Leaking Plumbing
LEAKING PLUMBING LLC - SIMULATION OVERVIEW & LEARNING OBJECTIVES
1. WHAT THE SIMULATION DOES
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Leaking Plumbing LLC is an interactive, scenario-based bookkeeping simulation
designed around a multi-owner trade service business. The business owners—humorously
named "Smelly Smith" and "Stinky Brown"—have fired their previous bookkeeper after
becoming dissatisfied with messy records, and they hire the student on a
three-month trial basis to clean up and maintain their company books.
The student acts as the firm's head bookkeeper across a full operational quarter,
recording all routine service transactions, contractor activities, vendor purchases,
and period-end adjustments.
Core System Mechanics & Features:
- Multi-Month Accounting Cycle:
* Covers 3 consecutive operating months of high-volume service transactions
( 103 transactions) and period-close procedures.
- Interactive Journalizing Platform:
* Students evaluate business vouchers/source documents and record transactions
into the General and Special Journals.
* Includes automated entry validation and error checks to prevent unposted or
unbalanced debits and credits from corrupting the general ledger.
- Service Business & Trade Accounting Workflow:
* Billing clients for plumbing services rendered (labor and service calls).
* Tracking plumbing parts and supplies consumed on job sites.
* Managing vendor accounts payable for plumbing supply houses, tools, and pipe fittings.
* Managing customer billings, credit terms, and cash collections on account.
* Recording truck/vehicle expenses, tool depreciation, licenses, and insurance.
- Multi-Member LLC Equity & Partner Distributions:
* Tracks individual partner equity balances (Smith Capital, Brown Capital).
* Records partner draws and profit/loss sharing distributions.
- Dynamic Real-Time Financial Statements & Workpapers:
* Dynamic General Journal and detailed General Ledger (T-Accounts).
* Trial Balance ensuring Total Debits equal Total Credits.
* Monthly and Cumulative Income Statements (Service Revenue vs. Operating Expenses).
* Month-End Balance Sheets illustrating the accounting equation (A = L + E).
2. WHAT THE STUDENT LEARNS
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The simulation provides practical training in trade contracting, service-sector
bookkeeping, and partnership accounting:
A. Service vs. Merchandising Business Model:
- Understanding revenue recognition for service businesses where revenue is
derived primarily from labor, service calls, and billable hours rather than
traditional retail merchandise markup.
- Recording parts and supplies inventory or expensing job materials used on site.
B. Trade Credit & Working Capital Management:
- Managing trade receivables (invoicing commercial and residential plumbing
clients on net payment terms).
- Managing trade payables (purchasing pipe, fixtures, and fittings from wholesale
plumbing supply houses on credit).
- Tracking customer receipts, deposits, and vendor check disbursements.
C. Fixed Asset Capitalization & Equipment Depreciation:
- Capitalizing major long-term assets such as service vans, trenchers, snakes,
and diagnostic camera equipment.
- Calculating and recording monthly depreciation expense and maintaining
contra-asset accounts (Accumulated Depreciation).
D. Month-End Adjustments & Accruals:
- Journalizing monthly adjusting entries for prepaid items (commercial vehicle
insurance, contractor bond premiums).
- Accruing unbilled utility expenses, payroll, and interest on equipment financing.
E. Partnership / Multi-Member LLC Accounting:
- Maintaining separate capital and drawing accounts for each partner (Smelly Smith
and Stinky Brown).
- Distinguishing between personal partner withdrawals (Drawings) and legitimate
business operating expenses.
- Allocating quarterly net income between the two owners and observing how closing
entries update their equity on the Balance Sheet.
F. Multi-Period Financial Synthesis:
- Analyzing monthly trends in service revenues, vehicle/tool maintenance costs,
and net operating profit.
- Confirming trial balance equilibrium and interpreting financial statements
to provide actionable business health insights to the owners.
Instructions and Answers are included.
What does the simulation look like ?