Accounting Study Material and Solved Assignments

This document provides study material and solved assignments for accounting. It includes topics such as preparing general journal entries, balance day adjustments, profit and loss statement, balance sheet, and ratio analysis. The content is relevant for students studying accounting and related courses in college or university.

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Accounting
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Question 1:...................................................................................................................3
a) Preparing general journal entries to record the transactions in June 2018:............3
b) Preparing general journal entries to record all the necessary balance day
adjustments as at 30 June 2018:..................................................................................4
c) Preparing Profit and Loss Statement for H2O Solutions for the year ended 30
June 2018:....................................................................................................................5
d) Calculating the balance of Owner’s Equity as at 30 June 2018:..............................5
Question 2: Prepare the corrected classified Profit and Loss Statement and Balance
Sheet.............................................................................................................................5
Question 3:...................................................................................................................7
a) Computing the relevant ratios:.................................................................................7
b) Commenting on the following and using the relevant ratios:...................................7
i) Indicating the profitable business:.............................................................................7
ii) Business providing higher return to the owner:........................................................8
iii) Indicating whether businesses able to meet their liabilities when they are due:.....8
iv) Business effective in collecting its debt:..................................................................9
v) Recommending the business for investment:..........................................................9
vi) Explaining two limitations of the method used for analysing the two businesses:..9
Reference and Bibliography:......................................................................................10

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Question 1:
a) Preparing general journal entries to record the transactions in June 2018:
Date Particulars Dr ($) Cr ($)
01-06-2018 OCBC Bank 30,000.00
Cash at Bank 30,000.00
Date Particulars Dr ($) Cr ($)
05-06-2018 Accounts Receivable 3,000.00
Sales 3,000.00
Date Particulars Dr ($) Cr ($)
08-06-2018 Drawings, Leslie Ng 40,000.00
Cash at Bank 40,000.00
Date Particulars Dr ($) Cr ($)
12-06-2018 Accounts Payable 9,000.00
Cash at Bank 9,000.00
Date Particulars Dr ($) Cr ($)
17-06-2018 Cash at Bank 40,000.00
Capital, Leslie Ng 40,000.00
Date Particulars Dr ($) Cr ($)
19-06-2018 Cash at Bank 7,000.00
Accounts Receivable 7,000.00
Date Particulars Dr ($) Cr ($)
23-06-2018 Office printer 8,000.00
Cash at Bank 800.00
Accounts Payable 7,200.00
Date Particulars Dr ($) Cr ($)
26-06-2018 Rental Expense 36,000.00
Cash at Bank 36,000.00
Date Particulars Dr ($) Cr ($)
29-06-2018 Rental Expense 4,000.00
Salaries Expense 8,700.00
Advertising Expense 6,000.00
Cash at Bank 18,700.00

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Date Particulars Dr ($) Cr ($)
30-06-2018 Accounts Receivable 21,150.00
Cash at Bank 9,400.00
Sales 30,550.00
Date Particulars Dr ($) Cr ($)
30-06-2018 Cost of Goods Sold 10,200.00
Cash at Bank 10,200.00
b) Preparing general journal entries to record all the necessary balance day
adjustments as at 30 June 2018:
Date Particulars Dr ($) Cr ($)
30-06-
2018 Cash at Bank 72.00
Interest received 72.00
Interest received =30,000*2.88%*(1/12) =
72
Date Particulars Dr ($) Cr ($)
30-06-
2018 Prepaid rent 30,000.00
Rental Expense 30,000.00
Prepaid rent =36,000 - (36,000/6) =
30,000
Date Particulars Dr ($) Cr ($)
30-06-
2018 Prepaid insurance 1,050.00
Insurance Expense 1,050.00
Prepaid insurance =(1800/12)*7) = 1,050
Date Particulars Dr ($) Cr ($)
30-06-
2018 Accounts Payable 650.00
Utilities Expense 650.00
Date Particulars Dr ($) Cr ($)
30-06-
2018 Depreciation expense 600.00
Accumulated Depreciation – Office

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Furniture 600.00
Date Particulars Dr ($) Cr ($)
30-06-
2018 Bad debts 2,300.00
Accounts Receivable 2,300.00
c) Preparing Profit and Loss Statement for H2O Solutions for the year ended
30 June 2018:
Profit and Loss Statement for H2O Solutions
Particulars Amount Amount
Sales 4,35,860.00
Sales Returns -34,020.00 4,01,840.00
Cost of Goods Sold -1,60,430.00
Gross profit 2,41,410.00
Interest received 72.00
Commission Income 21,500.00
Advertising Expense -21,200.00
Insurance Expense -1,800.00
Prepaid insurance 1,050.00
Rental Expense -82,000.00
Prepaid rent 30,000.00
Salaries Expense -63,700.00
Utilities Expense -7,800.00
Purchases -8,000.00
Depreciation
expense -600.00
Bad debts -2,300.00 -1,34,778.00
Net Profit 1,06,632.00
d) Calculating the balance of Owner’s Equity as at 30 June 2018:
Particulars Amount Amount
Capital, Leslie Ng 69,560.00
Drawings, Leslie Ng 17,400.00 52,160.00
Drawings, Leslie Ng 40,000.00
Capital, Leslie Ng 40,000.00 -
Retained earnings 1,07,232.00
Owner’s Equity as at 30 June 2018 1,59,392.00

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Question 2: Prepare the corrected classified Profit and Loss Statement and
Balance Sheet
Amanda Lai
Profit and Loss Statement as at 31 December 2017
Particulars Amount Amount
Sales
Course Fee Revenue 72,700.00
Total revenue 72,700.00
Less: Operating Expenses
Advertising Expense 42,440.00
Salesmen Commission 35,600.00
Selling & Distribution Expense 78,040.00
Office Salaries Expense 14,000.00
Telephone Expense 2,100.00
General and Administrative Expense 16,100.00
Total operating expenses 94,140.00
Operating Income/(Loss) -21,440.00
Depreciation Expense – Furniture &
Fittings 3,000.00
Bad Debts Expense 800.00
Interest Expense 480.00
Financial Expense 4,280.00
Net Loss -25,720.00
Amanda Lai
Balance Sheet for the year ended 31 December 2017
Particulars Amount
Current Assets
Cash at Bank 24,180.00
Prepaid Expense 7,400.00
Accrued Revenue 5,900.00
Total Current Assets 37,480.00
Non-Current Assets
Furniture and Fittings 16,500.00
Less: Accumulated Depreciation – Furniture &
Fittings 3,000.00
Total Non-Current Assets 13,500.00

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TOTAL ASSETS 50,980.00
Current Liabilities
Accounts Payable 3,600.00
Accrued Expense 900.00
Unearned Revenue 4,700.00
Total Current Liabilities 9,200.00
Non-Current Liabilities
Bank Loan (due on 30 June 2020) 9,500.00
Total Non-Current Liabilities 9,500.00
TOTAL LIABILITIES 18,700.00
NET ASSETS 32,280.00
Equity
Capital 65,000.00
Less: Drawings 7,000.00
Retained earnings -25,720.00
TOTAL EQUITY 32,280.00
Question 3:
a) Computing the relevant ratios:
Ratio Boat Quay Trading Clarke Quay Trading
(i) Current Ratio (times) 124,055/31,650 = 3.92 93,680 / 30,150 = 3.11
(ii) Quick Ratio (times)
(124,055 – 54,625) /
31650 = 2.19
(93,680-32,150)/30,150 =
2.04
(iii) Average Collection
Period (days)
(40,830 / 442,550) * 365
= 34 days
(22,880/500,800)*365 = 17
days
(iv) Gross Profit Margin
(%)
228,550/442,550 =
51.64% 250,400/500,800 = 50.00%
(v) Net Profit Margin (%) 40,955/442,550 = 9.25% 75,730/500,800 = 15.12%
(vi) Return on Equity (%) 40,955/132,855 = 30.83% 75,730/100,830 = 75.11%
(vii) Debt Ratio (%)
(20,000+31,650)/
(124,055+60,450) =
27.99%
(63,530)/(93,680+37,300) =
48.50%

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b) Commenting on the following and using the relevant ratios:
i) Indicating the profitable business:
After evaluating the profitability conditions of the companies that could be
identified that Clark Quay Trading has the highest level of net profit margin in
comparison to Boat Quay Trading. However, the gross profit margin of Boat Quay
Trading is higher than Clark Quay Trading, which indicates the low level of Cost of
goods expenses incurred by the organization (Vogel 2014). Nevertheless, after
comparing both the gross profit margin and net profit margin it could be identified
that Clark Quay Trading is the most profitable business, as it generate a net profit of
15.12% in comparison to 9.25% of Boat Quay Trading.
ii) Business providing higher return to the owner:
The calculation of return on equity helps to detect the business, which
provides the highest return to the owners (Jordan 2014). Moreover, the calculation
directly indicates that Clark Quay Trading provides the highest return on equity in
comparison to Boat Quay Trading. This relatively indicates that the owners of Clark
Quay Trading enjoy higher returns with their investments in the organization. Clark
Quay Trading provides return on equity of 75.11% in comparison to 30.83% of Boat
Quay Trading, which is exponentially higher due to the high net income earned
during the fiscal year.
iii) Indicating whether businesses able to meet their liabilities when they are
due:
The liability position and condition of the organization is detected from current
ratio and quick ratio, which evaluates their capability to support short-term

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obligations as and when they are due. Current ratio position of Boat Quay Trading is
aggressively higher in comparison to Clark Quay Trading, whereas both the
companies’ values are adequate to support to their short-term obligations as and
when they are due. The quick ratio of Boat Quay Trading is at the levels of 2.19,
whereas Clark Quay Trading value is at 2.04. This indicates that both the companies
are able to support the financial obligations as and when it is required without
hampering there noncurrent assets.
iv) Business effective in collecting its debt:
From the calculation, it could be understood that one of the company is not
able to collect their payments in time, as their customers are not following the credit
terms defined by the business. The payment collection days of Boat Quay Trading Is
relatively at the levels of 34 days, this is higher than the credit terms of 21 days.
However, the payment collection of Clark Quay Trading is at17 days, which is
confined within the credit terms. There is relevant risk to the business if no actions
are taken to improve the debt collection, as this will increase the chance of cash
stagnation (Greco, Figueira and Ehrgott 2016). This would eventually hamper their
capability to continue the operation without acquiring additional capital in form of
loans or other financial instruments. This would lead to further cash outflows and
hamper the financial stability of the organization, while eventually leading to
insolvency.
v) Recommending the business for investment:
After evaluating the financial ratios, Clark Quay Trading is recommended for
investment, as it would eventually allow the investor to generate higher return on
their investment.

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vi) Explaining two limitations of the method used for analysing the two
businesses:
Investments conducted with the help of financial ratios relatively pose two
different limitations, one of which is that the measure directly uses historical data that
does not portray their financial activities. The second limitation of the method is that
it does not project the share price trend using technical and fundamental analysis,
which is essential for the investors to increase their returns from investment.

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Reference and Bibliography:
Greco, S., Figueira, J. and Ehrgott, M., 2016. Multiple criteria decision analysis. New
York: Springer.
Jordan, B., 2014. Fundamentals of investments. McGraw-Hill Higher Education.
Omar, N., Koya, R.K., Sanusi, Z.M. and Shafie, N.A., 2014. Financial statement
fraud: A case examination using Beneish Model and ratio analysis. International
Journal of Trade, Economics and Finance, 5(2), p.184.
Vogel, H.L., 2014. Entertainment industry economics: A guide for financial analysis.
Cambridge University Press.
Xu, W., Xiao, Z., Dang, X., Yang, D. and Yang, X., 2014. Financial ratio selection for
business failure prediction using soft set theory. Knowledge-Based Systems, 63,
pp.59-67.