Accounting Cycle Final

7/31/2019 Accounting Cycle Final

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UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Accounting Cycle Form(Mark One)! ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended July 31, 2011

or" TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934For the transition period from July 1, 2011 to July 31, 2011.

Commission File No. 1-10635

PLANET EXPRESS, Inc.(Exact name of Registrant as specified in its charter)

New York 93-0584321(State or other jurisdiction

of incorporation) (IRS EmployerIdentification No.)1802 Hartford (212) 671-6453

Manhattan, New New York 97005-6453 (Registrants Telephone Number, Including Area Code)(Address of principal executive offices) (Zip Code)

Securities registered pursuant to Section 12(b) of the Act:Class B Common Stock New York Stock Exchange

(Title of Each Class) (Name of Each Exchange on Which Registered)Securities registered pursuant to Section 12(g) of the Act:

NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the

Securities Act. Yes! No "Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or

Section 15(d) of the Act. Yes" No !Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by

Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such

shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing

requirements for the past 90 days. Yes! No "


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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate

Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of

Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that

the registrant was required to submit and post such files). Yes! No"Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K

(229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrants

knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form 10-K. "

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-

accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer,

accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.Large accelerated filer ! Accelerated filer "Non-accelerated filer " Smaller Reporting Company "

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the

Act). Yes" No!As of November 30, 2010, the aggregate market value of the Registrants Class A Common Stock held

by non-affiliates of the Registrant was $2,005,831,959 and the aggregate market value of the RegistrantsClass B Common Stock held by non-affiliates of the Registrant was $33,459,424,185.

As of July 18, 2011, the number of shares of the Registrants Class A Common Stock outstanding was

89,989,447 and the number of shares of the Registrants Class B Common Stock outstanding was

384,840,843.DOCUMENTS INCORPORATED BY REFERENCE:

Parts of Registrants Proxy Statement for the Annual Meeting of Shareholders to be held on

September 19, 2011 are incorporated by reference into Part III of this Report.!

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Part 1

Item 1 Core Financial Statements Definitions

Financial Statements

Financial accounting information is conveyed through a standardized set of

reports. Those reports are the balance sheet, income statement, statement of retainedearnings, and statement of cash flows.

Income Statements

A summary of an entitys results of operation for a specified period of time isrevealed in the income statement, as it provides information about the revenues generatedand expenses incurred. The difference between the revenues and expenses is identified asthe net income or net loss. The income statement can be prepared using single-step ormulti-step approach, and might be further modified to include a number of specialdisclosures relating to unique items.

Balance SheetsThe balance sheet focuses on the accounting equation by revealing the economic

resources owned by an entity and the claims against those resources (liabilities andowners equity). The balance sheet serves as a snapshot of the company at one point intime, whereas the income statement and statement of retained earnings cover a period oftime. Assets are recorded with their historical cost (price at purchase), rather than fairmarket value. A balance sheet is an extended form of the accounting equation. Anaccounting equation is: Assets = Liabilities + Equity. Components of a balance sheet areas follows:

Assetswhat a company ownsLiabilitieswhat a company owes

Equitynet worth of a company

Part II

Item 2 Information Processing

Introduction

It is imperative that a business develops a reliable accounting system to captureand summarize its voluminous transaction data. In general terms, an accounting system isa system where transactions and events are reliably processed and summarized into usefulfinancial statements and reports. The heart of the system will contain the basic account

cycle tool: accounts, debits and credits, journals, and general ledger. What follows aregeneral definitions and principles that will help better understand Planet Expresssaccounting cycle.

Accounts

It is imperative that a business develops a reliable accounting system to captureand summarize its voluminous transaction data. In general terms, an accounting system isa system where transactions and events are reliably processed and summarized into useful


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financial statements and reports. The heart of the system will contain the basic accountcycle tool: accounts, debits and credits, journals, and general ledger.Double-Entry Bookkeeping

The process by which accounting transactions are entered; each individualtransaction always has an offsetting transaction(s).

Debits and Credits

Debits (abbreviated dr) and credits (abbreviated cr) are unique accountingtools to describe the change in a particular account that is necessitated by a transaction. Inother words, instead of saying that cash is increased or decreased, accountants saythe cash is debited or credited. Every transaction can be described in debit/creditform and for every transaction, debits will always equal credits.

Debits/Credit Rules

Assets, Expenses, Dividends

These three types of accounts follow the same debit/credit rules. Debits increase

these accounts and credits decrease these accounts.

Liabilities, Revenues, Equities

These accounts follow the rules that are opposite from the ones described above.Credits increase liabilities, revenues, and equity, while debits result in decreases.

Accrual Accounting

Accounting standards require accounting be done on accrual basis. Businesstransactions are recorded when they occur and not when the related payments arereceived or made. This concept is called accrual basis of accounting and it is fundamentalto the usefulness of financial accounting information. This method allows the currentcash inflows/outflows to be combined with future expected cash inflows/outflows to givea more accurate picture of a company's current financial condition. There are severaltypes of accruals and deferrals. Accrued revenues are revenues earned but not yetreceived in cash or previously recorded. Accrued expenses are expenses incurred but notyet paid in cash or previously recorded. Deferred revenues are liabilities resulting fromthe receipt of cash before the recognition of revenue (unearned revenue is considered aliability since the company owes its customers). Finally, deferred expenses are assetsresulting from the payment of cash before the actual incurrence of the expense.

Articulation

It is important to take note of the fact that the income statement, statement ofretained earnings, and balance sheet articulate. This means they act together in a self-balancing fashion. The income for the period ties into the statement of retained earnings,and the ending retained earnings ties into the balance sheet. This final tie-in causes thebalance sheet to balance.

Revenue Recognition

Revenue recognition principle tells that revenue is to be recognized only when therewards and benefits associated with the items sold or service provided is transferred,


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where the amount can be estimated reliability and when the amount is recoverable.Accrual basis of accounting is used in recognizing revenue which tells that revenue is tobe recognized ignoring when the cash inflows occur.

Matching Principle

In order to reach accurate net income figure the expenses incurred in earningsrevenues recognized in a time period should be recognized in that time period and not inthe next or previous. This is called matching principle.

Materiality

Financial statements are prepared to help the users with their decisions. Hence, allsuch information that has the ability to affect the decisions of the users of financialstatements is material and this property of information is called materiality. In decidingwhether a piece of information is material or not requires considerable judgment.Information is material either due to the amount involved or due to the importance of theevent. Materiality might be based on a percentage of sales such as 0.5% of sales or on

total assets. Materiality is helpful in determining which figures are to be reported onincome statement and balance sheet and which one in the notes. It is also helpful inhelping decide which items should appear as line items and which ones are aggregatedwith others.


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Part III

Item 3 Accounting Cycle

Introduction

The following section will explain the steps of the typical accounting cycle from

the perspective of a small delivery company called Planet Express. Its accountant,Hermes Conrad, will detail the steps he follows and the documents he creates duringPlanet Expresss accounting period. Here are the steps in the accounting cycle:

Journal Entries

The first step in the accounting cycle is the collection, analyzing, and recording ofthe data reflecting the transactions of the business. This data comes in a variety of forms,often called source documents. Source documents are documents generated eitherexternally or internally that provide the necessary information to record accountinginformation. Such source documents come in the form of checks, purchase orders, and


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invoices. Transactions of particular importance are events that would change the value ofits assets, liabilities, or equities.

After analyzing the transactions, events, and source documents, the company isnow ready to journalize. When the company journalizes the accountant applies the rulesof double-entry accounting. Remember that double-entry accounting means that each

transaction must be recorded in at least two accounts or that the debits must equal thecredits. After applying the rules of debits and credits, the accountant should then recordthe transactions in a journal, or journalize. A general journal is a chronological listing ofeach transaction of the business in debit/credit form.

Planet Express is a delivery company incorporated in the state of Texas. They area relatively new company that just finished their first month of operation. Theiraccountant is Hermes Conrad. The balance sheet on June 31 of Planet Express appearsbelow.

Planet Express

Balance Sheet, June 31

Assets Liabilities and Shareholders Equity

Current Assets: Liabilities:Cash $10,000 Accounts Payable: Wong $8,000

Equipment 5,000 Total Liabilities $8,000

Supplies 3,000 Common Stock 10,000

Retained Earnings 0

Total: $18,000 Total: $18,000

During July of operation of 2011, the company engaged in the followingtransactions:


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No. Date Transaction

1 July 1 Paid $8,000 on its account due to Wong

2 July 1 Received $65,000 from new investors, issued $65,000 of common stock

3 July 3 Company purchased $12,000 of equipment in cash

4 July 4 Provided $50,000 in services to customer. Customer pays half and promises to pay the rest.

5 July 7 Completed delivery for customer, customer paid $1,000 in cash

6 July 8 Paid $8,000 in salaries to employees

7 July 10 Company pays $30,000 in advance for 3 months rent

8 July 12 Received $2,000 from customer for future delivery

9 July 14 Company pays a cash dividend in the amount of $5,000

10 July 20 Company purchases $5,000 of office supplies on credit

11 July 23 Paid the accounts payable on supplies purchased on 7/20

12 July 25 Received utility bill of $3,000

13 July 31 Company purchases $3,000 in fuel

14 July 31 Paid $2,000 for equipment worth $4,000. The remaining amount is on a payable note.


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! The next table shows how Hermes would journalize the above events:

Ref. Date Account Dr Cr

a July 1 Accounts Payable: Wong $8,000

b Cash $8,000

To record payment to Wong

c July 1 Cash 65,000

d Common Stock 65,000

Issued $65,000 worth of stock

e July 3 Equipment 12,000

f Cash 12,000

To record purchase of equipment

g July 4 Cash 25,000

h Accounts Receivable 25,000

i Service Revenue 50,000

To record receipt of payment

j July 7 Cash 1,000

k Service Revenue 1,000


l July 8 Salary Expense 8,000

m Cash 8,000

To record payment of salary

n July 10 Prepaid Rent Expense 30,000

o Cash 30,000

To record payment of rent

p July 12 Cash 2,000

q Unearned Revenue 2,000


r

July 14Dividends

5,000s Cash 5,000

To record payment of dividends

t July 20 Supplies 5,000

u Accounts Payable 5,000

To record purchase of supplies

v July 23 Accounts Payable 5,000

w Cash 5,000

To record payment of supplies on 7/20

x July 25 Utility Expense 3,000

y Utilities Payable 3,000

To record receipt of utility bill

z July 31 Fuel Expense 3,000aa Cash 3,000

To record purchase of fuel

bb July 31 Equipment 4,000

cc Cash 2,000

dd Notes Payable 2,000

To record purchase of equipment


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At the end of the period, Hermes will post all of the journal entries to ledgeraccounts in the Planet Expresss General Ledger.

Ledger Accounts

The second step in the accounting cycle is to post the journal entries to the ledger

accounts. The compilation of all these accounts is the general ledger. Posting involvestransferring information from the journal to the ledger. A ledger is simply a collection ofall accounts it shows all of the number detail about a companys accounts. After posting

all the journal entries, the balance of each account must be calculated.For purposes of teaching and simplicity, Hermes uses T-Accounts for Planet

Expresss general ledger. Planet Expresss Ledger Accounts derived from its journalentries are as follows:

Asset Accounts

Cash

Dr Cr

$10,000 (a) $8,000(c) 65,000 (f) 12,000

(g) 25,000 (m) 8,000

(j) 1,000 (o) 30,000

(p) 2,000 (s) 5,000

(w) 5,000

(aa) 3,000

(cc) 2,000

$30,000

Supplies

Dr Cr

$3,000

(t) 5,000

$8,000

Equipment

Dr Cr

$5,000(e) 12,000

(bb) 4,000

$21,000

Accounts Receivable

Dr Cr

(h) $25,000

$25,000

Prepaid Rent

Dr Cr

(n) $30,000

$30,000


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Liability Accounts

Equity Accounts

Common Stock

Dr Cr

$10,000

(d) 65,000

$75,000

Revenue, Dividend, and Expense Accounts

Services

Dr Cr

(i) $50,000

(k) 1,000

$51,000

Unearned Revenue

Dr Cr

(q) $2,000

$2,000

Accounts Payable

Dr Cr

$8,000

(a) 8,000

(u) 5,000

(v) 5,000

$0

Notes Payable

Dr Cr

(dd) $2,000

$2,000

Utility Expense

Dr Cr

(x) $3,000

$3,000

Utilities Payable

Dr Cr

(y) $3,000

$3,000

Salary Expense

Dr Cr

(l) $8,000

$8,000

Fuel

Dr Cr

(z) $3,000

$3,000

Dividend

Dr Cr

(r) $5,000

$5,000


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Unadjusted Trial Balance

To verify that the companys debits equals the credits, an unadjusted trial balance

is prepared. A trial balance is a list of all accounts and their balances at a point in time.This is the fourth step of the accounting cycle. The account balances from the ledger is

used to create the trial balance. We call this trial balance an unadjusted trial balance

because it is prepared before the adjusting entries. Because of Double-Entry Accounting,Hermes will record each transaction where the debits should always equal the credits.Any difference indicates a mistake in either the recording process or calculations. Hermes

has prepared the following unadjusted trial balance based off Planet Expresss generalledger:

Unadjusted Trial Balance

Planet Express

July 31, 2011

Debit Credit

Cash $30,000

Supplies 8,000Prepaid Rent 30,000

Accounts Receivable 25,000

Equipment 21,000

Utilities Payable $3,000

Notes Payable 2,000

Accounts Payable 0

Unearned Revenue 2,000

Service Revenue 51,000

Common Stock 75,000

Salary Expense 8,000Utility Expense 3,000

Dividend 5,000

Fuel Expense 3,000

$133,000 $133,000

Adjusting Entries

The fifth step in the accounting cycle is to prepare adjusting entries. Adjustingentries involve bringing an asset or liability account balance to its proper amount and

updating the corresponding revenue or expense account. Adjusting entries are recorded inthe general journal and then posted to the ledger. All adjusting entries are made at the end

of the accounting time period. The purpose of adjusting entries is to match revenues andexpenses to the current accounting period that is required by the matching principle of

accounting. Adjustments include accruals and prepayments. Accrual entries are used torecord accrued revenues or expenses that should be matched to the current accounting

period. Prepayments are any prepaid expense or unearned revenue so that the revenuesand expenses match within the accounting period.


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Hermes must consider the relevant information when preparing the adjustedentries for Planet Express:

(1) Prepaid rent of $30,000 was paid for the months of July, August, andSeptember.

(2) Only $1,500 worth of service was provided to a customer who paid $2,000

in advance.The adjusted entries of Planet Express are as follows:

Date Account Dr Cr

July 31 Rent Expense $10,000

Prepaid Rent $10,000

$30,000/3=$10,000

July 31 Unearned Revenue $1,500

Service Revenue $1,500

Adjusted Trial Balance

After the adjusting entries have been posted, the Hermes will prepare another trialbalance. This trial balance is called the adjusted trial balance because it is preparedAFTER the adjusting entries. This trial balance is used to verify that the debits equal thecredits and also is used to prepare the financial statements. Planet Expresss adjusted trialbalance is as follows:

Adjusted Trial Balance

Planet Express

July 31, 2011

Debit Credit

Cash $30,000Supplies 8,000

Prepaid Rent 20,000


Equipment 21,000


Notes Payable 2,000

Accounts Payable 0

Unearned Revenue 500

Service Revenue 52,500

Common Stock 75,000

Salary Expense 8,000

Utility Expense 3,000

Dividend 5,000

Fuel Expense 3,000

Rent Expense 10,000

$133,000 $133,000


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Six-Column Worksheet

After determining that the debits equal the credits in the adjusted trial balance,

Hermes will use a worksheet to aid in the closing process and in the preparation offinancial statements. The worksheet allows Hermes to separate the revenue, gain, expense,

and loss accounts in the trial balance that flow into the income statement and the asset,

liability, and equity accounts that will appear on the balance sheet. Hermes six-columnworksheet for Planet Express is as follows:


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Planet Express

Six-Column Worksheet

Account Trial Balance Income Statement Balance Sheet

Dr Cr Dr Cr Dr Cr

Cash $30,000 $30,000

Supplies 8,000 8,000

Prepaid Rent 20,000 20,000

Accounts Receivable 25,000 25,000

Equipment 21,000 21,000

Utilities Payable $3,000 $3,000Notes Payable 2,000 2,000

Accounts Payable 0 0

Unearned Revenue 500 500

Service Revenue 52,500 $52,500

Common Stock 75,000 75,000

Salary Expense 8,000 8,000

Utility Expense 3,000 3,000

Dividend 5,000 5,000

Fuel Expense 3,000 3,000

Rent Expense 10,000 10,000

Subtotals $133,000 $133,000 29,000 52,500 104,000 80,500

Net Income 23,500 23,500

Totals $52,500 $52,500 $104,000 $104,000


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Financial Statements

Now that the adjusted trial balance has been prepared the next step is to prepare

the financial statements. Financial statements are a set of numeric records that summarizethe financial activities, financial position, and performance of a business. The financial

statements must be prepared in a very specific order. The order for the financial

statements is: income statement, statement of retained earnings, balance sheet, and thenstatement of cash flows, and statements of changes in equity. This order is importantbecause information provided in the income statement is used in the statement of retained

earnings, and information from the statement of retained earnings is used in the balancesheet.

Planet Expresss Income Statement and Balance Sheet for the period of July 31,2011:

Income Statement of Planet Express

As of July 31, 2011

Dr Cr

Revenue $52,500Less: Expenses:

Wage Expense $8,000

Rent Expense 10,000

Utility Expense 3,000

Fuel Expense 3,000

Total Expenses: (24,000)

Net Income $28,500

Balance Sheet for Planet Express

As of July 31, 2011Assets Liabilities and Shareholders Equity

Current Assets: Liabilities:

Cash $30,000 Accounts Payable $0

Accounts Receivable 25,000 Utilities Payable 3,000

Supplies 8,000 Unearned Revenue 500

Prepaid Rent 20,000 Notes Payable 2,000

Total: 83,000 Total Liabilities: 5,500

Non-Current Assets: Common Stock 75,000

Equipment 21,000 Retained Earnings 23,500

Total: $104,000 $104,000

Closing Entries

Step eight in the accounting cycle is to prepare the closing entries. Closing entries

are prepared after the financial statements are completed. The purpose of closing entriesis to prepare the accounts for recording transactions and events for the next period.

Accounts are closed by transferring their balances to permanent accounts. For example,


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retained earnings is a permanent account that keeps track of all the net income from everyyear and is where dividends are paid from. Therefore, their balances will become zero.

Closing entries are based on the account balances in the adjusted trial balance. Temporaryaccounts include:

Revenue and Accounts

Expense and Loss AccountsDividend, Drawings, or Withdrawals AccountsIncome Summary Account

Planet Expresss closing entries are as follows:

Note Date Account Dr Cr

1 July 31 Service Revenue $52,500

Income Summary $52,500

2 July 31 Income Summary 24,000

Salary Expense 8,000

Rent Expense 10,000Utility Expense 3,000

Fuel Expense 3,000

3 July 31 Income Summary 28,500

Retained Earnings 28,500

4 July 31 Retained Earnings 5,000

Dividends 5,000

The accompanying notes to consolidated financial statements are an integral part of thisstatement.

Note 1Service revenue account is debited and income summary account is credited totransfer the balance of service revenue account to income summary account.

Note 2Each expense account is credited and the income summary is debited for the

sum of the balances of expense accounts. This will reduce the balance in incomesummary account.

Note 3Income summary account is debited and retained earnings account is credited

for the an amount equal to the excess of service revenue over total expenses i.e. the netbalance in income summary account after posting the first two closing entries.

Note 4The last closing entry transfers the dividend or withdrawal account balance to

the retained earnings account. Since dividend and withdrawal accounts are contra to theretained earnings account, they reduce the balance in the retained earnings account.


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Post-Closing Trial Balance

Step nine, and Planet Express the last step in the accounting cycle, is to prepare a

post-closing trial balance. A post-closing trial balance should only contain the debit andcredit balance for permanent accounts, because these are the only accounts that are

remaining after the closing process. Once again the purpose of this trial balance is to

ensure that the debits equal the credits and that all temporary accounts have a zerobalance. Here is Planet Expresss post-closing trial balance after posting the closingentries to its general ledger and calculating new account balances:

Post Closing Trial Balance

Planet Express

As of July 31, 2011

Dr Cr

Cash $38,000

Supplies 5,000

Prepaid rent 20,000


Equipment 16,000


Notes Payable 2,000

Accounts Payable 0

Unearned Revenue 500

Common Stock 75,000

Retained Earnings 23,500

Total: $104,000 $104,000

Planet Express is now ready to start the new accounting period.


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SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the

registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly

authorized.PLANET EXPRESS, INC.By: /s/ Hubert J. Farnsworth

Hubert J. FarnsworthChief Executive Officer and President

Date: July 22, 2011Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has

been signed below by the following persons on behalf of the registrant and in the capacities and on the

dates indicated.Signature Title Date

Principal Executive Officer and Director:/s/ Hubert J. Farnsworth

Hubert J. Farnsworth Director, Chief Executive Officer andPresident July 22, 2011

Principal Financial Officer:/s/ John A. Zoidberg

John A. Zoidberg Chief Financial Officer July 22, 2011

Principal Accounting Officer:/s/ Hermes Conrad

Hermes Conrad Corporate Controller July 22, 2011

Directors:/s/ Philip J. Fry

Philip J. Fry Director, Chairman of the Board July 22, 2011

/s/ Turanga Leela

Turanga Leela Director July 22, 2011

/s/ Bender B. Rodriguez

Bender B. RodriguezDirector July 22, 2011

/s/ Amy Wong

Amy Wong Director July 22, 2011

/s/ Zapp Brannigan

Zapp Brannigan Director July 22, 2011

Accounting Cycle Final

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