Accounting Systems and Processes

This project report discusses accounting systems and processes, including journal entries, T-accounts, trial balance, adjusting entries, and financial statements.

Running Head: Accounting systems and Processes
1
Project Report: Accounting systems and Processes

Accounting systems and Processes 2
Contents
Question 1.........................................................................................................................3
Question 2.......................................................................................................................14
Question 3.......................................................................................................................17
References.......................................................................................................................20

Accounting systems and Processes 3
Question 1:
Journal Entries:
Flash Cleaning Services
General Journal - Period July 1, 2018 - July 31, 2018
Date Description PR Debit Credit
2018
Jul-
01 Bank a/c $ 30,000.00
Capital a/c $ 30,000.00
(Investment made.)
Jul-
01 Bank a/c $ 20,000.00
Bank Loan a/c $ 20,000.00
(Loan taken from bank)
Jul-
01 Motor vehicle a/c $ 18,000.00
Bank a/c $ 18,000.00
(Motor vehicle purchased)
Jul-
01 Prepaid insurance a/c $ 3,300.00
Insurance a/c $ 300.00
Bank a/c $ 3,600.00
(Insurance amount paid)
Jul-
01 Cleaning services equipment $ 4,800.00
Bank a/c $ 4,800.00
(cleaning services equipment
purchased)
Jul-
09 Supplies a/c $ 2,400.00
supplier a/c $ 2,400.00
(Goods purchased on credit)
Jul-
13 Bank a/c $ 500.00
services a/c $ 500.00
(Revenue received)

Accounting systems and Processes 4
Jul-
20 Wages a/c $ 1,600.00
Bank a/c $ 1,600.00
Jul-
25 Bank a/c $ 5,500.00
services a/c $ 5,500.00
(Revenue received)
Jul-
27 Supplier a/c $ 2,000.00
Bank a/c $ 2,000.00
(credit amount paid to supplier)
Jul-
31 Interest paid a/c $ 300.00
Bank a/c $ 300.00
(interest on loan paid)
Jul-
31 Advertising cost a/c $ 1,600.00
Bank a/c $ 1,600.00
(Advertising amount paid)
Jul-
31 Depreciation a/c $ 208.33
Motor vehicle a/c $ 208.33
(Depreciation charged)
T-accounts:
Bank A/C
Date Particulars Amount Date Particulars Amount
Jul-
01 Capital a/c $ 30,000.00
Jul-
01 Motor vehicle a/c $ 18,000.00
Jul-
01 Bank Loan a/c $ 20,000.00
Jul-
01
Prepaid insurance
a/c $ 3,300.00
Jul-
13 services a/c $ 500.00
Jul-
01 Insurance a/c $ 300.00
Jul-
25 services a/c $ 5,500.00
Jul-
01
Cleaning services
equipment $ 4,800.00
Jul-
20 Wages a/c $ 1,600.00

Accounting systems and Processes 5
Jul-
27 Supplier a/c $ 2,000.00
Jul-
31 Interest paid a/c $ 300.00
Jul-
31
Advertising cost
a/c $ 1,600.00
Jul-
31 Balance c/d $ 24,100.00
$ 56,000.00 $ 56,000.00
Capital A/C
Date Particulars Amount Date Particulars Amount
Jul-
31 Balance c/d $ 30,000.00
Jul-
01 Bank a/c $ 30,000.00
$ 30,000.00 $ 30,000.00
Bank Loan A/C
Date Particulars Amount Date Particulars Amount
Jul-
31 Balance c/d $ 20,000.00
Jul-
01 Bank a/c $ 20,000.00
$ 20,000.00 $ 20,000.00
Motor Vehicle A/C
Date Particulars Amount Date Particulars Amount
Jul-
01 Bank a/c $ 18,000.00
Jul-
31 Depreciation a/c $ 208.33
Jul-
31 Balance c/d $ 17,791.67
$ 18,000.00 $ 18,000.00
Prepaid insurance A/C
Date Particulars Amount Date Particulars Amount

Accounting systems and Processes 6
Jul-
01 Bank a/c $ 3,300.00
Jan-
00 Balance c/d $ 3,300.00
$ 3,300.00 $ 3,300.00
Insurance A/C
Date Particulars Amount Date Particulars Amount
Jul-
01 Bank a/c $ 300.00
Jan-
00 Balance c/d $ 300.00
$ 300.00 $ 300.00
Cleaning services equipment A/C
Date Particulars Amount Date Particulars Amount
Jul-
01 Bank a/c $ 4,800.00
Jul-
31 Balance c/d $ 4,800.00
$ 4,800.00 $ 4,800.00
Supplies A/C
Date Particulars Amount Date Particulars Amount
Jul-
09 supplier a/c $ 2,400.00
Jul-
31 Balance c/d $ 2,400.00
$ 2,400.00 $ 2,400.00
Supplier A/C
Date Particulars Amount Date Particulars Amount
Jul-
27 Bank a/c $ 2,000.00
Jul-
09 Supplies a/c $ 2,400.00
Jul-
31 Balance c/d $ 400.00
$ 2,400.00 $ 2,400.00
Services a/c

Accounting systems and Processes 7
Date Particulars Amount Date Particulars Amount
Jul-
31 Balance c/d $ 6,000.00
Jul-
13 Bank a/c $ 500.00
Jul-
25 Bank a/c $ 5,500.00
$ 6,000.00 $ 6,000.00
Wages A/C
Date Particulars Amount Date Particulars Amount
Jul-
20 Bank a/c $ 1,600.00
Jul-
31 Balance c/d $ 1,600.00
$ 1,600.00 $ 1,600.00
Interest paid A/C
Date Particulars Amount Date Particulars Amount
Jul-
31 Bank a/c $ 300.00
Jul-
31 Balance c/d $ 300.00
$ 300.00 $ 300.00
Advertising cost A/C
Date Particulars Amount Date Particulars Amount
Jul-
31 Bank a/c $ 1,600.00
Jul-
31 Balance c/d $ 1,600.00
$ 1,600.00 $ 1,600.00
Depreciation A/C
Date Particulars Amount Date Particulars Amount
Jul-
31
Motor vehicle
a/c $ 208.33
Jul-
31 Balance c/d $ 208.33
$ 208.33 $ 208.33

Accounting systems and Processes 8
Unadjusted Trial balance:
Account Name Debit Credit
Bank A/C 24100.00
Capital A/C 30000.00
Bank Loan A/C 20000.00
Motor Vehicle A/C 17791.67
Prepaid insurance A/C 3300.00
Insurance A/C 300.00
Cleaning services equipment A/C 4800.00
Supplies A/C 2400.00
Supplier A/C 400.00
Services a/c 6000.00
Wages A/C 1600.00
Interest paid A/C 300.00
Advertising cost A/C 1600.00
Depreciation A/C 208.33
56400.00 56400.00
Adjusting Entries:
Date Description PR Debit Credit
2018
Jul-31 Wages a/c
$
2,200.00
Outstanding wages
$
2,200.00
(Outstanding expenses recorded)
Jul-31 Accounts receivable
$
12,600.00
Services
$
12,600.00
(Services provided)
Jul-31 Telephone payable
$
100.00
Telephone expenses
$
100.00

Accounting systems and Processes 9
(Payable expenses of telephone)
Jul-31 Fuel payable
$
190.00
Fuel Expenses
$
190.00
(Fuel expenses payable)
Jul-31 Supplies Expenses
$
300.00
Supplies
$
300.00
(Supplies in hand)
Jul-31 Unearned revenue
$
5,000.00
Services
$
5,000.00
(Revenue unearned)
Ten column worksheet:
Trial
Balance
Adjustmen
ts
Adjusted
trial
balance
Income
Statement
Balance
sheet
Debi
t
Cre
dit
Debi
t
Cre
dit
Debi
t
Cre
dit
Exp
ense
s
Rev
enue
Asse
ts
Liab
ilitie
s
Account
Name
Debi
t
Cred
it
Bank A/C
$
24,1
00.0
0
$
24,1
00.0
0
$
24,1
00.0
0
Capital A/C
$
30,0
00.0
0
$
30,0
00.0
0
$
30,0
00.0
0
Bank Loan
A/C
$
20,0
00.0
0
$
20,0
00.0
0
$
20,0
00.0
0
Motor
Vehicle A/C
$
17,7
91.6
$
17,7
91.6
$
17,7
91.6

Accounting systems and Processes 10
7 7 7
Prepaid
insurance
A/C
$
3,30
0.00
$
3,30
0.00
$
3,30
0.00
Insurance
A/C
$
300.
00
$
300.
00
$
300.
00
Cleaning
services
equipment
A/C
$
4,80
0.00
$
4,80
0.00
$
4,80
0.00
Supplies A/C
$
2,40
0.00
$
300.
00
$
2,10
0.00
$
2,10
0.00
Supplier A/C
$
400.
00
$
400.
00
$
400.
00
Services a/c
$
6,00
0.00
$
5,00
0.00
$
12,6
00.0
0
$
13,6
00.0
0
$
13,6
00.0
0
Wages A/C
$
1,60
0.00
$
2,20
0.00
$
3,80
0.00
$
3,80
0.00
Interest paid
A/C
$
300.
00
$
300.
00
$
300.
00
Advertising
cost A/C
$
1,60
0.00
$
1,60
0.00
$
1,60
0.00
Depreciation
A/C
$
208.
33
$
208.
33
$
208.
33
Accounts
receivable
$
12,6
00.0
0
$
12,6
00.0
0
$
12,6
00.0
0
Outstanding
wages a/c
$
2,20
0.00
$
2,20
0.00
$
2,20
0.00
Telephone
payable
$
100.
00
$
100.
00
$
100.
00
Telephone
expenses
$
100.
00
$
100.
00
$
100.
00
Fuel payable
$
190.
00
$
190.
00
$
190.
00

Accounting systems and Processes 11
Fuel
expenses
$
190.
00
$
190.
00
$
190.
00
Supplies
Expenses
$
300.
00
$
300.
00
$
300.
00
Unearned
revenue
$
5,00
0.00
$
5,00
0.00
$
5,00
0.00
Profit
$
6,80
1.67
Pr
of
it
$
6,80
1.67
$
56,4
00.0
0
$
56,4
00.0
0
$
20,3
90.0
0
$
20,3
90.0
0
$
71,4
90.0
0
$
71,4
90.0
0
136
00
1360
0
$
64,6
91.6
7
$
64,6
91.6
7
Financial Statement:
Income statement
(For the month ending 31st July 2018)
Particulars Amount Particulars Amount
Insurance A/C
$
300.00 Services Revenue
$
13,600.00
Wages A/C
$
3,800.00
Interest paid A/C
$
300.00
Advertising cost
A/C
$
1,600.00
Depreciation A/C
$
208.33
Telephone expenses
$
100.00
Fuel expenses
$
190.00
Supplies Expenses
$
300.00
Net Profit
$
6,801.67
$
13,600.00
$
13,600.00
Balance sheet
As at 31st July 2018

Accounting systems and Processes 12
Particulars Amount Particulars Amount
Capital
$
36,801.67 Bank A/c
$
24,100.00
Bank Loan A/C
$
20,000.00 Motor Vehicle A/C
$
17,791.67
Supplier A/C
$
400.00 Prepaid insurance A/C
$
3,300.00
Outstanding wages
a/c
$
2,200.00
Cleaning services equipment
A/C
$
4,800.00
Telephone payable
$
100.00 Supplies A/C
$
2,100.00
Fuel payable
$
190.00 Accounts receivable
$
12,600.00
Unearned revenue
$
5,000.00
$
64,691.67
$
64,691.67
Statement of changes in equity
Opening Capital $ 30,000.00
Add:
Net profit $ 6,801.67
Total capital at the end of the
month $ 36,801.67
Ratio analysis:
Current
ratio Current Assets
$
18,000.00 2.28
Current Liabilities
$
7,890.00
Debt
Ratio Debt 20000 0.54
Capital
$
36,801.67
Revised ratios:
Debt Ratio Debt 10000 0.27

Accounting systems and Processes 13
Capital
$
36,801.67
Current
ratio Current Assets
$
8,000.00 1.63
Current Liabilities 4896
Recommendation:
On the basis of the above ratio analysis, it has been found that if the organization pays
back the loan amount to the bank then the liability of the company would be reduced. If the
organization don’t pay back the debt amount then the current ratio and debt ratio of the
organization would be 2.28 and 0.54 whereas if the loan amount would be paid back then the
current ratio and debt ratio would be 1.63 and 0.27 which depicts that even if the loan amount
would be paid by the organization, the liquidity and solvency position of the company would
be average. So, it is recommended the organization to pay back the loan amount (Chandra,
2011).

Accounting systems and Processes 14
Question 2:
Double entry bookkeeping system is a concept which is followed and applied by the
organizations to record all the transactions of the business. This concept explains that each of
the transaction of an organization has affect over 2 or more accounts of the business and
hence the recording of the transaction must be done in such a way that the balance of all the
affected accounts could be impacted. Earlier, the journal entries of the business used to be
one side. It used to show the impact over one account only. But then the evolution taken
place and origin of double entry system happen. This entry system explains that when one
transaction take place in an organization, it must be recorded in both (Debit and credit side)
of the journal book so that the cross checking of the entries could be done as well as balance
of each of the account could be maintained (Barnes, 2007).
Such as, when goods are sold by the organization on cash basis then it affects two
accounts of the organization i.e. sales a/c and the cash a/c of the business and hence the
recording must be done in both the accounts. In this example, the sales account is credited as
it defines about the deduction in the stock of the business. On the other hand, the cash a/c of
the business is debited which defines about the increment in the cash of the business. The
double entry book keeping system is quite helpful for the business to identify the financial
position of the business and prepare the financial statement of the business.
Because of the double entry bookkeeping system, it has become easier for the
organizations to prepare the T balance and trial balance (Koropp, Kellermanns, Grichnik, &
Stanley, 2014). The total of trial balance is the outcome of recording of all the transaction
perfectly. If the debit and credit side of the trial balance are equal then it depicts that the
transactions have been done in the business perfectly. System of double entry also helps the
business to tally the assets and liabilities side of the business. It helps the organization to
balance the balance sheet of the business.
Double entry bookkeeping system was written and presented by Italian mathematics
whose name was Fra Luca Pacioli and Leonardo da Vinci. They have published their book in
the year of 1994. The name of the book was “Summa de arithmetical, geometric, proportion
et proportionality” (Higgins, 2012). Both the authors have presented various concepts and
tools to improve the transaction recording of the business. Both the authors have given
various examples and presented each of the transaction efficiently in the book in order to
make it easier for the users to understand the concept and improve the accounting process of

Accounting systems and Processes 15
an organization. A great change has taken place in the organizations and financial acts after
the evolution of the double entry bookkeeping system after the traditional accounting system.
Importance of double entry bookkeeping:
For each of the business, it is quite important to maintain a record over all the financial
transaction of the business so that financial reports of the business could be prepared.
Financial reports of an organization help the business to evaluate the financial performance,
do competitor analysis and identify the stand of the organization in the industry. Double entry
bookkeeping system has evaluated the accounting at a great extent. Below is few importance
of double entry system:
Accuracy:
Double entry bookkeeping system offers the accurate data to its users as it identifies
all the account which has been affected due to the transaction and record the impact in all
those accounts (Madura, 2011). Hence, because of this system, the accounting process has
improved at great extent.
Reliability:
Double entry bookkeeping system offers the reliable and good data to its users as it
identifies all the relevant information and record them in all the affected accounts of the
business. Hence, because of this system, the reliability of the accounting process has been
improved in the market.
Error reduction:
the chances of error has been reduced in the accounting process because of the double
entry bookkeeping system as it records the impact in all those accounts. Hence, because of
this system, the accounting process has improved at great extent (DemaMoreno, 2009).
Cost control:
Further, it has also been found that the double entry bookkeeping system it less costly
and the impact of the system is quite huge. Hence, because of this system, the accounting
process has improved at great extent.
Difference among the single entry and double entry bookkeeping system:
Basis Double entry bookkeeping Single entry bookkeeping

Accounting systems and Processes 16
system system
Meaning Under this system,
the transaction affects 2 or
more then 2 accounts of the
business.
Under this system, the
transaction affects only 1
account of the business.
Recording Complete recording of the
transaction take place
Incomplete recording of the
transaction take place
Ledger Nominal, personal and real
accounts
personal and cash accounts
Nature Complex simple
Errors Simple to identify the errors Complex to identify the
errors (Rose & Hudgins,
2012)
On the basis of the overall study over the double entry bookkeeping system, it has been
identified that each of the transaction of an organization has affect over 2 or more accounts of
the business and hence the recording of the transaction must be done in such a way that the
balance of all the affected accounts could be impacted. Bookkeeping system has evolved and
these changes are for the good of the market, organizations and the users of the financial
books of an organization as it has made it easier for the business to evaluate all the changes
and make better decisions for the business.

Accounting systems and Processes 17
Question 3:
ABC learning is one of the well known Australian institutes of learning. It has been
established as one of the largest Australian chain to take care of the children. The
organization was established in the year of 1988 and after that, a rapid growth has been seen
in the organization. However, it has been found that huge losses and decrement has been
faced by the organization in recent years because of numerous issues (Rabin, 2013). A
number of points have been listed below which were the main cause behind the unsuccessful
of the business.
The main reason behind the unsuccessful and failure of the business was its debt.
Company has shown in its annual report of 2006 then the market capitalization of the
business is Australian $ 2.5 billion. Further, in the year of 2007, it has been shown by the
company that the sales of the company are $ 1.7 billion and the total net profit after tax is
Australian $ 143.1 million. It has grabbed the attention of the public and changed the entire
scenario of the business. Various issues of the business have come up together and because of
it, various issues have been faced by the business. The company has to sell out its 60% of the
US subsidiaries to manage the debt and the solvency level of the business. Earlier, the stock
price of the company was good but after such incident, the stock price has been recorded
Australian $ 0.54 (Governance for stakeholders, 2012). Several issues such as related party
transaction, accounting standard issues, liquidation damages, opaque level operation etc are
the main reason behind the failure of the business.
Accounting issues:
ABC limited has faced various issues because of that the company got failure. Among
them, the major issues was accounting related. Organization has not valued the assets
properly. No proper accounting standards have been followed by the business while
recording the business transaction and the valuation of the assets have been done in such a
way that financial statement of the company seems attractive. There were discrepancies with
the profits, earnings and revenues of the business. even, it has been found that in the year of
2003, external auditors of the company has resigned from the organization instead of
revealing about the fraud taking place in the business. After that E&Y has disclosed the
discrepancies and fraud which was taken place in the business.
Related party transaction:

Accounting systems and Processes 18
After the study over the investigation conducted over the company, it has been found
that E&Y has been appointed as the external auditor of the company and found that the CEO
of the company was involved in various unethical issues. Various decisions have been made
by the CEO to benefit himself and his friends (Hussey, 2014). The related party transaction
has also played a worse role in failing the business. Payment from various debtors and
payment to various suppliers have been manipulated and recorded in the books of the
business wrongly.
Poor strategies and No expansion planning:
The strategies of the company were quite poor. Company has not planned any action
properly which has directly impacted over the business and performance of the company.
Company has expanded overseas but no depth planning and feasibility study has done by the
business. High loan has been taken by the business to expand the business and improve the
performance of the business. Also, it has been found that the company has opted for multi
option facility in which $ 1.48 million has risen as debt and it impacted over the profitability
level of the business by 42% (Islam, 2017).
Opaque level:
The transaction and activities of the business were not at all transparent. Policies,
guidelines etc of the company has been breached by the CEO and other employee of the
company for their own betterment. The division planning and other process of the company
has not been followed properly because of the clarity in the guidelines and policies (Jeffrey,
2018).
These are among the few issues because of that the company had to face the failure in
the market. Further, the ethical issues which were taken place in the organization are as
follows:
Ethical issues:
On the basis of the study over ABC limited, it has been found that the company was
involved in various ethical issues. Above all, the main issues of the company were to lower
wages to its employees. Company was not even paying its employees according to the market
rate due to the fact that the main focus of the company was on to generating higher profits
from the market. In order to improve the goodwill, enhance the profitability, competitor
position, improvement in the stock price of the company etc, the wages rate has been lowered

Accounting systems and Processes 19
by the company. In the year of 2004, it has been found that the Australian accounting
standard was not justifying the wages rate if the company (Rose & Hudgins, 2012).
Further, the second issues faced by the company was manipulation of the accounting
and financial reports of the business. CEO and other board of directors of the company have
manipulated the accounting books of the company for their betterment. Various accounting
standards have not been followed by the company just to improve the attractiveness of the
books and hide the facts and transaction of the business.
Lastly, it has been found that no proper valuation has been done by the company and
the accountant of the company or inventory and other assets of the business, Policies and
guidelines of the company have been breached by its employee for self betterment (Higgns,
2012). It explains that there were various issues associated with the business which has
affected the overall performance and position of the company.

Accounting systems and Processes 20
References:
Barnes, P. (2007), The Analysis and Use of Financial Ratios: A Review Article, Journal of
Business Finance & Accounting, 14 (4), p. 449-461
Chandra, P. (2011). Financial management. Tata McGraw-Hill Education.
DemaMoreno, S. (2009). Behind the negotiations: Financial decision-making processes in
Spanish dual-income couples. Feminist Economics, 15(1), 27-56.
Governance for stakeholders, (2012).The ABC of a corporate collapse. Retrieved from
https://governanceforstakeholders.com/2012/12/28/the-abc-of-a-corporate-collapse/
Higgins, R. C. (2012). Analysis for marketing management. McGraw-Hill/Irwin.
Hussey, R. (2014). MBA Accounting 1st ed. U.K: Macmillan International Higher Education.
Islam, (2017).ABC Learning :: Collapse of an Entrepreneurial Venture. Retrieved from
http://dspace.bracu.ac.bd/xmlui/bitstream/handle/10361/9144/12164006.pdf?
sequence=1&isAllowed=y
Jeffrey, J. (2018). Research on Professional Responsibility and Ethics in Accounting 1st ed.
U.K: Emerald Group Publishing.
Koropp, C., Kellermanns, F. W., Grichnik, D., & Stanley, L. (2014). Financial decision
making in family firms: An adaptation of the theory of planned behavior. Family
Business Review, 27(4), 307-327.
Madura, J. (2011). International financial management. Cengage Learning.
Porcelli, A. J., & Delgado, M. R. (2009). Acute stress modulates risk taking in financial
decision making. Psychological Science, 20(3), 278-283.
Rabin, M. (2013). Risk aversion and expected-utility theory: A calibration theorem.
In Handbook of the Fundamentals of Financial Decision Making: Part I (pp. 241-252).
Rose, P. S., & Hudgins, S. C. (2012). Bank management & financial services. McGraw-Hill
Education.