Financial Accounting Assignment: Journal Entries and Statements

This accounting assignment covers a range of fundamental accounting topics. Question 1 focuses on journal entries, including the use of special journals (purchases, sales, cash receipts, cash payments) and the general journal, alongside the preparation of the accounts receivable control account. Question 2 requires the preparation of a cash flow statement and an analysis of equipment's carrying amount. Question 3 involves bank reconciliation, including the preparation of the cash at bank account and a bank reconciliation statement. Finally, Question 4 delves into bad debt accounting, exploring both the direct write-off method and the allowance method, along with the preparation of the allowance for doubtful debts account and the presentation of accounts receivable in the balance sheet. The assignment provides detailed solutions to each of these questions, offering a comprehensive review of essential accounting principles.

QUESTION 1
Simon Carlton began business on 1 July 2019, specializing in the purchase and supply of
packaging materials. An accounting system was designed and a chart of accounts was
established. The business uses the periodic inventory system and is registered for GST at the
rate of 10%.
A/c Code A/c Name A/c Code A/c Name
101 Cash at bank
113 Accounts Receivable Control 201 Accounts payable control
115 GST Paid 203 GST Collected
117 Prepaid insurance 204 Bank loan
118 Office supplies 251 Mortgage payable
151 Land 301 S. Carlton, Capital
154 Buildings 401 Sales
156 Store Furniture 403 Sales returns and allowances
405 Discount received 611 Electricity expenses
501 Purchases 621 Office expenses
503 Purchases returns and allowances 631 Discount allowed
601 Salaries expense
The following transactions occurred during July 2019 and are INCLUSIVE of GST where
appropr iate.
2019
July 1 S. Carlton invested $60,000 cash in the new business.
Purchased land and buildings of an existing retail store for $110,000 of which
$33,000 is considered land cost. Paid $33,000 by cheque no. 101 for the land and
buildings and signed a mortgage payable for the balance. (Hint: Remember GST)
2 Purchased store furniture on credit terms from Corma Ltd for $7,480, terms n/60.
5 Purchased inventory on credit terms from Tumult Ltd $4,400; invoice date 6 July,
terms 2/10, n/60.
6 Purchased a 3-year fire insurance policy for $792, cheque no. 102.
8 Purchased inventory for $5,500, cheque no. 103.
9 Returned unsatisfactory goods to Tumult Ltd and received a credit note for $880.
13 Sold inventory to M. Biller on account, $9,020; invoice no. 1, terms 1/10, n/30.
15 Paid Tumult Ltd cheque no. 104 for amount due.
Cash sales for period to 15 July were recorded today, $3,740.
16 Sold inventory to O. Mowen on account $5,170; invoice no. 2, terms 1/10, n/30.
Paid salaries for period to 15 July totaling $2,650, cheque no. 105.
20 Purchased inventory on credit terms from Lynwood Ltd, $5,390; invoice date 20 July,
terms 1/10, n/30.
22 Received account for $143 from M. Parson for items chargeable to Office expenses,
terms n/30.
23 Received inventory returned by O.Mowen and issued a credit note for $2,200.
Received a cheque from M. Biller for invoice no. 1.
26 Received a cheque from O. Mowen for balance due on invoice no. 2
29 Sold inventory worth $4,400 on credit to J. Rowls; invoice no. 3, terms 1/10, n/30.
Paid $220 for electricity expenses, cheque no. 106.
Paid Lynwood Ltd for the invoice dated 20 July, cheque no. 107.
31 Cash sales from 16 July to 31 July were $2,145.
Paid salaries for period 16-31 July totaling $2,850, cheque no. 108.
Purchased office supplies for $330, cheque no. 109.
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Required
a) Record the transactions in the special journals in the following order: purchases
journal, sales journal, cash receipts, cash payments and general journal. Ignore
narrations in the general journal. The business uses sales and purchases journals for
inventory transactions on credit only. Returns are processed through the general
journal. [21 Marks]
b) Show the accounts receivable control account in the general ledger, total and balance
the account. [3 Marks]
QUESTION 1 ANSWER
Purchase
Journal
Date Particulars Amount
2.7.19 Corma Ltd 4400
20.7 Lynwood 5390
Sales Journal
Date Particulars Terms Amount
13.7.19 M. Biller 9020
16.7.19 O. Mowen 5170
29.7.19 J. Rowls 4400
Cash Receipts
Journal
Date Particulars Amount
15.7.19 Sales 3740
26.7.19 O. Mowen 2918.3
31.7.19 Cash Sales 2145
2

31.7.19 Salaries 2850
31.7.19 Office Supplies 330
Cash Payments
Journal
Date Particulars 0 Amount
1.7.19 Land and Building 33000
6.7.19 Fire Insurance
Policy
792
8.7.19 Inventory 5500
15.7.19 Tumult Ltd. 4364.8
16.7.19 Salaries 2650
29.7.19 Electricity
Expenses
220
29.7.19 Lynwood 5336.1
General Journal
Date Particulars Amount Amount
1.7.19 Cash 60000
Capital 60000
2.7.19 Purchases 7480
Furniture 7480
9.7.19 Tumult Ltd. 880
Purchase
Returnsq
880
22.7.19 Office Expenses 143
3

Accounts Payable 143
23.7.19 Sales Returns 2200
O. Mowen 2200
QUESTION 1 ANSWER
b)
Date Particulars
Amoun
t
Amoun
t
31.7 Balance
15671.
7
QUESTION 1 ANSWER
4

QUESTION 2
Bejar Traders Limited
Unclassified Income Statement
for the year ended 30 June 2019
Sales (all credit) 893,000
Less: Sales Returns 3,000
Net Sales 890,000
Less: Cost of Sales 271,000
Gross Profit 619,000
Add: Other Income
Interest 33,000
652,000
Less: Other Expenses
Discount allowed 22,000
Loss on sale of Equipment 41,000
Depreciation of Equipment 16,000
Interest Expense 17,000
Bad Debts Expense# 61,000
Other Operating Expenses# 441,000
598,000
Operating profit 54,000
Bejar Traders Limited
Unclassified Statements of Financial Position as at
30 June 2018 30 June 2019
Assets
Cash at Bank 115,000 191,000
Cash on Hand 16,000 9,000
Accounts Receivable 74,000 67,000
Less: Allowance for Doubtful Debts (13,000) (10,000)
Prepaid Rent 51,000 49,000
Inventory 124,000 117,000
Investments (shares in companies) 0 30,000
Land 188,000 199,000
Equipment 255,000 210,000
Accumulated Deprec. – Equipment (37,000) (11,000)
Total Assets 773,000 851,000
Liabilities and Equity
Accrued Wages 51,000 46,000
Debentures 54,000 80,000
Accounts Payable 110,000 97,000
Share Capital 508,000 588,000
Revaluation Surplus 10,000 21,000
Retained Earnings 40,000 19,000
Total Liabilities and Equity 773,000 851,000
5

Additional Information
#The business uses the Allowance method to account for its bad debts
#Other Operating expenses do not include depreciation and loss on sale
a. The business sold Equipment during the year ended 30 June 2019.
b. The Equipment sold had originally been purchased for $93,000. The
Equipment had Accumulated Depreciation of $42,000 on the date of sale.
c. Dividends were paid during the year.
d. The estimated net selling price of the equipment on hand as at 30th June 2019 is
$220,000.
e. The present value of the net cash flows expected to be derived from using the
equipment asset is estimated to be $230,000.
REQUIRED
a) Prepare a cash flow statement for the year ended 30th June 2019. [17 marks]
b) Explain whether or not it is necessary to adjust the carrying amount of the equipment
in the balance sheet as at 30th June 2019. Give reasons for your answer. [3 marks]
QUESTION 2 ANSWER
Particulars Amount Amount
Net Operating Profit 54000
Additions to Profit
Depreciation 16000
Decrease in Accounts Receivable 7000
Decrease in Accounts Payable -13000
Loss on Sale of Equipment 41000
Decrease in Prepaid Rent 2000
Decrease in Inventory 7000
Decrease in Accrued Wages 5000
Net Cash Flow from Operating Activities 119000
Cash Flow From Investing Activities
Sale of Equipment 10000
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Purchase of Land -10000
Investments -30000
-30000
Cash Flow from Financing Activities
Issue of Debentures 26000
Share Capital 80000
Net Cash flow during the year 69000
Opening Cash and Cash Balance 131000
Closing Cash and Bank Balance 200000
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QUESTION 2 ANSWER
b. It is necessary to adjust the carrying amount of the equipment in the financial
statements because it allows the business to present a true and fair value of the
financial statements by showing the equipment at the net realizable value.
Otherwise, the amount of assets in the balance sheet would be overstated and the
results would be misleading for the entity.
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QUESTION 3
Pang Moon Ltd.received the November 2019 bank statement from First State Bank, as shown
below:
PANG MOON LTD.-STATEMENT OF ACCOUNT-FIRST STATE BANK
Date Particulars Debit Credit Balance
$ $ $
1 Nov Balance brought forward 18,000 CR
2 Nov Deposit 2,000 20,000 CR
2 Nov Cheque191 2,100 17,900 CR
4 Nov Cheque 205 900 17,000 CR
10 Nov Deposit 4,300 21,300 CR
14 Nov Cheque 207 2,200 19,100 CR
15 Nov EFT-Collection of Rent 2,000 21,100 CR
19 Nov Dishonoured cheque 1,500 19,600 CR
21 Nov Deposit 4,800 24,400 CR
25 Nov Interest on term deposit 500 24,900 CR
26 Nov Cheque 206 1,700 23,200 CR
27 Nov Cheque 208 750 22,450 CR
30 Nov Bank Charges 110 22,340 CR
The previous bank reconciliation performed at 31 October 2019 is shown below:
Bank Statement Balance 31 October 2019 $18,000 CR
Plus : Outstanding Deposits 2,000
20,000
Less;
Unpresented Cheques;
191 $2,100
204 $ 550 2,650
Balance per Cash At Bank Account 17,350
Pang Moon Ltd. cash records for November were:
Cash Receipts Journal
Date Particulars Cash at Bank
10 Nov Collections $4,300
20 Nov Collections 4,800
30 Nov Collections 5,100
Total $14,200
Cash Payments Journal
Date Cheque no. Particulars Cash at Bank
1 Nov 205 I Smith $ 900
7 Nov 206 A Wong 1,770
12 Nov 207 Insurance 2,200
20 Nov 208 S Woo 730
28 Nov 209 R Tan 1,800
Total $7,400
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QUESTION 3 CONT’D
Additional Information:
*EFT stands for Electronic Funds Transfer
*For any differences between the records of the bank and the entity, assume the bank
record to be correct
Required:
Using the information provided:
a. Prepare the Cash at Bank account at 30 November 2019 using a “T” account including
any required adjustments.
b. Prepare the Bank Reconciliation Statement for Pang Moon Ltd at
30 November 2019.
c. Explain why a dishonoured cheque would appear as a debit on Pang Moon’s bank
statement.
a) Cash at Bank a/c
Date Particulars
Amoun
t Date Particulars
Amoun
t
1.11 To Balance 18000 2.11 Cheque 2100
2.11 Deposit 20000 4.11 Cheque 900
10.11 Deposit 4300 19.11
Dishonored
Cheque 1500
15.11 Rent 2000 26.11 Cheque 206 1700
21.11 Deposit 4800 27.11 Cheque 208 750
21.11 Interest on Deposit 500 30.11 Bank Charges 110
By Balance C/d 42540
49600 49600
b)
BRS as on 30/11/19
Particulars Amount Amount
Balance as per Cash at Bank
Account
17350
Cheques credited but
dishonoured
1500
10

Bank Charges Unrecorded 110
Unrepresented Cheques 5580
24540
QUESTION 3 ANSWER
c) A Dishonored Cheque means that the payment which has been assumed to be
received from the accounts payable has not been received by the business. This
means that the business is required to receive the amount from the creditors but
has not happened. However, in the cash book, this amount is entered under the
assumption that it has been received by the business. The bank credits the
customer account on receiving the cheque. However, to write off this effect, the
customer’s account is debited. It is written back when the cheque is honoured.
QUESTION 4
Pots-R-Us deals in ceramic pots and figurines. All sales are conducted on a credit basis and
no cash discounts are given. Ignore GST. Ignore all journal narrations.
The following information was extracted from the accounting records at 30 June 2019:
Sales $552,000
Sales returns and allowances 37,900
Cash collected 319,120
Debts to be written off 4,022
Required
1a) Assume that Pots-R-Us uses the direct write-off method of accounting for bad
debts. Prepare the general journal entry required to write off the bad debt.
Record the journal entry in the space below.
Date Account Debit Credit
Profit and Loss a/c
Bad Debts Written Off
4022
4022
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b) What amount would be shown for accounts receivable in the balance sheet at
30 June 2019? (Show workings)
Sales 552000
Less:
Sales Returns and
Allowances
37900
Debts to be written off 4022
Cash Collected 319120
Accounts receivable on
30.6.2019
190958
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