Accounting 101 Assignment: Inventory, Sales, and Controls

This accounting assignment solution covers inventory valuation methods, journal entries, and internal controls. The assignment begins with a scenario involving a retail business, Spottie Ltd, and its transactions during January 2018, including share issuance, inventory purchases, sales, and payments. The solution demonstrates the application of both perpetual and periodic inventory systems, along with the First-In, First-Out (FIFO) method. Journal entries for each transaction are provided. The assignment also discusses the benefits of using cloud-based accounting software, such as Xero, highlighting automation, efficient cash flow management, and accessibility. Finally, the solution explains the importance of internal controls in preventing fraud and ensuring the accuracy of financial statements, illustrating the concept with a case study. This document provides a comprehensive guide to understanding and solving accounting problems related to inventory, sales, and internal controls.

ACCOUNTING 1
ACCOUNTING

ACCOUNTING 2
Answer 1:
The following are the relevant calculations:
(
i
)
a
)
First-
in-
first-
out
(FIFO
)
This method of inventory valuation is based on the assumption that the usage or sale
of goods follows the same order in which they are bought i.e. to say under this
method the earlier purchased goods are considered as first used. As a result, under
this method, the inventory is valued at most recent purchased price
b
)
Weig
hted
Avera
ge
Under this method of inventory valuation the cost of goods sold and inventory are
valued at weighted average cost of goods available during the period i.e. Cost of
Opening Inventory plus the Cost of Purchases is divided by the total units
(
i
i
)
a
)
Perpe
ctual
Meth
od of

ACCOUNTING 3
Inven
tory
Date Journal Entry
D
r.
/
C
r.
Amo
unt in
$
01-Jan Bank A/c
D
r.
2
0,
0
0
0
To Share Capital A/c
C
r.
2
0,
0
0
0
(Being shares issued)
03-Jan Inventory A/c D
r. 2,
4
0

ACCOUNTING 4
0
To Plush Toys Ltd.
C
r.
2,
4
0
0
(Being 400 soft toys purchased @
$6 per unit)
06-Jan Cost of Goods Sold (COGS) A/c
D
r.
9
6
0
To Inventory
C
r.
9
6
0
(Being cost of 160 soft toys
transferred to COGS @ $6 per
unit)
06-Jan Rainbow Preschool A/c
D
r.
1,
6
0
0
To Sales A/c C

ACCOUNTING 5
r.
1,
6
0
0
(Being 160 soft toys sold)
09-Jan Inventory A/c
D
r.
2,
1
0
0
To Bank A/c
C
r.
2,
1
0
0
(Being 300 soft toys purchases via
ETF @ $7 per unit)
12-Jan Plush Toys Ltd.
D
r.
2,
4
0
0
To Bank A/c C

ACCOUNTING 6
r.
2,
4
0
0
(Being amount paid to Plush Toys)
15-Jan Bank A/c
D
r.
1,
6
0
0
To Rainbow Preschool A/c
C
r.
1,
6
0
0
(Being amount received from
Rainbow Preschool)
20-Jan Cost of Goods Sold (COGS) A/c
D
r.
1,
2
0
0
To Inventory C

ACCOUNTING 7
r.
1,
2
0
0
(Being cost of 200 soft toys
transferred to COGS @ $6 per unit
from purchase of 3rd January)
20-Jan Children's Hospital A/c
D
r.
2,
0
0
0
To Sales A/c
C
r.
2,
0
0
0
(Being 200 soft toys sold)
22-Jan Inventory A/c
D
r.
1,
0
5
0

ACCOUNTING 8
To Plush Toys Ltd.
C
r.
1,
0
5
0
(Being 150 soft toys purchased @
$7 per unit)
24-Jan Plush Toys Ltd. A/c
D
r.
1,
0
5
0
To Bank A/c
C
r.
1,
0
2
9
To Discount Received A/c
C
r.
2
1
(Being amount paid to Plush Toys
and availed 2% discount)
25-Jan Cost of Goods Sold (COGS) A/c D

ACCOUNTING 9
r.
1,
3
6
0
To Inventory
C
r.
1,
3
6
0
(Being cost of 200 soft toys
transferred to COGS - 40 soft toys
@ $ 6 per unit from purchase of
3rd January and balance 160 soft
toys @ $ 7 per unit from purchase
of 9th January)
25-Jan Bank A/c
D
r.
2,
4
0
0
To Sales A/c C
r. 2,
4
0

ACCOUNTING 10
0
(Being 200 soft toys sold online)
31-Jan Closing Balance of Inventory
Number of Soft Toys
2
9
0
Value @ $7 per unit
2
0
3
0
(140 soft toys @ $ 7 per unit from
purchase of 9th January and 150
soft toys @ $ 7 per unit from
purchase of 22nd January)
b
)
Perio
dic
Meth
od of
Inven
tory
Date Journal Entry D
r.
/
Amo
unt in
$

ACCOUNTING 11
C
r.
01-Jan Bank A/c
D
r.
2
0,
0
0
0
To Share Capital A/c
C
r.
2
0,
0
0
0
(Being shares issued)
03-Jan Purchases A/c
D
r.
2,
4
0
0
To Plush Toys Ltd. C
r. 2,
4
0

ACCOUNTING 12
0
(Being 400 soft toys purchased @
$6 per unit)
06-Jan Rainbow Preschool A/c
D
r.
1,
6
0
0
To Sales A/c
C
r.
1,
6
0
0
(Being 160 soft toys sold)
09-Jan Purchases A/c
D
r.
2,
1
0
0
To Bank A/c C
r. 2,
1
0