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Chapter 5 Computers in accounting

5.1 Input devices, computer, output devices, secondary storage devices and communication devices.

5.2 Hardware is the physical equipment used in the system.

Input devices include a keyboard, mouse, light pen, magnetic ink character recognition (MICR), optical character recognition (OCR), optical mark recognition (OMR), bar codes and point of sale (POS) devices, touch phones, automated teller machines (ATMs), and voice recognition.

Storage devices include magnetic disk, magnetic tape and optical disk (CD-ROM or CD). Communication devices include network interface cards and a modem. Output devices include monitors, printers, plotters, POS devices, ATMs, computer output microfilm (COM) and speakers.

5.3 Software is the set of computer programs (the instructions for the various processing operations) that make the hardware function. There are three types of software: • system software, which is the ‘behind the scenes’ set of programs that control the computer system. Examples include

Windows XP and Vista, Macintosh OS, Unix and Pick • development software, which is a set of step-by-step instructions that guide the computer to complete a task and is commonly

referred to as a programming language. Common languages are Visual Basic, C++, Java and SQL • application software, which performs such tasks as keeping records, wordprocessing, spreadsheeting, accessing the Internet,

etc. Some examples include MYOB, Quickbooks, MS Word, MS Excel, Internet Explorer and Netscape.

5.5 People operate the hardware, produce the software, or administer and use the system. These include systems analysts, programmers, operators, technicians, data entry clerks and users.

5.6 Speed, accuracy, processing data automatically, flexibility in solving problems and the production of compact business records.

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5.7 • Pentium 4 is a type of microcomputer that has an Intel chip operating at 2.4 gigahertz. • Two gigabytes of random access memory. • Minitower is the case that the computer comes in. Other alternatives include desktop and full tower. • Eighty gigabytes of hard disk drive. A gigabyte is 1 073 741 824 bytes. • An optical mouse is one with no wires attached. A mouse allows the user to point and click to run commands rather than use

the keyboard. • 1.4 megabytes 3.5 inch floppy disk drive. • A 104 keyboard is a full keyboard with function keys along the top and a separate numeric keyboard on the right. • Two Universal Serial Bus ports for connecting all type of peripheral devices such as memory sticks, digital cameras, joysticks, etc. • One serial port for standard connections such as modems and printers. • One parallel port is generally used for the printer. • A 256-megabyte video adaptor card for high-resolution graphics that will appear on the 17-inch monitor. The video card

produces the image on the screen and has 256 megabytes of capacity. • DVD (Digital Video Disk) with +/– read/write format. • A cable modem is a modem that is used for communication. • A 17’ monitor is the size of the monitor — 17 inches. • A 10/100 network card allows the computer to be connected to a network. • 32-bit sound is a sound card for improved sound with the 180 watt speakers. • Windows Vista is the operating system that is used to run the computer.

5.8 • Menu and/or graphical interface driven A menu is a list of options available and allows the user to choose the appropriate

one. A graphical interface shows the various options with pictures, graphics, etc. These make the package easier to use. • Modules The more common modules available are general ledger, accounts receivable, accounts payable and inventories.

Optional modules include payroll/personnel, non-current assets, job costing and a report generator. These can be purchased individually or all together in one package.

• Flexible chart of accounts The package should be flexible so it can be used in a variety of businesses. • Audit trails For audit purposes, some output (which can be printed, if required) must show every debit and credit entry that

has taken place that results in the figures appearing in the financial statements. This is the most common way in which entries can be verified by the auditor.

• Security This ensures that only authorised personnel use the system. • Integration with other applications The accounting package should be able to link with other applications such as

spreadsheets, wordprocessors, databases, etc. This avoids the necessity of having to enter the data into the other application package.

5.9 a General ledger: chart of accounts, ledger accounts, trial balance, Income Statement, Balance Sheet, bank reconciliation. b Accounts receivable: tax invoices, adjustment notes, statements of account, accounts receivable list, aged analysis of accounts

receivable. c Accounts payable: writing of cheques, remittance advices, accounts payable list, aged analysis of accounts payable. d Inventories: reorder report, over/under-stocked goods, quantity and valuation report, inventory list, price list, product sales

report, outstanding purchase orders, future demands.

5.10 Survey.

5.11 Accounting package—features of the user’s package.

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5.12

Feature Manual accounting Computerised system accounting system

Equipment set-up costs Minimal Considerable, including hardware, software and training

Speed of processing Slow Fast Basis of entry Chart of accounts is helpful Chart of accounts is a necessity—

but optional it is the whole basis of entry Sequence of processing Source documents, journals and Set up chart of accounts,

bank reconciliation, ledger and receivables, payables, inventories trial balance, balance day and report layouts (once only), adjustments, closing entries, source documents, data entry and final reports, reversing entries bank reconciliation, interim reports

at any time, balance day adjustments, final reports, rollover to new period, reversing entries

Automatic postings All posted manually Many entries are posted automatically

Timely reports and queries Reports and queries are time- Available at the click of a button consuming to prepare and answer

Documents produced Prepared by hand Data entered and document produced, as well as processing the transaction into the accounting system

Specialised journals Specialised journals required, No specialised journals required depending upon the business

Control Manual controls implemented Computer controls implemented— generally more efficient and effective

System failure Susceptible if disaster strikes Susceptible if disaster strikes

5.13 MYOB or Quickbooks solution to questions in Chapters 3 and 4.

5.14 Research.

5.15 Labels, numbers and formulas.

5.16 Exercise on spreadsheet.

5.17 Exercise on spreadsheet. i i Total cost hasn’t changed

ii Total revenue increased to $180 iii Profit increased to $120

j i Total cost increased to $84 ii Total revenue hasn’t changed iii Profit now $96

n i Total cost increased to $150 ii Total revenue increased to $330 iii Profit increased to $180

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5.18 a Copy command b Absolute copying means that the formula does not change regardless of where the formula is copied to. $ signs are used on the coordinates that you want to copy absolutely. Relative copying means that the formula changes to take into account the new row or column. c Use the copy command to copy the cell and the paste command to paste the formula into the two cells. e 5.00 f A B C D E

i 5.00 5.00 5.00 5.00 5.00 ii Formula B1=A1 C1=A1 D1=A1 E1=A1

h 10.00 i A B C D E

i 10.00 10.00 10.00 10.00 10.00 ii Formula B3=A3 C3=B3 D3=C3 E3=D3

j All of row 1 changed to 7.00 because all the formulas related to A1—absolute copying. All of row 3 changed to 8.00 because each formula was linked to the column to the left of it—relative copying. There is no difference in this example between absolute and relative copying.

k In row 1, the only change was C1 changing to 2. In row 3, all figures to the right of C3 changed to 12. This is the difference between absolute and relative copying.

5.19 e A B C D E

1 1.00 2.00 3.00 4.00 5.00 2 6.00 7.00 8.00 9.00 10.00 3 4 7.00 9.00 11.00 13.00 15.00 5 7.00 7.00 7.00 7.00 7.00 6 7

f Row 4 is adding together the figures shown in each column because relative copying took place. Row 5 is only adding together the figures in A1 and A2 because absolute copying took place.

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5.20 Multiplication table on spreadsheet. Enter =B$2*$A3 in cell B3. Then copy B3 to B4:B14. Then copy B3:B14 to C3:M14.

5.21 b 25 + 23 adds up to 49 on the screen.

d A B C 1 25.40 25 25 2 23.30 23 23 3 4 48.70 49 48 5

The figures in column C now add up to the correct total. This is because the figures in memory are exactly the same as those on the screen due to the INT function.

f 22 + 35 + 41 adds up to 98 on the screen. h A B C

1 25.40 25 25 2 23.30 23 23 3 4 48.70 49 48 5 6 7 21.60 22 22 8 34.50 35 35 9 41.10 41 41 10 11 97.20 97 98 12 The figures in column C now add up to the correct total. This is because the ROUND function is used to make the figures in memory the same as those on the screen.

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5.22 c A B C D E

1 PRICE QTY GROSS DISCOUNT NET 2 3 12.47 3.00 37.41 0.93525 36.47475 4 13.13 1.00 13.13 0.32825 12.80175 5 49.27650

d A B C D E 1 PRICE QTY GROSS DISCOUNT NET 2 3 12.47 3.00 37.41 0.94 36.47 4 13.13 1.00 13.13 0.33 12.80 5 49.28 The addition in E5 is incorrect.

e A B C D E 1 PRICE QTY GROSS DISCOUNT NET 2 3 12.47 3.00 37.41 0.94 36.47 4 13.13 1.00 13.13 0.33 12.80 5 49.27 The addition is correct in E5 as the figures in E3 and E4 are rounded off to two decimal places.

5.23

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b

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c ii

5.24

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5.25

5.26 Chapter summary.

5.27 a A computer system would help in running the business for a small corner store—controlling inventories would be the main

advantage as the perpetual inventory system would be used. There would therefore be greater control over ordering, storage and sale of inventories. A point of sale system incorporating scanning could also be used. Communications would be minimal.

b A computer system is vital for large commercial businesses such as David Jones and Myer. Control of inventories and point of sale software is essential. Communications are critical. Each point of sale terminal must be connected to the central computer/server so the transaction can be recorded with appropriate updating of inventory records. Authorisation of credit card transactions must also occur immediately.

c A typical organisation might be Symantec, which sells virus protection software. Customers must be able to access the site via the Internet so communications is very important. Customer details must be collected and recorded for warranty and support purposes, and when the sale takes place the accounting system must record the sale in the usual way.

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5.28

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5.29

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5.30

5.31

The formula in B20 is: =IF(AND(AND(OR(OR(OR(OR(B13=22.5,B13=48),B13=75),B13=108),B13=256),B14>=2),B15>0),0,1)

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Appendix A5.1

Walters Hardware General Ledger [Detail] 1/03 To 31/03

Page 1 ID# Src Date Memo Debit Credit Job Net Activity Ending Balance 1-1300 Merchandise Inventory Beginning Balance: $300.00 IJ000001 IJ 1/03 Inventory count $300.00 $0.00 IJ000001 IJ 1/03 Inventory count $300.00 $300.00 00000001 PJ 2/03 Purchase; Jackson Supplies $1,500.00 $1,800.00 00000001 SJ 5/03 Sale; M Kantor $1,523.08 $276.92 00000002 SJ 7/03 Sale; M Kantor $69.23 $346.15 00000002 PJ 10/03 Purchase; Jagor Industries $4,000.00 $4,346.15 00000003 PJ 12/03 Purchase; Jagor Industries $80.00 $4,266.15 00000003 SJ 20/03 Sale; Cash Sales $3,088.62 $1,177.53 00000004 SJ 24/03 Sale; Larwood Ltd $579.11 $598.42 IJ000002 IJ 31/03 Inventory count $19.30 $579.12

Total: $5,869.23 $5,590.11 $279.12 $579.12 4-1100 Hardware Sales Beginning Balance: $0.00 00000001 SJ 5/03 Sale; M Kantor $4,950.00 $4,950.00Cr 00000002 SJ 7/03 Sale; M Kantor $225.00 $4,725.00Cr 00000003 SJ 20/03 Sale; Cash Sales $8,000.00 $12,725.00Cr 00000004 SJ 24/03 Sale; Larwood Ltd $1,500.00 $14,225.00Cr

Total: $225.00 $14,450.00 $14,225.00Cr $14,225.00Cr 5-2000 Cost of Goods Sold Beginning Balance: $0.00 00000001 SJ 5/03 Sale; M Kantor $1,523.08 $1,523.08 00000002 SJ 7/03 Sale; M Kantor $69.23 $1,453.85 00000003 SJ 20/03 Sale; Cash Sales $3,088.62 $4,542.47 00000004 SJ 24/03 Sale; Larwood Ltd $579.11 $5,121.58 1 CD 27/03 $126.00 $5,247.58

Total: $5,316.81 $69.23 $5,247.58 $5,247.58 5-5000 Inventory Adjustment Beginning Balance: $0.00 IJ000002 IJ 31/03 Inventory count $19.30 $19.30

Total: $19.30 $0.00 $19.30 $19.30

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Walters Hardware Trial Balance March Account Debit Credit YTD Debit YTD Credit Cheque Account $7,874.00 $7,874.00 Trade Debtors $6,225.00 $6,225.00 Merchandise Inventory $279.12 $579.12 Trade Creditors $5,420.00 $5,420.00 Owner’s Capital $0.00 $300.00 Hardware Sales $14,225.00 $14,225.00 Cost of Goods Sold $5,247.58 $5,247.58 Inventory Adjustment $19.30 $19.30

Total: $19,645.00 $19,645.00 $19,945.00 $19,945.00

Note: MYOB is used in this exercise. No Sales Returns account is used in MYOB in perpetual inventories and no Trading account is available.

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A5.2 Broger Industries

General Ledger [Detail]

1/06 To 30/06 ID# Src Date 1-1200 Trade Debtors Beginning Balance: $0.00 00000001 SJ 2/06 00000001 SJ 2/06 00000002 SJ 18/06 00000002 SJ 18/06 00000003 SJ 20/06 00000003 SJ 20/06

SJ000001 SJ 20/06

SJ000001 SJ 20/06

00000004 SJ 27/06 00000004 SJ 27/06 1-1300 Merchandise Inventory Beginning Balance: $0.00 GJ000001 GJ 1/06 IJ000001 IJ 1/06 IJ000001 IJ 1/06 00000001 SJ 2/06 00000001 PJ 4/06 00000002 PJ 6/06 00000003 PJ 17/06 00000002 SJ 18/06 00000003 SJ 20/06 00000004 SJ 27/06 IJ000002 IJ 30/06 2-1200 Trade Creditors Beginning Balance: $0.00 00000001 PJ 4/06 00000001 PJ 4/06 00000002 PJ 6/06 00000002 PJ 6/06

PJ000001 PJ 6/06

PJ000001 PJ 6/06

00000003 PJ 17/06 00000003 PJ 17/06 4-1000 Sales Beginning Balance: $0.00 GJ000001 GJ 1/06 00000001 SJ 2/06 00000002 SJ 18/06 00000003 SJ 20/06 00000004 SJ 27/06 5-1000 Cost of Goods Sold Beginning Balance: $0.00

Memo

Sale; Varon Ltd Sale; Varon Ltd Sale; Varon Ltd Sale; Varon Ltd Sale; Varon Ltd Sale; Varon Ltd Varon Ltd: Credit from 00000003 Varon Ltd: Credit from 00000003 Sale; Varon Ltd Sale; Varon Ltd

Total:

Inventory count Inventory count Sale; Varon Ltd Purchase; Santo Ltd Purchase; Santo Ltd Purchase; Santo Ltd Sale; Varon Ltd Sale; Varon Ltd Sale; Varon Ltd Inventory count

Total:

Purchase; Santo Ltd Purchase; Santo Ltd Purchase; Santo Ltd Purchase; Santo Ltd Santo Ltd: Debit from 00000002 Santo Ltd: Debit from 00000002 Purchase; Santo Ltd Purchase; Santo Ltd

Total:

Sale; Varon Ltd Sale; Varon Ltd Sale; Varon Ltd Sale; Varon Ltd

Total:

Debit Credit Job Net Activity Ending Balance

$1,400.00 $1,400.00 $140.00 $1,540.00

$18,000.00 $19,540.00 $1,800.00 $21,340.00

$225.00 $21,115.00 $22.50 $21,092.50

$247.50 $21,340.00

$247.50 $21,092.50

$14,400.00 $35,492.50 $1,440.00 $36,932.50

$37,427.50 $495.00 $36,932.50 $36,932.50

$1,000.00 $1,000.00 $1,000.00 $0.00

$1,000.00 $1,000.00 $800.00 $200.00

$8,800.00 $9,000.00 $330.00 $8,670.00

$12,000.00 $20,670.00 $9,237.99 $11,432.01

$115.47 $11,547.48 $10,392.73 $1,154.75

$173.21 $981.54

$22,915.47 $21,933.93 $981.54 $981.54

$8,800.00 $8,800.00Cr $880.00 $9,680.00Cr

$330.00 $9,350.00Cr $33.00 $9,317.00Cr

$363.00 $9,680.00Cr

$363.00 $9,317.00Cr

$12,000.00 $21,317.00Cr $1,200.00 $22,517.00Cr

$726.00 $23,243.00 $22,517.00Cr $22,517.00Cr

$235,400.00 $235,400.00Cr $1,400.00 $236,800.00Cr

$18,000.00 $254,800.00Cr $225.00 $254,575.00Cr

$14,400.00 $268,975.00Cr

$225.00 $269,200.00 $268,975.00Cr $268,975.00Cr

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GJ000001 GJ 1/06 $180,600.00 $180,600.00 00000001 SJ 2/06 Sale; Varon Ltd $800.00 $181,400.00 00000002 SJ 18/06 Sale; Varon Ltd $9,237.99 $190,637.99 00000003 SJ 20/06 Sale; Varon Ltd $115.47 $190,522.52 00000004 SJ 27/06 Sale; Varon Ltd $10,392.73 $200,915.25

Total: $201,030.72 $115.47 $200,915.25 $200,915.25 5-1100 Cartage Inwards Beginning Balance: $0.00 1 CD 10/06 $110.00 $110.00

Total: $110.00 $0.00 $110.00 $110.00 5-2000 Inventory Adjustment Beginning Balance: $0.00 IJ000002 IJ 30/06 Inventory count $173.21 $173.21

Total: $173.21 $0.00 $173.21 $173.21 Broger Industries Trial Balance June Account Debit Credit YTD Debit YTD Credit Cheque Account $121.00 $121.00 Trade Debtors $36,932.50 $36,932.50 Merchandise Inventory $981.54 $981.54 Bldgs & Imprvmnts at Cost $100,000.00 $100,000.00 Land $70,000.00 $70,000.00 Trade Creditors $22,517.00 $22,517.00 GST Collected $3,357.50 $3,357.50 GST Paid $2,058.00 $2,058.00 Owner/Sharehldr Capital $116,200.00 $116,200.00 Sales $268,975.00 $268,975.00 Cost of Goods Sold $200,915.25 $200,915.25 Cartage Inwards $110.00 $110.00 Inventory Adjustment $173.21 $173.21

Total: $411,170.50 $411,170.50 $411,170.50 $411,170.50

Broger Industries

Profit & Loss Statement

1/06 through 30/06

Income Sales $268,975.00 Total Income $268,975.00 Cost of Sales Cost of Goods Sold $200,915.25 Cartage Inwards $110.00 Inventory Adjustment $173.21 Total Cost of Sales $201,198.46 Gross Profit $67,776.54

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Broger Industries

Balance Sheet

As of June

Assets

Current Assets

Cash On Hand

Cheque Account Total Cash On Hand Trade Debtors Merchandise Inventory Total Current Assets Fixed Assets Buildings and Improvements Bldgs & Imprvmnts at Cost Total Buildings and Improvements Land Total Fixed Assets Total Assets Liabilities Current Liabilities Trade Creditors GST Liabilities GST Collected GST Paid Total GST Liabilities Total Current Liabilities Total Liabilities Net Assets Equity Owner/Shareholder Equity Owner/Shareholder Capital Total Owner/Shareholder Equity Current Year Earnings Total Equity

-$121.00 -$121.00

$36,932.50 $981.54

$100,000.00

$100,000.00

$70,000.00

$22,517.00

$3,357.50 -$2,058.00

$1,299.50

$116,200.00

$37,793.04

$170,000.00 $207,793.04

$23,816.50 $23,816.50

$183,976.54

$116,200.00 $67,776.54

$183,976.54

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Broger Industries Aged Receivables [Detail] 30/06 Name ID# Date Total Due 0-30 31-60 61-90 90+ Varon Ltd *None Net 30th after EOM

00000001 2/06 $1,540.00 $1,540.00 00000002 18/06 $19,552.50 $19,552.50 00000004 27/06 $15,840.00 $15,840.00

Total: $36,932.50 $36,932.50 $0.00 $0.00 $0.00

Grand Total: $36,932.50 $36,932.50 $0.00 $0.00 $0.00 Ageing Percent: 100.0% 0.0% 0.0% 0.0%

Broger Industries Aged Payables [Detail] 30/06 Name ID# Date Total Due 0-30 31-60 61-90 90+ Santo Ltd *None Net 30th after EOM

00000001 4/06 $9,317.00 $9,317.00 00000003 17/06 $13,200.00 $13,200.00

Total: $22,517.00 $22,517.00 $0.00 $0.00 $0.00 Grand Total: $22,517.00 $22,517.00 $0.00 $0.00 $0.00 Ageing Percent: 100.0% 0.0% 0.0% 0.0%

Broger Industries Items List [Summary] Item Primary Supplier Units On Hand Total Value Average Cost Current Price Zet Zet

85 $981.54 $11.5475

Grand Total: $981.54

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A5.3 Java Enterprises 189 Montange Rd TOWNSVILLE 4810 General Ledger [Detail] 1/06 To 30/06 ID# Src Date 1-1200 Trade Debtors Beginning Balance: $2,000.00 00000001 SJ 1/06 00000001 SJ 1/06 00000002 SJ 1/06 00000002 SJ 1/06 00000003 SJ 2/06 00000003 SJ 2/06 00000004 SJ 14/06 00000004 SJ 14/06 00000005 SJ 16/06 00000005 SJ 16/06

SJ000001 SJ 16/06

SJ000001 SJ 16/06

00000006 SJ 21/06 00000006 SJ 21/06 00000007 SJ 25/06 00000007 SJ 25/06 1-1800 Inventory Beginning Balance: $1,000.00 00000003 SJ 2/06 00000002 PJ 10/06 00000004 SJ 14/06 00000003 PJ 14/06 00000004 PJ 15/06 00000005 SJ 16/06 00000005 PJ 20/06 00000006 SJ 21/06 00000007 SJ 25/06 IJ000002 IJ 30/06

2-1200 Trade Creditors Beginning Balance: $1,000.00 cr 00000001 PJ 1/06 00000001 PJ 1/06 00000002 PJ 10/06 00000002 PJ 10/06 00000003 PJ 14/06 00000003 PJ 14/06

PJ000001 PJ 14/06

PJ000001 PJ 14/06

00000004 PJ 15/06 00000004 PJ 15/06 00000005 PJ 20/06 00000005 PJ 20/06

Memo

Pre-conversion sale Pre-conversion sale Pre-conversion sale Pre-conversion sale Sale; M Flynn Sale; M Flynn Sale; S Masters Sale; S Masters Sale; S Masters Sale; S Masters S Masters: Credit from 00000005 S Masters: Credit from 00000005 Sale; A Summers Sale; A Summers Sale; M Flynn Sale; M Flynn

Total:

Sale; M Flynn Purchase; T Adams Sale; S Masters Purchase; T Adams Purchase; C Race Sale; S Masters Purchase; R James Sale; A Summers Sale; M Flynn Inventory count

Total:

Pre-conversion purchase Pre-conversion purchase Purchase; T Adams Purchase; T Adams Purchase; T Adams Purchase; T Adams T Adams: Debit from 00000003 T Adams: Debit from 00000003 Purchase; C Race Purchase; C Race Purchase; R James Purchase; R James

Total:

Debit Credit Job Net Activity Ending Balance

$1,500.00 $3,500.00 $1,500.00 $2,000.00

$500.00 $2,500.00 $500.00 $2,000.00

$400.00 $2,400.00 $40.00 $2,440.00

$1,500.00 $3,940.00 $150.00 $4,090.00

$30.00 $4,060.00 $3.00 $4,057.00

$33.00 $4,090.00

$33.00 $4,057.00

$2,800.00 $6,857.00 $280.00 $7,137.00

$4,500.00 $11,637.00 $450.00 $12,087.00

$12,153.00 $2,066.00 $10,087.00 $12,087.00

$200.00 $800.00 $2,100.00 $2,900.00

$500.00 $2,400.00 $60.00 $2,340.00

$1,800.00 $4,140.00 $10.00 $4,150.00

$1,800.00 $5,950.00 $1,323.76 $4,626.24 $2,634.78 $1,991.46

$77.46 $1,914.00

$5,710.00 $4,796.00 $914.00 $1,914.00

$1,000.00 $2,000.00Cr $1,000.00 $1,000.00Cr

$2,100.00 $3,100.00Cr $210.00 $3,310.00Cr

$60.00 $3,250.00Cr $6.00 $3,244.00Cr

$66.00 $3,310.00Cr

$66.00 $3,244.00Cr

$1,800.00 $5,044.00Cr $180.00 $5,224.00Cr $1,800.00 $7,024.00Cr $180.00 $7,204.00Cr

$1,132.00 $7,336.00 $6,204.00Cr $7,204.00Cr

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4-1000 Sales Beginning Balance: $0.00 00000003 SJ 2/06 Sale; M Flynn $400.00 $400.00Cr 00000004 SJ 14/06 Sale; S Masters $1,500.00 $1,900.00Cr 00000005 SJ 16/06 Sale; S Masters $30.00 $1,870.00Cr 00000006 SJ 21/06 Sale; A Summers $2,800.00 $4,670.00Cr 00000007 SJ 25/06 Sale; M Flynn $4,500.00 $9,170.00Cr

Total: $30.00 $9,200.00 $9,170.00Cr $9,170.00Cr 5-1000 Cost of Goods Sold Beginning Balance: $0.00 00000003 SJ 2/06 Sale; M Flynn $200.00 $200.00 00000004 SJ 14/06 Sale; S Masters $500.00 $700.00 00000005 SJ 16/06 Sale; S Masters $10.00 $690.00 00000006 SJ 21/06 Sale; A Summers $1,323.76 $2,013.76 00000007 SJ 25/06 Sale; M Flynn $2,634.78 $4,648.54

Total: $4,658.54 $10.00 $4,648.54 $4,648.54 5-2000 Inventory Adjustment Beginning Balance: $0.00 IJ000002 IJ 30/06 Inventory count $77.46 $77.46

Total: $77.46 $0.00 $77.46 $77.46

Java Enterprises 189 Montange Rd TOWNSVILLE 4810 Trial Balance June Account Debit Credit YTD Debit YTD Credit Cheque Account $355.00 $545.00 Trade Debtors $10,087.00 $12,087.00 Inventory $914.00 $1,914.00 Bldgs & Imprv at Cost $0.00 $10,000.00 Land $0.00 $40,000.00 Trade Creditors $6,204.00 $7,204.00 GST Collected $917.00 $917.00 GST Paid $569.00 $569.00 Owner’s/Sharehldr Capital $0.00 $52,900.00 Sales $9,170.00 $9,170.00 Cost of Goods Sold $4,648.54 $4,648.54 Freight Inwards $50.00 $50.00 Inventory Adjustment $77.46 $77.46 Wages & Salaries $300.00 $300.00

Total: $16,646.00 $16,646.00 $70,191.00 $70,191.00

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Java Enterprises

189 Montange Rd

TOWNSVILLE 4810


1/06 through 30/06

Income Sales $9,170.00 Total Income $9,170.00 Cost Of Sales Cost of Goods Sold $4,648.54 Freight Inwards $50.00 Inventory Adjustment $77.46 Total Cost Of Sales $4,776.00 Gross Profit $4,394.00 Expenses Employment Expenses Wages & Salaries $300.00 Total Employment Expenses $300.00 Total Expenses $300.00 Operating Profit $4,094.00

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Java Enterprises

189 Montange Rd

TOWNSVILLE 4810

Balance Sheet

As of June

Assets

Current Assets

Cash On Hand

Cheque Account $545.00 Total Cash On Hand Trade Debtors Inventory Total Current Assets Fixed Assets Buildings & Improvements Bldgs & Imprv at Cost $10,000.00 Land $40,000.00 Total Buildings & Improvements Total Fixed Assets Total Assets Liabilities Current Liabilities Trade Creditors GST Liabilities GST Collected $917.00 GST Paid -$569.00 Total GST Liabilities Total Current Liabilities Total Liabilities Net Assets Equity Owner’s/Shareholder’s Equity Owner’s/Sharehldr Capital Total Owner’s/Shareholder’s Equity Current Year Earnings Total Equity

$545.00

$12,087.00 $1,914.00

$14,546.00

$50,000.00

$50,000.00 $64,546.00

$7,204.00

$348.00 $7,552.00

$7,552.00

$56,994.00

$52,900.00

$52,900.00

$4,094.00 $56,994.00

149

Java Enterprises 189 Montange Rd TOWNSVILLE 4810 Aged Receivables [Detail] 30/06 Name ID# Date Total Due 0-30 31-60 61-90 90+ A Summers *None Net 30th after EOM

00000002 1/06 $500.00 $500.00 00000006 21/06 $3,080.00 $3,080.00

Total: $3,580.00 $3,580.00 $0.00 $0.00 $0.00

M Flynn *None Net 30th after EOM

00000001 1/06 $1,500.00 $1,500.00 00000003 2/06 $440.00 $440.00 00000007 25/06 $4,950.00 $4,950.00

Total: $6,890.00 $6,890.00 $0.00 $0.00 $0.00

S Masters *None Net 30th after EOM

00000004 14/06 $1,617.00 $1,617.00

Total: $1,617.00 $1,617.00 $0.00 $0.00 $0.00


Java Enterprises 189 Montange Rd TOWNSVILLE 4810

Aged Payables [Detail]

30/06 Name ID# Date Total Due 0-30 31-60 61-90 90+ C Race *None Net 30th after EOM

00000004 15/06 $1,980.00 $1,980.00

Total: $1,980.00 $1,980.00 $0.00 $0.00 $0.00 R James *None Net 30th after EOM

00000001 1/06 $1,000.00 $1,000.00 00000005 20/06 $1,980.00 $1,980.00

Total: $2,980.00 $2,980.00 $0.00 $0.00 $0.00

T Adams *None Net 30th after EOM

00000002 10/06 $2,244.00 $2,244.00


150

Java Enterprises 189 Montange Rd TOWNSVILLE 4810 Items List [Summary] Item Primary Supplier Units On Hand Total Value Average Cost Current Price X Product X

460 $1,346.67 $2.9275 Y Product Y

300 $567.33 $1.8911

Grand Total: $1,914.00

151

A5.4 a i-xi Walker Industries 453 Trander Rd BRISBANE 4000 Reconciliation Report ID# Date Payee Deposit Withdrawal Cheque Account: 1-1110 Cheque Account Date of Bank Statement: 30/06 Outstanding Cheques 698 26/06 $2,400.00 700 30/06 $1,000.00 Total: $0.00 $3,400.00 Reconciliation

MYOB Balance on 30/06: $4,501.00 Add: Outstanding Cheques: $7,901.00 Subtotal: $7,835.00 Deduct: Outstanding Deposits: $0.00 Expected Balance on Statement: $7,901.00

152

Walker Industries 453 Trander Rd BRISBANE 4000

General Ledger [Detail] 1/06 To 30/06

ID#

1-1110 Beginning Balance: 694 695 921

CR000001 696

697 698 699 700 SC300602

1-1200 Beginning Balance: 00000001 00000001 00000001 00000002 00000002 00000002 00000441

921 00000442 00000442 CR000001 00000268 SJ000003 SJ000003 00000442 00000442 SJ000004 SJ000004 SJ000005 SJ000005 1-1300 Beginning Balance: 00000441 IJ000001 IJ000001 00000442 00000268 00000004 00000442 00000005 00000006

Src Date

Cheque Account $18,000.00

CD 1/06 CD 1/06 CR 2/06 CR 3/06 CD 12/06 CD 14/06 CD 26/06 CD 30/06 CD 30/06 CD 30/06

Trade Debtors $6,000.00

SJ 1/06 SJ 1/06 SJ 1/06 SJ 1/06 SJ 1/06 SJ 1/06 SJ 1/06 CR 2/06 SJ 3/06 SJ 3/06 CR 3/06 SJ 4/06 SJ 4/06 SJ 4/06 SJ 7/06 SJ 7/06 SJ 30/06 SJ 30/06 SJ 30/06 SJ 30/06

Merchandise Inventory $129,000.00

SJ 1/06 IJ 1/06 IJ 1/06 SJ 3/06 SJ 4/06 PJ 4/06 SJ 7/06 PJ 16/06 PJ 22/06

Memo

M Charlton

Payment; Hillier Co Ltd Cash Sales for 00000442

Total:

Pre-conversion sale Pre-conversion sale Pre-conversion sale Pre-conversion sale Pre-conversion sale Pre-conversion sale Sale; G Silvio Payment; Hillier Co Ltd Sale; Cash Sales Sale; Cash Sales Cash Sales for 00000442 Sale; G Silvio G Silvio: Credit from 00000268 G Silvio: Credit from 00000268 Sale; M Gillispie Sale; M Gillispie Sale; R Wilson Sale; R Wilson R Wilson: Credit from SJ000004 R Wilson: Credit from SJ000004

Total:

Sale; G Silvio Inventory count Inventory count Sale; Cash Sales Sale; G Silvio Purchase; M Charlton Sale; M Gillispie Purchase; D Yarrow Purchase; D Yarrow

Total:

Ending Debit Credit Job Net Activity Balance

$1,800.00 $16,200.00 $8,800.00 $7,400.00

$4,350.00 $11,750.00 $396.00 $12,146.00

$2,400.00 $9,746.00 $1,100.00 $8,646.00 $2,400.00 $6,246.00

$660.00 $5,586.00 $1,000.00 $4,586.00

$85.00 $4,501.00

$4,746.00 $18,245.00 $13,499.00Cr $4,501.00

$3,954.55 $9,954.55 $395.45 $10,350.00

$4,350.00 $6,000.00 $1,500.00 $7,500.00

$150.00 $7,650.00 $1,650.00 $6,000.00

$1,800.00 $7,800.00

$4,350.00 $3,450.00 $360.00 $3,810.00

$36.00 $3,846.00 $396.00 $3,450.00 $225.00 $3,225.00

$225.00 $3,450.00 $225.00 $3,225.00

$14,000.00 $17,225.00 $1,400.00 $18,625.00

$1,500.00 $17,125.00 $150.00 $16,975.00

$1,650.00 $18,625.00 $1,650.00 $16,975.00

$25,471.00 $14,496.00 $10,975.00 $16,975.00

$1,080.00 $127,920.00 $129,000.00 $1,080.00Cr

$129,000.00 $127,920.00 $170.00 $127,750.00

$135.00 $127,885.00 $10,000.00 $137,885.00

$7,000.00 $130,885.00 $5,950.00 $136,835.00

$119.00 $136,716.00

$145,085.00 $137,369.00 $7,716.00 $136,716.00

153

1-2410 Beginning Balance: PJ000003

2-1200 Beginning Balance: 00000001 00000001 00000001 00000002 00000002 00000002 694 00000004 00000004 00000005 00000005 00000006 00000006 PJ000002 PJ000002 PJ000003 PJ000003 2-1310 Beginning Balance: 00000442 00000442 SJ000004

2-1330 Beginning Balance: 695 00000004 697 00000005 00000006 PJ000003 699 3-1200 Beginning Balance: 700 4-1100 Beginning Balance: 00000441 00000442 00000268 00000442

Furniture & Fixtures at Co $18,000.00

PJ 29/06 Purchase; Carlyle Co Ltd

Total:

Trade Creditors $7,500.00 cr

PJ 1/06 Pre-conversion purchase PJ 1/06 Pre-conversion purchase PJ 1/06 Pre-conversion purchase PJ 1/06 Pre-conversion purchase PJ 1/06 Pre-conversion purchase PJ 1/06 Pre-conversion purchase CD 1/06 M Charlton PJ 4/06 Purchase; M Charlton PJ 4/06 Purchase; M Charlton PJ 16/06 Purchase; D Yarrow PJ 16/06 Purchase; D Yarrow PJ 22/06 Purchase; D Yarrow PJ 22/06 Purchase; D Yarrow PJ 22/06 D Yarrow: Debit from 00000006 PJ 22/06 D Yarrow: Debit from 00000006 PJ 29/06 Purchase; Carlyle Co Ltd PJ 29/06 Purchase; Carlyle Co Ltd

Total:

GST Collected

$0.00 SJ 3/06 Sale; Cash Sales SJ 7/06 Sale; M Gillispie SJ 30/06 Sale; R Wilson

Total:

GST Paid

$0.00 CD 1/06 PJ 4/06 Purchase; M Charlton CD 14/06 PJ 16/06 Purchase; D Yarrow PJ 22/06 Purchase; D Yarrow PJ 29/06 Purchase; Carlyle Co Ltd CD 30/06

Total:

Owner/Sharehldr Drawings $0.00

CD 30/06

Total:

Sales $0.00

SJ 1/06 Sale; G Silvio SJ 3/06 Sale; Cash Sales SJ 4/06 Sale; G Silvio SJ 7/06 Sale; M Gillispie

Total:

$3,000.00 $21,000.00

$3,000.00 $0.00 $3,000.00 $21,000.00

$1,636.36 $9,136.36Cr $163.64 $9,300.00Cr

$1,800.00 $7,500.00Cr $5,181.82 $12,681.82Cr

$518.18 $13,200.00Cr $5,700.00 $7,500.00Cr $1,800.00 $5,700.00Cr

$10,000.00 $15,700.00Cr $1,000.00 $16,700.00Cr $5,950.00 $22,650.00Cr

$595.00 $23,245.00Cr $119.00 $23,126.00Cr

$11.90 $23,114.10Cr $130.90 $23,245.00Cr

$130.90 $23,114.10Cr $3,000.00 $26,114.10Cr

$300.00 $26,414.10Cr

$9,561.80 $28,475.90 $18,914.10Cr

$36.00 $36.00Cr $1,400.00 $1,436.00Cr

$150.00 $1,286.00Cr

$150.00 $1,436.00 $1,286.00Cr $1,286.00Cr

$800.00 $800.00 $1,000.00 $1,800.00

$100.00 $1,900.00 $595.00 $2,495.00

$11.90 $2,483.10 $300.00 $2,783.10

$60.00 $2,843.10

$2,855.00 $11.90 $2,843.10 $2,843.10

$1,000.00 $1,000.00

$1,000.00 $0.00 $1,000.00 $1,000.00

$1,800.00 $1,800.00Cr $360.00 $2,160.00Cr

$225.00 $1,935.00Cr $14,000.00 $15,935.00Cr

$225.00 $16,160.00 $15,935.00Cr $15,935.00Cr

154

$26,414.10Cr

5-4000 Beginning Balance: 00000441 00000442 00000268 00000442 5-4500 Beginning Balance: 699 6-1200 Beginning Balance: SC300602 6-1250 Beginning Balance: SJ000004 6-4400 Beginning Balance: 695

6-4600 Beginning Balance: 697

6-5130 Beginning Balance: 696 698

Cost of Goods Sold $0.00

SJ 1/06 Sale; G Silvio SJ 3/06 Sale; Cash Sales SJ 4/06 Sale; G Silvio SJ 7/06 Sale; M Gillispie

Total:

Freight Inwards $0.00

CD 30/06

Total:

Bank Charges $0.00

CD 30/06

Total:

Bad Debts $0.00

SJ 30/06 Sale; R Wilson

Total:

Rent $0.00

CD 1/06

Total:

Telephone $0.00

CD 14/06

Total:

Wages & Salaries $0.00

CD 12/06 CD 26/06

Total:

$1,080.00 $1,080.00 $170.00 $1,250.00

$135.00 $1,115.00 $7,000.00 $8,115.00

$8,250.00 $135.00 $8,115.00 $8,115.00

$600.00 $600.00

$600.00 $0.00 $600.00 $600.00

$85.00 $85.00

$85.00 $0.00 $85.00 $85.00

$1,500.00 $1,500.00

$1,500.00 $0.00 $1,500.00 $1,500.00

$8,000.00 $8,000.00

$8,000.00 $0.00 $8,000.00 $8,000.00

$1,000.00 $1,000.00

$1,000.00 $0.00 $1,000.00 $1,000.00

$2,400.00 $2,400.00 $2,400.00 $4,800.00

$4,800.00 $0.00 $4,800.00 $4,800.00

155

Trial balance before adjustments Walker Industries 453 Trander Rd BRISBANE 4000

Trial Balance

June Account Debit Credit YTD Debit YTD Credit Cheque Account $13,499.00 $4,501.00 Trade Debtors $10,975.00 $16,975.00 Merchandise Inventory $7,716.00 $136,716.00 Furniture & Fixtures at Co $3,000.00 $21,000.00 Office Equip at Cost $0.00 $48,000.00 Trade Creditors $18,914.10 $26,414.10 GST Collected $1,286.00 $1,286.00 GST Paid $2,843.10 $2,843.10 Bank Loans $0.00 $67,500.00 Owner/Sharehldr Capital $0.00 $144,000.00 Owner/Sharehldr Drawings $1,000.00 $1,000.00 Sales $15,935.00 $15,935.00 Cost of Goods Sold $8,115.00 $8,115.00 Freight Inwards $600.00 $600.00 Bank Charges $85.00 $85.00 Bad Debts $1,500.00 $1,500.00 Rent $8,000.00 $8,000.00 Telephone $1,000.00 $1,000.00 Wages & Salaries $4,800.00 $4,800.00 Total: $49,634.10 $49,634.10 $255,135.10 $255,135.10

156

Trial balance after adjustments Walker Industries 453 Trander Rd BRISBANE 4000 Trial Balance June Account Debit Credit YTD Debit YTD Credit Cheque Account $13,499.00 $4,501.00 Trade Debtors $10,975.00 $16,975.00 Less Prov’n for Doubtful Debts $340.00 $340.00 Merchandise Inventory $7,560.00 $136,560.00 Prepayments $5,333.00 $5,333.00 Furniture & Fixtures at Co $3,000.00 $21,000.00 Furniture & Fixtures Accum Dep $300.00 $300.00 Office Equip at Cost $0.00 $48,000.00 Office Equip Accum Dep $1,200.00 $1,200.00 Trade Creditors $18,914.10 $26,414.10 GST Collected $1,286.00 $1,286.00 GST Paid $2,843.10 $2,843.10 Accrued Interest $563.00 $563.00 Accrued Wages $480.00 $480.00 Bank Loans $0.00 $67,500.00 Owner/Sharehldr Capital $0.00 $144,000.00 Owner/Sharehldr Drawings $1,000.00 $1,000.00 Sales $15,935.00 $15,935.00 Cost of Goods Sold $8,115.00 $8,115.00 Freight Inwards $600.00 $600.00 Inventory Adjustment $156.00 $156.00 Bank Charges $85.00 $85.00 Bad Debts $1,840.00 $1,840.00 Depreciation on Office Equip $1,200.00 $1,200.00 Depreciation on Furn & Fixt $300.00 $300.00 Interest Expense $563.00 $563.00 Rent $2,667.00 $2,667.00 Telephone $1,000.00 $1,000.00 Wages & Salaries $5,280.00 $5,280.00

Total: $52,517.10 $52,517.10 $258,018.10 $258,018.10

157

Walker Industries

453 Trander Rd

BRISBANE 4000


1/06 through 30/06

Income

Gross Sales

Sales $15,935.00 Total Gross Sales $15,935.00 Total Income $15,935.00 Cost of Sales Cost of Goods Sold $8,115.00 Freight Inwards $600.00 Inventory Adjustment $156.00 Total Cost of Sales $8,871.00 Gross Profit $7,064.00 Expenses General & Administrative Exp Bank Charges $85.00 Bad Debts $1,840.00 Depreciation on Office Equip $1,200.00 Depreciation on Furn & Fixt $300.00 Interest Expense $563.00 Total General & Administrative Exp $3,988.00 Operating Expenses Rent $2,667.00 Telephone $1,000.00 Total Operating Expenses $3,667.00 Employment Expenses Wages & Salaries $5,280.00 Total Employment Expenses $5,280.00 Total Expenses $12,935.00 Operating Profit -$5,871.00 Net Profit / (Loss) -$5,871.00

158

Walker Industries

453 Trander Rd

BRISBANE 4000

Balance Sheet

As of June

Assets Current Assets Cash On Hand Cheque Account $4,501.00 Total Cash On Hand $4,501.00 Trade Debtors $16,975.00 Less Prov’n for Doubtful Debts -$340.00 Merchandise Inventory $136,560.00 Prepayments $5,333.00 Total Current Assets $163,029.00 Fixed Assets Furniture and Fixtures Furniture & Fixtures at Co $21,000.00 Furniture & Fixtures Accum Dep -$300.00 Total Furniture and Fixtures $20,700.00 Office Equipment Office Equip at Cost $48,000.00 Office Equip Accum Dep -$1,200.00 Total Office Equipment $46,800.00 Total Fixed Assets $67,500.00 Total Assets $230,529.00 Liabilities Current Liabilities Trade Creditors $26,414.10 GST Liabilities GST Collected $1,286.00 GST Paid -$2,843.10 Total GST Liabilities -$1,557.10 Accrued Interest $563.00 Accrued Wages $480.00 Total Current Liabilities $25,900.00 Long-term Liabilities Bank Loans $67,500.00 Total Long-term Liabilities $67,500.00 Total Liabilities $93,400.00 Net Assets $137,129.00 Equity Owner/Shareholder Equity Owner/Sharehldr Capital $144,000.00 Owner/Sharehldr Drawings -$1,000.00 Total Owner/Shareholder Equity $143,000.00 Current Year Earnings -$5,871.00 Total Equity $137,129.00

159

Walker Industries 453 Trander Rd BRISBANE 4000 Aged Receivables [Detail] 30/06 Name ID# Date Total Due 0-30 31-60 61-90 90+ G Silvio *None Net 30th after EOM

00000441 1/06 $1,575.00 $1,575.00

Total: $1,575.00 $1,575.00 $0.00 $0.00 $0.00 M Gillispie *None Net 30th after EOM

00000442 7/06 $15,400.00 $15,400.00

Total: $15,400.00 $15,400.00 $0.00 $0.00 $0.00


Walker Industries 453 Trander Rd BRISBANE 4000 Aged Payables [Detail] 30/06 Name ID# Date Total Due 0-30 31-60 61-90 90+ C Chan *None Net 30th after EOM

00000002 31/05 $5,700.00 $5,700.00

Total: $5,700.00 $5,700.00 $0.00 $0.00 $0.00 Carlyle Co Ltd *None Net 30th after EOM

PJ000003 29/06 $3,300.00 $3,300.00

Total: $3,300.00 $3,300.00 $0.00 $0.00 $0.00 D Yarrow *None Net 30th after EOM

00000005 16/06 $6,414.10 $6,414.10

Total: $6,414.10 $6,414.10 $0.00 $0.00 $0.00 M Charlton *None Net 30th after EOM

00000004 4/06 $11,000.00 $11,000.00

Total: $11,000.00 $11,000.00 $0.00 $0.00 $0.00


160

Walker Industries 453 Trander Rd BRISBANE 4000 Items List [Summary] Item Primary Supplier Units On Hand Total Value Average Cost Current Price T500

2,930 $43,950.00 $15.00 $25.00 Y430

1,060 $53,000.00 $50.00 $110.00 Z297

2,330 $39,610.00 $17.00 $39.60


b Trial balance after rollover and payment of GST Walker Industries 453 Trander Rd BRISBANE 4000

Trial Balance

July Account Debit Credit YTD Debit YTD Credit

Cheque Account $1,557.10 $6,058.10 Trade Debtors $0.00 $16,975.00 Less Prov’n for Doubtful Debts $0.00 $340.00 Merchandise Inventory $0.00 $136,560.00 Prepayments $5,333.00 $0.00 Furniture & Fixtures at Co $0.00 $21,000.00 Furniture & Fixtures Accum Dep $0.00 $300.00 Office Equip at Cost $0.00 $48,000.00 Office Equip Accum Dep $0.00 $1,200.00 Trade Creditors $0.00 $26,414.10 GST Collected $1,286.00 $0.00 GST Paid $2,843.10 $0.00 Accrued Interest $563.00 $0.00 Accrued Wages $480.00 $0.00 Bank Loans $0.00 $67,500.00 Owner/Sharehldr Capital $0.00 $144,000.00 Owner/Sharehldr Drawings $0.00 $1,000.00 Retained Earnings $0.00 $5,871.00 Interest Expense $563.00 $563.00 Rent $5,333.00 $5,333.00 Wages & Salaries $480.00 $480.00 Total: $9,219.10 $9,219.10 $240,797.10 $240,797.10

161

A5.5 a-n Baker Enterprises 563 Prestal Avenue Brisbane 4000 Reconciliation Report ID# Date Payee Deposit Withdrawal Cheque Account: 1-1110 Cheque Account Date of Bank Statement: 31/07 Outstanding Cheques 3673 2/07 Cash Purchases $10,186.00 3675 7/07 Yeuman Enterprises $342.80 3678 27/07 Cash Purchases $544.50 Total: $0.00 $11,073.30 Outstanding Deposits CR000003 18/07 Cash Sales for 00000563 $550.00 Total: $550.00 $0.00 Reconciliation

MYOB Balance on 31/07: -$30,386.20 Add: Outstanding Cheques: $11,073.30 Subtotal: -$19,312.90 Deduct: Outstanding Deposits: $550.00 Expected Balance on Statement: -$19,862.90

162

Baker Enterprises 563 Prestal Avenue Brisbane 4000

General Ledger [Detail] 1/07 To 31/07 ID#

1-1110 Beginning Balance:

CR000001 3673 3674 3675 3676 187 CR000002 CR000003 3677 3678 3679 SC310703

1-1200

Beginning Balance: CR000001 00002376 00002376 SJ000002 SJ000002 00002377 00002377 CR000002 00000563 00000563 CR000003 00002377 00002377 00000387 00000387

1-1300 Beginning Balance: 00000003

IJ000001 IJ000001 00000004 00000005 00002376 00002377 00000563 00002377 00000387 00000007

Src Date Memo

Cheque Account $16,155.80 Cr CR 1/07 Payment; Broton Trading CD 2/07 Cash Purchases CD 7/07 CD 7/07 Yeuman Enterprises CD 10/07 CR 15/07 CR 15/07 Cash Sales for 00002377 CR 18/07 Cash Sales for 00000563 CD 21/07 CD 27/07 Cash Purchases CD 31/07 CD 31/07

Total:

Trade Debtors $1,738.05 CR 1/07 Payment; Broton Trading SJ 9/07 Sale; Byron Ltd SJ 9/07 Sale; Byron Ltd SJ 12/07 W Black: Credit from 00000387 SJ 12/07 W Black: Credit from 00000387 SJ 15/07 Sale; Cash Sales SJ 15/07 Sale; Cash Sales CR 15/07 Cash Sales for 00002377 SJ 18/07 Sale; Cash Sales SJ 18/07 Sale; Cash Sales CR 18/07 Cash Sales for 00000563 SJ 19/07 Sale; W Black SJ 19/07 Sale; W Black SJ 21/07 Sale; W Black SJ 21/07 Sale; W Black

Total:

Merchandise Inventory $7,510.00 PJ 1/07 Purchase; Tyrone Ltd IJ 1/07 Inventory count IJ 1/07 Inventory count PJ 2/07 Purchase; Cash Purchases PJ 2/07 Purchase; Tyrone Ltd SJ 9/07 Sale; Byron Ltd SJ 15/07 Sale; Cash Sales SJ 18/07 Sale; Cash Sales SJ 19/07 Sale; W Black SJ 21/07 Sale; W Black PJ 27/07 Purchase; Cash Purchases

Debit Credit Job Net Activity

$1,279.00 $10,186.00

$890.00 $342.80

$1,958.00 $331.10 $632.50 $550.00

$890.00 $544.50

$2,200.00 $11.70

$2,792.60 $17,023.00 $14,230.40Cr

$1,279.00 $15,849.00

$1,584.90

$138.60 $138.60

$575.00 $57.50

$632.50 $500.00

$50.00 $550.00

$4,410.00 $441.00

$126.00 $12.60

$23,606.00 $2,738.70 $20,867.30

$4,300.00 $7,510.00

$7,510.00 $9,260.00

$430.00 $8,006.71 $262.50 $212.00 $2,274.51

$64.99 $495.00

Ending Balance

$14,876.80Cr $25,062.80Cr $25,952.80Cr $26,295.60Cr $28,253.60Cr $27,922.50Cr $27,290.00Cr $26,740.00Cr $27,630.00Cr $28,174.50Cr $30,374.50Cr $30,386.20Cr

$30,386.20Cr

$459.05 $16,308.05 $17,892.95

$18,031.55 $17,892.95 $18,467.95 $18,525.45 $17,892.95 $18,392.95 $18,442.95 $17,892.95 $22,302.95 $22,743.95 $22,617.95 $22,605.35

$22,605.35

$11,810.00 $4,300.00 $11,810.00 $21,070.00 $20,640.00 $12,633.29 $12,370.79 $12,158.79 $9,884.28 $9,949.27 $10,444.27

Total: $21,629.99 $18,695.72 $2,934.27 $10,444.27

163

2-1200 Trade Creditors Beginning Balance: $1,592.25 cr 00000003 PJ 1/07 00000003 PJ 1/07 00000004 PJ 2/07 00000004 PJ 2/07 00000005 PJ 2/07 00000005 PJ 2/07 PJ000001 PJ 2/07 PJ000001 PJ 2/07 3673 CD 2/07 3675 CD 7/07 00000007 PJ 27/07 00000007 PJ 27/07 3678 CD 27/07 2-1310 GST Collected Beginning Balance: $0.00 00002376 SJ 9/07 00002377 SJ 15/07 187 CR 15/07 00000563 SJ 18/07 00002377 SJ 19/07 00000387 SJ 21/07

2-1330 GST Paid Beginning Balance: $0.00 00000003 PJ 1/07 00000004 PJ 2/07 00000005 PJ 2/07 3676 CD 10/07 00000007 PJ 27/07 3679 CD 31/07 4-1500 Sales Beginning Balance: $0.00 00002376 SJ 9/07 00002377 SJ 15/07 00000563 SJ 18/07 00002377 SJ 19/07 00000387 SJ 21/07 5-3500 Cost of Goods Sold Beginning Balance: $0.00 00002376 SJ 9/07 00002377 SJ 15/07 00000563 SJ 18/07 00002377 SJ 19/07 00000387 SJ 21/07 6-1200 Bank Charges Beginning Balance: $0.00 SC310703 CD 31/07

Purchase; Tyrone Ltd Purchase; Tyrone Ltd Purchase; Cash Purchases Purchase; Cash Purchases Purchase; Tyrone Ltd Purchase; Tyrone Ltd Tyrone Ltd: Debit from 00000005 Tyrone Ltd: Debit from 00000005 Cash Purchases Yeuman Enterprises Purchase; Cash Purchases Purchase; Cash Purchases Cash Purchases

Total:

Sale; Byron Ltd Sale; Cash Sales

Sale; Cash Sales Sale; W Black Sale; W Black

Total:

Purchase; Tyrone Ltd Purchase; Cash Purchases Purchase; Tyrone Ltd

Purchase; Cash Purchases

Total:

Sale; Byron Ltd Sale; Cash Sales Sale; Cash Sales Sale; W Black Sale; W Black

Total:

Sale; Byron Ltd Sale; Cash Sales Sale; Cash Sales Sale; W Black Sale; W Black

Total:

Total:

$4,300.00 $5,892.25Cr $430.00 $6,322.25Cr

$9,260.00 $15,582.25Cr $926.00 $16,508.25Cr

$430.00 $16,078.25Cr $43.00 $16,035.25Cr

$473.00 $16,508.25Cr $473.00 $16,035.25Cr

$10,186.00 $5,849.25Cr $342.80 $5,506.45Cr

$495.00 $6,001.45Cr $49.50 $6,050.95Cr

$544.50 $5,506.45Cr

$12,019.30 $15,933.50 $3,914.20Cr $5,506.45Cr

$1,584.90 $1,584.90Cr $57.50 $1,642.40Cr $30.10 $1,672.50Cr $50.00 $1,722.50Cr

$441.00 $2,163.50Cr $12.60 $2,150.90Cr

$12.60 $2,163.50 $2,150.90Cr $2,150.90Cr

$430.00 $430.00 $926.00 $1,356.00

$43.00 $1,313.00 $178.00 $1,491.00

$49.50 $1,540.50 $200.00 $1,740.50

$1,783.50 $43.00 $1,740.50 $1,740.50

$15,849.00 $15,849.00Cr $575.00 $16,424.00Cr $500.00 $16,924.00Cr

$4,410.00 $21,334.00Cr $126.00 $21,208.00Cr

$126.00 $21,334.00 $21,208.00Cr $21,208.00Cr

$8,006.71 $8,006.71 $262.50 $8,269.21 $212.00 $8,481.21

$2,274.51 $10,755.72 $64.99 $10,690.73

$10,755.72 $64.99 $10,690.73 $10,690.73

$11.70 $11.70

$11.70 $0.00 $11.70 $11.70

164

6-3100 Advertising Beginning Balance: $0.00 3676 CD 10/07 $1,780.00 $1,780.00

Total: $1,780.00 $0.00 $1,780.00 $1,780.00 6-4400 Rent Beginning Balance: $0.00 3679 CD 31/07 $2,000.00 $2,000.00

Total: $2,000.00 $0.00 $2,000.00 $2,000.00 6-5130 Wages & Salaries Beginning Balance: $0.00 3674 CD 7/07 $890.00 $890.00 3677 CD 21/07 $890.00 $1,780.00

Total: $1,780.00 $0.00 $1,780.00 $1,780.00 8-3000 Commission Revenue Beginning Balance: $0.00 187 CR 15/07 $301.00 $301.00Cr

Total: $0.00 $301.00 $301.00r $301.00Cr

Trial balance before adjustments Baker Enterprises 563 Prestal Avenue Brisbane 4000 Trial Balance July Account Debit Credit YTD Debit YTD Credit Cheque Account $14,230.40 $30,386.20 Trade Debtors $20,867.30 $22,605.35 Merchandise Inventory $2,934.27 $10,444.27 Equip at Cost $0.00 $4,300.00 Motor Vehicle $0.00 $21,200.00 Trade Creditors $3,914.20 $5,506.45 GST Collected $2,150.90 $2,150.90 GST Paid $1,740.50 $1,740.50 Owner/Sharehldr Capital $0.00 $17,000.00 Sales $21,208.00 $21,208.00 Cost of Goods Sold $10,690.73 $10,690.73 Bank Charges $11.70 $11.70 Advertising $1,780.00 $1,780.00 Rent $2,000.00 $2,000.00 Wages & Salaries $1,780.00 $1,780.00 Commission Revenue $301.00 $301.00 Total: $41,804.50 $41,804.50 $76,552.55 $76,552.55

165

Trial balance after adjustments Baker Enterprises 563 Prestal Avenue Brisbane 4000

Trial Balance

July Account Debit Credit YTD Debit YTD Credit Cheque Account $14,230.40 $30,386.20 Trade Debtors $20,867.30 $22,605.35 Less Prov’n for Doubtful Debts $678.00 $678.00 Merchandise Inventory $2,760.97 $10,270.97 Accrued Revenue $285.00 $285.00 Equip at Cost $0.00 $4,300.00 Equip Accum Dep $90.00 $90.00 Motor Vehicle $0.00 $21,200.00 Motor Vehicle Accum Dep $333.00 $333.00 Trade Creditors $3,914.20 $5,506.45 GST Collected $2,150.90 $2,150.90 GST Paid $1,740.50 $1,740.50 Accrued Expenses $545.00 $545.00 Owner/Sharehldr Capital $0.00 $17,000.00 Sales $21,208.00 $21,208.00 Cost of Goods Sold $10,690.73 $10,690.73 Inventory Adjustment $173.30 $173.30 Bad Debts $678.00 $678.00 Bank Charges $11.70 $11.70 Depreciation on Equipment $90.00 $90.00 Depreciation on Motor Vehicle $333.00 $333.00 Interest Expense $100.00 $100.00 Advertising $1,780.00 $1,780.00 Rent $2,000.00 $2,000.00 Wages & Salaries $2,225.00 $2,225.00 Commission Revenue $586.00 $586.00

Total: $43,735.50 $43,735.50 $78,483.55 $78,483.55

Baker Enterprises 563 Prestal Avenue Brisbane 4000 Aged Receivables [Detail] 31/07 Name ID# Date Total Due 0-30 31-60 61-90 90+ Byron Ltd *None Net 30th after EOM

00002376 9/07 $17,433.90 $17,433.90

Total: $17,433.90 $17,433.90 $0.00 $0.00 $0.00 W Black *None Net 30th after EOM

00000001 30/06 $459.05 $459.05 00002377 19/07 $4,712.40 $4,712.40


166


Aged Payables [Detail]

31/07 Name ID# Date Total Due 0-30 31-60 61-90 90+ Tyrone Ltd *None Net 30th after EOM

00000002 30/06 $1,249.45 $1,249.45 00000003 1/07 $4,257.00 $4,257.00

Total: $5,506.45 $4,257.00 $1,249.45 $0.00 $0.00

Grand Total: $5,506.45 $4,257.00 $1,249.45 $0.00 $0.00 Ageing Percent: 77.3% 22.7% 0.0% 0.0%

Baker Enterprises 563 Prestal Avenue Brisbane 4000 Items List [Summary] Item Primary Supplier Units On Hand Total Value Average Cost Current Price A101

290 $6,281.97 $21.662 $0.00 B111

125 $1,343.00 $10.744 $0.00 C121

252 $2,646.00 $10.50 $0.00


167



1/07 through 31/07 Income Sales Sales $21,208.00 Total Sales $21,208.00 Total Income $21,208.00 Cost of Sales Cost of Goods Sold $10,690.73 Inventory Adjustment $173.30 Total Cost of Sales $10,864.03 Gross Profit $10,343.97 Expenses General & Administrative Exp Bad Debts $678.00 Bank Charges $11.70 Depreciation on Equipment $90.00 Depreciation on Motor Vehicle $333.00 Interest Expense $100.00 Total General & Administrative Exp $1,212.70 Advertising & Promotion Exp Advertising $1,780.00 Total Advertising & Promotion Exp $1,780.00 Operating Expenses Rent $2,000.00 Total Operating Expenses $2,000.00 Employment Expenses Wages & Salaries $2,225.00 $2,225.00 Total Employment Expenses Total Expenses $7,217.70 Operating Profit $3,126.27 Other Income Commission Revenue $586.00 Total Other Income $586.00 Net Profit / (Loss) $3,712.27

168


Balance Sheet

As of July Assets Current Assets Cash On Hand Cheque Account Total Cash On Hand Trade Debtors Less Prov’n for Doubtful Debts Merchandise Inventory Accrued Revenue Total Current Assets Fixed Assets Equipment Equip at Cost Equip Accum Dep Total Equipment Motor Verhicle Motor Vehicle Motor Vehicle Accum Dep Total Motor Vehicle Total Fixed Assets Total Assets Liabilities Current Liabilities Trade Creditors GST Liabilities GST Collected GST Paid Total GST Liabilities Accrued Expenses Total Current Liabilities Total Liabilities Net Assets Equity Owner/Shareholder’s Equity Owner/Shareholder Capital Total Owner/Shareholder’s Equity Current Year Earnings Total Equity

-$30,386.20 -$30,386.20 $22,605.35

-$678.00 $10,270.97

$285.00 $2,097.12

$4,300.00 -$90.00

$4,210.00

$21,200.00 -$333.00

$20,867.00 $25,077.00

$27,174.12

$5,506.45

$2,150.90 -$1,740.50

$410.40 $545.00

$6,461.85 $6,461.85

$20,712.27

$17,000.00

$17,000.00

$3,712.27 $20,712.27

169

Baker Enterprises 563 Prestal Avenue Brisbane 4000 Trial Balance August

Account Debit Credit YTD Debit YTD Credit Cheque Account $410.40 $30,796.60 Trade Debtors $0.00 $22,605.35 Less Prov’n for Doubtful Debts $0.00 $678.00 Merchandise Inventory $0.00 $10,270.97 Accrued Revenue $285.00 $0.00 Equip at Cost $0.00 $4,300.00 Equip Accum Dep $0.00 $90.00 Motor Vehicle $0.00 $21,200.00 Motor Vehicle Accum Dep $0.00 $333.00 Trade Creditors $0.00 $5,506.45 GST Collected $2,150.90 $0.00 GST Paid $1,740.50 $0.00 Accrued Expenses $545.00 $0.00 Owner/Shareholder Capital $0.00 $17,000.00 Sales $0.00 $21,208.00 Cost of Goods Sold $0.00 $10,690.73 Inventory Adjustment $0.00 $173.30 Bad Debts $0.00 $678.00 Bank Charges $0.00 $11.70 Depreciation on Equipment $0.00 $90.00 Depreciation on Motor Vehicle $0.00 $333.00 Interest Expense $100.00 $0.00 Advertising $0.00 $1,780.00 Rent $0.00 $2,000.00 Wages & Salaries $445.00 $1,780.00 Commission Revenue $285.00 $301.00 Total: $2,980.90 $2,980.90 $75,913.05 $75,913.05

170

Chapter 6 Accounting for cash

6.1

* Signed by J Finlay or authorised officer.

6.2

* Signed by S Shaw or authorised officer.

171

Receipt No 234 Date 11 January 2008 Received from P Nixon For Painting of premises Authorising Officer * Cash $900

Receipt No 229 Date 1 June 2008 Received from J Wilson For Settlement of account Authorising Officer * Cash $2000

6.3

D McArthur Cash Receipts Journal

Date Rec Particulars Folio Accounts Sales Rent Other GST Details Cash at COGS Dr

No Receivable Revenue Collected Bank Invent Cr Cr Cr Cr Cr Cr

2008

May 1 1000 L Kane 1 000 100 1 100

CRS Sales 4 000 400 4 400 5 500 2 800

3 CRS Sales 3 700 370 4 070 2 400

6 1001 B Cluwa 100 10 110

7 1002 P Reynolds 3104.1 922 922

1003 H Wallace 3104.2 1 522 1 522

CRS Sales 5 000 5 000 7 444 3 000

31 $2 444 $12 700 $1 100 $880 $17 124

(1101) (1106) (4102.2) (3103) $8 200

(2105/3106)

172

[Error in text—Assets should have inventories $15 000. Capital—D McArthur should be $19 465]

D McArthur Ledger

2008 2008

Sales No 1101

May 31 Cash CR 12 700

Rent Revenue No 1105


Cost of Goods Sold No 2105


Cash at Bank No 3103

May 1 Balance 765

31 Sundry accounts CR 17 124

P Reynolds No 3104.1

May 1 Balance 1 600 May 7 Cash CR 922

H Wallace No 3104.2

May 1 Balance 2 100 May 7 Cash CR 1 522

Inventories No 3106

May 1 Balance 15 000 May 31 Cost of goods sold CR 8 200

GST Collected No 4102.2

May 31 Cash CR 880

Capital—D McArthur No 5101

May 1 Balance 19 465

173

Trial Balance as at 31 May 2008

Dr Cr Sales 12 700 Rent Revenue 1 100 Cost of Goods Sold 8 200 Cash at Bank 17 889 P Reynolds 678 H Wallace 578 Inventories 6 800 GST Collected 880 Capital—D McArthur 19 465

$34 145 $34 145

6.4 S Smith

Cash Receipts Journal Date Receipt Particulars Folio Accounts Sales Commission Fees Other GST Details Cash at COGS Dr

No Receivable Revenue Collected Bank Invent Cr Cr Cr Cr Cr Cr Dr Cr

May 7 CRS Sales 140 14 154 120

12 Fees 50 5 55

13 P Day 3104.1 171 171 380

8 CRS Sales 130 13 143 115

14 Commission 20 2 22 165

9 CRS Sales 125 125 90

10 CRS Sales 120 12 132 105

15 Fees 40 4 44 176

11 16 Rent 70 7 77

CRS Sales 230 23 253 330 140

12 17 Commission 70 7 77

$171 $745 $90 $90 $70 $87 $1 253

(1101.1) (1106) (1102) (4102.2) (3103) $570

(2105/ 3106)

174

Note: A separate column could have been made for Rent Revenue.

S Smith Ledger

Sales No 1101

May 31 Cash CR 745

Fees Revenue No 1102

May 31 Cash CR 90

Commission Revenue No 1103

May 31 Cash CR 90


May 11 Cash CR 70


May 31 Cash CR 570


May 1 Balance 720

31 Sundry accounts CR 1253

P Day No 3104.1

May 1 Balance CR 370 May 13 Cash CR 171

Inventories No 3106

May 1 Balance 1 580 May 31 Cost of goods sold CR 570


May 31 Cash CR 87

Capital—S Smith No 5101

May 1 Balance 2 670 175

6.5

* To be signed by C Jones or authorised officer.

6.6

* To be signed by N Mays or authorised officer.

176

Trial Balance as at 31 May

Dr Cr Sales 745 Fees Revenue 90 Commission Revenue 90 Rent Revenue 70 Cost of Goods Sold 570 Cash at Bank 1 973 P Day 199 Inventories 1 010 GST Collected 87 Capital—S Smith 2 670

$3 752 $3 752

10 June 2008

17 November 2008

10 June 2008

17 November 2008

6.7 a Cheque butt. b Decrease cash at bank.

6.8 N Blake

Cash Payments Journal Date Cheque No Particulars Folio Accounts Inventories Wages Other GST Credits Cash at

Payable Payments Received Bank Dr Dr Dr Dr Dr Cr

2008

Sept 1 017 Purchases 2 000 200 2 200

2 018 Drawings 5101A 100

Sundry office expenses 2417 100 10 210

019 P Roberts 4101.1 1 022 1 022

4 020 Furniture 3201 3 000 300 3 300

5 021 Purchases 2 300 230 2 530

7 022 Wages 550 550

8 023 Purchases 40 40

$1 022 $4 340 $550 $740 $9 852

(3106) (2421) (4102.2A) (3103)

177

N Blake Ledger

2008 2008

Sundry Office Expenses No 2417

Sept 2 Cash CP 100

Wages No 2421

Sept 30 Cash CP 550


Sept 1 Balance CP 12 500 Sept 30 Sundry accounts CP 9 852

Inventories No 3106

Sept 1 Balance 462

30 Cash CP 4 340

Furniture No 3201

Sept 4 Cash CP 3 000

P Roberts No 4101.1

Sept 2 Cash CP 1 022 Sept 1 Balance 1 022

GST Credits Received No 4102.2A

Sept 30 Cash CP 740

Capital—N Blake No 5105.1

Sept 1 Balance 11 940

Drawings—N Blake No 5101A

Sept 2 Cash CP 100

178

Trial Balance as at 30 September 2008

Dr Cr Sundry Office Expenses 100 Wages 550 Cash at Bank 2 648 Inventories 4 802 Furniture 3 000 GST Credits Received 740 Capital—N Blake 11 940 Drawings—N Blake 100

$11 940 $11 940

6.9 B Best

Cash Receipts Journal Date Receipt Particulars Folio Accounts Sales Rent Other GST Details Cash at COGS Dr

No Receivable Revenue Collected Bank Invent Cr Cr Cr Cr Cr Cr Dr

2008

Sep 1 81 C Muller 3104.1 500 500

CRS Sales 800 800 600

16 CRS Sales 3 000 300 3 300 1 800

25 82 D Miles 3104.2 461 461

CRS Sales 2 000 200 2 200 2 661 1 500

27 CRS Sales 1 000 100 1 100 800

30 $961 $6 800 $600 $8 361

(1101) (4102.2) (3103) $4 700

(2105/ 3106)

B Best Cash Payments Journal

Date Cheque No Particulars Folio Accounts Inventories Wages Other GST Credits Cash at

Payable Payments Received Bank Dr Dr Dr Dr Dr Cr

2008

Sept 2 100 Wages 1 000 1 000

101 Purchases 2 000 200 2 200

13 102 B Nally 4101.1 330 330

16 103 Wages 1 000

Sundry expenses 2417 100 10 1110

26 104 Office furniture 3210 820 82 902

27 105 Purchases 100 100

30 106 A Morrison 4102.1 206 206

$536 $2 100 $2 000 $920 $292 $5 848

(3106) (2421) (4102.2A) (3103)

179

B Best Ledger

2008 2008

Sales No 1101

Sep 30 Cash CR 6 800


Sep 30 Inventories CR 4 700

Sundry Expenses No 2417

Sep 16 Cash CP 100

Wages No 2421

Sep 30 Cash CP 2 000


Sep 1 Balance 1 500 Sep 30 Sundry accounts CP 5 848


C Muller No 3104.1

Sep 1 Balance 750 Sep 30 Cash CR 500

D Miles No 3104.1

Sep 1 Balance 461 Sep 30 Cash CR 461

Inventories No 3106

Sep 1 Balance 5 639 Sep 30 Cost of goods sold CR 4 700

30 Cash CP 2 100

Office Furniture No 3201

Sep 26 Cash CP 820

B Nally No 4101.1

Sep 13 Cash CP 330 Sep 1 Balance 411

A Morrison No 4101.2

Sep 25 Cash CP 206 Sep 1 Balance 206


Sep 30 Cash CR 600


Sep 30 Cash CP 292

Capital—B Best No 3105.1

Sep 1 Balance 7 733 180

Trial Balance

as at 30 September 2008

Dr Cr

Sales 6 800 Cost of Goods Sold 4 700 Sundry Expenses 100 Wages 2 000 Cash at Bank 4 013 C Muller 250 Inventories 3 039 Office Furniture 820 B Nally 81 GST Collected 600 GST Credits Received 292 Capital—B Best 7 733

$15 214 $15 214

181

6.10

Billingham Enterprises Cash Receipts Journal

Date Receipt Particulars Folio Accounts Sales Service Rent Other GST Details Cash at COGS Dr

No Receivable Charges Revenue Receipts Collected Bank Invent Cr Cr Cr Cr Cr Cr Cr Dr

May 5 CRS Sales 1 060 106 1 166 720

51 R Long 190 19 209 1 375

8 52 Rent revenue 500 50 550

9 CRS Sales 181 181 90

12 53 J Andrews 3104.1 1 004 1004

CRS Sales 780 78 858 510

54 Furniture 3201 70 7 77 1 939

16 BS Interest revenue 1105 150 150

20 55 Service charge 160 16 176

22 56 Rent revenue 500 50 550

CRS Sales 880 88 968 1 518 615

27 57 Hodgetts Ltd 140 14 154

58 Rent revenue 500 50 550 704

30 CRS Sales 180 18 198 90

$1 004 $3 081 $490 $1 500 $220 $496 $6 791

(1101) (1102) (1106) (4102.2) (3103) $2 025

(2105/ 3106)

Billingham Enterprises Cash Payments Journal

Date Cheque Particulars Folio Accounts Inventories Wages and Cleaning Other GST Credits Cash at

No Payable Salaries Payments Received Bank Dr Dr Dr Dr Dr Dr Cr

May 2 701 A Freeman 4101.1 641 641

3 702 Purchases 45 45

6 703 Salaries 962 962

10 704 Cleaning 400 40 440

15 705 Drawings 5101A 100 100

17 706 Purchases 1 390 139 1 529

707 Wages 519 519

21 708 Machinery 3206 4 620 462 5 082

24 709 Commission Expense 2306 50 5 55

25 710 Purchases 980 98 1 078

28 711 Wages 519 519

31 712 Cleaning 400 40 440

$641 $2 415 $2 000 $800 $4 770 $784 $11 410

(3106) (2421) (2423) (4102.2A) (3103)

182

(2105/ 3106)

[Error in text—Balances as at 1 May: Cash at Bank $4500; J Andrews $2000; Inventories $4300; Furniture $1000; A Freeman (Accounts Payable) $641; Capital $11 159]

Billingham Enterprises Ledger

Sales No 1101


Service Fees No 1102

May 31 Cash CR 490

Interest Revenue No 1105

May 16 Cash CR 150




May 31 Inventories CR 2 025

Commission Expense No 2306

May 24 Cash CP 50

Wages and Salaries No 2421

May 31 Cash CP 2 000

Cleaning No 2423

May 31 Cash CP 800


May 1 Balance 4 500 May 31 Sundry accounts CR 11 410


J Andrews No 3104.1

May 1 Balance 2000 May 12 Cash CR 1 004

Inventories No 3105

May 1 Balance 4 300 May 31 COGS CR 2 025

31 Cash CP 2 415

Furniture No 3201

May 1 Balance 1000 May 12 Cash CR 70

Machinery No 3207

May 21 Cash CP 4 620

A Freeman No 4101.1

May 2 Cash CP 641 May 1 Balance 641

183


May 31 Cash CR 496


May 31 Cash CP 784

Capital No 5101

May 1 Balance 11 159

Drawings No 5101A

May 15 Cash CP 100

Trial Balance as at 31 May ….

Dr Cr Sales 3 081 Service Fees 490 Interest Revenue 150 Rent Revenue 1 500 Cost of Goods Sold 2 025 Commission Expense 50 Wages and Salaries 2 000 Cleaning Expense 800 Cash at Bank 119 J Andrews 996 Inventories 4 690 Furniture 930 Machinery 4 620 GST Collected 496 GST Credits Received 784 Capital—A Billingham 11 159 Drawings 100

$16 995 $16 995

6.11 a The purpose of the bank reconciliation is to show that agreement exists between the cash records kept by the business and the

records of cash dealings by the business kept by the bank. b Bank reconciliation is very important as it highlights any discrepancies between the records kept by the business and those kept

by the bank. The bank is an independent organisation that has no direct link with the running of the business.

184

$499

6.12 a

E Toft

Cash Receipts Journal (Extract) Date Receipt No Particulars Bank

2008

452 etad ot seirtnE 92 enuJ

P Small 45

$299

(3103)

Cash Payments Journal (Extract) Date Receipt No Particulars Bank

2008

062 etad ot seirtnE 72 enuJ

30 Bank charges* (bank fee) 5

Bank charges (account-keeping fee) 10

$275

(3103)

* Accountants prefer to charge fees to a Bank Charges account. b

Ledger


2008 2008

June 1 Balance b/d 200 June 30 Sundry accounts CP 275

30 Sundry accounts CR 299 Balance c/d 224 $499

July 1 Balance b/d $224

c

Bank Reconciliation Statement as at 30 June 2008

Credit balance as per bank statement 295 Add Deposits not yet credited 39

334

Less Unpresented cheques No 278 80

279 30 110 Debit balance as per Cash at Bank account $224

185

6.13 a

J Anderson


2008

Nov 25 Entries to date 315.58

30 T Rose 54.60

$370.18

(3103)

Cash Payments Journal (Extract) Date Cheque No Particulars Bank

2008

Nov 16 Entries to date 260.25

30 Bank charges 1.50

Bank charges 7.50

$269.25

(3103)

Ledger


2008 2008

Nov 1 Balance b/d 350.00 Nov 30 Sundry accounts CP 269.25

30 Sundry accounts CR 370.18 Balance c/d 450.93

$720.18 $720.18

Dec 1 Balance b/d 450.93

Bank Reconciliation Statement as at 30 November 2008

Credit balance as per bank statement 396.63 Add Deposits not yet credited 80.80

477.43 Less Unpresented cheques

No. 865 26.50 26.50 Debit balance as per Cash at Bank account $450.93

186

6.14 J Weller


2008

Apr 30 Entries to date 484.71

Interest on bonds 7.90

$492.61

(3103)


2008

Apr 30 Entries to date 364.06

Interest on overdraft 5.70

Bank charges 6.80

$376.56

(3103)

Ledger

Cash at Bank No. 3103

2008 2008

Apr 30 Sundry accounts CR 492.61 Apr 1 Balance b/d 247.50

Balance c/d 131.45 30 Sundry accounts CP 376.56

$624.06 $624.06

May 1 Balance b/d 131.46 Bank Reconciliaiton Statement as at 30 April 2008

Debit balance as per bank statement 106.01 Add Unpresented cheques

No 747 81.90 81.90 187.91

Less Deposits not yet credited 56.46 Credit balance as per Cash at Bank account $131.45

187

6.15 R Murray


2008

Sept 21 Entries to date 3 050

30 Interest on investment 80

$3 130

(3103)


2008

Sept 27 Entries to date 1 176

30 A Donaldson (dishonoured cheque) 90

Bank charges 16

$1 282

(3103)

Ledger


2008 2008

Sept 1 Balance b/d 2 000 Sept 30 Sundry accounts CP 1 282

Sundry accounts CR 3 130 Balance c/d 3 848

$5 130 $5 130

Oct 1 Balance b/d 3 848

Bank Reconciliation Statement as at 30 September 2008

Credit balance as per bank statement 2 958 Add Deposits not yet credited 1 200

4 158 Less Unpresented cheques

No 2029 $70 2030 50 2032 190 310

Debit balance as per Cash at Bank account $3 848

188

6.16 a

A Johnson Cash Receipts Journal (Extract)

Date Receipt No Particulars Bank

2008

Oct 31 Entries to date 2 292

R Dawson 122

$2 414

(3103)

Cash Payments Journal (Extract) Date Cheque No Particulars Bank 2008

Oct 29 Entries to date 2 230

31 Bank charges 5

Bank charges 10

$2 245

(3103)

Ledger


2008 2008

Oct 1 Balance b/d 7 359 Oct 31 Sundry accounts CP 2 245

31 Sundry accounts CR 2 414 Balance c/d 7 528

$9 773 $9 773

Nov 1 Balance b/d 7 528

b

Bank Reconciliation Statement as at 31 October 2008

Credit balance as per bank statement 8 144 Add Deposits not yet credited 600


No 721 $56 731 970 734 42 736 115 737 21 739 12 1 216

Debit balance as per Cash at Bank account $7 528 c Cheque 733 is missing because it has been cancelled. It should be available for the auditor to inspect. 189

6.17 C Webb

Cash Receipts Journal (Extract) Date Receipt No Particulars Bank 2008

June 30 Entries to date 1 048

Interest on bonds 50

$1 098

(3103)


2008

June 30 Entries to date 854

S Wills (dishonoured cheque) 41

Bank charges 11

Bank charges 17

Debit card fee 18

Credit card fee 24

$965

(3103)

Ledger


2008 2008

June 1 Balance b/d 1 488 June 30 Sundry accounts CP 965


$2 586 $2 586

July 1 Balance b/d 1 621

190

Bank Reconciliation Statement as at 30 June 2008


102 191 2 421

Less Unpresented cheques No 161 $70

167 217 171 46 172 13 173 70 176 29 177 122 179 21 180 44 181 15 182 82 183 71 800

Debit balance as per Cash at Bank account $1 621

191

6.18 W Nichols


Jan 31 Entries to date 460

$460

(3103)


2008

Jan 31 Entries to date 733

Interest on overdraft 17

Bank charges 2

$752

(3103)

Ledger


2008 2008

Jan 31 Sundry accounts CR 460 Jan 1 Balance b/d 120

Balance c/d 412 31 Sundry accounts CP 752

$872 $872

Feb 1 Balance b/d 412

Bank Reconciliation Statement as at 31 January 2008

Credit balance as per bank statement 70 Add Deposits not yet credited 100

170 Less Unpresented cheques

No 204 $20 217 116 220 436 221 10 582

Credit balance as per Cash at Bank account $412 192

6.19 i a Cash Receipts Journal (Extract)

Particulars Other Bank A Warmsley 54 54

b Bank Reconciliation Statement

Debit balance as per bank statement 1 000 Add Bank error—cheque no 274 54

1 054 c Bank Reconciliation Statement

Credit balance as per bank statement 1 000 Less Bank error—cheque no 274 54

946 ii a Cash Payments Journal (Extract)

Particulars Inventories Bank Inventories 18 18


Debit balance as per bank statement 1 000 Less Bank error—cheque no 189 18

982

c Bank Reconciliation Statement

Credit balance as per bank statement 1 000 Add Bank error—cheque no 189 18

1 018 iii a Cash Receipts Journal (Extract)

Particulars Sales Bank Sales 18 18

b Bank Reconciliation Statement Debit balance as per bank statement 1 000 Add Bank error—deposit 18 Jan 18

1 018


Credit balance as per bank statement 1 000 Less Bank error—deposit 18 Jan 18

982 iv a Cash Payments Journal (Extract)

Particulars Other Bank R Saunders 90 90


Debit balance as per bank statement 1 000 Less Bank error—deposit 26 March 90

910


Credit balance as per bank statement 1 000 Add Bank error—deposit 26 March 90

$1 090

Note: The net method of adjusting for bank errors in the bank reconciliation statement is shown here. The gross method is equally acceptable and should come to the same final answers.

193

6.20 Most errors found during bank reconciliation are due to human error that occurs accidentally or deliberately. Wrong figures, the transposing of numbers or entering a completely wrong figure, can occur accidentally or could be entered to cover fraud where cash has been misappropriated.

6.21 W Klein


2008

Aug 27 Entries to date 2 446

31 B Thompson (Error) 30

$2 476

(3103)


2008

Aug 25 Entries to date 1 014

Bank charges 15

Bank charges 6

31 $1 035

(3103)

Ledger


2008 2008

Aug 1 Balance b/d 610 Aug 31 Sundry accounts CP 1 035


$3 086 $3 086

Sept 1 Balance b/d 2 051

Bank Reconciliaiton Statement as at 31 August 2008

Credit balance as per bank statement 2 671 Less Unpresented cheques

No 907 $310 922 215 923 95 620

Debit balance as per Cash at Bank account $2 051 194

6.22 A Massina


2008

Jan 31 Entries to date 1 380

$1 380

(3103)


2008

Jan 31 Entries to date 1 287

Bank charges 10

J Adams (dishonoured cheque) 110

Bank charges 4

$1 411

(3103)

Ledger


2008 2008

Jan 31 Sundry accounts CR 1 380 Jan 1 Balance b/d 100

Balance c/d 131 31 Sundry accounts CP 1 411

$1 511 $1 511


Bank Reconciliation Statement as at 31 January 2008

Credit balance as per bank statement 362 Add Deposit not yet credited 110

472 Less Unpresented cheques

No 217 $30 225 90 228 12 229 115 230 82 232 319 648

(176) Add Bank error cheque 230 ($72-$27) 45 Credit balance as per Cash at Bank account $131

195

6.23 A Marvin


2008

Apr 30 Entries to date 7 760.42

P Wilson 500.00

$8 260.42

(3103)


2008

Apr 30 Entries to date 7 625.00

Bank charges 15.00

$7 640.00

(3103)

Ledger


2008 2008

Apr 1 Balance b/d 1 316.00 Apr 30 Sundry accounts CP 7 640.00

30 Sundry accounts CR 8 260.42 Balance c/d 1 936.42

$9 576.42 $9 576.42

May 1 Balance b/d 1 936.42

Bank Reconciliation Statement as at 30 April 2008

Credit balance as per bank statement 1 832.24 Add Deposit not yet credited 264.18

2 096.42 Less Unpresented cheques

No 154 $26 159 134 160.00

Debit balance as per Cash at Bank account $1 936.43 196

6.24 R Brewster


2008

Aug 31 Entries to date 22 062.47

Interest on government bonds 216.00

$22 278.47

(3103)

Cash Payments Journal (Extract) Date Cheque No Particulars Bank 2008

Aug 31 Entries to date 20 427.15

C Harrison (dishonoured cheque) 116.00

Interest on overdraft 64.00

Bank charges 10.00

$20 617.15

(3103)

Ledger


2008 2008

Aug 1 Sundry accounts CR 22 278.47 Aug 1 Balance b/d 9 620.50

Balance c/d 7 959.18 31 Sundry accounts CP 20 617.15

$30 237.65 $30 237.65

Sept 1 Balance b/d 7 959.18

Bank Reconciliation Statement as at 31 August 2008

Debit balance as per bank statement 7 190.18 Add Unpresented cheque

No 572 $764 579 125 889.00

8 079.18 Less Deposits not yet credited $94

26 120.00 Credit balance as per Cash at Bank account $7 959.18

197

6.25 Spreadsheet—cash register reconciliation.

6.26 Spreadsheet—cash receipts journal.


198

6.28 R Bradley


Feb 28 Entries to date 6 461

Rent 800

D Johnson 920

Sales (Error) 100

$8 281

(3103)


2008

Feb 28 Entries to date 4 526

Marsden (dishonoured cheque) 214

Bank charges 10

Bank charges 15

$4 765

(3103)

Ledger


2008 2008

Feb 1 Balance b/d 5 668 Feb 28 Sundry accounts CP 4 765


$13 949 $13 949

Mar 1 Balance b/d 9 184 199

Bank Reconciliation Statement as at 28 February 2008



No 865 $19 869 86 875 29 878 88 880 527 884 82 886 270 887 82 1 183

9 194 Less Bank error cheque no 873 10 Debit balance as per Cash at Bank account $9 184

200

6.29 a

A Gaskell

Cash Receipts Journal Date Bank

July 4 810

211

10 430

140

14 820

330

19 1 000

31 B/S Rent revenue 210

$3 951

Cash Payments Journal Date Cheque No Bank

571 475

July 5 572 420

14 573 1 020

574 530

21 575 600

24 576 150

30 577 16

31 B/S Bank charges 7

B/S Malfont Ltd 460

B/S Bank charges 6

B/S Debit card fee (EFTPOS fee) 14

B/S Credit card fee (Merchant fee) 23

$3 721

(3103)

b Bank Reconciliation Statement as at 31 July

Credit balance as per bank statement 6 854 Less Unpresented cheques

No 491 $45 560 191 573 1020 574 600 577 16 1 872

4 982 Less Bank error cheque no 574 30 Debit balance as per Cash at Bank account $4 952

201

c Cash at Bank No 3103

July 1 Balance b/d 4 722 July 31 Sundry accounts CP 3 721

July 31 Sundry accounts CR 3 951 Balance c/d 4 952

$8 673 $8 673

Aug 1 Balance b/d 4 952

6.30 a 2005 $433.8 million; 2006 $525.9 million b $92.1 million increase; 21 per cent increase c Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank

overdrafts that are repayable on demand and form an integral part of the consolidated entity’s cash management are included as a component of cash and cash equivalents for the purpose of the Cash Flow Statement.

d $529.9 million e $39 938.3 million

202

Chapter 7 Accounting for accounts receivable and accounts payable

7.1 Credit transactions occur where goods are provided or services performed and these are not paid for at the time but will be paid for at a future date. These credit transactions give rise to the terms receivables and payables. Amounts that are due to the firm as a result of credit transactions are called receivables and amounts owing by the firm as a result of credit transactions are called payables.

7.2 a

Discount (2.5 × 40 × $50 000 × 12) 6 000 100 100

Staff costs 35 000 Printing, postage, stationery, telephone 7 000 Opportunity cost ($50 000 × 7 × 1 × 12) 3 500

100 12

Total costs for year $51 500 b

$51 500 × 100 45 = $114 444 Sales must increase by $114 444 just to cover the cost of providing credit.

7.3 $3 000 × 100 40 = $7 500

7.4 Tax Invoice

Qty Description Unit value GST Total 10 Unpainted chests of drawers 80.00 8.00 880.00

5 Dining tables and chairs 800.00 80.00 4 400.00 2 Lounge suites 1 000.00 100.00 2 200.00

7 480.00

203

7.5

Tax Invoice Qty Description Unit price GST Total 200 Rolls Rhapsody wallpaper 14.00 1.40 3 080.00 100 One-litre tins white gloss paint 13.95 1.39 1 534.00

20 Wallpaper rollers 13.00 1.30 286.00 20 Wallpaper trays 12.95 1.29 284.80

5 184.80 7.6

D McLean Enterprises Sales Journal P4

Date Tax Invoice Accounts Folio Sales GST Accounts COGS Dr

No Receivable Collected Receivable Inventories Cr Cr Dr Cr

July 6 22 G Alex 3104.1 1 000 100 1 100 400

7 23 L Abraham 3104.2 900 900 500

8 24 Victor Enterprises 3104.3 500 50 550 230

24 25 G Alex 3104.1 200 20 220 95

31 $2 600 $170 $2 770

(1101) (4102.2) $1 225

(2105/3106)

D McLean Ledger P1

Sales No 1101

July 31 Accounts receivable S4 2 600


July 31 Inventories S4 1 225

G Alex No 3104.1

July 6 Sales S4 1 100

24 Sales S4 220

L Abraham No 3104.2

July 7 Sales S4 900

Victor Enterprises No 3104.3

July 8 Sales S4 550

Inventories No 3106

July 31 Cost of goods sold S4 1 225

GST Collected 4102.2

July 31 Sales S4 170 204

7.7 C Ivy

Sales Journal P4 Date Tax Invoice Accounts Folio Sales GST Accounts COGS Dr


Aug 1 8 B McLennan 3104.1 900 90 990 425

9 C Simpson 3104.2 500 50 550 180

15 10 B McLennan 3104.1 1 200 1 200 490

28 11 C Simpson 3104.2 450 45 495 270

31 $3 050 $185 $3 235

(1101) (4102.2) $1 365

(2105/3106)

C Ivy Ledger P1

Sales No 1101

Aug 31 Accounts receivable S4 3 050


Aug 31 Inventories S4 1 365

B McLennan No 3104.1

Aug 1 Sales S4 990

15 Sales S4 1 200

C Simpson No 3104.2

Aug 1 Sales S4 550

28 Sales S4 495

Inventories No 3106

Aug 31 Cost of goods sold S4 1 365


Aug 31 Sales S4 185 205

7.8 M McAuliffe

Purchases Journal P10 Date Tax Invoice Accounts Payable Folio Inventories GST Credits Received Accounts

No Dr Dr Cr

Nov 2 82 A Proctor 4101.1 800 80 880

3 22 Schubert Manufacturing 4101.2 750 750

10 97 A Proctor 4101.1 1 400 140 1 540

25 101 A Marsden 4101.3 600 60 660

30 $3 550 $280 $3 830

(3106) (4102.2A)

M McAuliffe Ledger P1

Inventories No 3106

Nov 30 Accounts payable P10 3 550

A Proctor No 4101.1

Nov 2 Inventories P10 880

10 Inventories P10 1 540

Schubert Manufacturing No 4101.2


A Marsden No 4101.3



Nov 30 Accounts payable P10 280

206

7.9 a

M Ryan

Purchases Journal P10 Date Tax Invoice Accounts Folio Inventories GST Credits Accounts Payable

No Payable Received Dr Dr Cr

Sept 7 10 G Wilson 4101.1 5 000 500 5 500

10 11 Butler Ltd 4101.2 400 400

14 12 Christie and Co 4101.3 660 66 726

27 13 Christie and Co 4101.3 1 400 140 1 540

30 $7 460 $706 $8 166

(3106) (4102.2A)

M Ryan Ledger P1

Inventories No 3106

Sept 30 Accounts Payable P10 7 460

G Wilson No 4101.1

Sept 7 Inventories P10 5 500

Butler Ltd No 4101.2

Sept 10 Inventories P10 400

Christie and Co No 4101.3

Sept 14 Inventories P10 726

27 Inventories P10 1 540


Sept 30 Accounts payable P10 706

b The firm has renumbered the invoices.

7.10 a Interest would be charged as a penalty to make accounts receivable pay on time to avoid the charge, particularly if the rate

charged is higher than the current commercial interest rate on borrowed money. b If the accounts receivable has informed the firm, it is having trouble meeting its commitments and has asked for an extension

of time in which to pay. An accounts receivable who has been a regular payer may inadvertently have missed a payment. c

Sept 1 Gator Industries Dr 12 Interest revenue Cr 12

Sept 8 Interest expense Dr 8 Mantor Industries Cr 8

Sept 8 J Handon Dr 70 Interest revenue Cr 70

207

7.11 a

K Sam General Ledger

Sales No 1101

Jan 31 Accounts receivable S 2 000

Cash CR 1 698


Jan 4 Cash CR 200


Jan 31 Inventories S 1 050

Inventories CR 877


Jan 31 Sundry accounts CR 4 685

Accounts Receivable Control No 3104

Jan 1 Balance b/d 2 900 Jan 31 Cash CR 2 650

31 Sales S 2 160 Balance c/d 2 410

$5 060 $5 060

Feb 1 Balance b/d 2 410

Inventories No 3106

Jan 1 Balance b/d 23 000 Jan 31 Cost of goods sold S 1 050

Cost of goods sold CR 877


Jan 31 Sales S 160

Cash CR 137

Capital No 5101

Jan 1 Balance b/d 25 900

K Sam Trial Balance as at 31 January

Account Account Debit Credit Number $ $ 1101 Sales 3 698 1104 Interest Revenue 200 2105 Cost of Goods Sold 1 927 3103 Cash at Bank 4 685 3104 Accounts Receivable Control 2 410 3105 Inventories 21 073 4102.2 GST Collected 297 5101 Capital 25 900 _______ ______ $30 095 $30 095

208

Accounts Receivable Ledger

C Muller No 3104.1

Jan 1 Balance b/d 900 Jan 1 Cash CR 900

$900 $900

N Noel No 3104.2


6 Sales S 660 31 Balance c/d 660

$1 510 $1 510


A Graham No 3104.3

Jan 1 Balance b/d 550 Jan 31 Balance c/d 950

14 Sales S 400

$950 $950

Feb 1 Balance b/d $950

J Frank No 3104.4

Jan 12 Sales S 770 Jan 31 Balance c/d 770

$700 $700


F Wilson No 3104.5


$600 $600

R Pratt

Jan 16 Sales S 330 Jan 21 Cash CR 300

31 Balance c/d 30

$330 $330

Feb 1 Balance b/d 30 b

Schedule of Accounts Receivable as at 31 January

3104.2 N Noel 660 3104.5 A Graham 950 3104.3 J Frank 770 3104.6 R Pratt 30 Balance as per Control account $2 410

209

7.12 a

B Simpson General Ledger

Sales No 1101

Nov 30 Accounts receivable S 1 540

Cash CR 1 650


Nov 10 Cash CR 40


Nov 14 Cash CR 450


Nov 30 Inventories S 780

Inventories CR 985


Nov 30 Sundry accounts CR 3225


Nov 1 Balance b/d 550 Nov 30 Cash CR 880


$2 169 $2 169

Dec 1 Balance b/d 1289

Inventories No 3106

Nov 1 Balance b/d 21 450 Nov 30 Cost of goods sold S 780



Nov 30 Sales S 79

Cash CR 205

Capital No 5101

Nov 1 Balance b/d 22 000

B Simpson Trial Balance as at 30 November

Account Account Debit Credit Number $ $ 1101 Sales 3 190 1105 Interest Revenue 40 1106 Rent Revenue 450 2105 Cost of Goods Sold 1 765 3103 Cash at Bank 3 225 3104 Accounts Receivable Control 1 289 3106 Inventories 19 685 4102.2 GST Collected 284 5101 Capital 22 000 _______ ______ $25 964 $25 964

210


S Brown No 3104.1


Balance c/d 10

$200 $200


R Sanderson No 3104.2



$1 050 $1 050


A Mathews No 3104.3

Nov 1 Balance b/d 50

M Adamson No 3104.4

Nov 1 Sales S 440 Nov 30 Balance 440

$440 $440


T Mitchell No 3104.5

Nov 21 Sales S 429 Nov 30 Cash CR 390

Balance c/d 39

$429 $429


b

Schedule of Accounts Receivable as at 30 November

3104.1 S Brown 10 3104.2 R Sanderson 750 3104.3 A Mathews 50 3104.4 M Adamson 440 3104.5 T Mitchell 39 Balance as per Control Account $1 289

211

7.13 a

S Jacobs General Ledger

Sales No 1101

Apr 30 Accounts receivable S 6 589

Cash CR 1 873


Apr 30 Inventories S 3 869

Inventories CR 863


Apr 30 Sundry accounts CR 5 911


Apr 1 Balance b/d 2 917 Apr 30 Cash CR 3 918

Sales S 7 215 Balance c/d 6 214

$10 132 $10 132

May 1 Balance b/d 6 214

Inventories No 3106

Apr 30 Cost of goods sold S 3 869



Apr 30 Sales S 635

Cash CR 120

212


M Ballard No 3104.1

Apr 1 Balance b/d 624 Apr 30 Cash CR 630

30 Balance c/d 6

$630 $630

May 1 Balance b/d 6

S Dawkins No 3104.2

Apr 22 Sales S 55 Apr 1 Balance b/d 15

28 Cash CR 40

$55 $55

C Ramak No 3104.3


$92 $92

J Fern No 3104.4

Apr 5 Sales S 825 Apr 28 Cash CR 750

30 Balance c/d 75

$825 $825

May 1 Balance b/d $75

R Lyons No 3104.5

Apr 1 Balance b/d 1 416 Apr 4 Cash CR 1 416

2 Sales S 2 882 30 Balance c/d 2 964

16 Sales S 82

$4 380 $4 380

May 1 Balance b/d 2 964

A Brockhurst No 3104.6

Apr 20 Sales S 247 Apr 28 Cash CR 190

30 Balance c/d 57

$247 $247

May 1 Balance b/d 57

C Thompson No 3104.7


$800 $800

F Lillie No 3104.8

Apr 15 Sales S 880 Apr 30 Balance c/d 880

$880 $880


C Peterson No 3104.9

Apr 16 Sales S 2 167 Apr 30 Balance c/d 2 167

$2 167 $2 167

May 1 Balance b/d 2 167 213

S Taylor No 3104.10

Apr 29 Sales S 77 Apr 30 Balance c/d 77

$77 $77


b

Schedule of Accounts Receivable as at 30 April

3104.4 J Fern 75

3104.5 R Lyons 2 964

3104.6 A Brokhurst 57

3104.8 F Lillee 880

3104.9 C Peterson 2 167

3104.10 S Taylor 77

6 220

3104.1 M Ballard (Cr) 6

Balance as per Control account $6 214

214

7.14 a

W McGovern General Ledger

Advertising No 2301

Mar 12 Cash CP 210

Vehicle Expenses No 2409

Mar 5 Cash CP 90

Wages No 2421

Mar 31 Cash CP 860


Mar 1 Balance 25 400 Mar 31 Sundry accounts CP 3 502

Inventories No 3106

Mar 31 Accounts payable P 1 610

Cash CP 465

Accounts Payable Control No 4101

Mar 31 Cash CP 1 810 Mar 1 Balance b/d 1 250

Balance c/d 1 187 31 Inventories CP 1 747

$2 997 $2 997

Apr 1 Balance b/d 1 187


Mar 31 Accounts payable P 137

Cash CP 67

Capital No 5101

Mar 1 Balance b/d 24 150

W McGovern Trial Balance as at 31 March

Account Account Debit Credit Number $ $ 2301 Advertising 210 2409 Vehicle Expenses 90 2421 Wages 860 3103 Cash at Bank 21 898 3106 Inventories 2 075 4101 Accounts Payable Control 1 187 4102.2A GST Credits Received 204 5101 Capital 24 150 _______ ______ $25 337 $25 337

215

Accounts Payable Ledger

L Smith No 4101.1

Mar 2 Cash CP 300 Mar 1 Balance b/d 300

31 Balance c/d 605 3 Inventories P 605

$905 $905

Apr 1 Balance 605

D Hailday No 4101.2

Mar 28 Cash CP 700 Mar 1 Balance b/d 700


$940 $940

Apr 1 Balance 240

C Friedman No 4101.3

Mar 31 Balance c/d 250 Mar 2 Balance 250

$250 $250

Apr 1 Balance b/d 250

K Monessey No 4101.4

Mar 28 Cash CP 810 Mar 16 Inventories P 902

31 Balance c/d 92

$902 $902

Apr 1 Balance b/d 92

b

Schedule of Accounts Payable as at 31 March

4101.1 L Smith 605 4101.2 D Hailday 240 4101.3 C Friedman 250 4101.4 K Monessey 92 Balance as per Control account $1 187

216

7.15 P Simmons

General Ledger

Rent Expense No 2414

Dec 17 Cash CP 560

Wages No 2421

Dec 31 Cash CP 600


Dec 31 Sundry accounts CP 2 455

Inventories No 3106

Dec 31 Accounts payable P 360

Cash CP 650


Dec 31 Cash CP 524 Dec 1 Balance b/d 396

Balance c/d 263 31 Inventories P 391

$787 $787

Jan 1 Balance b/d 263


Dec 31 Accounts payable P 31

Cash CP 121

217


R Harper No 4101.1

Dec 31 Balance c/d 40 Dec 1 Balance b/d 40

$40 $40


N Nicoll No 4101.2


$90 $90

J Jackson No 4101.3



$320 $320


M Mitchell No 4101.4

Dec 1 Balance b/d 4 Dec 14 Inventories P 50

31 Balance c/d 46

$50 $50


L Lovett No 4101.5


31 Balance c/d 88 Inventories P 88

$214 $214


O Owen No 4101.6

Dec 31 Balance c/d 77 Dec 26 Inventories P 77

$77 $77


b

Schedule of Accounts Payable as at 31 December

4101.1 R Harper 40 4101.3 J Jackson 12 4101.4 M Mitchell 46 4101.5 L Lovett 88 4101.6 O Owen 77 Balance as per Control account $263

218

7.16 a

J Green



Sept 3 W Mackay 3104.3 600 60 660 258

10 S Black 3104.4 400 40 440 230

30 $1 000 $100 $1 100

(1101) (4102.2) (3104) $488

(2105/3106)

Purchases Journal P10 Date Tax Invoice Accounts Folio Inventories GST Credits Accounts

No Payable Received Payable Dr Dr Cr

Sept 8 J Brennan 4101.3 1 800 1 800

16 A Able 4101.1 950 95 1 045

28 S Sam 4101.5 700 70 770

30 $3 450 $165 $3 615

(3106) (4102.2A) (4101)

Cash Receipts Journal Date Particulars Folio Accounts Sales Other GST Details Bank COGS Dr

Receivable Receipts Collected Invent Cr Cr Cr Cr Cr Dr $ $ $ $ $ $

Sept 1 R Ryan 3104.1 2 000 2 000

6 Rent 1106 200 20 220

12 Sales 900 90 990 400

W Mackay 3104.3 1 500 1 500 2 490

24 Sales 1 000 100 1 100 458

27 M Inglis 3104.2 500 500

28 Rent 1106 200 20 220

28 Sales 1 600 1 600 720

Interest 1105 40 40 1 640

$4 000 $3 500 $440 $230 $8 170

(3104) (1101) (4102.2) (3103) $1 578

(2105/ 3106)

219

Cash Payments Journal Date Particulars Folio Accounts Inventories Wages Other GST Credits Bank

Payable Payments Received Dr Dr Dr Dr Dr Cr

Sept 5 F Faint 4101.2 340 340

12 Wages 400 400

Purchases 600 60 660

24 Purchases 600 600

28 Wages 400 400

30 J Brennan 4101.3 2 500 2 500

A Able 4101.1 1 560 1 560

$4 400 $1 200 $800 $60 $6 460

(4101) (3106) (2421) (4102.2A) (3103)

220

General Ledger

Sales No 1101

Sept 30 Accounts receivable S 1 000

Cash CR 3 500


Sept 28 Cash CR 40


Sept 6 Cash CR 200

28 Cash CR 200


Sept 30 Inventories S 488

Inventories CR 1 578

Wages No 2421

Sept 30 Cash CP 800


Sept 1 Balance b/d 14 000 Sept 30 Sundry accounts CP 6 460


$22 170 $22 170



Sept 1 Balance b/d 6 500 Sept 30 Cash CR 4 000


$7 600 $7 600


Inventories No 3106

Sept 1 Balance 6 000 Sept 30 Cost of goods sold S 488

30 Accounts payable P 3 450 Cost of goods sold S 1 578

Cash CP 1 200 Balance c/d 8 584

$10 650 $10 650


Furniture and Fittings No 3201

Sept 1 Balance b/d 600

Buildings No 3205


221

Land No 3206


Accounts Payable Control No 4102.2

Sept 30 Cash CP 4 400 Sept 1 Balance b/d 5 400

Balance c/d 4 615 30 Inventories P 3 615

$9 015 $9 015



Sept 30 Accounts receivable S 100

Accounts receivable CR 230


Sept 30 Accounts payable 165

Cash 60

Capital No 5101



R Ryan No 3104.1


$2 000 $2 000

M Inglis No 3104.2

Sept 1 Balance b/d 500 Sept 27 Cash CR 500

$500 $500

W Mackay No 3104.3



$2 160 $2 160

Oct 1 Balance b/d 660

S Black No 3104.4

Sept 1 Balance b/d 2 500 Sept 30 Balance c/d 2 940

10 Sales S 440

$2 940 $2 940


222


A Able No 4101.1



$2 605 $2 605


F Faint No 4101.2

Sept 5 Cash CP 340 Sept 1 Balance b/d 340

$340 $340

J Brennan No 4101.3



$4 300 $4 300


R Lindsay No 4101.4

Sep 1 Balance b/d 1 000

S Sam No 4101.5

Sep 28 Inventories P 770

b

Schedule of Accounts Receivable as at 30 September

3104.3 W Mackay 660 3104.4 S Black 2 940 Balance as per Control account $3 600

Schedule of Accounts Payable as at 30 September 4101.1 A Able 1 045 4101.3 J Brennan 1 800 4101.4 R Lindsay 1 000 4101.5 S Sam 770 Balance as per Control Account $4 615

223

Trial Balance as at 30 September

No Account Dr Cr 1101 Sales 4 500 1105 Interest Revenue 40 1106 Rent Revenue 400 2105 Cost of Goods Sold 2 066 2421 Wages 800 3103 Cash at Bank 15 710 3104 Accounts Receivable Control 3 600 3106 Inventories 8 584 3201 Furniture and Fittings 600 3205 Building 40 000 3206 Land 10 000 4101 Accounts Payable Control 4 615 4102.2 GST Collected 330 4102.2A GST Credits Received 225 5101 Capital 71 700

$81 585 $81 585

7.17 A doubtful debt is a debt that for one reason or another is considered by the firm to be uncollectable in the next accounting period. The debt may have been outstanding for a period of time and is unlikely to be collected, or the firm owing the money may be in financial difficulties and may be declared bankrupt. Until the debt is declared bad and written off, it is considered doubtful and must be accounted for so that proper matching of revenues and expenses can occur in the current accounting period.

7.18 The purpose of a Provision for Doubtful Debts account is to enable a proper matching of revenue and expenses by estimating present accounts receivable who are unlikely to pay their debts in the next accounting period. It is sometimes known as an Allowance for Doubtful Debts.

7.19 a $7 120 b $1 950

c Balance % Doubtful Doubtful

Current 120 000 0.04 48 30 days 40 000 2.0 800 60 days 5 000 7.0 350

90 days 7 000 25.0 1 750 Over 90 days 2 000 60.0 1 200

$174 000 $4 148 224

7.20 a Providing for doubtful debts ensures that any bad debt that arises as a result of a credit transaction in a particular accounting

period is recognised in that accounting period not when the debt is actually declared bad. Should it not be recognised in the accounting period in which the debt occurred, the profit for that period would be overstated by the amount of the debt considered doubtful. Consequently, the profit for the period in which the debt is declared bad would be decreased by that amount. Ultimately, two accounting periods of profit figures would be affected if a provision account is not set up for the doubtful debts.

b The bad debts are transferred to the Provision for Doubtful Debts account to offset the bad debts that have occurred during the period against the provision that was originally set up to provide for them.

7.21 T Savage

General Journal Date Particulars Dr Cr July 1 Bad debts 250

GST Collected 25 R Johnson 275

(Wrote off R Johnson’s accounts as a bad debt)

Aug 2 Bad debts 490 M Allen 490

(Wrote off balance of M Allen’s account as bad debt)

Sep 3 Bad debts 320 GST Collected 32

R Miller 352 (Wrote off balance of R Miller’s account as a bad debt)

225

7.22 a

L Herbert

General Ledger Date Particulars Folio Dr Cr Jan 17 Bad and doubtful debts 2501 700

Accounts receivable control 3104 (S Marshall) 3104.1 700

(Wrote off bad debt)

Mar 26 Cash at bank 3103 75 Accounts receivable control 3104 (M Waters) 3104.2 75

(Received cash)

Bad and doubtful debts 2501 595 Accounts receivable control 3104 (M Waters) 3104.2 595


Oct 29 Cash at bank 3103 225 Accounts receivable control 3104 (R Adamson) 3104.3 225

(Received cash)

Bad and doubtful debts 2501 675 Accounts receivable control 3104 (R Adamson) 3104.3 675


Dec 31 Provision for doubtful debts 3104A 1 970 Bad and doubtful debts 2501 1 970

(Transfer of bad debts to provision)

Bad and doubtful debts 2501 1 470 Provision for doubtful debts 3104A 1 470

(Estimated provision for doubtful debts)

Profit and Loss 5103 1 470 Bad and doubtful debts 2501 1 470

(Closing entries)

226

b General Ledger

Bad and Doubtful Debts No 2501

Jan 17 Accounts receivable G 700 Dec 31 Provision for doubtful debts G 1 970

Mar 26 Accounts receivable G 595

Oct 19 Accounts receivable G 675 Profit and loss G 1 470

Dec 31 Provision for doubtful debts G 1 470

$3 440 $3 440


Jan 1 Balance b/d 25 000 Jan 17 Bad debts G 700

Mar 26 Bad debts G 595

Oct 19 Bad debts G 675

Provision for Doubtful Debts No 3104A

Dec 31 Bad debts G 1 970 Jan 1 Balance b/d 700

Balance c/d 200 Dec 31 Bad debts G 1 470

$2 170 $2 170

2006


c

Income Statement (extract) for year ended 31 December

Finance expenses Bad and doubtful debts 1 470

7.23 a Bad debts $83 380 b

Income Statement (extract) Finance expenses Bad and doubtful debts 83 380

227

7.24 i a

Ledger


2007 2008

During year Accounts receivable 215 000 Jun 30 Provision for control doubtful debts G 215 000

Profit and Loss G 202 000

2008

Jun 30 Provision for doubtful debts G 202 000

$417 000 $417 000


Jul 1 Balance b/d 300 000


2007

Jun 30 Bad debts G 215 000 Jul 1 Balance b/d 22 000

Balance c/d 9 000

2008

Jun 30 Bad debts G 202 000

$224 000 $224 000


Profit and Loss No 5103

Jun 30 Bad and doubtful debts G 202 000

b

General Journal Date Particulars Folio Dr Cr

2008 Jun 30 Provision for doubtful debts 3104A 215 000

Bad and doubtful debts 2501 215 000 (Transfer of bad debts to provision)

Bad debts 2501 202 000 Provision for doubtful debts 3104A 202 000

(Estimated provision for doubtful debts at 3% of accounts receivable)

Profit and loss 5103 202 000 Bad and doubtful debts 2501 202 000

(Closing entries) 228

c

Income Statement (extract) for year ended 30 June 2008 Finance expenses Bad and doubtful debt 202 000

Balance Sheet (extract) as at 30 June 2008

Current assets Accounts receivable control 300 000 Less Provision for doubtful debts 9 000 291 000

229

ii a Ledger


2007 2008

During Accounts Jun 30 Provision for year receivable control 170 000 doubtful debts G 170 000

2008 Profit and loss G 162 000


$332 000 $332 000




2008 2007

Jun 30 Bad and doubtful debts G 170 000 Jul 1 Balance b/d 15 000

Balance c/d 7 000 2008


$177 000 $177 000




b








c

Income Statement (extract) for year ended 30 June 2008 Finance expenses Bad and doubtful debts 162 000



231

iii a Ledger

2007

During Accounts receivable year control

2008

Jun 30 Provision for doubtful debts G

2007

Jul 1 Balance b/d

During Sales year

2008

Jul 1 Balance b/d

2008

Jun 30 Bad debts G

Balance c/d Jun 30 Bad and

doubtful debts G


2008

Jun 30 Provision for 10 000 doubtful debts G 10 000

Profit and loss G 12 726

12 726

$22 726 $22 726


70 000 During Cash 680 000 year

800 000 Discount 8 700

Bad debts 10 000

2008

Jun 30 Balance c/d 171 300

$870 000 $870 000

171 300


2007

10 000 Jul 1 Balance b/d 700

3 426 2008


$13 426 $13 426



12 726

232

b General Journal

Date Particulars Folio Dr Cr




(Estimated provision for doubtful debts at 2% of accounts receivable control)


(Closing entries)

c



Accounts receivable control 171 300 Less Provision for doubtful debts 3 426 167 874

233

iv a Ledger

2007

During Accounts receivable year control G

Jun 30 Provision for

doubtful debts G

2007

Jul 1 Balance b/d

During Sales year


2008

Jun 30 Provision for 35 800 doubtful debts G 35 800


36 465

$72 265 $72 265


30 000 During Sales returns 46 000 year

950 000 Cash 800 000

Cash (dishonoured cheque) 500 Discount 2 500

Interest revenue 300 Bad debts G 35 800

Balance c/d 96 500

$980 800 $980 800

2008



2008 2007

Jun 30 Bad debts G 35 800 Jul 1 Balance b/d 300

Balance c/d 965 2008


$36 765 $36 765

Jul 1 Balance b/d 965



234

b General Journal

Date Particulars Folio Dr Cr




(Estimated provision for doubtful debts at 1% of accounts receivable control)


(Closing entries)

c



Current assets Accounts receivable control 96 500 Less Provision for doubtful debts 965 95 535

235

7.25 A Harper Ledger


2007 2008

During Accounts Jun 30 Provision for year receivable control 200 doubtful debts G 200

2008

Jun 30 Provision for Profit and loss G 350 doubtful debts G 350

$550 $550




Jun 30 Bad debts 200 Jun 30 Bad and doubtful debts G 350

Balance c/d 150

$350 $350

Jul 1 Balance b/d 150


Jun 30 Bad and doubtful debts G 350

General Journal Date Particulars Folio Dr Cr 2008 Jun 30 Provision for doubtful debts 3104A 200

Bad and doubtful debts 2501 200 (Write off bad debts)

Bad and doubtful debts 2501 350 Provision for doubtful debts 3104A 350

(Estimated provision for doubtful debts at 1% of accounts receivable)

Profit and loss 5103 350 Bad and doubtful debts 2501 350

(Closing entries)

236

7.26 Balance % Doubtful Doubtful

Current 90 000 0.05 45 30 days 30 000 2.5 750 60 days 9 000 8.0 720 90 days 4 000 22.0 880 Over 90 days 6 000 65.0 3 900

$139 000 $6 295 a


Provision for doubtful debts 70 000 Bad and doubtful debts 70 000


Bad and doubtful debts 70 795 Provision for doubtful debts 70 795


Profit and loss 70 795 Bad and doubtful debts 70 795

(Closing entries) b




237

7.27

Ledger


2007 2008


2008

Jun 30 Provision for G 1 000 Profit and loss G 1 000 doubtful debts

$9 000 $9 000




2007

Jun 30 Bad and Jul 1 Balance b/d 10 000 doubtful debts G 8 000



$11 000 $11 000




b

General Journal Date Particulars Folio Dr Cr During Bad and doubtful debts 2501 8 000 year GST collected 4102.2 800

Accounts receivable control 3104 8 800 (Writing off bad debts)

2008 Provision for doubtful debts 3104A 8 000 Jun 30 Bad and doubtful debts 2501 8 000



(Estimated allowance for doubtful debts at 1% of accounts receivable control)



i a

c



Current assets 300 000 Less Provision for doubtful debts 3 000 297 000

239

ii a Ledger


2007 2008


2008

Jun 30 Provision for Profit and loss G 1 900 doubtful debts G 1 900

$3 400 $3 400




2008 2007




$3 500 $3 500




b

General Journal Date Particulars Folio Dr Cr During Bad and doubtful debts 2501 1 500 year GST collected 4102.2 150

Accounts receivable control 3104 1 650 (Writing off bad debts)

2008 Provision for doubtful debts 3104A 1 500 Jun 30 Bad and doubtful debts 2501 1 500



(Estimated allowance for doubtful debts)


(Closing entries)

240

c




241

7.28

Ledger

Bad and doubtful debts No 2501

2007 2008



2008


$139 150 $139 150


2008 2007


Balance c/d 5 150

2008

Jun 30 Doubtful debts G 69 150

$75 150 $75 150


b


c



242

7.29

Income Statement (extract) for year ended 31 December 2008 Finance expenses Bad and doubtful debts 13 215

Balance Sheet (extract) as at 31 December 2008


7.30

Income Statement (extract) for year ended 31 December 2008

Finance expenses Bad and doubtful debts 2 260

Balance Sheet (extract) as at 31 December 2008


7.31 a An accounts receivable may repay a debt previously written off as bad to restore creditworthiness and good reputation. This would be particularly important where that person is seeking to obtain credit for current transactions. b

General Journal Date Particulars Dr Cr Sep 6 Cash at bank 6820

R Major 6820 (Received cash)

R Major 6 820 GST collected 620 Bad debts recovered 6 200

7.32 Spreadsheet application—provision for doubtful debts.


243

7.34 The growing tendency to rely less on cash has meant that firms have to offer an alternative means by which customers can acquire goods or services now and pay later. The major alternatives to using cash are credit or credit card facilities. Competition for sales means that a firm has to offer prospective customers all choices otherwise there is the risk that sales will be lost to competitors who do give customers a choice. Should a customer decide that the preferred method of acquiring the goods or services is through credit then this choice should be available or a potential sale may be lost.

7.35 Points to make in your answer: • Whenever credit sales are made, bad debts will occur despite the best efforts of the credit department to screen people before

credit is given. • If no balance day adjustment is made, proper matching of revenue and expenses will not occur as the bad debt can occur in a

period different to when the sale is made. • A firm can ensure an accurate profit figure each year by ensuring the proper matching of revenues and expenses by providing

for any expected doubtful debts that may arise from this period’s accounts receivables. To achieve this the following balance day adjustment must be recorded:

Bad and doubtful debts Dr xx

Provision for doubtful debts Cr xx

This increases the expense account Bad and Doubtful Debts to enable proper matching to occur and creates an appropriate amount in the Provision for Doubtful Debts account to reflect the amounts shown as accounts receivable will not all be collected.

244

7.36 L Jacobs


No Receivable Collected Receivable Invent Cr Cr Cr Dr

June 3 306 A Johnson 3104.6 9 800 980 10 780 5 600

10 307 R Franks 3104.4 9 100 910 10 010 5 150

18 308 P Gills 3104.2 3 000 300 3 300 2 675

30 $21 900 $2 190 $24 090

(1101) (4102.2) (3104) $13 425

(2105/3106)

Purchases Journal P10 Date Tax Invoice No Accounts Payable Folio Inventories GST Credits Accounts

Received Payable Dr Dr Cr

June 3 618 G Gawler 4101.1 3 640 364 4 004

29 84 A Hilton 4101.3 122 122

30 $3 762 $364 $4 126

(3106) (4102.2A) (4101)

Cash Receipts Journal Date Receipt Particulars Folio Accounts Sales Other GST Details Cash at COGS Dr

No Receivable Receipts Collected Bank Invent Cr Cr Cr Cr Cr Dr

June 1 378 G Hawkins 3104.5 440 440

10 379 D Watkins 3104.3 18 000 18 000

11 CRS Sales 1 000 1 000 740

14 380 A Johnson 3104.6 10 780 10 780

21 381 R Franks 3104.4 2 066 2 066

29 CRS Sales 1 460 146 1 606 930

$31 286 $2 460 $0 $146 $33 892

(3104) (1101) (4102.1) (3103) $1 670

(2105/ 3106)

245

Cash Payments Journal

Date Cheque No Particulars Folio Accounts Inventories Wages Other GST Credits Cash at

Payable Received Revenue Bank Dr Dr Dr Dr Dr Cr

June 1 428 Purchases 980 98 1 078

3 429 Wages 1 200 1 200

6 430 G Gawler 4101.1 15 000 15 000

30 431 Wages 4 000 4 000

432 R Perkins 4101.4 1 500 1 500

$16 500 $980 $5 200 0 $98 $ 22 778

(4101) (3106) (2421) (4102.2A) (3103)

General Journal Date Particulars Folio Dr Cr June 1 Accounts receivable control 3104/

(G Hawkins) 3104.5 440 GST collected 4102.2 40 Bad debts recovered 1108 400

(Recovery of bad debt)

6 Bad and doubtful debts 2501 5 250 Accounts receivable control 3104/ (B Winter) 3104.1 5 250


19 Sales returns 1101A 200 GST collected 4102.2 20

Accounts receivable control 3104/ (P Gills) 3104.2 220

(Sales returns)

27 Furniture 3204 9 200 GST credits received 4102.2A 920

Office suppliers 4102.3 10 120 (Bought furniture)

Accounts payable control 4101/ (G Gawler) 4101.1 1 012

GST credits received 92 Inventories 920

(Purchases returns)

28 Accounts receivable control 3104/ (R Franks) 3104.2 22

Interest revenue 1105 22 (Charged R Franks interest)

246

Ledger

Sales No 1101

Jun 30 Accounts receivable S 21 900

Cash CR 2 460

Sales Returns No 1101A

Jun 30 Accounts receivable SR 200


Jun 28 Accounts receivable G 22

Bad Debts Recovered No 1108

Jun 1 Accounts receivable G 400


Jun 30 Inventories CR 1 670

Inventories S 13 425

Wages No 2421

Jun 30 Cash CP 5 200


Jun 6 Accounts receivable G 5 250


Jun 1 Balance b/d 30 000 Jun 30 Sundry accounts CP 22 778

Jun 30 Sundry accounts CR 33 892 Balance c/d 41 114

$63 892 $63 892



Jun 1 Balance b/d 45 000 Jun 30 Sales returns SR 220

Sales S 24 090 Cash CR 31 286

Bad debts recovered G 440 Bad and doubtful debts G 5 250

Jun 28 Interest revenue G 22 Balance c/d 32 796

$69 552 $69 552

Jul 1 Balance c/d 32 796


Jun 30 Balance c/d 1 000 Jun 1 Balance b/d 1 000

$1 000 $1 000


247

Inventories No 3106

Jun 1 Balance 75 000 Jun 30 Cost of goods sold S 13 425

Jun 30 Accounts payable P 3 762 Cost of goods sold CR 1 670

Cash CP 980 Accounts payable G 920

Balance c/d 63 727

$79 742 $79 742


Office Furniture No 3201

Jun 1 Balance b/d 900

Jun 27 Office supplies G 9 200

Buildings No 3205

Jun 1 Balance b/d 150 000

Land No 3206



Jun 30 Inventories G 1 012 Jun 1 Balance b/d 37 500

Cash CP 16 500 Jun 30 Purchases P 4 126

Balance c/d 24 114

$41 626 $41 626



Jun 30 Accounts receivable SR 20 Jun 1 Hawkins G 40

Jun 30 Accounts receivable S 2 190

Balance c/d 2 356 Cash CR 146

$2 376 $2 376



Jun 21 Office suppliers G 920 Jun 30 Accounts payable G 92

Jun 30 Accounts payable CP 98

Purchases P 364 Balance c/d 1 290

$1 382 $1 382


Office Suppliers No 4102.3

Jun 27 Equipment G 10 120

Loan from Fast Co Ltd No 4201


Capital—L Jacobs No 5101

Jun 1 Balance b/d 329 900 248


B Winter No 3104.1

Jun 1 Balance b/d 5 250 Jun 6 Bad and doubtful debts G 5 250

$5 250 $5 250

P Gills No 3104.2

Jun 1 Balance b/d 18 000 Jun 19 Sales returns G 220

18 Sales S 3 300 30 Balance c/d 21 080

$21 300 $21 300


D Watkins No 3104.3

Jun 1 Balance b/d 18 000 Jun 10 Cash CR 18 000

$18 000 $18 000

R Franks No 3104.4

Jun 1 Balance b/d 3 750 Jun 30 Cash CR 2 066


28 Interest G 22

$13 782 $13 782


G Hawkins No 3104.5

Jun 1 Bad debts recovered G 440 Jun 1 Cash CR 440

$440 $440

A Johnson No 3104.6

Jun 3 Sales S 10 780 Jun 14 Cash CR 10 780

$10 780 $10 780

249


G Gawler No 4101.1

Jun 5 Cash CP 15 000 Jun 1 Balance b/d 15 000

27 Purchases returns G 1 012 2 Purchases P 4 004

30 Balance c/d 2 992

$19 004 $19 004


B Ranton No 4101.2


A Hilton No 4101.3

Jun 30 Balance c/d 13 622 Jun 1 Balance b/d 13 500

29 Purchases P 122

$13 622 $13 622


R Perkins No 4101.4

Jun 29 Cash CP 1 500 Jun 1 Balance b/d 1 500

$1 500 $1 500

Schedule of Accounts Receivable Schedule of Accounts Payable as at 30 June as at 30 June

31 04.2 P Gills 21 080 4101.1 G Gawler 2 992

31 04.4 R Franks 11 716 4101.2 B Ranton 7 500

4101.3 A Hilton 13 622

Balance as per Control Account $32 796 Balance as per Control Account $24 114

250

Trial Balance as at 30 June

Dr Cr 1101 Sales 24 360 1101A Sales Returns 200 1105 Interest Revenue 22 1108 Bad Debts Recovered 400 2105 Cost of Goods Sold 15 095 2420 Wages 5 200 2501 Bad Debts 5 250 3103 Cash at Bank 41 114 3104 Accounts Receivable Control 32 796 3104A Provision for Doubtful Debts 1 000 3106 Inventories 63 727 3201 Office Furniture 10 100 3205 Buildings 150 000 3206 Land 75 000 4101 Accounts Payable Control 24 114 4120.2 GST Collected 2 356 4102.2A GST Credits Received 1 290 4102.3 Office Suppliers 10 120 4201 Loan from Fast Co Ltd 7 500 5101 Capital—L Jacobs 329 900

$399 772 $399 772

7.37 Analysis of financial reports—Woolworths Limited a 2005 $595.6m 2006 $1160.4m (note 8) b 2005 $16.2m 2006 $14m c 2005 $2916.1m 2006 $3573.4m d 2005 $2610.4m 2006 $3704m

251

Chapter 8 Accounting for inventories

8.1 a Inventories are items held for sale in the ordinary course of normal operations of the business. b Motor vehicles, furniture, computer equipment. c Because they are held for sale in the ordinary course of normal operations of the business. d Stock, goods, merchandise.

8.2 a The purpose of a stock ledger card is to record all individual movements of inventories at cost price for a particular item of

inventory. b The quantities, unit cost and total cost of inventories moving in and out of the business as well as the balance on hand.

8.3 a and b Specific identification: able to trace the cost price of each item at all times, e.g. motor vehicles, furniture.

First-In First-Out (FIFO): assumes the first items coming into the business are the first items to go out of the business, e.g. any inventory item. Last-In First-Out (LIFO): assumes the last items to come into the business are the first to go out, e.g. any inventory item. Weighted average cost: assumes the inventory items are completely intermingled and so a new weighted average cost price is calculated, generally after each item of purchase, e.g. any inventory item. Standard cost: uses a predetermined cost, e.g. inventories in manufacturing businesses.

c It is not allowed by the accounting standards and by the Australian Taxation Office.

252

8.4 a i

FIFO

Stock Ledger Card

Date Particulars In Out Balance

Qty Unit Total Qty Unit Total Qty Unit Total cost cost cost cost cost cost

$ $ $ $ $ $

Oct 1 Balance 600 3.00 1 800 3 Purchase 200 3.20 640 600 3.00 1 800

200 3.20 640 6 Issue 400 3.00 1 200 200 3.00 600

200 3.20 640 10 Issue 200 3.00 600

50 3.20 160 150 3.20 480 16 Purchase 500 3.10 1 550 150 3.20 480

500 3.10 1 550 18 Issue 150 3.20 480

450 3.10 1 395 50 3.10 155ii

Weighted average Stock Ledger Card



$ $ $ $ $ $

Oct 1 Balance 600 3.00000 1 800.00 3 Purchase 200 3.20 640 800 3.05000 2 440.00 6 Issue 400 3.05000 1 220.00 400 3.05000 1 220.00

10 Issue 250 3.05000 762.50 150 3.05000 457.50 16 Purchase 500 3.10 1 500 650 3.08846 2 007.50 18 Issue 600 3.08846 1 853.08 50 3.08846 154.42

b FIFO $3 835.00 Weighted average $3 835.58

253

8.5 a

FIFO

Stock Ledger Card



$ $ $ $ $ $

Dec 1 Balance 350 2.00 700 4 Issue 200 2.00 400 150 2.00 300 7 Issue 100 2.00 200 50 2.00 100

10 Purchase 150 2.40 360 50 2.00 100 150 2.40 360

12 Issue 50 2.00 100 50 2.40 120 100 2.40 240

21 Purchase 70 2.30 161 100 2.40 240 70 2.30 161

29 Issue 100 2.40 240 10 2.30 23 60 2.30 138

b FIFO $1 083

254

8.6

Product X (FIFO) Stock Ledger Card



$ $ $ $ $ $

Jan 1 Balance 120 4.00 480 4 Purchase 200 3.90 780 120 4.00 480

200 3.90 780 5 Issue 120 4.00 480

30 3.90 117 170 3.90 663 15 Issue 80 3.90 312 90 3.90 351 21 Purchase 100 4.10 410 90 3.90 351

100 4.10 410 22 Purchase 200 4.15 830 90 3.90 351

100 4.10 410 200 4.15 830

24 Issue 90 3.90 351 100 4.10 410 60 4.15 249 140 4.15 581

28 Issue 100 4.15 415 40 4.15 166

Product Y (Weighted Average) Stock Ledger Card



$ $ $ $ $ $

Sep 1 Balance 70 3.00000 210.00 10 Purchase 25 3.40 85 95 3.10526 295.00 16 Issue 40 3.10526 124.21 55 3.10526 170.79 21 Purchase 90 3.20 288 145 3.16407 458.79 24 Purchase 100 3.60 360 245 3.34200 818.79 26 Issue 160 3.342 534.72 85 3.34200 284.07

8.7 a Perpetual inventory system b FIFO c 350 units at a value of $950 d $650, determined by adding up the cost of goods issued

255

8.8 Debit side of Inventories Control account: opening balance of inventories; and the purchases of inventories and sales returns of inventories at cost price. Credit side of Inventories Control account: sales of inventories and purchases returns of inventories at cost price; and the closing balance of inventories, which is carried forward. The purpose of the Inventory Control account is to record all movements of inventories at cost price.

8.9 a The cost of goods sold account will include the total cost of goods including freight, customs duty, etc. These expenses are

not shown in the stock ledger cards. b The debit side of the Cost of Goods Sold account includes the cost price of goods sold and any cost of goods sold expenses

such as cartage inwards, customs duty, etc. The credit side of the Cost of Goods Sold account includes the cost price of sales returns. The purpose of the Cost of Goods Sold account is to record the cost of all goods sold. This cost is always known because it represents the balance of the account. Gross Profit can therefore always be calculated.

8.10 The records show what inventory should be on hand. The physical stocktake will show what actually is on hand. Any difference must be recorded as an inventory gain or loss.

8.11 a

Weighted Average Stock Ledger Card



$ $ $ $ $ $

Jul 1 Balance 100 .80000 80.00 2 Purchase 90 .85 76.50 190 .82368 156.50 6 Issue 110 .82368 90.61 80 .82368 65.89

Aug 10 Issue 60 .82368 49.42 20 .82368 16.47 Sept 12 Purchase 80 .95 76.00 100 .92470 92.47

14 Issue 70 .92470 64.73 30 .92470 27.74 30 Inventory shortage 3 .92470 2.77 27 .92470 24.97

256

b Sales No 1101

Sept 30 Trading 392.00 Jul Accounts receivable 165.00

Aug Accounts receivable 87.00

Sept Accounts receivable 140.00

$392.00 $392.00


Jul Inventories control 90.61 Sept 30 Trading 204.76

Aug Inventories control 49.42

Sept Inventories control 64.73

$204.76 $204.76

Inventory Adjustment No 2108

Sept 30 Inventories control 2.77 Sept 30 Trading 2.77

$2.77 $2.77

Inventories Control No 3106

Jul 1 Balance b/d 80.00 Jul Cost of goods sold 90.61

Jul Accounts payable (purchases) 76.50 Aug Cost of goods sold 49.42

Sept Accounts payable (purchases) 76.00 Sept Cost of goods sold 64.73

Sept 30 Inventory adjustment 2.77

(shortage)

Balance c/d 24.97

$232.50 $232.50

Oct 1 Balance b/d 24.97

Trading No 5102

Sept 30 Cost of goods sold 204.76 Sept 30 Sales 392.00

Inventory adjustment 2.77

Profit and loss (gross profit) 184.47

$392.00 $392.00

257

c FIFO

Stock Ledger Card



$ $ $ $ $ $

Sept 1 Balance 100 .80 80.00 2 Purchase 90 .85 76.50 100 .80 80.00

90 .85 76.50 6 Issue 100 .80 80.00

10 .85 8.50 80 .85 68.00 10 Issue 60 .85 51.00 20 .85 17.00 12 Purchase 80 .95 76.00 20 .85 17.00

80 .95 76.00 14 Issue 20 .85 17.00

50 .95 47.50 30 .95 28.50 30 Inventory shortage 3 .95 2.85 27 .95 25.65

258

8.12 a

FIFO

Stock Ledger Card



$ $ $ $ $ $

Nov 1 Balance 200 10 2 000 Purchase 800 9 7 200 200 10 2 000

800 9 7 200 2 Issue 200 10 2 000

100 9 900 700 9 6 300 9 Issue 500 9 4 500 200 9 1 800

10 Purchase 700 11 7 700 200 9 1 800 700 11 7 700

11 Purchase returns 50 11 550 200 9 1 800 650 11 7 150

23 Purchase 600 10 6 000 200 9 1 800 650 11 7 150 600 10 6 000

24 Issue 200 9 1 800 600 11 6 600 50 11 550

600 10 6 000 25 Issue return 20 11 220 70 11 770

600 10 6 000 30 Inventory shortage 30 11 330 40 11 440

600 10 6 000

259

b Sales No 1101

Nov 30 Trading 33 000 Nov 2 Accounts receivable 6 000

9 Accounts receivable 10 000


$33 000 $33 000

Sales Returns No 1101

Nov 25 Accounts receivable 500 Nov 30 Trading 500

$500 $500


Nov 2 Inventories control 2 900 Nov 25 Inventories control 220

9 Inventories control 4 500 30 Trading 15 800

14 Cash (cartage) 220

23 Inventories control 8 400

$16 020 $16 020


Nov 30 Inventories control 330 Nov 30 Trading 330

$330 $330


Nov 1 Balance b/d 2 000 Nov 2 Cost of goods sold 2 900

Accounts payable (purchases) 7 200 9 Cost of goods sold 4 500

10 Accounts payable (purchases) 7 700 14 Accounts payable

23 Accounts payable (purchases) 6 000 (purch returns) 550

25 Cost of goods sold 220 23 Cost of goods sold 8 400

30 Inventory adjustment 330 (shortage)

Balance c/d 6 440

$23 120 $23 120

Dec 1 Balance b/d 6 440

Trading No 5102

Nov 30 Sales returns 500 Nov 30 Sales 33 000

Cost of goods sold 15 800

Inventory adjustment 330

Profit and loss (gross profit) 16 370

$33 000 $33 000 260

c

Weighted Average Stock Ledger Card



$ $ $ $ $ $

Nov 1 Balance 200 10.00000 2 000.00 Purchases 800 9.00000 7 200.00 1 000 9.20000 9 200.00

2 Issue 300 9.20000 2 760.00 700 9.20000 6 440.00 9 Issue 500 9.20000 4 600.00 200 9.20000 1 840.00

10 Purchase 700 11.0000 7 700.00 900 10.60000 9 540.00 11 Purchases

Returns 50 11.0000 550.00 850 10.57647 8 990.00 23 Purchase 600 10.0000 6 000.00 1 450 10.33793 14 990.00 24 Issue 800 10.33793 8 270.34 650 10.33793 6 719.66 25 Issue return 20 10.33793 206.76 670 10.33793 6 926.42 30 Inventory

Shortage 30 10.33793 310.14 640 10.33793 6 616.28

261

8.13 a

Weighted Average Walters Hardware Stock Ledger Card



$ $ $ $ $ $

Mar 1 Balance 150 2.00000 300.00 2 Purchase 500 3.00000 1 500.00 650 2.76923 1 800.00 5 Issue 550 2.76923 1523.08 100 2.76923 276.92 7 Issue return 25 2.76923 69.23 125 2.76923 346.15

10 Purchase 1000 4.00000 4 000.00 1125 3.86324 4 346.15 12 Purchase return 20 4.00000 80.00 1105 3.86077 4 266.15 20 Issue 800 3.86077 3088.62 305 3.86077 1 177.53 24 Issue 150 3.86077 579.11 155 3.86077 598.42 31 Inventory shortage 5 3.86077 19.30 150 3.86077 579.12

262

b Sales No 1101

Mar 31 Trading 14 450.00 Mar 5 Accounts receivable 4 950.00

20 Cash 8 000.00

24 Accounts receivable 1 500.00

$14 450.00 $14 450.00


Mar 7 Accounts receivable 225.00 Nov 30 Trading 225.00

$225.00 $225.00


Mar 5 Inventories control 1 523.08 Mar 7 Inventories control 69.23

20 Inventories control 3 088.62 30 Trading 5 247.58

24 Inventories control 579.11

27 Cash (freight inwards) 126.00

$5 316.81 $5 316.81


Mar 31 Inventories control 19.30 Mar 31 Trading 19.30

$19.30 $19.30


Mar 1 Balance b/d 300.00 Mar 5 Cost of goods sold 1 523.08

2 Accounts payable (purchases) 1 500.00 12 Accounts payable (purch returns) 80.00

7 Cost of goods sold 69.23 20 Cost of goods sold 3 088.62

10 Accounts payable (purchases) 4 000.00 24 Cost of goods sold 579.11

31 Inventory adjustment (shortage) 19.30

Balance c/d 579.12

$5 869.23 $5 869.23

Apr 1 Balance b/d 579.12

Trading No 5102

Nov 30 Sales returns 225.00 Nov 30 Sales 14 450.00

Cost of goods sold 5 247.58


Profit and loss (gross profit) 8 958.12

$14 450.00 $14 450.00

263

8.14

Advantages of perpetual inventories Disadvantages of perpetual inventories • Greater control over inventories as the business • Can be costly and time consuming, but with

knows what items should be on hand. These are the use of computer systems this disadvantage compared with what items are actually on hand. can be overcome easily.

• Short-term financial statements can be prepared at any time.

• The stock ledger cards help to maintain sufficient quantities of inventories for sale, ensuring that the business will rarely be out of items or have too much money tied up in inventories.

8.15 a The limitations of the periodic inventory system include:

• There is very little control over inventories as there is no mechanism that tells the business the value of inventories that should have been on hand.

• Because a stocktake is generally such a long procedure, there is a considerable cost and disruption to normal business routines. This usually prevents a physical inventory being taken more frequently than once or twice a year.

• Short-term (monthly or quarterly) Income Statements cannot be easily be prepared. • The stocktake should be as accurate as possible; otherwise, it will have a detrimental effect on the profit figure obtained.

b It is very simple to implement as no record has to be kept of daily movement of inventories.

8.16 a ‘Cost of goods sold’ simply means the cost of goods that were actually sold. The sales accounts record the selling price of the

goods and the cost of goods sold account records the cost price. b Cost of goods sold = Opening inventories

+ Purchases (net) + Any other expenses incurred in getting the goods into a location and condition ready for sale (customs duty, cartage on purchases) - Closing inventories

264

8.17 a, b and c

C Taylor Ledger

Sales No 1101

Dec 31 Trading G 452 000 During Cash CR 110 000 year

Accounts receivable S 342 000

$452 000 $452 000


During Accounts year receivable SR 34 000 Dec 31 Trading G 34 000

$34 000 $34 000

Purchases No 2101

During Cash CP 72 000 Dec 31 Trading G 228 000 year

Accounts payable P 156 000 $228 000 $228 000

Purchases Returns No 2101A

Dec 31 Trading G 18 000 During Accounts payable PR 18 000 year

$18 000 $18 000

Freight Inwards No 2103

During Cash CP 6 000 Dec 31 Trading G 6 000 year

$6 000 $6 000

Inventories No 3106

Jan 1 Balance b/d 50 000 Dec 31 Trading G 50 000

Dec 31 Trading G 48 000

Trading No 5102

Dec 31 Inventories G 50 000 Dec 31 Inventories G 48 000

Sales returns G 34 000 Sales G 452 000

Purchases G 228 000 Purchases returns G 18 000

Freight inwards G 6 000


$518 000 $518 000

265

General Journal

Date Particulars Folio Dr Cr Dec 31 Trading 5102 50 000

Inventories 3105 50 000 (Balance day adjustment—opening inventories)

Inventories 3105 48 000 Trading 5102 48 000

(Balance day adjustment—closing inventories)

Trading 5102 268 000 Sales returns 1101A 34 000 Purchases 2101 228 000 Freight inwards 2103 6 000

Sales 1101 452 000 Purchase returns 2101A 18 000

Trading 5102 470 000 (Closing entries)

Profit and loss 5103 200 000 Trading 200 000

(Transfer of gross profit to trading) d

Income Statement (extract) for year ended 31 December

Sales 452 000 Less Sales returns 34 000 418 000 Less Cost of goods sold Inventories (1.1.08) 50 000 Purchases 228 000 Less Purchases returns 18 000 210 000 Freight inwards 6 000 216 000 Goods available for sale 266 000 Less Inventories (31/12/08) 48 000 218 000 Gross profit 200 000

Balance Sheet (extract) as at 31 December Current assets Inventories $48 000

8.18 a The perpetual inventory system records all movements of inventories in and out of the business at cost price. The balance of inventories and the value of cost of goods sold is always available. b The periodic inventory system only records inventories at the beginning and end of the period as a result of a stocktake. Cost of goods must be calculated by way of a formula.

266

8.19 The periodic inventory system does not provide a continuous record of inventories, does not reveal stock shortages and does not allow short-term profit determination.

8.20

Summary of periodic and perpetual inventory systems Periodic Perpetual

Provides a continuous No Yes record of inventories Stocktake necessary Yes Yes (only for stock shortages) Reveals shortages No Yes (only if stocktake taken)

Short-term profit No Yes determination Determining cost of Use formula: Always available in a goods sold Cost of goods sold Cost of Goods Sold

= Opening inventories account + Purchases (net) + Any other expenses incurred in getting the goods into a

saleable condition and location

- Closing inventories Asset account Inventories Inventories control in ledger Only records opening • Records all

and closing inventory movements of figures inventories in and

out of the business, at cost price • Cost of inventories is

constantly available Method of recording No Control account or Control account/

subsidiary ledger Subsidiary ledger (stock ledger card)

Recording sales and Selling price only Selling price and cost sales returns price

Control over inventories Very little Very good

Cost to maintain Low Higher

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8.21 a The ‘lower of cost and net realisable value’ rule simply means that when valuing inventories, the accountant should:

• determine the cost of the inventories • determine the net realisable value of the inventories • use the lower value of the two.

b ‘Cost’ means specific identification, FIFO, weighted average cost or standard cost. ‘Net realisable value’ is the amount that the business could sell the item for, less any marketing, selling or distribution expenses.

8.22 Net Realisable Value (NRV) = Selling price - (marketing + distribution + selling expenses)

= 1200 - (10 + 25 + 30) = 1200 - 65 = $1135

8.23 Net Realisable Value (NRV) = Selling price - (marketing + distribution + selling expenses)

= 400 - (14 + 26) = 400 - 40 = $360

8.24 Item A 200 Item B 150 Item C 604 Item D 314 Inventories on hand $1 268

8.25 T Ltd 300 @ 3.95 1 185 Grummond Ltd 500 @ 10.40 5 200 Borval Ltd 200 @ 1.20 240

$6 625

8.26 Spreadsheet application.


8.28 Points about the perpetual inventory system should include: • it provides a continuous record of inventories • it reveals stock shortages if a stocktake is carried out • the value of cost of goods sold and inventories is always available • it has greater control over inventories as reorder points and reorder quantities can be established • it is not very costly to maintain if a computer system is used.

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8.29 a

Perpetual Inventory Stock Ledger Card

Description Code No Maximum Quantity Reorder Point Minimum Quantity Recorder Quantity



$ $ $ $ $ $

Jun 1 300 9 2 700 5 Purchase 300 10 3 000 300 9 2 700

300 10 3 000 7 Purchase returns 100 10 1 000 300 9 2 700

200 10 2 000 14 Issue 300 9 2 700

100 10 1 000 100 10 1 000 15 Issue returns 100 10 1 000 200 10 2 000 20 Purchases 600 12 7 200 200 10 2 000

600 12 7 200 23 Issue 200 10 2 000

100 12 1 200 500 12 6 000 30 Stock shortage 50 12 600 450 12 5 400

269

R Raymond

General Ledger

Sales No 1101

Jun 30 Trading 14 000 Jun 14 Accounts receivable 8 000


$14 000 $14 000


Jun 15 Accounts receivable 2 000 Jun 30 Trading 2 000

$2 000 $2 000


Jun 14 Inventories control 3 700 Jun 15 Inventories control 1 000

23 Inventories control 3 200 30 Trading 5 900

$6 900 $6 900


Jun 30 Inventories control 600 Jun 30 Trading 600

$600 $600


Jun 1 Balance b/d 2 700 Jun 7 Accounts payable

(purch returns) 1 000

5 Accounts payable (purchases) 3 000 14 Cost of goods sold 3 700

15 Cost of goods sold 1 000 23 Cost of goods sold 3 200

20 Accounts payable (purchases) 7 200 30 Inventory adjustment (shortage) 600

Balance c/d 5 400

$13 900 $13 900

Jul 1 Balance b/d $5 400

Trading No 5102

Jun 30 Sales returns 2 000 Jun 30 Sales 14 000

Cost of goods sold 5 900

Inventory adjustment 600


$14 000 $14 000

270

b Periodic Inventory

Sales No 1101

Jun 30 Trading 14 000 Jun 14 Accounts receivable 8 000


$14 000 $14 000


Jun 15 Accounts receivable 2 000 Jun 30 Trading 2 000

$2 000 $2 000

Purchases No 2101

Jun 5 Accounts payable 3 000 Jun 30 Trading 10 200

20 Accounts payable 7 200

$10 200 $10 200

Purchase Returns No 2101A

Jun 30 Trading 1 000 Jun 7 Accounts payable 1 000

$1 000 $1 000


Jun 1 Balance b/d 2 700 Jun 30 Trading 2 700

30 Trading 5 400 Balance c/d 5 400

$8 100 $8 100


Trading No 5102

Jun 30 Inventories 2 700 Jun 30 Inventories 5 400

Sales returns 2 000 Sales 14 000

Purchases 10 200 Purchases returns 1 000


$20 400 $20 400

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8.30 a i

Perpetual Inventory System Weighted Average



$ $ $ $ $ $

Jun 1 Balance 500 6.00000 3 000.00 4 Balance 300 6.00000 1 800.00 200 6.00000 1 200.00 7 Issue return 5 6.00000 30.00 205 6.00000 1 230.00

10 Purchase 700 7.00000 4 900.00 905 6.77348 6 130.00 17 Purchase 600 8.00000 4 800.00 1505 7.26246 10 930.00 18 Issue 1200 7.26246 8 714.95 305 7.26246 2 215.05 24 Purchase 400 10.0000 4 000.00 705 8.81567 6 215.05 26 Purchase return 10 10.0000 100.00 695 8.79863 6 115.05 30 Inventory shortage 3 8.79863 26.40 692 8.79863 6 088.65

272

Perpetual Ledger

Sales No 1101

Jun 30 Trading 16 200.00 Jun 4 Accounts receivable 3 000.00


$16 200.00 $16 200.00


Jun 7 Accounts receivable 50.00 Jun 30 Trading 50.00

$50.00 $50.00


Jun 4 Inventories control 1 800.00 Jun 7 Inventories control 30.00

18 Inventories control 8 714.95 30 Trading 10 784.95

21 Cash (customs duty) 300.00

$10 814.95 $10 814.95


Jun 30 Inventories control 26.40 Jun 30 Trading 26.40

$26.40 $26.40

Wages No 2421

Jun 27 Cash 200.00 Jun 30 Profit and loss 200.00

$200.00 $200.00


Jun 21 Cost of goods sold 300.00

Jun 30 Balance c/d 500.00 27 Wages 200.00

$500.00 $500.00

Jun 1 Balance b/d 500.00

Accounts Receivable No 3104

Jun 4 Sales 3 000.00 Jun 7 Sales returns 50.00

18 Sales 13 200.00

30 Balance c/d 16 150.00

$16 200.00 $16 200.00

Jul 1 Balance b/d 16 150.00


Jun 1 Balance b/d 3 000.00 Jun 4 Cost of goods sold 1 800.00

7 Cost of goods sold 30.00 18 Cost of goods sold 8 714.95

10 Accounts payable (purchases) 4 900.00 26 Accounts payable

17 Accounts payable (purchases) 4 800.00 (purch returns) 100.00

24 Accounts payable (purchases) 4 000.00 30 Inventory adjustment

(shortage) 26.40

Balance c/d 6 088.65

$16 730.00 $16 730.00


273

Accounts Payable No 4101

Jun 26 Inventories control 100.00 Jun 1 Inventories control 4 900.00

17 Inventories control 4 800.00

30 Balance c/d 13 600.00 24 Inventories control 4 000.00

$13 700.00 $13 700.00


Capital—S Harold No 5101

Jun 1 Inventories control 3 000.00

Jun 30 Balance c/d 8 138.65 30 Profit and loss 5 138.65

$8 138.65 $8 138.65


Trading No 5102

Jun 30 Sales returns 50.00 Jun 30 Sales 16 200.00

Cost of goods sold 10 784.95



$16 200.00 $16 200.00


Jun 30 Wages 200.00 Jun 30 Trading 5 338.65

Capital (net profit) 5 138.65

$5 338.65 $5 338.65

ii

Trial Balance (after adjustment) as at 30 June

No Account Dr Cr 1101 Sales 16 200.00 1101A Sales Returns and Allowances 50.00 2105 Cost of Goods Sold 10 784.95 2108 Inventory Adjustment 26.40 2421 Wages 200.00 3103 Cash at Bank 500.00 3104 Accounts Receivable Control 16 150.00 3106 Inventories Control 6 088.65 4101 Accounts Payable Control 13 600.00 5101 Capital—S Harold 3 000.00

$33 300.00 $33 300.00 274

iii

Income Statement for month ended 30 June Sales 16 200.00 Less Sales returns 50.00 16 150.00 Less Cost of goods sold 10 784.95 Inventory shortage 26.40 10 811.35 Gross profit 5 338.65

Less Expenses General and administration Wages 200.00 200.00 Net profit $5 138.65

Balance Sheet as at 30 June

Assets Current assets Accounts receivable control 16 150.00 Inventories control 6 088.65 22 238.65

Less Liabilities Current liabilities Bank overdraft 500.00 Accounts payable control 13 600.00 14 100.00 Net assets $8 138.65

Owner’s equity Capital—S Harold 3 000.00 Add Net profit 5 138.65 $8 138.65

275

b Periodic Inventory System

Sales No 1101

Jun 30 Trading 16 200.00 Jun 4 Accounts receivable 3 000.00


$16 200.00 $16 200.00


Jun 7 Accounts receivable 50.00 Jun 30 Trading 50.00

$50.00 $50.00

Purchases No 2101

Jun 10 Accounts payable (purchases) 4 900.00 Jun 30 Trading 13 700.00

17 Accounts payable (purchases) 4 800.00

24 Accounts payable (purchases) 4 000.00

$13 700.00 $13 700.00

Purchases Returns No 2101A

Jun 30 Trading 100.00 Jun 26 Accounts payable 100.00

$100.00 $100.00

Customs Duty No 2103

Jun 21 Cash 300.00 Jun 30 Trading 300.00

$300.00 $300.00

Wages No 2421

Jun 27 Cash 200.00 Jun 30 Profit and loss 200.00

$200.00 $200.00


Jun 21 Cost of goods sold 300.00

Jun 30 Balance c/d 500.00 27 Wages 200.00

$500.00 $500.00

Jul 1 Balance b/d 500.00

Accounts Receivable No 3104

Jun 4 Sales 3 000.00 Jun 7 Sales returns 50.00

18 Sales 13 200.00

30 Balance c/d 16 150.00

$16 200.00 $16 200.00



Jun 1 Balance b/d 3 000.00 Jun 30 Trading 3 000.00

30 Trading 6 088.65 Balance c/d 6 088.65

$9 088.65 $9 088.65


276

Accounts Payable No 4101

Jun 26 Inventories control 100.00 Jun 1 Inventories control 4 900.00

17 Inventories control 4 800.00

30 Balance c/d 13 600.00 24 Inventories control 4 000.00

$13 700.00 $13 700.00

Jun 1 Balance b/d 13 600.00

Capital—S Harold No 5101

Jun 1 Inventories control 3 000.00

Jun 30 Balance c/d 8 138.65 30 Profit and loss 5 138.65

$8 138.65 $8 138.65


Trading No 5102

Jun 30 Inventories 3 000.00 Jun 30 Inventories 6 088.65

Sales returns 50.00 Sales 16 200.00

Purchases 13 700.00 Purchases returns 100.00

Customs duty 300.00


$22 388.65 $22 388.65


Jun 30 Wages 200.00 Jun 30 Trading 5 338.65

Capital (net profit) 5 138.65

$5 338.65 $5 338.65

8.31 Woolworths Limited a 2005 $1969.6m 2006 $2316.1m b Lower of cost or net realisable value. Average cost. c 2005 $23 678.9m 2006 $28 405.1m

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