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Homework Questions (All Modules/Weeks)
Week 1 – N/A (no homework)
Week 2
Chapter 1, DQ 7
Internal users of accounting information are: managers. They require special
purpose nancial statements to help them make soun! economic !ecisions for
the "usiness entity. It also helps them plan an! control the entity. #$ternal users
of accounting information are: cre!itors% in&estors% customers% employees%
go&ernments an! agencies. They require general purpose nancial statements
which gi&es them an o&er&iew of the "usiness's relati&e success an! presente!
with general information in min!.
Chapter 2, DQ !
The cash recei&e! from the sale of a goo! counts as income as an inow of cash
which is ser&ing to #NAN*# the owners current assets an! creates wealth for
the "usiness% with new money coming in. The cash contri"ute! "y an owner !oes
not constitute as income for the "usiness as the personal contri"utions an!
acti&ities of the "usiness owner nee! to "e kept separate from their personal
a+airs.
Chapter 2, DQ "
An asset !oes not nee! to "e legally owne! to "e recor!e! as an asset on the"alance sheet if the entity is a sole tra!er or a partnership. As long as the entity
owns the asset% it can "e recor!e! on the "alance sheet.
#$er%ise 2&"
Balance Sheet – contri"ution of cash% purchase of stu!io on cre!it% electricity
costs% stu!io fees% !rawings% money "orrowe!% cash hel! at en! of year
Income Statement – electricity costs% stu!io fees payment% rental of chille! water
machine
Statement of Changes in Equity – contri"ution of cash% !rawings%
Statement of Cash Flows – contri"ution of cash (nancing acti&ity)% stu!io fees
payment (operating)% !rawings (nancing)% cash hel! at "usiness at en! year%
money "orrowe! (nancing)% electricity costs pai! (operating)% chille! machine
rental (operating)
,The owners house shoul! not appear on any of the nancial statements.
'rolem 2&
See in text. All answers correct.
'rolem 2&!
A&
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DAW*+ -D.*0-#*
-n%ome *tatement
for year en!e! - ecem"er 012
IN*34#
5er&ices Income 6 72 811
#9#N5#5
;ent #$pense 6 -811
5upplies #$pense 8081
#lectricity #$pense 2011
Telephone #$pense 7< >81
;3?IT 6 82 @81
&
DAW*+ -D.*0-#*
alan%e *heet
?or year en!ing - ecem"er 012
A55#T5 IABIITI#5
*ash at Bank 6 1 081 Accounts aya"le
6 281
Less: rawings
0- 711
ila awson% *apital – - ec 012 6
>8 -81
To n! the capital at the "eginning of the year:
,ll in the information you ha&e G prot for the year% !rawings% an! capital
en! of year (this is equal to equity on your "alance sheet
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,a!! en! year capital to !rawings to gi&e total capital (>8-81 H 0-711
1>281),now minus prot from that total capital to gi&e you initial capital at the
"eginning of the year (1>281 – 82@81 8 11).
D& 5upplies are assets an! refer items (eg machinery) that the owner has "oughtthrough their own in&estment for purposes to "e use! within the "usiness. It is
recor!e! on the "alance sheet. 5upplies e$pense from the income statement are
what &alue (!ollar worth) of supplies ha&e "een use! up when performing the
ser&ice (eg the use of nail art when !oing a nail ser&ice in a salon)
Week
Chapter 2, #$er%ise 2&6
. Increase an asset an! increase a lia"ility Increase in Accounts aya"le% as
you can "uy something (eg supplies) on cre!it (that increases your assets)% an!you pay for them later (increases your lia"ilities)
0. ecrease one asset an! increase another asset Accounts ;ecei&a"le J *ash
at Bank% as you ha&e collecte! the money in Accounts ;ecei&a"le% which
transfers into your *ash at Bank (increases your asset) urchase an asset for
cash.
-. ecrease an asset an! !ecrease equity *ash at Bank an! 3wners'
rawings% as you take money out of your cash for personal use% an! therefore a
!ecrease in !rawings% which !ecreases your equity
7. Increase an asset an! increase equity *ash at Bank J *apital Account% asyou put more money into your *ash account% it will increase your capital (equity)
account.
8. ecrease a lia"ility an! !ecrease an asset Accounts aya"le. The "usiness
pays cash to its cre!itors – the Accounts aya"le account is re!uce! an! the
cash asset account is also re!uce!
@. ecrease an equity item an! !ecrease an asset 3wners rawings.
#$er%ise 2&11
A
A55#T5 IABIITI#5
H
#CDITE
*ash at Bank H 5upplies
H
#quipment oan
aya"le
H Accounts
aya"le
H .
Fones%
*apital
(
)
H6-8 111
H H6-8 111
(0
)
G7 1111
H
H607 111 H1
111
(-
)
0 111
H
H8 111
H 07 111 H1 111 H -8 111
H 8
111(7
)
0@ 111
H
H 07 111 H1 111 H 71 111
G
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G 811 811
(8
)
07 811
H 0 11
H 07 111 H 1 111
H0 11
H -> 811
(@
)
07 811
H
G 781
0 11 H 07
111
H 1 111 H 0 11 H -> 811
G 781
(2
)
0- 181
HG 0 11
0 11 H 07 111 H 1 111
G 0 11
H -2 181
(>
)
01
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*ash at Bank 6 01 81
>81
8 #quipment 8111
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*ash at Bank
Accounts aya"le
eposit place! for equipment% with
amount paya"le in @1 !ays
811
7811
< A!&ertising #$pense
*ash at BankA!&ertising pai! "y cash
81
81
7 Accounts aya"le
*ash at Bank
5upplies pai! in cash to cre!itors
-01
-01
> 5alaries #$pense
*ash at Bank
5alaries pai! to employees
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> Fune ai! salaries of 61O will "e pai! within @1
!ays.Analysis The accounts a+ecte! inclu!e rinting ?ees% *ash at Bank an!
Accounts aya"le. The *ash at Bank account has a !e"it entry of
60711% as 01O of fees were collecte!% which represents an
increase in an asset. The remaining >1O (6 *#0?-C#
rial alan%e
as at -1 Fune 01@
Account e"it *re!it*ash at Bank 6 -01 111Accounts
;ecei&a"le
82 811
3ce
#quipment
78 111
Buil!ings 20 111an! 1 111Accounts
aya"le
6 0-1 111
4ortgage
aya"le
@1 111
. iper% *apital @17 811,6 >
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The calculation of prot is not as simple as !e!ucting cash payments from cash
collectionsP there are other &aria"les that may a+ect the prot (loss) of a
company. =e nee! to take into account other e$penses an! re&enues of the
"usiness that coul! a+ect the prota"ility of the companyP for e$ample wages%
rent or other cre!itor payments "eing ma!e that woul! re!uce the amount of
cash collections.
The income statement !oes not gi&e information on a cash "asis% it reports
information on accrual "asis meaning that any income (re&enue) earne! is
recor!e! when it is generate!% not when the cash is recei&e!. The e$penses are
only recognise! on the income statement when it is incurre!% reecte! "y a
consumption of those e$penses. The income statements reects all amounts
recei&a"le an! paya"le as assets an! lia"ilities% an! not Kust a"out the inow an!
outow of money.
DQ
=e classify assets in or!er of liqui!ity on the "alance sheet to highlight the
amount of liqui! cash the "usiness coul! ha&e in the futureP that is% we can see
how liqui! the company is "y looking at the "alance sheet an! analysing the rst
few assets an! seeing how liqui! the company is in the short term. ow much
the company coul! potentially sell their assets for in the short term.
#$er%ise ;&2
A&
Arch #tec
T3TA ;3?ITyear en!ing -1 Fune 01@
*ash
"asis
Accrual
"asis*ash income (;e&enue)
;e&enue earne! "ut not yet recei&e!
;e&enue recei&e! a!&ance "ut not
yet earne!
608 111
- 111
608 111
> 111
!AL I"C!#E $%e&enue' ()* +++ (,, +++ess #$penses5alaries% rent% insurance% incurre!
e$penses5alaries owing% not yet pai!
repai! e$penses not yet incurre!
1@ 111
@ 111
1@ 111
7 111
!AL E-E"SES (() +++ ((+ +++'roBt (loss) :1" 11 recei&a"les – asset (accounts recei&a"le)0. unpai! salaries of 67111 – lia"ility (accounts paya"le)
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-. 6-111 a!&ance payment recei&e! on 8 Fune – lia"ility
7. cash payment of 6@111 for prepai! e$penses – asset
#$er%ise ;&!
A&
*AQIN'5 *#ANINL
Leneral Fournalate
-1 Fune
articulars e"it *re!it
Dnearne! *leaning 5er&ices
;e&enue
*leaning 5er&ices ;e&enue
;e&enue collecte! in a!&ance% not
earne!
$/eferral of unearned re&enue fromlia0ility account $dr' to income
account $cr''
- 011
- 011
0 epreciation #$pense
Accumulate! epreciation
epreciation e$pense for the
perio!$/eferral of 1re1aid ex1ense from an
ex1ense account $dr' to asset account
$cr''
0 111
0 111
- 5alaries #$pense
5alaries aya"le
5alaries occurre!% not yet pai!$Accrued entry for unrecorded
ex1ense from ex1ense account $dr' to
lia0ility 1aya0le account $cr'
@ 711
@ 711
7 Insurance #$pense
repai! #$pense
repai! insurance e$pire!$/eferral of 1re1aid ex1ense from an
ex1ense account $dr' to asset account
$cr''
011
011
8 Interest ;ecei&a"le
Interest ;e&enueInterest re&enue accrue!$Accrual of unrecorded re&enue from
an accounts recei&a0le $dr' to an
re&enue lia0ility account $cr''
@11
@11
&
rot 3Q#;5TAT# with e$penses not recor!e! 6< @11 (insurance H salaries
H !epreciation)
rots DN#;5TAT# with re&enues not recor!e! 67 >11 (ser&ices re&enue H
interest re&enue)
Therefore% 3Q#;5TAT#4#NT of prot without a!Kustments is 67 >11
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'rolem ;&
*us%ription 0eenue
.nearned *us%ription 0eenue/2/@
//@
/-/2
/8/2
Balance
*ash at
Bank
*ash at
Bank
*ash at
Bank
622 811
7 >11
-7 011
@ 811
67- 111
'repaid -nsuran%e/2/@
8//@
Balance
*ash at
Bank
6
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oan aya"le
Dnearne! rent rnueL5T aya"le
F. Fetson% *apital
F. Fetson% rawings
;ental ;e&enue
5alaries #$pense
;ent #$pense
;epair/4an
#$pense
4arine 5up
#$pense
Telephone #$pense
02 - @>1
< 221
00 771
7 @01
:;;
1
< @21
(f) @11
(e) 8@1
02 -1
@71
00 771
8 001
0 01
@ @111<
->1
01
081
8- @>1
@71
00 771
8 001
01 081
02 -1
;epair/4an
aya"le
Insurance #$pense
ep #$pense – Ketski
ep #$pense –
oce eq
5alaries aya"le
Telephone aya"le
Interest aya"le
Interest #$pense
(")
111
(c) 0>811
(c) -01
(g) 2
>11
(a)
>21
(!) -
2>1
(f) @11
(g) 2
>11
111
0> 811
-01
2 >11
:;2
!<
>21
- 2>1
@11
2 >11
:;2
!<
111
0> 811
-01
2 >11
:1!<
!;<
:12<
2!< 72 721
- 2>1
@11
2 >11
672
781
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rot or oss 5ummary
*lose income accounts to prot
loss summary account
rot or oss 5ummary
#$pense Accounts*lose e$pense accounts to
prot/loss summary
rot or oss 5ummary
L. Bartel% *apital
*lose prot or loss to capital
L. Bartel% *apital
L% Bartel% rawings
*lose !rawings to capital
-< 721
@ ->1
0 81
-< 721
@ ->1
0
*tatement o Chan3es in #4uit5
?or month en!ing -1 Fune 01@
L. Bartel% *apital – Fuly 018 6 0 121
A!!: prot for the year @ ->1
ess: !rawings for the year
0
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Interest aya"le *r 271
Accrue! interest
5er&ices performe! for clients% "ut not yet recor!e!% amount to 6@80>.7. 5er&ice ?ees ;ecei&a"le r @80>
5er&ice ;e&enue *r @80>?ees owe! an! not yet recei&e!
3n 8 5eptem"er% the company pai! 60>>1 for a @Gmonth a!&ertising
campaign "eginning on that !ate. This transaction was recor!e! "y
!e"iting repai! A!&ertising. At the en! of the year% a!&ertising costing
60071 ha! "een consume!8. A!&ertising #$pense r 0071
repai! A!&ertising*r 0071
A!&ertising consume! en! of year
The unearne! re&enue account has a "alance of 6@18% recor!e! when
cash was recei&e! on No&em"er. It was e$pecte! the 6@18 woul! "e
earne! equally o&er No&em"er% ecem"er an! Fanuary.@. Dnearne! ;e&enue r 121
5er&ice ?ees ;e&enue *r 121
5er&ice fees earne! for two months.(%@18 ,0/-)
The company !eci!e! to !eclare a !i&i!en! of 60 111 to its sharehol!ers
on - ecem"er.2. ;etaine! #arnings r 0 111
i&i!en! aya"le *r 0 111
i&i!en! !eclare!
& ;e&ersal entries are only nee!e! for accruals. Therefore% only entries % - an!
7 nee! entries:
. =ages aya"le r 0181
=ages #$pense *r 0181
;e&ersing entry on wages accrue!
-. Interest aya"le r 271
Interest #$pense *r 271
;e&ersing entry of interest accrue!
7. 5er&ice ;e&enue r @80>
5er&ice ?ees ;ecei&a"le *r @80>
;e&ersing entry of fees owe!% not yet recei&e!
Week "
Chapter 7, DQ "
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This error woul! "e !isco&ere! when n!ing the totals of the su"si!iary account
to the control account% "efore "eing poste! to the general le!ger. =hen the
accountant "alances the su"si!sary le!ger up% they will n! that an error has
"een ma!e. The error will nee! to "e poste! as an a!Kusting an! correcting
entry% that will appear on the general le!ger only.
#$er%ise 7&2
The control account !oes not "alance with the su"si!iary le!ger account "ecause
the incorrect num"ers were totalle!: The entry on the 8/@ shoul! "e -@1% not @-1
which was entere! incorrectly.
Amen!e! Accounts ;ecei&a"le *ontrol Account
at
e
#$planation ost
;ef
e"it *re!it Balance
/@
8/@-1/
@
-1/
@
Balances
5ales return5ales
*ash ;eceipts
LF>5<
*;@
8208-@1
-201
7 111
-@71
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@ *ales Fournal is poste! to the ACC+.* 0#C#-?A=# 5DB #L#; as
a deit
A%%ounts 0e%eiale
*usidiar5 =ed3er
L. ierate ost ;ef e"it *re!it Balance0/7 5F -08 -08
5onic t!ate ost ;ef e"it *re!it Balance8/7 5F 01 01
*a&alllaro t!ate ost ;ef e"it *re!it Balance08/7 5F 2@1 2@1
. Burtonate ost ;ef e"it *re!it Balance
0
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ughh
De%ision Anal5sis
A& Ees% a 5ales Fournal woul! "e useful for this company% as they are making a lot
of sales !eli&eries to gi&e customers in the surroun!ing !istricts fuel% with arange of !i+erent customers. A 5ales Fournal will "e helpful% as it will allow the
Leneral Fournal to "e less time consuming% an! one person can work on it% while
another accountant employe! can work on a !i+erent special Kournal. The 5ales
Kournal coul! "e specic to the type of pro!uct "eing use!% such as analysis of
sales through the !i+erent pro!uct lines. Dsing a computerise! account coul!
help spee! up the automatic mailing of in&oices to their customers.
& urchases *AN "e recor!e! in the general Kournal% if they are things that occur
infrequently. If the company is regularly making new purchases (whether for
stocking in&entory% oce supplies% equipment% etc) then a urchases Fournal
woul! "e important to help consoli!ate the Accounts aya"le accounts in thegeneral le!ger. A multipurpose Kournal coul! help with recor!ing !i+erent types
of purchases on the one Kournal.
C& A *ash ;eceipts Kournal woul! "e a goo! i!ea for this company% as they are
preparing a lot of sales !ockets after a sale. These coul! "e easily consoli!ate!
into a *ash ;eceipts Kournal so It is more ecient an! timely. Also% customers are
also allowe! a !iscount% an! this Kournal woul! allow the company to create a
iscount Allowe! account to help track !iscounts. The other accounts that woul!
"e use! inclu!e Accounts ;ecei&a"le% an! *ash at Bank.
D& Ees% if the company is making purchases using cash (such as the cashpurchase of an in&entory)% it woul! "e a goo! i!ea to set up this special Kournal.
owe&er% if they are not making many purchases an! wages are pai! twice
weekly% it may not "e necessary.
Week 7
Chapter ", DQ
This
DQ 6
This
#$er%ise "&6
This
#$er%ise "&1!
This
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'rolem "&; (, C, D
This
'rolem "&! (, C, D)
This