Recording and Adjusting the First Month of Operations for Copper Creek Lawn Care, LLC: March Journal Entries, Period-End Adjustments, and the Income Statement
Student Name
College of Online and Continuing Education, Southern New Hampshire University
ACC 201: Financial Accounting
Instructor Name
Month Day, Year
Recording March Transactions for Copper Creek Lawn Care, LLC
Copper Creek Lawn Care, LLC is a composite single-member company that opened for business on March 1, 2025. It uses the accrual basis and closes its books monthly. Three transactions started the month. On March 1 the owner deposited $24,000 of personal money into the business account, recorded as a debit to Cash of $24,000 and a credit to Owner's Capital of $24,000. On the same day the company bought a mower and trailer package for $18,000, paying $6,000 in cash and signing a 12-month note payable at 6 percent for the remaining $12,000: debit Equipment $18,000, credit Cash $6,000, credit Notes Payable $12,000. Also on March 1 it paid $3,600 for a 12-month insurance policy, debiting Prepaid Insurance and crediting Cash for $3,600.
Seven more entries carried the rest of the month. On March 3 the company bought $2,400 of supplies on account: debit Supplies, credit Accounts Payable. On March 10 a property manager paid $4,800 in advance for six months of service, March through August, which is a liability rather than revenue until the work is done, so the entry is a debit to Cash of $4,800 and a credit to Unearned Service Revenue of $4,800. Between March 15 and March 31 the company billed customers $16,200 for mowing and cleanup already performed, debiting Accounts Receivable and crediting Service Revenue, and collected $11,500 of that amount, debiting Cash and crediting Accounts Receivable. It then paid $1,500 against the supplies bill, paid $5,600 of wages covering March 1 through March 28, and the owner withdrew $2,000.
Two of those entries are where beginners most often go wrong, so they are worth stating plainly. The $4,800 received in advance is not revenue in March, because the company has performed only one month of the six it promised, and revenue is recognized as the promised service is transferred to the customer (Financial Accounting Standards Board, 2024). The $11,500 collection is not revenue either, because that revenue was already recorded between March 15 and March 31 when the mowing was done. Recording it a second time would double part of the month's sales. Cash after all ten entries is $21,600, and every entry above has equal debits and credits, which is the first thing to check before going any further.
Adjusting Entries at March 31
Adjusting entries are made at the end of the period so that revenues appear in the month they are earned and expenses appear in the month they helped produce those revenues (Weygandt et al., 2021). Copper Creek needs six. The first is insurance: $3,600 bought 12 months of coverage and one month has passed, so $300 has expired. Debit Insurance Expense $300, credit Prepaid Insurance $300. The second is supplies: $2,400 was purchased, a count on March 31 found $900 still on hand, so $1,500 was used. Debit Supplies Expense $1,500, credit Supplies $1,500. The third is depreciation: the $18,000 equipment has an estimated salvage value of $1,800 and a five-year life, which is $3,240 a year on the straight-line method, or $270 a month. Debit Depreciation Expense $270, credit Accumulated Depreciation, Equipment $270.
The remaining three adjustments move numbers in the other direction. One month of the six-month advance has now been earned, so $800 of the $4,800 moves out of the liability: debit Unearned Service Revenue $800, credit Service Revenue $800. Wages were paid through March 28, which leaves three days at $280 a day unpaid at month end: debit Wages Expense $840, credit Wages Payable $840. Interest on the note has accrued for one month even though no payment is due yet, computed as $12,000 times 6 percent times one twelfth, or $60: debit Interest Expense $60, credit Interest Payable $60. None of these three involves cash in March, which is exactly the point of accrual accounting (Warren et al., 2020).
A pattern is visible once all six are written out. Every adjusting entry touches one income statement account and one balance sheet account, and none of them touches Cash. If an adjustment appears to debit or credit Cash, it is not an adjusting entry and something has gone wrong. Accumulated Depreciation is worth a second look as well: it is a contra asset, so the credit sits against Equipment on the balance sheet instead of reducing the Equipment account directly, which keeps the original $18,000 cost visible to anyone reading the statements. Those categories are not arbitrary labels either, since assets, liabilities, revenues, and expenses are defined elements of the statements, and putting an amount in the wrong element misstates more than one report at once (Financial Accounting Standards Board, 2021).
The Adjusted Balances and the Income Statement for March
With the adjustments posted, the income statement for the month ended March 31, 2025 can be prepared. Service Revenue is $17,000, made up of the $16,200 billed to customers and the $800 earned from the advance payment. Expenses are Wages Expense of $6,440, which is the $5,600 paid plus the $840 accrued; Supplies Expense of $1,500; Insurance Expense of $300; Depreciation Expense of $270; and Interest Expense of $60. Total expenses are $8,570. Net income for March is $8,430. Presenting the statement in that order, revenue first and expenses beneath it, is the standard form an owner, a lender, or a bank expects to see (U.S. Securities and Exchange Commission, 2007).
Read plainly, the statement says the business earned $8,430 in its first month of operation. That is not the same as saying it has $8,430 more cash, and the difference is worth walking through. Cash on hand at March 31 is $21,600, but $24,000 of that came from the owner, $12,000 of the equipment was financed by a note, and $4,000 of the balance is money customers paid for service the company still owes them. At the same time, $4,700 of March revenue has been billed and not yet collected. Net income measures performance for the month; the cash balance measures what is in the account on one day. Both are true, and they answer different questions.
The last step is proving the work. Total assets at March 31 are $48,230: Cash of $21,600, Accounts Receivable of $4,700, Supplies of $900, Prepaid Insurance of $3,300, and Equipment of $18,000 less Accumulated Depreciation of $270. Total liabilities are $17,800: Accounts Payable of $900, Wages Payable of $840, Interest Payable of $60, Unearned Service Revenue of $4,000, and the $12,000 note. Owner's equity is $30,430, which is the $24,000 invested plus $8,430 of net income less the $2,000 withdrawal. Liabilities plus equity equal $48,230, matching total assets, which confirms that the entries and the adjustments hold together. A balance sheet that does not balance contains an error, and the error is always findable.
References
Financial Accounting Standards Board. (2021). Concepts Statement No. 8: Conceptual framework for financial reporting, Chapter 4, Elements of financial statements. Financial Accounting Foundation. https://www.fasb.org/
Financial Accounting Standards Board. (2024). Accounting Standards Codification 606, Revenue from contracts with customers. Financial Accounting Foundation. https://asc.fasb.org/
U.S. Securities and Exchange Commission. (2007). Beginners' guide to financial statements. https://www.sec.gov/reportspubs/investor-publications/investorpubsbegfinstmtguide
Warren, C. S., Jones, J. P., & Tayler, W. B. (2020). Financial accounting (16th ed.). Cengage Learning.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2021). Financial accounting (11th ed.). Wiley.
How this ACC 201 Module 3 example is structured
This ACC 201 Module 3 example is built the way an introductory accounting problem is actually solved, one step at a time. The first section sets up the company and records the month's transactions, showing each debit and credit and stopping to explain the two entries beginners most often reverse. The second section makes the six adjusting entries at March 31 and shows the arithmetic behind each one, including the straight-line depreciation and the one-month interest accrual. The third section prepares the income statement, reads it in plain language against the cash balance, and proves the books by checking that assets equal liabilities plus equity. In many sections of Financial Accounting at Southern New Hampshire University this module asks undergraduates for a worked scenario of that kind; your classroom instructions and rubric decide the exact form.
ACC 201 Module 3 questions, answered
What does ACC 201 Module 3 usually cover?
In most sections this module sits in the recording phase of the accounting cycle: journalizing transactions, posting, and preparing period-end adjustments before statements. The example above works all three on one company. Your classroom instructions and rubric decide the exact form, including whether you submit entries in a workbook, in a template, or written out in a paper.
How do I know whether an entry is an adjusting entry?
Use the rule in the example: an adjusting entry always touches one income statement account and one balance sheet account, and it never touches Cash. Cash moved when the transaction happened, either earlier or later than the period being reported. If your adjustment includes Cash, you have recorded a transaction rather than an adjustment.
Why does net income not match the change in cash?
Because accrual accounting records revenue when the service is performed and expenses when they are incurred, not when money moves. In the example, $4,700 of March revenue was billed and uncollected, $4,000 of cash held belongs to service not yet performed, and depreciation of $270 reduced income without touching the bank account.
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