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In this case-study, you, the student, will set up a new service company file using the Easy Step Interview found by clicking on Detailed Start after clicking to create a new company. As you navigate through the Easy Step Interview, you will decide the best answers to the interview based on the information presented here. You will also have the opportunity to practice setting up a Chart of Accounts, and completing Journal entries, sales, Bills, and Cheques. As an extended activity, you may be required to complete the Bank Reconciliation.

Accounting Information

Bob Brown has decided to start a business of his own, doing backhoe work for clients beginning January 1. He will run the business from his home at 123 Any Street, Chatham, Ontario N7M 1A1. He has obtained his Business Number and registered for Goods and Services tax. Tax rates are GST 5%, and HST 13%

  • Bob will use the calendar year as his fiscal year.
  • His first HST quarterly report period will end March 31.
  • Bob will only do business in Southwest Ontario.
  • This is a Service Based Business with no inventory. To assist with setting up the Chart of Accounts, choose ‘General Service-Based Business’ as the industry in the Easy Step Interview process.
  • Set up a Service Item called Back Hoe Fees, Description Back Hoe Services, Default Tax will be HST Only.
  • Bob Expects to invoice some Customers and collect Payment later.
  • Bob will sometimes buy products and services on credit and pay his vendors later.
  • Attached is a Chart of Accounts Bob has been given to use with his business.

Chart of Accounts:

Account TypeDescription
10500Chequing AccountBankChequing Account
11000Prepaid InsuranceOther current assetPrepaid Insurance
12000Accounts ReceivableAccounts ReceivableAccounts Receivable
13000Home Office EquipmentFixed AssetHome office Equipment
13010Computer Equipment additionsFixed AssetComputer equipment additions
13020Computer Equipment DepreciationFixed AssetComputer equipment Depreciation
13510Office Equipment AdditionsFixed AssetOffice Equipment Additions
13520Office Equipment DepreciationFixed AssetOffice Equipment Depreciation
14990Undeposited FundsOther Current assetsUndeposited funds
15000EquipmentFixed AssetEquipment
15010Equipment additionsFixed AssetEquipment Additions
15020Equipment depreciationFixed AssetEquipment Depreciation
20000Accounts PayableAccounts PayableAccounts Payable
25500GST/HST PayableOther Current LiabilityHST Payable
30000Opening Bal EquityEquityOpening bal Equity
32000Bob Brown CapitalEquityBob Brown capital
30800Bob Brown WithdrawalsEquityBob Brown Withdrawals
39000Retained EarningsEquityRetained Earnings
40100Back Hoe fees earnedIncomeFees
60400Depreciation expenseExpenseDepreciation Expense
61000Advertising ExpenseExpenseAdvertising Expense
62000Back Hoe Equipment RentalExpenseBack Hoe Equipment Rental
62500Back Hoe Gas & OilExpenseBack Hoe Gas & Oil
63000Bank feesExpenseBank fees
64250Liability InsuranceExpenseLiability Insurance
65000Home Office ExpenseExpenseHome Office Expense
65250Office SuppliesExpenseOffice supplies
65500Utilities ExpenseExpenseUtilities Expense
65750Telephone ExpenseExpenseTelephone Expense
66200Professional feesExpenseProfessional fees
66500AccountingExpenseAccounting Fees
68300FederalExpenseFederal taxes


On 3 January, Bob deposits $25,000 in a separate Bank Account for the Business at CIBC, downtown branch. (Create journal Entry # 1 to Debit Chequing Account and Credit B Brown, Capital)

Bob has decided to lease the backhoe. The monthly payment of $2,000 (plus HST) is made on the 15th day of each month to Brian’s Leasing.

The Following Transactions took place in January:

3Purchased a computer by cheque from Impact Computers $4,600 (plus HST)Chq 1
4Bob Contributed a ladder to the Business Valued at $400 Fair Market valueJournal Entry #2
6Completed cash Job for Maple City construction, issued receipt for $2500 (plus HST). Receive Payment in full and deposited cash in bank.Sales Receipt 101
7Bob paid expenses for the business: Telephone $198.45 (plus HST $20.00) to Telus. Overwrite calculated HSTChq 2
 Electricity $430 (plus HST) to Origin PowerChq 3
 Advertising $2,000 (plus HST) to leader PapersChq 4
8Completed Job for JP Construction, 158 Keil Drive, Chatham, Ontario N7L1A1 (519) 555-1234. Invoiced $2000 (Plus HST),Invoice 201
 Terms Net 30. 
11Completed cash job for Big Brothers Construction, issued receipt for 4,400.00 (plus HST). Received payment in full and deposited cash in bank.Sales receipt 102
 Bob purchased office furniture on credit Inv B333 $700 (plus HST) from Bizquip. Terms Net 30Bill
12Bob paid expenses for the business: Fuel $214(plus HST) to Echo fuelsChq 5
 Insurance $600 to CUG Insurance for 12 Months liability Insurance. Expense January Insurance and set up Prepaid Insurance for Balance.Chq 6
 Bob drew $800 cash for his own use.Chq 7
15Paid Brian’s Leasing for the lease of the backhoe.Chq 8

Problem Statement

Step 1: You have been hired to set up a Service Company File for Bob and set up the chart of Accounts as provided by the Consulting Accountant.

Step 2: You have been directed to complete the transactions for the first two weeks of January. Step 3: You receive the bank statement and process the Reconciliation.

NOTE – Only complete the steps as assigned by your instructor.

Required Items for Each Step Step 1

  • Create the file Bob’s Back Hoes – Your Name”. This will help distinguish your report from the other students’ assignments.
  • Add, Edit, Delete or Make Inactive Accounts to match the Chart of Accounts

Step 2

  • Process the transactions for January (including the initial capital contribution).
  • Print (or create a pdf) the following reports for the period January 1-16:
    • Chart of Accounts
    • Income Statement
    • Balance Sheet
    • Journals

Step 3

  • Complete Bank Reconciliation using the Bank Statement dated January 16 found on the next page
  • Print (or create a pdf) the following report for the Period January 1-16:
    • Bank Reconciliation Detailed

Bank Statement

Using the bank statement below, prepare the bank reconciliation at January 16

Account Name Bob’s Back Hoes Account No 333067
  Statement for January 1-16
DateDebitCredit         Balance
January 2Cash/Chqs25,000.0025,000.00CR
6    Cash/Chqs 2,825.0022,627.00CR
8                0003485.90 22,141.10CR
11    Cash/Chqs 4,972.0027,113.10CR
0002218.45 26,894.65CR
0007800.00 26,094.65CR
13    Bank fee20.00 26,074.65CR
0006600.00 25,474.65CR
  Check figures:    
  • Net Income: $3,987.55
  • Book Value of Chequing Account after bank reconciliation: $20,712.83