.0
0
50,000.00

4
Cash

20,000.0
0
30,000.0
0

Note payable
07/06/201

Advertising

5,000.00

4
Cash
08/06/201

Internet expense

5,000.00
2,000.00

4
Cash
17/06/201

Account receivable

2,000.00
70,000.00

4
Counselling service
17/06/201

Cash

70,000.0
0
10,000.00

4
Unearned revenue
18/06/201
4
18/06/201

Entertainment
equipment
Cash
Cash

10,000.0
0
9,000.00
9,000.00
10,000.00

4
Counselling service
19/06/201

Cash

10,000.0
0
50,000.00

4
Unearned revenue

50,000.0
0

General Journal

Bank Loan
Travel Expense
Date
Debit
Credit
20/07/20 12,000
14

Account Receivable
Electricity Bill
Water Bill
Date
Debit Cred
Date
Deb Cred
Credit
Debit
Date
it
it
it
03/07/20
10,0
70,0
417
04/07/20 5,00
14
00
000
99
14
10,0
418
Counselling Fees
00
21
70,000
418
Credit
Debit 35
Date
70000
17/06/2014
1000
10000
18/06/2014
0
15000
20000

05/07/2014
07/07/2014

15000
20000
150000

08/07/2014
25/07/2014

Date

Debit

01/06/20
14

Credit
500,0
0

Unearned Revenue
Date
Debit
Credit
17/06/201
10,000
4
19/06/201
50,000
4
08/06/201
20,000
4
80,000

Date
28/06/20
14
28/07/20
14

Salaries
Debit

Credi
t

375000
375000
75,000

10

Office Furniture
Date
Debit
Credit
04/06/20 30,000
14
18/07/20 15,000
14
45,000

Date
02/06/2014

Office
Debit
250,000

Owner's Capital
Date

Debit

Credit

02/06/20
500,00
14
0
Utilities Expense
Date
Deb Cred
it
it
03/06/20 5,00
14
0

Credit
Internet Service

Notes Payable
Date
Debit
Advertising Expense
02/06/2014
Date
Debit
Credit
06/06/2014
04/06/2014 5,000

Date
Credit
08/06/201
150,00
30,000
4
180,00
0

Debit

Credi
t

2,00
0

Office Supplies
Date
Debit
Credit
05/06/2014 30,000
06/07/2014 3,000
33,000

Office Equipment
Owner's Drawing
Date
Debit
Credit
Date
Debit
Credit
06/06/2014
50,000
27/06/2014 40,000
18/07/2014 9,000
10/07/2014 25,000
59,000
65,000

11

Cash
Cred
it

Debit

Date

5000
00
5000
00

01/06/2
014
02/06/2
014
02/06/2
014
03/06/2
014
04/05/2
014
05/06/2
014
06/06/2
014
07/06/2
014
08/06/2
014
17/06/2
014
18/06/2
014
18/06/2
014
19/06/2
014
27/06/2
014
28/06/2
014
01/07/2
014
03/07/2
014
04/07/2
014
05/07/2
014
06/07/2
014
07/07/2
014

1000
00
5000
3000
0
3000
0
2000
0
5000
2000
10,00
9000
1000
0
5000
0
4000
0
3750
0
10,0
00
1000
0
5000
1500
0
3000
2000
0

12

1500
0
2000
0
2500
0
7000
0
1500
0
12,0
00
20,00
0
3750
0
3860
00

08/07/2
014
08/07/2
014
10/07/2
014
15/07/2
014
18/07/2
014
20/07/2
014
25/07/2
014
28/07/2
014

1220
000
8340
00

10,000
834,00
0
500,00
0
65,000
150,00
0
180,00
0
80,000
2,000
250,00
0
33,000
5,000
5,000

Account Receivable
Cash
Owner's Capital
Owner's Drawing
Counselling Fees
Note Payable
Unearned Revenue
Internet service
Office
Office supplies
Advertising Expense
Legal Utilities
expense
Salaries
Office equipment
Office furniture
Water bill
Electricity bill
Travel expenses

75,000
59,000
45,000
5,000
10,000
12,000
500,00
Bank loan
0

13

Credit

Debit
10,000
834,00
0

500,00
0
150,00
0
180,00
0
80,000

Trail Sheet
May, 31, 2014

Note Payable

500,00
0
1,410,00
0

Owner's Drawing
Counselling Fees

2,000
250,00
0
33,000
5,000
5,000
75,000
59,000
45,000
5,000
10,000
12,000

Ahmed Alaozali
Legal Consultant

Cash
Owner's Capital

65,000

Trail Sheet

Transaction
Account Receivable

Unearned Revenue
Internet service
Office
Office supplies
Advertising Expense
Legal Utilities
Salaries
Office equipment
Office furniture
Water bill
Electricity bill
Travel expenses

Law firm and

Bank loan
1,410,00
0

14

Owner's Equity Statement and Income Statement

Ahmed Alaozali Law firm and Legal Consultant

Income Statement
May, 31, 2014
Transaction
150,0
00

Counselling Fees
Less: Expense
Advertising
5,000
Expense
Legal Utilities
5,000
expense
75,00
Salaries
0
15

5,000
10,00
0
2,000
12,00
0
114,0
00
36,00
0

Water bill
Electricity bill
Internet service
Travel expenses

NET INCOME

Ahmed Alaozali Law firm and Legal Consultant

Owner's Equity Statement
May, 31, 2014
Credi
Debit
t
500,0
00

Transactio
n
Capital

Less:
Drawing
65,00 Owner's
0 Drawing
435,0
00
36,00 Add: Net
0 income
471,0 New
00 Capital

Balance Sheet
Ahmed Alaozali Law firm and Legal Consultant
16

Classified Balance Sheet

May, 31, 2014

834,000
10,000
33,000
877,000
250,000
59,000
45,000
354,000
1,231,00
0
500,000
80,000
580,000
180,000
760,000
471,000
1,231,00
0

Assets
Current Assets
Cash
Account Receivable
Supplies
Total Current Asset
Fixed Assets
Office
Office equipment
Office furniture
Total Fixed Assets
Total Assets
Liabilities
Current liabilities
Bank loan
Unearned Revenue
Total Current liabilities
Long- term liabilities
Notes payable
Total liabilities
Owner's Equities

Accounting cycle
In order to have an accounting cycle, we have to follow nine steps. First, we have to
analyze the transactions according to the accounting equation. Second, we have to
journalize the transactions. Third, we will record the transactions on ledger account
depending wither it is debit nor credit. Fourth, we will prepare the trail balance,
where we post the transactions depend on the normal balance. Fifth, we will post
the entries according to if they are deferrals or accruals. Sixth, we will prepare an
adjusted trial balance. Seventh, we will prepare the financial statements which
include income statement, owner's equity statement and balance sheet. Eighth, we
have to journalize and post-closing entries. Finally, we will prepare a post-closing
trial balance. However, steps 4, 5 and 6 are combined to gather in the worksheet if
a worksheet is prepared. Also, if reversing entries are prepared, they occur between
steps 9 and 1.

17

Budgeting:
Importance of budgeting to this business:
Budgeting is a tool for internal purposes for a specified future time period,
expressed in financial term. It helps this business to manage future plans for all
levels and helps to definite objectives for evaluating performance. In addition, the
budgeting provide early awareness for possible problems, so the management can
avoid problems. Moreover, it helps to linking each goal with the office's objectives,
so the office will get revenues more. Also, it is provide better management
awareness of the outside operations. Finally, it helps to encourage the employees to
achieve the office's goals. Operating budgets and financial budgets are consider as
master budget. Master budget is a set of interrelated budgets that constitutes a
plan of action for specific time period contain the following: (John Wiley & Sons,
2000-2011).
Operating budget contains several budgets:
Sale budget: It is the first budget prepared and it is derived from the sales forecast.
It comes by this equation: selling price per unit X expected sales unit.
Production budget: It helps in showing the amount of unites that must be produced
to meet anticipated sales. It comes from the sale budget. The formula of the
production budget is:
Required production units = budgeted sales unit+ Desired ending finished goods
units beginning finished good units
Direct materials budget: It shows both quantity and cost of direct materials to be
purchased. The formula of direct materials budget is: required direct materials units
to be purchase = direct materials units required for production+ desired ending
direct materials units beginning direct materials units.
Direct labor budget: Shows both quantity of the hours and cost of direct labor
necessary to meet production requirement. It is applied by this formula:
Total direct labor cost= units to be produced X Direct labor time per unit X direct
labor cost per hours.
Manufacturing overhead budget: Is displays the expected manufacturing overhead
costs for the budget period.
Selling and administrative expense budget: Projection of anticipated operating
expense.
Budget income statement: Important end-product of the operating budgets.
Financial Budgets: Contain the following budgets:
18

Cash Budget: Shows anticipated cash flows, it is the most important output in
preparing financial budgets and it shows beginning and ending cash balances. It is
contains three sections:
Cash receipts: It is consider as sources of revenue.
Cash disbursement: It shows the expenses and payments.
Financing: Shows expected borrowings and the repayment of the borrowed funds
plus interest.
Budgeted Balance Sheet: Developed from the budgeted balance sheet for the
previous year and the budget for the current year.
Sales Budget:
Ahmed gave me his counselling prices are between AED 500 and AED 3,000 per
hours depend on the case. The average was 500+600+650+1000+2000+3000/6
=5250
August

July

June

32

15

20

Unit

31

31

30

days

992

465

600

Counsel per
month

August

July

June

992

465

600

5250

5250

5250

5208000

2487750

3150000

expected unit
sales
Unit sale price
Total

19

Cash Budget
Ahmed opened his new office in Abu Dhabi, he will need several calculations to
know his cash budget. First, he will prepare the schedule of expected collections for
the counselling services, schedule of expected cash disbursements and cash budget
for three months June, July and August 2015. Ahmed expect cash on June 1, 2015 as
AED 90,000. Total of sales 60% are credit sales. Collection of credit service are
the following:

25% are collected in the month of service.

25% are collected one month after service.
50% are collected two months after the service.

Cash Disbursement:

Of the total purchases, 50% are credit purchases.

Credit purchases are paid 40% in the month of purchases and 60% in the
following month.

Other Expense:

Salaries per month are AED 37,500.

He will start to pay insurance 2,000 each month next year 2015.
Internet expense AED 2,000 monthly.
Water bills AED 5,000 in June, AED 5,000 in July, and AED 10,000 in August.
Electricity bills AED15, 000 in June, AED 20,000 in July and AED 20,000 in
August.

Ahmed Alaozali Law firm and Legal Consultant

Schedule of Expected Collection from Customers (in AED)

20

August

July

5,208,00
0
3,124,80
0

2,441,25
0
1,464,75
0

10500
9000
15000
34500
1,249,92
0
1284420

9000
7500
16500
976,500
993000

June
3,150,00
Total Expected Sales
0
1,890,00
Expected Credit Service
0
Collection of Credit Service
7500 Collection in the month of service
Collection one month after service
collection two months after service
7500 Total Credit Collection
1,260,00
Cash Service
0
1267500 Total Cash Receipts

Ahmed Alaozali Law firm and Legal Consultant

Schedule of Expected Cash Disbursements (in AED)
August
July
June
80,000
90,000 130,000 Total Expected Purchases
40000
45000
65000 Expected Credit Purchases
Payment of Credit Purchases
16,000
18,000
26,000 Payment in the month of Purchases
Payment in the month after
27,000
39000
Purchases
21

40,000
83,000

45000
102,000

37,500
2,000
10,000
20,000

37,500
2,000
5000
20,000

2,000
154,500

2,000
168,500

65000 Cash Purchases

91,000 Total Cash Paid for Purchases
Payment for:
Variable Cost
37,500 Salaries
2,000 Internet
5,000 Water bill
15,000 Electricity bill
Fixed
2,000 insurance
152,500 Total Cash Disbursements

Ahmed Alaozali Law firm and Legal Consultant

Cash Budget (in AED)

August
101,000

June
187,000

July
250,000

1284420
1385420

993000
1,180,000

1267500
1,517,500

154,500
1,230,920

168,500
1,011,500

152,500
1,365,000

0
1,230,920

0
1,011,500

0
1,365,000

Begin Cash Balance

Add : Receipts
Collection from Customers
Total Available Cash
Less: Disbursements
Total Cash Disbursements
Excess of Cash available
Financing
Borrowing
Ending Cash Balance

Cost Volume Profit:

Importance of managerial accounting to the business:
Managerial accounting is provides economic information for managers and internal
users. It helps in many activities, such as manufacturing and nonmanufacturing
costs, computing cost of providing services or manufacturing a product, analyzing
cost volume profit relationship with a company. Moreover, it helps in management
22

in profit planning and formalizing the plans in budgets form. Providing a basis for
controlling coast and expenses by comparing actual results with planned objectives
and standard cost. Finally, it helps in management decision making.

CVP income statement:

June
Total

July
Per unit

Total

August
Per unit

Total

Per unit

sales(AE 3,150, 3150000/60

24412 2441250465 520800 5208000992
D)
000
0= 5250
50
=5250
0
=5250
less:
59500 59500/5250
64500 645005250
69500
69500/5250=
variable
=11.3
=12.3
13.3
cost
(rounded)
(rounded)
contribu 3,090, 525023767 5250513850 5236.7
tion
500
11.3=5238.7 50
12.3=5237.7
0
margin
less:
2000
2000
2000
fixed
cost
net
3,088,
23747
513650
income
500
50
0
Cost Volume Profit (CVP) income statement helps to categorizes the costs wither
they are fixed cost or variable cost, it is format for internal use.

June

July

August

break even in June

2000/5238.7=0.38
Units
break even in Dhs
2004.3
Total
Per unit
Total
margin
of safety 4987.5
3,147,996
sales(AE
2,992,
D)
500
less:
59500
59500/4987.5
variable
=11.9
cost

0.4
0.4
July
August
(rounded)
( rounded)
2004.7
2005
Per unit
Total
Per unit
( rounded)
5205995
23191 2439245.3
4987.5
49476 4987.5
88
00
64500 645004987.
69500 69500/4987.5
5=12.9
=13.9

23

contributi
on
margin
less:
fixed cost
net
income

2,933,
000

525011.9=4975.6

22546
88

525012.9=4974.6

48781
00

2000

2000

2000

2,931,
000

22526
88

48761
00

break even in
Units
break even in
Dhs
margin of safety

June
2000/4975.6=0.3

July
0.4

August
0.4

2004.8 (rounded)

2005.2
( rounded)
2317182.3

2005.6
(rounded)
4945594.4

2,990,495

4973.6

CVP analysis
In the schedules above, first find the average of counselling per month and
decrease it by 5%, then subtract the average to find the sales per unit. Then

24

calculate total sales by multiply counselling per month with sales per unit for each
month. And I preform those equations:

Margin cost = Sales Variable cost

Contribution Margin = Price per unit variable cost
Price per unite = variable cost + Fixed cost + profit

Then, calculate the breakeven to know if he will have lost or no. Breakeven is to
show that there is no profit and no lost.

25

REFRENCES:
(Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, 2013)
(Jerry J. Weygandt, 2013)
(John Wiley & Sons, 2000-2011)

26