Assignment Solution: Accounting Processes and Systems Analysis

This document presents a comprehensive solution to an accounting assignment focused on accounting processes and systems. The solution begins with detailed journal entries for various transactions, followed by the creation of ledger accounts to track the impact of these transactions. An unadjusted trial balance is then constructed, and adjusting journal entries are provided to ensure accuracy. The document culminates in the preparation of an income statement and a balance sheet, offering a complete overview of the company's financial performance and position. The assignment also includes explanations of key concepts like double-entry bookkeeping and its importance. The solution covers a range of accounting topics, from initial investment and loans to depreciation, revenue recognition, and expense allocation, demonstrating a thorough understanding of accounting principles. Additionally, the assignment explores the implications of loan repayment on the company's financial health and ratios.

Running head: ACCOUNTING PROCESSES AND SYSTEMS
1
ACCOUNTING PROCESSES AND SYSTEMS

ACCOUNTING PROCESSES AND SYSTEMS 2
Table of Contents
Question 1...................................................................................................................................................3
1...............................................................................................................................................................3
2...............................................................................................................................................................5
3...............................................................................................................................................................8
4...............................................................................................................................................................9
5.............................................................................................................................................................10
6.............................................................................................................................................................10
7.............................................................................................................................................................11
Question 2.................................................................................................................................................11
Importance of Double Entry Bookkeeping.............................................................................................12
Question 3.................................................................................................................................................14
1.............................................................................................................................................................14
Accounting issues..................................................................................................................................15
Related party Transactions....................................................................................................................15
Opaque Operations................................................................................................................................15
Poor strategic planning and expansion...................................................................................................16
2.............................................................................................................................................................16
Ethical issues.........................................................................................................................................16
References.................................................................................................................................................18

ACCOUNTING PROCESSES AND SYSTEMS 3
Question 1
1.
Journal
Entries
Date Particulars Debit Credit
7/1/2018 Bank A/c Dr.
$
30,000.00
To Capital
A/c
$
30,000.00
(For capital invested in the business)
7/1/2018 Bank A/c Dr.
$
20,000.00
To Loan Account
$
20,000.00
(for loan taken from the bank)
7/1/2018 Interest Account Dr.
$
2,400.00
To Loan A/c
$
2,400.00
(For interest charged on loan by the bank)
7/1/2018 Motor Vehicle Account Dr.
$
18,000.00
To Bank Account
$
18,000.00
(for motor vehicle
purchased)
7/31/201
8 Depreciation Account Dr.
$
208.33
To Motor Vehicle Account
$
208.33
(for depreciation charged on the motor cycle)
Cleaning equipment A/c Dr.
$
4,800.00
To Bank Account
$
4,800.00
(for cleaning equipment purchased)
7/1/2018 Prepaid insurance A/c Dr. $

ACCOUNTING PROCESSES AND SYSTEMS 4
3,600.00
To bank A/c
$
3,600.00
(for insurance paid in cash in advance)
7/9/2018 Supplies A/c Dr.
$
2,400.00
To Accounts Payable
$
2,400.00
(for supplies acquired on credit )
7/13/201
8 Bank A/c Dr.
$
500.00
To Rainbow Child care
Centre
$
500.00
(for amount received for the cleaning services)
7/20/201
8 Wages A/c Dr.
$
1,600.00
To bank A/c
$
1,600.00
(for cash paid to the wages)
7/25/201
8 Bank A/c Dr.
$
5,500.00
To ABC Public School
$
5,500.00
(for cash received from the school for the purpose of cleaning)
7/27/201
8 Accounts Payable A/c Dr.
$
2,000.00
To bank
$
2,000.00
(for cash paid to the accounts payable from whom the
supplied were purchased)
7/31/201
8 Interest on Loan A/c Dr.
$
300.00
To Bank A/c
$
300.00
(for loan charged by the
bank)
7/31/201
8 Advertising A/c Dr.
$
1,600.00
To Bank A/c $

ACCOUNTING PROCESSES AND SYSTEMS 5
1,600.00
(for advertising charges paid thorugh bank account)
2.
Ledger Accounts
BANK A/C
Date Particulars
Amoun
t Date Particulars Amount
7/1/2018 To Capital A/c 30000 7/1/2018 By Motor Vehicle A/c 18000
7/1/2018 To Loan A/c 20000 7/1/2018
By Cleaning equipment
A/c 4800
7/25/201
8 To ABC Public Limited 5500 7/1/2018 By Prepaid Insurance A/c 3600
7/13/201
8
To Rainbow Child Care
Centre 500
7/20/201
8 By Wages A/c 1600
7/31/201
8 By Interest A/c 300
7/31/201
8 By Advertising A/c 1600
7/27/201
8 By Accounts Payable 2000
7/31/201
8 By Cash A/c 24100
56000 56000
CAPITAL A/C
Date Particulars
Amoun
t Date Particulars Amount
7/31/201
8 To Bal c/d 30000 7/1/2018 By Bank A/c 30000
30000 30000
LOAN AC/C

ACCOUNTING PROCESSES AND SYSTEMS 6
Date Particulars
Amoun
t Date Particulars Amount
7/31/201
8 To Bal c/d 20000 7/1/2018 By Bank A/c 20000
20000 20000
INTEREST A/C
Date Particulars
Amoun
t Date Particulars Amount
7/31/201
8 To Bank A/c 300
7/31/201
8 By Bal c/d 300
300 300
MOTOR VEHICLE
A/C
Date Particulars
Amoun
t Date Particulars Amount
7/1/2018 To Bank A/c 18000
7/31/201
8 By Depreciation A/c 208.33
7/31/201
8 By Bal c/d 17791.67
18000 18000
DEPRECIATION A/C
Date Particulars
Amoun
t Date Particulars Amount
7/31/201
8 To Motor Vehicle 208.33
7/31/201
8 By Bal c/d 208.33
208.33 208.33

ACCOUNTING PROCESSES AND SYSTEMS 7
PREPAID INSURANCE A/C
Date Particulars
Amoun
t Date Particulars Amount
7/1/2018 To Bank A/c 3600
7/31/201
8 By Bal c/d 3600
3600 3600
SUPPLIES A/C
Date Particulars
Amoun
t Date Particulars Amount
7/9/2018 To Accounts Payable A/c 2400
7/31/201
8 By Bal c/d 2400
2400 2400
WAGES A/C
Date Particulars
Amoun
t Date Particulars Amount
7/20/201
8 To Bank A/c 1600
7/31/201
8 By Bal c/d 1600
1600 1600
RAINBOW CHILD CARE CENTRE
Date Particulars
Amoun
t Date Particulars Amount
7/31/201
8 To Bal c/d 500
7/25/201
8 By Bank A/c 500
500 500

ACCOUNTING PROCESSES AND SYSTEMS 8
ABC PUBLIC LIMITED
Date Particulars
Amoun
t Date Particulars Amount
7/31/201
8 To Bal c/d 5500
7/25/201
8 By Bank A/c 5500
5500 5500
ACCOUNTS PAYABLE A/C
Date Particulars
Amoun
t Date Particulars Amount
7/27/201
8 To Bank A/c 2000 7/9/2018 By Supplies A/c 2400
To Bal C/d 400
2400 2400
INTEREST ON LOAN A/C
Date Particulars
Amoun
t Date Particulars Amount
7/31/201
8 To Bank A/c 300
7/31/201
8 By interest on Loan A/c 2400
7/31/201
8 To Bal c/d 2100
2400 2400
ADVERTISING A/C
Date Particulars
Amoun
t Date Particulars Amount
7/31/201
8 To Bank A/c 1600 By Bal c/d 1600
1600 1600

ACCOUNTING PROCESSES AND SYSTEMS 9
3.
Unadjusted Trial Balance
Account Name Debit Credit Adjustments Final Trial
Debit Credit Debit Credit
Bank A/c
18100.0
0 18100.00
Accounts Receivable 6000.00 12600 18600.00
Supplies 2400.00 2100 300.00
Prepaid Insurance 3600.00 3600.00
Store Equipment 4800.00 4800.00
Acc. Depreciation - Equipment
Motor Cycle
18000.0
0 208.33 17791.67
Acc. Depreciation - Automobile
Accounts Payable 400.00 400.00
Interest Payable 2400.00 2400.00
Unearned revenue 5000 5000.00
Loan Payable 22400.00 22400.00
Mortgage Payable
Telephone Expenses Payable 100 100.00
Fuel Expenses Paybale 190 190.00
Outstanding Expenses 2200 2200.00
Capital 30000.00 30000.00
Drawings
Revenue 6000.00 17600 23600.00
Advertising Expense 1600.00 1600.00
Wages 1600.00 1600.00
Depreciation Expense - Store
Equipment
Depreciation Expense - Motor Cycle 208.33 208.33
Miscellaneous Expense
Expenses 2490 2490.00
Supplies Expense 2100 2100.00
Telephone Expenses Payable
Fuel Expenses Paybale
Interest Expense 300.00 300.00
58800.0
0 58800.00
22398.3
3
22398.3
3
78890.0
0
78890.0
0

ACCOUNTING PROCESSES AND SYSTEMS 10
4.
Adjusting Journal entries
Date Particulars Debit Credit
31/07/2018 Expenses Dr.
$
2,200.00
To Outstanding Expenses
$
2,200.00
(For outstanding expenses recorded)
31/07/2018 Accounts receivable Dr.
$
12,600.00
To Service
revenue
$
12,600.00
(for services given to the customers)
31/07/2018
Telephone
payable Dr.
$
100.00
To telephone expenses
$
100.00
(For telephone expenses payable)
31/07/2018 Fuel payable Dr.
$
190.00
To fuel Expenses
$
190.00
(for fuel expenses payable)
31/07/2018 Supplies Expenses Dr.
$
2,100.00
To supplies
Account
$
2,100.00
(for supplies in hand)
31/07/2018 Unearned revenue Dr. 5000
To revenue 5000
(for revenue unearned)
5.
Income statement
(For the month ending 31st July 2018)
Particulars Amount Particulars Amount
By Revenue 23600
Advertising Expense 1600

ACCOUNTING PROCESSES AND SYSTEMS 11
Wages 1600
Depreciation Expense - Motor Cycle 208.33
Expenses 2490
Supplies Expense 2100
Interest Expense 300
Net Profit 15301.67
23600 23600
6.
Balance sheet
As at 31st July 2018
Particulars Amount Particulars Amount
Capital Bank A/c 18100
Add: net profit 30000
15302 Store Equipment 4800
Loan 20000 Motor Cycle 17798
Accounts payable 400
Supplies 2000 Accounts Receivable 18600
Outstanding expenses 2200 Supplies 300
Telephone payable 100 Interest Accrued 2000
Fuel payable 196 Prepaid Insurance 3600
Unearned Revenue 5000
70197.67 70197.67
7.
If the company pay backs the loan than the amount of the debt will be zero and the
company will be left with no major liability. If the bank loan is repaid, it will be paid only out of
the bank balance, the entire cash in hand or bank balance will be zero. This situation will be
creating a positive instance for the temporary period as the zero cash in hand will not be the
appropriate step the company might take. Hence, the half loan can be paid so that the liability
may decrease and the bank balance shall also be there to pay the emergency costs if required.
The debt to equity ratio will be reduced from 0.67 to 0.33 and this is the sound benefit. The
current ratio on the other hand will have the impact will be bearable as the current ratio will 5.45
which is declined from 7.50 than the previous stop. The current ratio will depict the liquidity
position of the company, whereas the debt to capital ratio will determine how much funds are
financed from the loan as well as the capital.

ACCOUNTING PROCESSES AND SYSTEMS 12
Question 2
Double entry bookkeeping is said to be a concept that is applicable and followed in all the
transactions in the account. According to this concept, all the accounting transactions have two
effects on the financial aspects of the business. The general ledger is used to record the two sides
of every transaction takes in an organization. It a business vends its services or products, the
revenue of the company increases and cash also increased by the same amount. The time a
business borrows some funds from its creditor, the cash balance of the company increased
however the debt balance of the business also increases with the same amount (Walshaw, 2018).
The system of double-entry results in creating a balance sheet comprised of equity,
liabilities, and assets. The sheet is said to be balanced since the assets of the company always
remain equal to liabilities plus equity. Assets of the company are comprised of a list of items
such as machinery, inventory, cash and intangible assets like patents. Liabilities of the company
highlights all the items that business owns to someone else, like long-term notes payable and
short term accounts payable. Equity highlights the stake of the owner in the business. Equity can
also be the owner's contribution to the business, plus profits or minus losses of the company.
Every entry possesses a credit side and a debit side that is recorded by the accountant of the
company in the general ledger (Bragg, 2011).
The double entry system book was first presented by Fra Luca Pacioli and Leonardo da
Vinci the Italian mathematicians. The book was published in the year 1994, with the title
“Summa de arithmetical, geometric, proportion et proportionality”. da Vinci and Pacioli do not
call themselves the inventors of this system but have discovered the way concepts can be utilized
in an effective and planned manner.
Da Vinci is responsible for drawing the practical examples and Pacioli is responsible for
writing text in order to assist in understanding the book. The book was separated into the diverse
segment and the part that illustrates double entry system was titled with the name “Particularis de
computis et scripturis”. The book was further separated into different small sections or chapters
that recite about trial balance, income statement, double entry, balance sheet, journals, and
different techniques and tools successively accepted by a number of traders and accountants.