Accounting for Business Decisions - Study Material and Solved Assignments
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This study material covers various topics related to Accounting for Business Decisions, including bank reconciliation, journal entries, cost of sales, depreciation, adjustment entries, and closing entries. It also includes references to relevant books and journals.
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ACCOUNTING FOR BUSINESS DECISIONS
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Contents MAIN BODY...................................................................................................................................3 Question No 1:........................................................................................................................3 Question No 2:........................................................................................................................3 Question No 3:........................................................................................................................4 Question No 4:........................................................................................................................4 Question No 5:........................................................................................................................5 Question No 6:........................................................................................................................6 REFERENCES................................................................................................................................8
MAIN BODY Question No 1: A) Energy Boost's Bank Reconciliation as on 31stMay, 2022 $$ Balance as per cash book1,06,210 Add: Cheques issued but not presented52,370 Add: Interest earned on bank account105 Add: Electronic transfer from client5,410 Add: Cheque for insurance premium incorrectly recorded75558,640 Less: Deposits not reflected on bank statement17,556 Less: Service charge on bank statement210 Less: Cheque deposited but dishonoured5,46023,226 Balance as per bank statement1,41,624 B)BankReconciliationstatementisastatementpreparedbyafirmtomatchbank transactions recorded in books with bank statement. There are plenty of reasons why bank reconciliation is prepared and some common reasons are mentioned below: The reconciliation acknowledges an unreasonable pause in clearing of deposited or released cheques. Reconciliation aims to validate the authenticity of entries registered in the cash book by management. It identifies mistakes in either cash book or bank statement. Question No 2: Journal Entries in the books of ANZ Kitchen Appliances Pvt Ltd DateParticularsDrCr
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15/06/22Bank A/cDr To Accounts Receivables A/c 3300 3300 16/06/22Bad Debts A/cDr To Accounts Receivables A/c 9900 9900 16/06/22AllowancefordoubtfuldebtsA/c Dr To Bad Debts A/c 9900 9900 30/06/22Profit & Loss A/cDr To Allowance for doubtful debts A/c 15180 15180 Statement of Profit & Loss A/c (Extract) for the period ending 30thJune 2022 Particulars$Particulars$ Allowance for Doubtful Debts15180 Working Note: Balance as on 30 June 2022 of Allowance for Doubtful Debts$ Credit Balance as on 1 June 202211220 Less: Bad debts written off9900 1320 Estimated Bad Debt Expense on 30thJune (2% of 825000)16500 Less: Balance as on 30 June1320 Allowance of Doubtful Debts to be created15180 Balance Sheet (Extract) as on 30thJune 2022 S.No.ParticularsNote No.Amount($)
ASSETS 1Non-Current Assets 2Current Assets Accounts Receivables1808500 Notes to Accounts S. No.Particulars$$ 1Accounts Receivables Net Credit Sales825000 Less: Allowance for Doubtful Debts16500808500 Question No 3: A) Calculation of Cost of Sales for month of May: Number of units sold during the period = 7,200-2,160 =5,040 Cost of Sales:$ Beginning inventory [2520 units @$33 per unit]83,160 Purchase on 10thMay [1800 units @ $34.8 per unit]62,640 Purchase on 15thMay [720 units @ $36.6 per unit] (balance)26,352 Total1,72,152 Calculation of Closing Inventory: $ Purchase on 15thMay [1080-720 units @ $36.6 per unit]13,176 Purchase on 23thMay [1800 units @ $39]70,200
Closing inventory83,376 B) The difference between perpetual inventory system and periodic inventory system are being mentioned below: BasisPerpetual Inventory SystemPeriodic Inventory System MeaningThissystemcompetenttotrace everysinglemovementinthe inventory as and when they arise. In this method in stock records are being updated at periodic intervals BasisBook RecordsPhysical Verification UpdationContinuouslyAt the end of financial year or accounting period Possibility of control on inventory YesNo InformationInventory and cost of salesInventory and cost of goods sold Question No 4: a. Purchase of Equipment List Price134734 Freight Costs3105 Installation Costs3036 Total amount to be debited in Equipment A/c140875 b. 1.Straight Line Depreciation Method Depreciation for 2019-2020 [(220000-11000)]/1020900
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Depreciation for year 2020-202120900 Accumulated Depreciation as on 30 June 202141800 2.Diminishing Balance Method Depreciation for the year 2019-2020[(220000* 25%)55000 Depreciation for the year 2020-2021[(220000-55000)]*25%41250 Accumulated Depreciation as on 30 June 202196250 c. Balance of Machine as on 30 June 2021 (220000-41800)178200 Machine is sold for190000 Profit11800 d. Depreciation is the permanent and continuous decrease in the book value of a depreciable fixed asset due to use, effluxion of time, obsolescence expiration of legal rights or any other cause. Depreciation does not result in cash out flow. It isanon cash expenditure. Question No 5: Adjustment entries in the books of Achi Design for the period ended 30 June 2019: DateParticularDebitCredit 1.Supplies Expense a/c Dr$ 2700 To Office Supplies a/c$ 2700 2.Unearned Fees a/c Dr$ 26350 To Fees a/c$ 26350 3.Depreciation Expense a/c Dr$ 27930 To Accumulated Depreciation a/c$ 27930
4.Advertisement Expense a/c Dr$ 11600 To Prepaid Advertisement Expense a/c$ 11600 5.Provision for Doubtful Debt a/c Dr$ 7308 To Accounts Receivables a/c$ 7308 Question No 6: a)Preparation of Closing entries: Step 1: Close of the income accounts to income summary accounts: DateParticularDebitCredit Sales Revenue a/c Dr16500 To Income Summary a/c16500 Step 2:Close all the expenses to income summary account: DateParticularDebitCredit Income Summary a/c Dr9075 To Wages Expense a/c2125 To Miscellaneous Expense a/c2500 To Supplies Expense a/c1450 To Depreciation Expense a/c3000 Step 3:The balance in income summary account will be transferred to J B capital account in the following manner: Income Summary a/c Dr7425 To J.B Capital Account7425 Step 4:The drawings that are being made will be reduced from the capital account: J.B Capital Account Dr2500
To Drawings a/c2500 The net balance of the capital account would be = 20820 + 7425 – 2500 = 25745 b)Presentation of Profit and loss if the nature of JB sports is being a company instead of small proprietorship firm: In case if JB sports is a company instead of sole proprietor firm then in that case if the dividend is being paid by the company then in that case the retained earnings balance gets reduced as from such balance the payment to shareholder for dividend is being made.
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REFERENCES Books and Journals Aldeia, S., 2021. The accounting role in determining the corporate tax base in India.Academy of Strategic Management Journal,20, pp.1-7. Almagtome,A.H., 2021. ArtificialIntelligenceApplicationsin Accountingand Financial Reporting Systems: An International Perspective. InHandbook of Research on Applied AI for International Business and Marketing Applications(pp. 540-558). IGI Global. Anderson, S.B., Hodder, L.D. and Hopkins, P.E., 2020. Money Illusion and the Effect of ReportingComponentsofAccountingEstimatesonFinancialStatementUsers’ Investment Decisions.Available at SSRN 3688524. Kreilkamp, N., Schmidt, M. and Wöhrmann, A., 2020. Debiasing as a powerful management accountingtool?EvidencefromGermanfirms.JournalofAccounting& Organizational Change. Rimmel, G. ed., 2020.Accounting for Sustainability. Routledge. Saliy, V.V., Ishchenko, O.V., and Abyzova, E.V., 2021. Accounting and analytical systems as an integral element of contemporary accounting. InFrontier Information Technology and Systems Research in Cooperative Economics(pp. 739-746). Springer, Cham. San-Jose,L.,Mendizabal,X.andRetolaza,J.L.,2020.SocialAccountingandBusiness Legitimacy. InHandbook of Business Legitimacy(pp. 967-981). Springer, Cham. Shokiraliyevich, G.I., 2021. Role of information and communication technologies in accounting anddigitaleconomy.SouthAsianJournalofMarketing&Management Research,11(5), pp.17-20. Sudhamathi, R.K., 2022. Artificial intelligence in accounting profession: A way forward.Asian Journal of Research in Banking and Finance,12(3), pp.7-9. Zhang, Y., Liu, H., and Wang, S., 2019, October. Research on the influence of distributed accountingtechnologyonaccounting.In20196thInternationalConferenceon Behavioral, Economic and Socio-Cultural Computing (BESC)(pp. 1-6). IEEE.