Reference no: EM13497295

Reza Carwash Enterprise

Shah Reza, a 3rd Year accounting student, decided to carry out carwash services during the semester break to earn some extra income for the new academic session 2012/2013. To start the business on 1 May, he deposited RM4,000 in a new bank account. The RM4,000 consisted of a RM2,400 loan from his father and RM1,600 of his own money. The business was named Reza Carwash Enterprise.
Reza rented carwash equipment, purchased supplies and hired school leavers to wash his customers' cars. At the end of each month, Reza mailed bills to his customers. On 31 August, Reza was ready to dissolve his business and return to University Malaya for the new academic session 2012/2013.Because he had been so busy, he had kept a few records other than his cheque book and a list of amounts owed to him by customers.

At 31 August, Reza's cheque book shows a balance of RM3,360, and his customers still owe him RM2,000. During the semester break, he collected RM17,600 from customers. His cheque book lists payments for supplies totaling RM1,600, and he still has petrol, water hoses and other supplies that cost a total of RM200. He paid his employees RM7,600. and he still owes them RM800 for the final week of the semester break. Reza rented some equipment from Junior Tool Sdn. Bhd. On 1 May, he signed a six-month lease on carwash equipment and paid RM2,400 for the full lease period. Junior will refund the unused portion of the prepayment if the equipment is in good shape. In order to get the refund, Reza has kept the carwash equipment in excellent condition. In fact, he had to pay RM1,200 to repair equipment that was run over by a moving car. To transport employees and equipment to workplace, Reza used a second-hand motorcycle that he bought for RM1,200. He figures that the semester break work used up one-third of the motorcycle's service potential. The business cheque book lists a drawing of RM1,840 by Reza during the semester break. Reza paid his father back at the end of the semester break.

Required:

Describe the advantages and disadvantages of conducting a business in the form of a sole proprietorship.
Prepare the Journal entries
Posting to journal entries
Prepare Unadjusted trial balance
Prepare the statement of comprehensive income of Reza Carwash Enterprise for the four months May to August. Assume that the business is not subject to income tax.
Prepare the statement of fiancial position as at 31 August 2012.
Concolution - What Reza should do?