University Assignment: Accounting for Business Decisions - Finance

This document presents a comprehensive solution to an accounting assignment focused on business decisions. The assignment includes a bank reconciliation statement for Energy Boost, detailing adjustments for outstanding checks, interest earned, and other discrepancies. It also features journal entries for ANZ Kitchen Appliances, including bad debts and the creation of an allowance for doubtful debts. Further, the assignment calculates the cost of sales and closing inventory using the FIFO method, and contrasts perpetual and periodic inventory systems. It also includes calculations for depreciation using both the straight-line and diminishing balance methods, as well as adjusting entries for various expenses and a closing entry example for JB Sports. Finally, the solution offers a discussion of depreciation and its impact on financial statements.

ACCOUNTING
FOR
BUSINESS
DECISIONS

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 31st May, 2022
$ $
Balance as per cash book 1,06,210
Add: Cheques issued but not presented 52,370
Add: Interest earned on bank account 105
Add: Electronic transfer from client 5,410
Add: Cheque for insurance premium incorrectly recorded 755 58,640
Less: Deposits not reflected on bank statement 17,556
Less: Service charge on bank statement 210
Less: Cheque deposited but dishonoured 5,460 23,226
Balance as per bank statement 1,41,624
B) Bank Reconciliation statement is a statement prepared by a firm to match bank
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
Date Particulars Dr Cr

15/06/22 Bank A/c Dr
To Accounts Receivables A/c
3300
3300
16/06/22 Bad Debts A/c Dr
To Accounts Receivables A/c
9900
9900
16/06/22 Allowance for doubtful debts A/c
Dr
To Bad Debts A/c
9900
9900
30/06/22 Profit & Loss A/c Dr
To Allowance for doubtful debts A/c
15180
15180
Statement of Profit & Loss A/c (Extract)
for the period ending 30th June 2022
Particulars $ Particulars $
Allowance for Doubtful Debts 15180
Working Note:
Balance as on 30 June 2022 of Allowance for Doubtful Debts $
Credit Balance as on 1 June 2022 11220
Less: Bad debts written off 9900
1320
Estimated Bad Debt Expense on 30th June (2% of 825000) 16500
Less: Balance as on 30 June 1320
Allowance of Doubtful Debts to be created 15180
Balance Sheet (Extract)
as on 30th June 2022
S.No. Particulars Note No. Amount($)

ASSETS
1 Non-Current Assets
2 Current Assets
Accounts Receivables 1 808500
Notes to Accounts
S. No. Particulars $ $
1 Accounts Receivables
Net Credit Sales 825000
Less: Allowance for Doubtful Debts 16500 808500
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 10th May [1800 units @ $34.8 per unit] 62,640
Purchase on 15th May [720 units @ $36.6 per unit] (balance) 26,352
Total 1,72,152
Calculation of Closing Inventory:
$
Purchase on 15th May [1080-720 units @ $36.6 per unit] 13,176
Purchase on 23th May [1800 units @ $39] 70,200

Closing inventory 83,376
B) The difference between perpetual inventory system and periodic inventory system are being
mentioned below:
Basis Perpetual Inventory System Periodic Inventory System
Meaning This system competent to trace
every single movement in the
inventory as and when they arise.
In this method in stock records are being
updated at periodic intervals
Basis Book Records Physical Verification
Updation Continuously At the end of financial year or accounting
period
Possibility
of control on
inventory
Yes No
Information Inventory and cost of sales Inventory and cost of goods sold
Question No 4:
a.
Purchase of Equipment
List Price 134734
Freight Costs 3105
Installation Costs 3036
Total amount to be debited in Equipment A/c 140875
b.
1.Straight Line Depreciation Method
Depreciation for 2019-2020 [(220000-11000)]/10 20900

Depreciation for year 2020-2021 20900
Accumulated Depreciation as on 30 June 2021 41800
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 2021 96250
c.
Balance of Machine as on 30 June 2021 (220000-41800) 178200
Machine is sold for 190000
Profit 11800
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 is a non cash expenditure.
Question No 5:
Adjustment entries in the books of Achi Design for the period ended 30 June 2019:
Date Particular Debit Credit
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:
Date Particular Debit Credit
Sales Revenue a/c Dr 16500
To Income Summary a/c 16500
Step 2: Close all the expenses to income summary account:
Date Particular Debit Credit
Income Summary a/c Dr 9075
To Wages Expense a/c 2125
To Miscellaneous Expense a/c 2500
To Supplies Expense a/c 1450
To Depreciation Expense a/c 3000
Step 3: The balance in income summary account will be transferred to J B capital account in the
following manner:
Income Summary a/c Dr 7425
To J.B Capital Account 7425
Step 4: The drawings that are being made will be reduced from the capital account:
J.B Capital Account Dr 2500

To Drawings a/c 2500
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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