Accounting for Business Decisions: Tutorial Questions - HI5001

This document presents a comprehensive solution to accounting tutorial questions, addressing key concepts such as the accounting process, financial statements (income statement, balance sheet), and journal entries. The solution includes detailed examples, such as the income statement and balance sheet for a specific period, as well as journal entries for various transactions. Furthermore, the document extends to more complex topics like adjusted trial balance and closing entries, as demonstrated through the Elliot Painting Services case study. The provided solutions are designed to aid students in understanding and applying accounting principles, thereby improving their grasp of accounting for business decisions.

Accounting for Business Decision
Making

TABLE OF CONTENTS
Week 1.............................................................................................................................................3
Week 2.............................................................................................................................................3
Week 3.............................................................................................................................................4
Week 4...........................................................................................................................................10
Week 5...........................................................................................................................................11

Week 1
Accounting can be defined as the procedure of recording financial transactions relating to a
business. The accounting process includes summarizing, analyzing, and reporting of these transactions
to several agencies, regulators and government entities for the sole purpose of tax collection and
auditing. Accounting is a diverse subject and includes several branches like financial accounting, cost
accounting and management accounting. The accounting involves preparation of some financial
statements like income statement, balance sheet and cash flow statement that provides summarized
information of the organization’s financial position.
‘Accounting is all about numbers’ although it is a common myth that is believed by everyone but
it is not true. As mentioned above, there are several branches of accounting like management
accounting and financial accounting; the financial accounting is concerned with summarizing, analyzing
and reporting of financial transactions whereas managerial accounting involves the practice of analyzing
and interpreting manager’s performance to make several business decisions for the future. The main
objective of managerial accounting is to improve the overall performance of its employees and
management so that they can achieve organizational goals and objectives effectively and efficiently.
Unlike financial accounting, this branch of accounting takes into account both qualitative and
quantitative aspects which are also equally important for the systematic growth of the company. Both of
these branches are equally important pillars of accounting and if the organizations fail to correctly
interpret any one of the two, it can affect the growth prospects of the business.
Thus, it can be concluded that, ‘accounting is just numbers’ is a big misconception that people
tend to have because of their limited knowledge of the subject. Moreover, many people fail to
comprehend that the whole process of accounting involves extensive training, business experience,
practical & adequate judgment and professional decision-making skills rather than just calculating
numbers.
Week 2
Week 2
Income statement for year ended 30th June
2019

Particulars Amount ($)
Income:
Equipment Hire income 170000
less: Expenses
Wages 75000
Advertising 30000
Electricity 18000
Telephone 7500
Net profit 39500
Balance sheet at 30th
June 2019
Particulars
Amou
nt
Liabilities :
Capital 165000
Mortgage
payable 130000
Loan
payable 50000
Accounts
payable 40000
Total
liabilities 385000
Assets:
Cash at bank 45000
Building 85000
Land 75000
Hire
equipment 180000
Total assets 385000
Week 3
Week3
Journal entries
Date
Particul
ars L.F.
Debi
t ($)
Credit
($)
2/7/201
8
Cash at
Bank Ac
10
0
120000

Dr.
To
capital
30
0 120000
2/7/201
8
Rent Exp
A/c Dr.
50
0 1800
To Cash
at bank
a/c
10
0 1800
3/7/201
8
Equipme
nt A/c
Dr.
10
3 70000
To Cash
at bank
a/c
10
0 32000
To loan
payable
A/c
20
0 38000
4/7/201
8
Supplies
A/c Dr.
10
2 8400
To Cash
at bank
A/c
10
0 8400
6/7/201
8
Advertisi
ng
Expense
Ac Dr.
50
1 890
To Cash
at bank
a/c
10
0 890
16/7/20
18
Cash at
bank A/c
Dr.
10
0 3250
Accounts
Receivab
le A/c
Dr.
10
1 620
To
revenue
A/c
40
0 3870
20/7/20
18
Insuranc
e
Expense
A/c Dr.
50
2 480
To Cash
at Bank
A/c
10
0 480

23/7/20
18
Cash At
Bank A/c
Dr.
10
0 140
To
Accounts
Receivab
le A/c
10
1 140
28/7/20
18
Drawing
A/c Dr.
30
1 560
To Cash
at bank
A/c
10
0 560
31/7/20
18
Cash at
bank A/c
Dr.
10
0 3680
Accounts
Receivab
le A/c
Dr.
10
1 580
To
revenue
A/c
40
0 4260
31/7/20
18
Telephon
e
Expense
A/c Dr.
50
3 330
To Cash
at bank
A/c
10
0 330
Total 210730 210730

Dr.
Cash at Bank
A/c Cr.
Date Particulars J.F
Amou
nt Date
Particul
ars J.F
Amo
unt
2/7/2018 To capital A/c 300
12000
0
2/7/20
18
By rent
exp. 500 1800
16/7/2018 To revenue A/c 400 3250
3/7/20
18
By
equipme
nt A/c 103
7000
0
23/7/2018 To Accounts
receivable A/c
101 140 4/7/20
18
By
supplies
102 8400

A/c
31/7/2018 To revenue A/c 400 3680
6/7/20
18
By
advertisi
ng 501 890
20/7/2
018
By
insurance 502 480
28/7/2
018
By
Drawing
s A/c 301 560
31/7/2
018
By
telephon
e Exp 503 330
31/7/2
018 By bal c/d
4461
0
12707
0
1270
70
Dr. Capital A/c Cr.
Date
Particula
rs J.F
Amou
nt Date Particulars J.F
Amou
nt
31/7/201
8 To bal c/d 120000
2/7/201
8
By cash at
bank A/c 100 120000
120000 120000
Dr. Rent Exp A/c Cr.
Date Particulars J.F
Amou
nt Date
Particula
rs J.F
Amou
nt
2/7/201
8
To cash at
bank A/c 100 1800
31/7/201
8 By bal c/d 1800
1800 1800
Dr. Equipment A/c Cr.
Date Particulars J.F
Amou
nt Date
Particula
rs J.F
Amou
nt
3/7/201
8
To Cash at
bank a/c 100 32000
3/7/201
8
To loan
payable A/c 200 38000
31/7/201
8 By bal c/d 70000
70000 70000
Dr.
Loan Payable
A/c Cr.

Date
Particula
rs J.F
Amou
nt Date Particulars J.F
Amou
nt
31/7/201
8 To bal c/d 38000
3/7/201
8
By
equipment
A/c 103 38000
38000 38000
Dr. Supplies A/c Cr.
Date Particulars J.F
Amou
nt Date
Particula
rs J.F
Amou
nt
4/7/201
8
To Cash at
bank A/c 100 8400
31/7/201
8 By bal c/d 8400
8400 8400
Dr. Advertising A/c Cr.
Date Particulars J.F
Amou
nt Date
Particula
rs J.F
Amou
nt
6/7/201
8
To Cash at
bank a/c 100 890
31/7/201
8 By bal c/d 890
890 890
Dr. Accounts receivable A/c Cr.
Date
Particular
s J.F
Amou
nt Date Particulars J.F
Amou
nt
16/7/201
8
To
revenue
A/c 400 620
23/7/201
8
By Cash at
bank a/c 100 140
31/7/201
8
To
revenue
A/c 400 580
31/7/201
8 By bal c/d 1060
1200 1200
Dr. Revenue A/c Cr.
Date
Particula
rs J.F
Amou
nt Date Particulars J.F
Amou
nt
31/7/201
8 To bal c/d 8130
16/7/201
8
By Cash at bank
A/c 100 3250
16/7/201
8
By Accounts
receivable A/c 101 620
31/7/201 By Cash at bank 100 3680

8 A/c
31/7/201
8
By Accounts
receivable A/c 101 580
8130 8130
Dr. Insurance A/c Cr.
Date Particulars J.F
Amou
nt Date
Particula
rs J.F
Amou
nt
20/7/20
18
To Cash at
bank a/c 100 480
31/7/20
18 By bal c/d 480
480 480
Dr. Drawings A/c Cr.
Date Particulars J.F
Amou
nt Date
Particula
rs J.F
Amou
nt
28/7/20
18
To Cash at
bank A/c 100 560
31/7/20
18 By bal c/d 560
560 560
Dr.
Telephone Exp.
A/c Cr.
Date Particulars J.F
Amou
nt Date
Particula
rs J.F
Amou
nt
31/7/20
18
To Cash at
bank A/c 100 330
31/7/20
18 By bal c/d 330
330 330
Trial Balance at 31st July
2018
Particulars Debit
Credi
t
Cash at bank 44610
Accounts
receivable 1060
Supplies 8400
Equipment 70000
Loan Payable 38000
Capital
12000
0
Drawings 560
Revenue 8130

Rent exp 1800
Advertising
Exp 890
Insurance
Expense 480
Telephone
Expense 330
Total
16613
0
16613
0
Week 4
Date Accounts Ref Debit Credit
30-Jun-
19 Interest expenses a/c 1 480
To Interest payable a/c 480
30-Jun-
19 Prepaid insurance a/c 2 820
To Insurance expenses a/c 820
30-Jun-
19 Wages expenses a/c 3 1320
To wages payable a/c 1320
30-Jun-
19 Unearned revenue a/c 4 700
To revenue a/c 700
30-Jun-
19 Office supplies expense a/c 5 1650
To Office supplies a/c 1650
Reference
1. Interest accrued n Northern bank loan is follows:
Interest = Loan amount* rate of interest* no. of months due in a year/12 months
= 16000*8%*4.5/12
= $480

2. Prepaid insurance for 1-year policy = 660*4/12 = $220
Prepaid insurance for 3-year policy = 2700*8/36 = $600
Total prepaid insurance amount = $820
3. Wages payable = 220*2*3 = $1320
4. Unearned revenue = 2100*1/3 = $700
5. Supplies used = 280+1560-190 = $1650
Week 5
Elliot Painting services
For the year ended 30 June 2019
Account
Adjusted trial
balance Income statement Balance sheet
Debit Credit Debit Credit Debit Credit
Cash at Bank 1230 1230
Accounts Receivable 75600 75600
prepaid Rent 1800 1800
Office Supplies 8320 8320
Equipment 160000 160000
Accum. Depr. Equip't 25000 25000
Accounts Payable 54000 54000
Salaries Payable 8760 8760
Unearned Revenue 3430 3430
F. Elliot, Capital 101500 101500
F. Elliot, Drawings 22000 22000
Painting Revenue 219650 219650
Salaries Expense 106000 106000
Rent Expense 6050 6050
Depreciation Expense 8040 8040
Telephone Expense 4020 4020
Office Supplies used 10080 10080
Sundry Expenses 9200 9200
412340 412340 143390 219650 268950 192690
Profit for the period 76260 76260
219650 219650 268950 268950
b)

Date Accounts Ref Debit Credit
30-Jun-
19 Painting revenue a/c 219650
To profit and loss a/c 219650
(Closing income account)
30-Jun-
19 Profit and loss a/c 820
To Office supplies used a/c 8320
To Rent Expense a/c 1800
To Salaries expense a/c 8760
To Depreciation Expense a/c 25000
(Closing expense account)
30-Jun-
19 Profit and loss a/c 76260
To F. Elliot, Capital a/c 76260
30-Jun-
19 F. Elliot, Capital a/c 22000
To F. Elliot, Drawings a/c 22000