sol unit 1 chapter 1 accounting process

7/29/2019 SOL UNIT 1 CHAPTER 1 Accounting Process

http://slidepdf.com/reader/full/sol-unit-1-chapter-1-accounting-process 1/321 VCE Accounting Unit 11. The accounting process.

SOLUTIONS

VCE Accounting Unit 1Cash based service businesses

A multi-media approachSOLUTIONS

David Page



SOLUTIONS

VCE Accounting Unit 1Cash based service businesses

A multi-media approach

Chapter 1 ... The accounting process.Chapter 2 ... Adding GST to the accounting process.Chapter 3 ... Classification of the accounting reports.Chapter 4 ... Bank reconciliations.Chapter 5 ... Budgeting.



SOLUTIONS

Chapter 1The accounting process



SOLUTIONS

Annie is an architect providing professional advice to individuals and businesses. Thisadvice is the revenue activity of her business. At 1/7/19, the business had the

following Balance Sheet:

Assets $ Equities $

Bank 40000 Capital, Annie 95000

Office assets 25000

Vehicle 30000

Annie the Architect: Balance Sheet at 1/7/19

Total assets 95000 Total equities 95000Assets and equities ‘balance’ in aBalance Sheet. Annie has 100%ownership in the assets of thebusiness at 1/7/19. Her equity in thebusiness is often called ‘Capital’.

Transactions for Annie the Architect, July 2019:

Annie the ArchitectReceipt # 40

Date: 1/7/19

From: Customers

For:Consulting fees

$: $3000.00

Thank you

Botanical Bank

Date: 5/7/19

For: Wages expense

This cheque $900.00

Cheque number 55

To: Shelly

Annie the Architect


Date: 9/7/19

From: Customers

For:Consulting fees

$: $2000.00

Thank youBotanical Bank

Date: 12/7/19

For: Internetexpenses

This cheque $300.00

Cheque number 56

To: HotWire

Annie the Architect


Date: 17/7/19

From: Customers

For:Consulting fees

$: $4000.00

Thank you

Botanical Bank

Date: 22/7/19

For: Rent expense

This cheque $4500

Cheque number 57

To: Andersons

Annie the Architect

Botanical Bank

Date: 26/7/19

For: Cleaningexpenses

This cheque $200.00

Cheque number 58

To: Flash in the Pan

Annie the Architect

Botanical Bank

Date: 28/7/19

For: Office assets(new computer)

This cheque $3000

Cheque number 59

To: OfficeWorks

Annie the Architect


Date: 31/7/19

From: Customers

For:Consulting fees

$: $1000.00

Thank you

Transactions are evidenced by documents.Documents verify the transaction and ensurethe data is reliable. Documents are inputs intothe accounting system.

AssetsResources under the controlof the business which willprovide economic benefits.

Record in the journals.

Equities

Who has an ‘ownership’ or ‘interest’ or ‘claim’ in the assets.



SOLUTIONS

Cash Receipts Journal (CRJ)CFS √ √ √ √ √

IS X √ rev. X X √

BS √ calc. X √ calc. √ calc. X

Date Details Doc. BankConsultation

FeesCash

CapitalLoans

InterestRevenue

Sundry

1/7/19 CONS. FEES 40 3000 30009/7 CONS. FEES 41 2000 2000

17/7 CONS. FEES 42 4000 4000

31/7 CONS. FEES 43 1000 1000

31/7 TOTALS 10000 10000

Journals for July 2019: Journals record the transactions of the business. Cash receipt

transactions are recorded in the Cash Receipts Journal and cashpayment transactions are recorded in the Cash Payments Journal.

The design or format of the journals varies from business to business anddepends on the information needs of each business. If a particular type of transaction occurs frequently, it usually has its own column in the journals.

Add up thecolumns at the

end of July.

Accounting reports for July 2019:

Annie has decided to prepare accounting reports for

July. July is thus the reporting period.

Annie the Architect:Cash Flow Statement for July 2019

Cash Receipts $ $CONSULTING FEES 10000

Cash Payments

WAGES 900

INTERNET EXPS. 300

RENT 4500

CLEANING EXPS. 200

OFFICE ASSETS 3000 8900

Change in cash 1100

+ cash bal. at start 40000= cash bal. at end 41100

The Cash Flow Statement reports on cash receipts for the reporting period less cash paymentsfor the reporting period and calculates the cash balance at the end of the reporting period. Most of the data for the Cash Flow Statement comes from the cash journals.

Get the data from the Cash Receipts Journal.

Get the data from the Cash Payments Journal.

Get the cash at start from the Balance Sheet

at the start of the reporting period.

This is the most important value — the cash balance at the end.

1. Cash Flow Statement:

revenue activity

Cash Payments Journal (CPJ)CFS √ √ √ √ √ √ √ √ √

IS X √ exp. √ exp. X X √ exp. √ exp. √ exp. √ exp. ?

BS √ calc. X X √ √ calc. X X X X ?

Date Details Doc. Bank WagesInternet

Exps.Drawings Loan Interest Rent Cleaning

OfficeExps.

Sundry

5/7/19 WAGES 55 900 900

12/7 INT. EXPS. 56 300 300

22/7 RENT 57 4500 4500

26/7 CLEANING 58 200 200

28/7 OFF.ASSETS 59 3000 3000

31/7 TOTALS 8900 900 300 4500 200 3000

Sundry is used formiscellaneous or infrequent

type transactions!



SOLUTIONS

2. Income Statement: The definition of profit is revenue less expenses for the reportingperiod. The Income Statement reports on revenue and expensesfor the period to determine profit or loss.

Annie the Architect:Income Statement for July 2019

Revenue $ $

CONSULTING FEES 10000

Less Expenses

WAGES 900

INTERNET EXPS. 300

CLEANING EXPS. 200 5900

Net Profit 4100

RENT 4500

The revenue activity for Annie the Architect isConsultation Fees. Annie could call this revenue othernames such as ‘Fees’ or ‘Takings’ etc. Each business candecide the name it uses for its revenue activity. SourceAnnie the Architects’ revenue data from the Cash Flow

Statement or Cash Receipts Journal.

Expenses work to reduce profit. Overtime, you

will become skilled at identifying expenses. Toassist you, see the top section of the CashPayments Journal and look for items in the ‘IS’ row with this symbol: ( exp.)

3. New Balance Sheet:

At the end of the reporting period, a business will prepare a newBalance Sheet to report on the assets and equities at thatpoint in time. The data comes from the Balance Sheet at thestart of the reporting period plus any relevant changes that haveoccurred to assets and equities over the reporting period.

Assets $ Equities $


Office assets 28000 Add Net Profit 4100

Vehicle 30000


Total assets 99100 Total equities 99100

Get the Bank or Cashvalue from the Cash

Flow Statement.

Profit belongs to theowner so it is reported

with Capital in theBalance Sheet. Get thevalue from the Income

Statement.

Summary of the accounting process so far:

Start of reporting

period

Businesstransactions are

evidenced bydocuments.

Transactions arerecorded in journals:Cash Receipts JournalCash Payments Journal

End of reporting

period

Prepare AccountingReports:

Cash Flow StatementIncome Statement

Balance Sheet

Input stage Processing stage Output stage

The accounting reports are prepared for stakeholders. Stakeholders areindividuals or businesses that are interested in the performance of the business.Examples of stakeholders include the owner, manager, potential owner, people/businesses who are owed money, employees, Australian Taxation Office etc.

Calculations/schedules:

Sometimes at the end of the reporting

period, calculations have to be done to helpprepare the new Balance Sheet. Calculations

are usually done in a schedule like this:

Office Assets Schedule at 31/7/19

$

Balance at start (Balance Sheet) 25000Add new office assets (CPJ) 3000

Balance at end 28000

(CPJ)CFS √

IS √ exp.

BS X

Date Wages



SOLUTIONS

Accounting for August:

Assets $ Equities $


Office assets 28000

Vehicle 30000



This capital value comes from the last

Balance Sheet and is the addition of theoriginal capital plus profit. Annie still has100% ownership in the assets of thebusiness: will this change during August?

Transactions for Annie the Architect, August 2019:


Date: 1/8/19

From: Customers

For:Consulting fees

$: $1000.00

Thank you

Botanical Bank

Date: 5/8/19

For: Wages expense

This cheque $900.00

Cheque number 60

To: Shelley

Annie the Architect


Date: 9/8/19

From: Customers

For:Consulting fees

$: $3000.00

Thank you

Botanical Bank

Date: 12/8/19

For: Rent expense

This cheque $4500

Cheque number 61

To: Andersons

Annie the Architect

Annie the Architect

Receipt # 46

Date: 17/8/19

From: Customers

For:Consulting fees

$: $600.00

Thank you

Botanical Bank

Date: 22/8/19

For: Office expenses

This cheque $850

Cheque number 62

To: OfficeWorks

Annie the Architect

Botanical BankDate: 26/8/19


This cheque $170.00

Cheque number 63


Annie the ArchitectBotanical Bank

Date: 31/8/19

For: Equipment (CAD

drawing system)This is an asset.

This cheque $6000

Cheque number 64

To: Ace Importers

Annie the Architect


Date: 31/8/19

From: AMP Bank

For:Loan

$: $7000

Thank you





Fees

Cash

Capital

LoansInterest

Revenue

Sundry

1/8/19 CONS. FEES 44 1000 1000

9/8 CONS. FEES 45 3000 3000

17/8 CONS. FEES 46 600 600

31/8 AMP LOAN 47 7000 7000

31/8 TOTALS 11600 4600 7000

Journals for August:

Add up thecolumns at theend of August.

Cheque #64 is the purchase of new equipment. This is an asset so donot forget to report this in the Balance Sheet at the end of the month.


IS X √ exp. √ exp. X X √ exp. √ exp. √ exp. √ exp.

BS √ calc. X X √ √ calc. X X X X



OfficeExps.

Sundry

5/8/19WAGES 60 900 900

12/8 RENT 61 4500 450022/8 OFFICE EXPS 62 850 850

26/8 CLEANING 63 170 170

31/8 EQUIPMENT 64 6000 6000

31/8 TOTALS 12420 900 4500 170 850 6000




SOLUTIONS

Accounting reports for August 2019:

Annie the Architect:Cash Flow Statement for August 2019

Cash Receipts $ $

CONSULTING FEES 4600LOAN AMP 7000 11600

Cash Payments

WAGES 900

RENT 4500

CLEANING 170

OFFICE EXPENSES 850

EQUIPMENT 6000 12420

Change in cash (820)

+ cash bal. at start 41100

= cash bal. at end 40280


Cash at start will be cashat end of lat month.

2. Income Statement:

Annie the Architect:Income Statement for August 2019

Revenue $ $


Less Expenses

WAGES 900

RENT 4500

OFFICE EXPENSES 850 6420

Net Loss (1820)

CLEANING 170

See the top section of the cash journals to helpyou identify the revenue and expenses.

3. Balance Sheet:

Assets $ Equities $

Bank 40280 Liabilities

Office assets 28000 AMP Loan

Vehicle 30000 Owners Equity


Total assets 104280 Total equities

Less net loss (1820)

Equipment 6000 Capital, Annie 99100

$

7000

97280

104280

The Balance Sheet now reports

liabilities as an equity. Liabilitiesare obligations to individuals or

businesses, in this example, AMP.AMP has an ‘ownership’ or ‘claim’ or

‘interest’ in the assets of thebusiness until the loan is repaid by

Annie the Architect.

Most businesses have liabilities, so for most businesses equities is made up of twocomponents: liabilities and owners equity. Liabilities is the external ownership in the

assets and owners equity is the internal ownership in the assets.

The information in the accounting reports is saidto be reliable if it is supported by documentaryevidence. Stakeholders expect the information

in the reports to be reliable.

ASSETS EQUITIES

$104280 $104280

=

ASSETS$104280 =

EQUITIES

LIABILITIES$7000

OWNERS EQUITY$97280

The Accounting Equation at 31/8/19:

The equality between assets and equities or the relationship between the values of assets,liabilities and owners equity is often called the accounting equation. The accounting

equation is really just the Balance Sheet, that is, assets equals liabilities plus owners equity.

If expensesare more

than revenue,

it is a netloss.



SOLUTIONS

Accountingfor September:

Transactions for Annie the Architect, September 2019:


Date: 1/9/19

From: Customers

For:Consulting fees

$: $2000.00

Thank you

Botanical Bank

Date: 4/9/19

For: Wages expense

This cheque $900.00

Cheque number 65

To: Shelley

Annie the Architect


Date: 10/9/19

From: Customers

For:Consulting fees

$: $1500.00

Thank you

Botanical Bank

Date: 13/9/19

For: Rent expense

This cheque $4500

Cheque number 66

To: Andersons

Annie the ArchitectAnnie the ArchitectReceipt # 50

Date: 19/9/19

From: Customers

For:Consulting fees

$: $800.00

Thank you

Botanical Bank

Date: 24/9/19

For: iPhone charges(office expenses)

This cheque $900

Cheque number 67

To: Optus

Annie the Architect

Botanical BankDate: 27/9/19


This cheque $190.00

Cheque number 68


Annie the Architect

Botanical Bank

Date: 30/9/19

For: Loan repayment

This cheque $500

Cheque number 69

To: AMP

Annie the Architect





FeesCash

CapitalLoans

InterestRevenue

Sundry

1/9/19CONS. FEES 48 2000 2000

10/9 CONS. FEES 49 1500 1500

19/9 CONS. FEES 50 800 800

30/9 TOTALS 4300 4300

Journals for September:

Add up thecolumns at the end

of September.


Assets $ Equities $


Office assets 28000 AMP Loan 7000

Vehicle 30000 Owners Equity

Equipment 6000 Capital, Annie 97280


Botanical Bank

Date: 30/9/19

For: Drawings

This cheque $2700

Cheque number 70

To: Cash

Annie the Architect

Drawings is when the owner takes assets for personal use.Drawings is usually cash but can be any business asset.



BS √ calc. X X √ √ calc. X X X X



OfficeExps.

Sundry

4/9/19 WAGES 65 900 900

13/9 RENT 66 4500 450024/9 OFFICE EXP. 67 900 900

27/9 CLEANING 68 190 190

30/9 LOAN 69 500 500

30/9 DRAWINGS 70 2700 2700

30/9 TOTALS 9690 900 2700 500 4500 190 900




SOLUTIONS

Loan schedule at 30/9/19

Balance at start (Balance Sheet) 7000Add new loans (CRJ) 0

Sub-total 7000

Less loan payments (CPJ) (500)

Balance at end 6500

$

Accounting reports for September 2019:

Annie the Architect:Cash Flow Statement for September 2019

Cash Receipts $ $


Cash Payments

WAGES 900

DRAWINGS 2700

LOAN AMP 500

RENT 4500

CLEANING EXPS. 190

OFFICE EXPS. 900 9690

Change in cash (5390)+ cash bal. at start 40280



Cash at start will be cashat end of last month.

2. Income Statement:

Annie the Architect:

Income Statement for September 2019

Revenue $ $


Less Expenses

WAGES 900

RENT 4500

OFFICE EXPENSES 900 6490

Net Loss (2190)

CLEANING 190


3. Balance Sheet:

Assets $ Equities $

BANK 34890 Liabilities

OFFICE ASSETS 28000 AMP loanVEHICLE 30000 Owners Equity



LESS LOSS (2190)

EQUIPMENT 6000 Capital, Annie 97280

$

6500

98890

LESS DRAWINGS (2700) 92390

Drawings reduces the ownersownership in the businesses assetsthus it is deducted in the owners

equity section of the Balance Sheet.

Calculations/schedules:

Use this loan schedule to workout how much is owing to AMP at

the end of September.

Accounting equation at 30/9/19:

The owner, who is usually themanager, is the major stakeholder!

ASSETS EQUITIES

$98890 $98890

=

ASSETS$98890 =

EQUITIES

LIABILITIES$6500

OWNERS EQUITY$92390



SOLUTIONS



SOLUTIONS

INTERNET TRANSFER: PAYMENT. 009

DATE: 25/1/21

FROM: PETE THE PAINTER A/C: P98332

TO: PETE A/C: 55743

FOR: DRAWINGS

TOTAL: $4500

MEMO #26:31/1/21Stocktake of paint. $2100.

Pete the Painter: Balance Sheet at 1/1/21

Assets $ Equities $ $

Truck 30000 Liabilities

Trailer 2000 ANZ Loan 10000

Office assets 9000 Bank overdraft 3000 13000

Stock of paint 6700 Owners Equity

Equipment 12000 Capital, Pete 46700Total assets 59700 Total equities 59700

Note that Pete the Painter hasa bank overdraft, a liability.This means the business has

no money in its bank accountand owes the bank money!

Transactions for Pete the Painter, January, 2021:

Bank of Dandenong

Date: 4/1/21

For: Wages expense

This cheque $670

Cheque number 346

To: Bazza

Pete the Painter

Pete the PainterReceipt # 119

Date: 1/1/21

From: Customers

For:Takings

$: $2000.00

Thank you

Bank of Dandenong

Date: 8/1/21

For: Paint (asset)

This cheque $370

Cheque number 347

To: Dulux

Pete the Painter


Date: 11/1/21From: Customers

For:Takings

$: $800.00

Thank youBank of Dandenong

Date: 14/1/21

For: vehicle expenses

This cheque $290

Cheque number 348

To: Garretts

Pete the Painter

Bank of Dandenong

Date: 17/1/21

For: Telephone

expenses

This cheque $170

Cheque number 349

To: Telstra

Pete the Painter



For:Takings

$: $1600.00

Thank you

Bank of Dandenong

Date: 24/1/21

For: Paint (asset)

This cheque $490

Cheque number 350

To: Dulux

Pete the Painter

Pete has used an internet transfer to pay himself

drawings. This is an easy and quick way to transfermoney from the business account to the owners personalaccount. It is still recorded in the cash payments journal.

Memo #26 is an example of a non-cash transaction so itis not recorded in the cash journals. It will be recorded in a

new journal called the General Journal. See below:

Date Details $

31/1/21 STOCKTAKE OF PAINT, MEMO #26 2100

General Journal (GJ)

We have seen 3 journals. Cash receipts, cash payments andnow the general journal for non-cash transactions.

Pete thePainters’ revenue

activity ispainting!




SOLUTIONS

When Pete buys paint, it is an asset.The paint that is used-up during thereporting period is an expense.At the end of each reporting period,Pete needs to calculate the paintused-up to calculate paint expense.


IS X √ exp. √ exp. X X √ exp. √ exp. √ calc. √ exp.

BS √ calc. X X √ √ calc. X X Stock at end X

Date Details Doc. Bank WagesTeleph.Exps.

Drawings Loan InterestVeh.Exps.

PaintOfficeExps.

Sundry

4/1/21 WAGES 346 670 670

8/1 PAINT 347 370 370

14/1 VEH.EXPS. 348 290 290

17/1 TELE. EXPS. 349 170 170

24/1 PAINT 350 490 490

25/1 DRAWINGS 009 4500 4500

31/1 TOTALS 6490 670 170 4500 290 860

Pete the Painter calls hisrevenue activity ‘Takings’.

Cash Journals for January:

Calculations/schedules for January:

Paint expense schedule at 31/1/21

Stock of paint at start (Bal. Sheet) 6700

Add purchases of new paint (CPJ) 860

Sub-total 7560

Less stocktake of paint (GJ) (2100)

Paint expense for period 5460

$

Accounting reports for January 2021:

Pete the Painter: Cash FlowStatement for January 2021

Cash Receipts $ $

TAKINGS 4400

Cash Payments

Paint purchases 860

WAGES 670

DRAWINGS 4500

VEHICLE EXPS. 290

TELEPHONE EXPS. 170 6490


+ cash bal. at start (3000)

= cash bal. at end (5090)

1. Cash Flow Statement: 2. Income Statement:

Pete the Painter: Income State-ment for January 2021

Revenue $ $

TAKINGS 4400

Less Expenses

Paint 5460

WAGES 670

Net Loss (2190)

TELEPHONE EXPS. 170 6590

VEHICLE EXPS. 290


Note: there is a difference between paint purchases as reported in the Cash FlowStatement and paint expense as reported in the Income Statement.

Don’t forgetthe paintexpensefrom theschedule!

The cash balance at the end

is a (negative) which meansthere is an overdraft.




Date Details Doc. Bank TakingsCash

CapitalLoans

InterestRevenue

Sundry

1/1/21 TAKINGS 119 2000 2000

11/1 TAKINGS 120 800 800

21/1 TAKINGS 121 1600 1600

31/1 TOTALS 4400 4400



SOLUTIONS

3. Balance Sheet:

Assets $ Equities $

TRUCK 30000 Liabilities

TRAILER 2000 ANZ loan 10000

STOCK OF PAINT 2100 Owners Equity



LESS NET LOSS (2190)

EQUIPMENT 12000 Capital, Pete 46700

$

55100


OFFICE ASSETS 9000 BANK OVERDRAFT 5090 15090

All of the reports are expressedin Australian dollars, $A, as perthe monetary unit principle.

Assets are recorded attheir historical cost (original cost) which canalways be verified bydocumentary evidence.

Transactions for Pete the Painter, February, 2021:


DATE: 15/2/21


TO: PETE A/C: 55743

FOR: DRAWINGS

TOTAL: $1000


Date: 1/2/21

From: Customers

For:Takings

$: $2000.00

Thank you

Bank of Dandenong

Date: 18/2/21

For: Paint (asset)

This cheque $750

Cheque number 351

To: Dulux

Pete the Painter


Date: 11/2/21

From: Customers

For:Takings

$: $1700.00

Thank you

Bank of Dandenong

Date: 19/2/21

For: Petrol (vehicleexpenses)

This cheque $89

Cheque number 352

To: Shell Doveton

Pete the Painter

Bank of Dandenong

Date: 22/2/21

For: Telephoneexpenses

This cheque $150

Cheque number 353

To: Telstra

Pete the Painter


Date: 23/2/21

From: Customers

For: Takings

$: $3100.00

Thank you

Bank of Dandenong

Date: 24/2/21

For: Insuranceexpense

This cheque $570Cheque number 354

To: AMP

Pete the Painter


DATE: 5/2/21


TO: BAZZA A/C: 776589

FOR: WAGES EXPENSE

TOTAL: $690

MEMO #27:24/2/21Owner contributed a personalcomputer to the business, $2000.Record as office assets.

Bank of Dandenong

Date: 28/2/21

For: Paint (asset)

This cheque $210

Cheque number 355

To: Dulux

Pete the Painter

INTERNET TRANSFER: RECEIPT. R776

DATE: 29/2/21

FROM: PETE A/C: 55743

TO: PETE THE PAINTER A/C: P98332

FOR: CAPITAL INJECTION OF CASH

TOTAL: $2700

MEMO #28:29/2/21Stocktake of paint. $830.00

Bankoverdraft

is a

liability.




SOLUTIONS

Journals for February:

Date Details $

24/2/21 CAPITAL CONTRIBUTION OF PERSONAL COMPUTER (OFFICE ASSETS), MEMO #27 2000


29/2 STOCKTAKE OF PAINT, MEMO #28 830

Total the cash journals atthe end of February.

Calculations/schedules for February:




Sub-total 3060



$

Accounting reports for February 2021:

Pete the Painter: Cash FlowStatement for February 2021

Cash Receipts $ $

TAKINGS 6800

CAPITAL 2700 9500

Cash Payments

Paint purchases 960

WAGES 690

TELEPHONE EXPS. 150

DRAWINGS 1000

VEHICLE EXPS. 89

INSURANCE 570 3459

Change in cash 6041




Pete the Painter: IncomeStatement for February 2021

Revenue $ $

TAKINGS 6800

Less Expenses

Paint 2230

WAGES 690

INSURANCE 570 3729

Net Profit 3071

VEHICLE EXPS. 89

TELEPHONE EXPS. 150


Don’t forget

the paintexpensefrom the

schedule!

Office Assets schedule at 29/2/21$

Balance at start (Bal. Sheet) 9000

Add new office assets 2000






CapitalLoans

InterestRevenue

Sundry

1/2/21TAKINGS 122 2000 2000

11/2 TAKINGS 123 1700 1700

23/2 TAKINGS 124 3100 3100

29/2 CAPITAL R776 2700 270029/2 TOTALS 9500 6800 2700






PaintOfficeExps.

Sundry

5/2/21WAGES 010 690 690

15/2 DRAWINGS 011 1000 1000

18/2 PAINT 351 750 750

19/2 VEH.EXPS. 352 89 89

22/2 TELE.EXPS. 353 150 150

24/2 INSURANCE 354 570 57028/2 PAINT 355 210 210

29/2 TOTALS 3459 690 150 1000 89 960 570

Capital schedule at 29/2/21

$


Add new capital GJ + CRJ 4700




SOLUTIONS

3. Balance Sheet: Assets $ Equities $

STOCK OF PAINT 830 Liabilities

BANK 951 ANZ loan

TRAILER 2000 Owners Equity



EQUIPMENT 12000 ADD NET PROFIT 3071

OFFICE ASSETS 11000 Capital, Pete 44710

$

10000

56781


TRUCK 30000

Accounting Equation:

Consider the following transaction of Pete the Painter and the impact on the accounting equation.

1. Cash takings $3000.

ASSETS LIABILITIES OWNERS EQUITY

Increase in bank $3000 No impact Increase $3000 due to takingsrevenue.

= +

2. Cash drawings $6000.


DECREASE CASH $6000 NO IMPACT DECREASE $6000 DUE TODRAWINGS (—OE).

= +

3. Bought office assets $5000 cash.


DECREASE $5000 CASH. IN-CREASE $5000 OFF. ASSETS.

NO IMPACT NO IMPACT

= +

4. Paid cash for wages, $600.


DECREASE CASH $600.NO IMPACT DECREASE $600 DUE TO WAG-

ES EXPENSE.

= +

5. Borrowed $3000 from ANZ bank.


INCREASE $3000 CASH.INCREASE $3000 DUE TO

ANZ LOAN.NO IMPACT

= +

6. Owner injected $1000 into the business.


INCREASE $1000 CASH.NO IMPACT INCREASE $1000 DUE TO CAP-

ITAL CONTRIBUTION.

= +

Assets are recorded attheir historical cost (original cost) which canalways be verified bydocumentary evidence.



SOLUTIONS



SOLUTIONS

Transactions for Pete the Painter, March, 2021:

INTERNET TRANSFER: PAYMENT. 013DATE: 19/3/21


TO: PETE A/C: 55743

FOR: DRAWINGS

TOTAL: $3000


Date: 3/3/21

From: Customers

For:

Takings

$: $1400.00

Thank you

Bank of Dandenong

Date: 7/3/21

For: Paint (asset)

This cheque $390

Cheque number 356

To: Dulux

Pete the Painter


Date: 11/3/21

From: Customers

For:Takings

$: $550.00

Thank you

Bank of Dandenong

Date: 17/3/21

For: Petrol (vehicleexpenses)

This cheque $117

Cheque number 357

To: Shell Doveton

Pete the PainterBank of DandenongDate: 22/3/21

For: Accountingpackage—officeexpenses

This cheque $350

Cheque number 358

To: City Sotware

Pete the PainterPete the PainterReceipt # 127

Date: 23/3/21

From: Customers

For: Takings

$: $700.00

Thank you

Bank of Dandenong

Date: 28/3/21

For: Spray paintingmachine (equipment)Asset.

This cheque $3000Cheque number 359

To: Paint Spot

Pete the Painter


DATE: 13/3/21


TO: BAZZA A/C: 776589

FOR: WAGES EXPENSES

TOTAL: $810

Bank of Dandenong

Date: 29/3/21

For: Paint (asset)

This cheque $160

Cheque number 360

To: Dulux

Pete the Painter

MEMO #29:31/3/21Stocktake of paint. $600.00


Assets $ Equities $

Stock of paint 830 Liabilities

Bank 951 ANZ loan 10000

Truck 30000

Trailer 2000 Owners Equity

Office assets 11000 Capital, Pete 46781

Equipment 12000


INTERNET TRANSFER: RECEIPT. 01

DATE: 1/3/21

FROM: ANZ BANK: A/C: ANZ99811278

TO: PETE THE PAINTER A/C: P98332

FOR: INCREASE IN LOAN

TOTAL: $2900


DATE: 27/3/21


TO: ANZ BANK: A/C: ANZ99811278

FOR: LOAN REPAYMENT $500, INTEREST $70

TOTAL: $570




SOLUTIONS






PaintOfficeExps.

Sundry

7/3/21PAINT 356 390 390

13/3 WAGES 012 810 810

17/3 VEH.EXPS. 357 117 117

19/3 DRAWINGS 013 3000 3000

20/3 OFF.EXPS. 358 350 350

27/3 LOAN-ANZ 013 570 500 7028/3 EQUIPMENT 359 3000 3000

29/3 PAINT 360 160 160

31/3 TOTALS 8397 810 3000 500 70 117 550 350 3000

Journals for March:

Date Details $

31/3 STOCKTAKE OF PAINT, MEMO #29 600


Total the cash journals atthe end of March.

Calculations/schedules for March:




Sub-total 1380



$

Accounting reports for March 2021:

Pete the Painter: Cash FlowStatement for March 2021

Cash Receipts $ $

TAKINGS 2650

LOAN-ANZ 2900 5550

Cash Payments

Purchases of paint 550

WAGES 810

DRAWINGS 3000

LOAN-ANZ 500

INTEREST 70

VEHICLE EXPS. 117

OFFICE EXPS. 350

EQUIPMENT 3000 8397





Pete the Painter: IncomeStatement for March 2021

Revenue $ $

TAKINGS 2650

Less Expenses

Paint 780

WAGES 810INTEREST 70

VEHICLE EXPS. 117


Net Profit/loss 523


Don’t forgetthe paintexpensefrom the

schedule!



Add new loans (CRJ) 2900Sub-total 12900

Less loan payments (CPJ) (500)


$





CapitalLoans

InterestRevenue

Sundry

1/3/21LOAN-ANZ 01 2900 2900

3/3 TAKINGS 125 1400 1400

10/3 TAKINGS 126 550 550

23/3 TAKINGS 127 700 70031/3 TOTALS 5550 2650 2900

Equipment schedule at 31/3/21

$


Add new equipment (CPJ) 3000




SOLUTIONS

Assets $ Equities $

STOCK OF PAINT 600 Liabilities

TRUCK 30000 ANZ loan 12400

OFFICE ASSETS 11000 Owners Equity



ADD NET PROFIT 523

EQUIPMENT 15000 Capital, Pete 46781

$

58600


TRAILER 2000 BANK OVERDRAFT 1896 14296

3. Balance Sheet:

Accounting Equation:

Consider the following transactions of Pete the Painter and the impact on the accounting equation.

1. Owner contributed vehicle to business, $20000.


INCREASE $20000 DUE TOVEHICLE

NO IMPACT INCREASE $20000 DUE TOCAPITAL CONTRIBUTION.

= +

2. Paid rent $4000.


DECREASE $4000 CASH.NO IMPACT

DECREASE $4000 DUE TORENT EXPENSE.

= +

3. Bought computer $4000 cash.


DECREASE $4000 CASH. IN-CREASE $4000 COMPUTER.

NO IMPACT NO IMPACT= +

4. Cash takings, $3500.


INCREASE $3500 CASH. NO IMPACT INCREASE $3500 DUE TOTAKINGS REVENUE.

= +

5. Borrowed $2000 from Commonwealth Bank.


INCREASE $2000 CASH. INCREASE $2000 DUE TO C/WLOAN.

NO IMPACT

= +

6. Owner injected $7000 cash into the business.


INCREASE $7000 CASH. NO IMPACT INCREASE $7000 DUE TO CAP-ITAL CONTRIBUTION.

= +

7. Repaid $2000 to the Commonwealth Bank.


DECREASE $2000 CASH. DECREASE $2000 DUE TODECREASE LOAN.

NO IMPACT.

= +



SOLUTIONS

Haley’s Gardening: Balance Sheet at 30/6/19

Assets $ Equities $

Stock of supplies 4900 Liabilities

Truck 26000 Vic Finance Co. 11000

Office assets 15000 Bank overdraft 3000

Mower 3800 Owners Equity

Capital, Haley 35700


Supplies includefertilizers, chemicals,petrol for mower etc.





CapitalVic

LoanInterestRevenue

Sundry

31/7 TOTALS — 16900 6900 7000 3000

Date Details $

31/7 Owner took some office assets for private use, memo #55. 600


Stocktake of supplies, memo#56 3800

Sundry, $2700, is for a new trailer, asset.

Transactions for July have been recorded and totalled above. Completethe following schedules and the accounting reports for July 2019.

Supplies expense schedule at31/7/19

Stock at start 4900

Add purchases 790

Sub-total 5690

Less stocktake (3800)

Supplies expense 1890

$


Balance at start 11000

Add new loans 3000

Sub-total 14000

Less loan payments (390)


$

Drawings schedule at 31/7/19

$

Cash drawings 1600

+ other drawings 600

= total drawings 2200

Office assets schedule at 31/7/19

$

Balance at start 15000

+ change office assets (600)


Haley’s Gardening: Cash FlowStatement for July 2019

Cash Receipts $ $

TAKINGS 6900

CAPITAL 7000

VIC LOAN 3000 16900

Cash Payments

ADVERTISING 450

PHONE COSTS 140

DRAWINGS 1600

VIC LOAN 390

INTEREST 75

VEHICLE EXPS. 370

SUPPLIES 790

OFFICE EXPS. 250

TRAILER 2700 6765

Change in cash 10135

Cash bal. at start (3000)

Cash bal. at end 7135

Haley’s Gardening:Income Statement for July 2019

Revenue $ $

TAKINGS 6900

Less expenses

SUPPLIES 1890

ADVERTISING 450

PHONE COSTS 140

INTEREST 75

VEHICLE EXPS. 370


Net Profit/loss 3725

Haley’s Gardening:Balance Sheet at 31/7/19

Assets $ $

BANK 7135

STOCK OF SUPP. 3800

TRUCK 26000

OFFICE ASSETS 14400

MOWER 3800

TRAILER 2700

Total Assets 57835

Equities

Liabilities

LOAN-VIC 13610

Owners Equity

CAPITAL, HALEY 42700

ADD PROFIT 3725

LESS DRAW. (2200) 44225

Total Equities 57835

Note the differentpresentation of the

Balance Sheet.

Gardening is Haley’srevenue activity which

she calls ‘Takings’.




Date Details Doc. BankAdvertisingExpenses

Phonecosts

DrawingsLoan

Repay.Interest

Veh.Exps.

SuppliesOfficeExps.

Sundry

31/7 TOTALS 6765 450 140 1600 390 75 370 790 250 2700

Capital schedule at 31/7/19

$

Balance at start (Bal.Sheet) 35700Add new capital (CRJ) 7000




SOLUTIONS

Review of the elements

1. A simple definition of an asset would be …RESOURCES UNDER THE CONTROL OF THEBUSINESS WHICH WILL PROVIDE FUTUREECONOMIC BENEFITS.

2. List 5 examples of assets. CASH OR BANK STOCK COMPUTER ETC VEHICLES PREMISES

3. A simple definition of a liability would be …FUTURE OBLIGATIONS OF THE BUSINESS.

4. Three examples of liabilities are ...

BANK OVERDRAFT, LOAN, CREDITORS(INCLUDING ATO).

5. An asset which can sometimes become a liability is

CASH OR BANK.

6. A simple definition of owners equity would be …ASSETS LESS LIABILITIES. THE OWNERS‘INTEREST’, ‘CLAIM’ OR ‘OWNERSHIP’ IN THEASSETS OF THE BUSINESS.

7. A simple explanation of equities would beWHO HAS AN INTEREST, CLAIM OR OWNERSHIPIN THE ASSETS OF THE BUSINESS. INDIVIDUALSOR BUSINESSES. LIABILITIES PLUS OWNERSEQUITY.

8. When does the value of assets = owners equity?

WHEN THERE ARE NO LIABILITIES.

9. List four factors that can change the value of ownersequity.(i) CAPITAL CONTRIBUTIONS. (ii) DRAWINGS. (iii) PROFIT (OR REVENUE). (iv) LOSS (OR EXPENSES).

10. The owner of a business took $5000 for privateuse. How would this impact on the accountingequation?DECREASE IN ASSETS, $5000, AND A $5000

DECREASE IN OWNERS EQUITY DUE TODRAWINGS.

11. A simple definition of revenue would be …TRANSACTIONS THAT LEAD TO AN INCREASE INOWNERS EQUITY, EXCLUDING CAPITALCONTRIBUTIONS.

12. A simple definition of expenses would be …TRANSACTIONS THAT LEAD TO A DECREASE INOWNERS EQUITY, EXCLUDING DRAWINGS.

13. A business had cash revenue of $2000. Explainhow this would impact on the accounting equation.$2000 INCREASE IN ASSETS DUE TO CASH AND A$2000 INCREASE IN OWNERS EQUITY DUE TOREVENUE.

14. At 1/1/17 owners equity was $30000. DuringJanuary revenue was $19000, drawings $3000, andexpenses $12000. The value of owners equity at31/1/17 would be …$30000 + PROFIT $7000 (REVENUE $19000 LESS

EXPENSES $12000) — DRAWINGS $3000 =$34000.

15. At 1/7/20 owners equity was $60000. During Julyrevenue was $20000, capital contribution $4000,expenses $15000 and drawings $9000. The value of owners equity at 31/7/20 would be …$60000 + CAPITAL CONTRIBUTION $4000 +PROFIT $5000 (REVENUE $20000 — EXPENSES$15000) LESS DRAWINGS $9000 = $60000.

16. A business borrowed $5000 from the ANZ Bank.How would this impact on the accounting equation?$5000 INCREASE IN ASSETS DUE TO CASH AND

$5000 INCREASE IN LIABILTIES DUE TO LOAN.

17. Explain the term reporting period.PERIOD OF TIME OVER WHICH PROFIT ISCALCULATED.

18. This type of transaction works to decrease ownersequity but excludes drawings.EXPENSES.

19. This type of transaction works to increase ownersequity but excludes capital contribution.REVENUE.

20. Three journals are …(i) CASH RECEIPTS JOURNAL. (ii) CASH PAYMENTS JOURNAL. (iii) GENERAL JOURNAL.

A L OE R E



SOLUTIONS

Kim is a hairdresser and her Balance Sheet is provided at 1/6/15:

Kim’s Hairdressing Services: Balance Sheet at 1/6/15

Assets $ Equities $

Bank 10000 AMP Loan 8000

Stock of supplies 3000 Capital, Kim 65000

Other assets 60000


The following transactions occurred during June2015:

Takings, $44000.

Capital contribution of cash $5000.

Purchases of more supplies $700.

Other expenses $22000.

Paid $2000 off the AMP loan principal.

Stocktake of supplies at 30/6 = $400.

Prepare the following 3 reports.

Kim’s Hairdressing ServicesCash Flow Statement for June 2015

Receipts $ $

TAKINGS 44000

CAPITAL 5000 49000

Payments

SUPPLIES 700

OTHER EXPENSES 22000

AMP LOAN 2000 24700


Add balance at start 10000

Equals balance at end 34300Kim’s Hairdressing Services

Income Statement for June 2015

Revenue $

TAKINGS 44000

Total revenue

Less Expenses

OTHER EXPENSES 22000

SUPPLIES 3300

Total expenses 25300

Profit 18700

Kim’s Hairdressing Services: Balance Sheet at 30/6/15

Assets $ Equities $

BANK 34300 LIABILITIES

STOCK OF SUPPLIES 400 LOAN—AMP 6000

OFFICE ASSETS 60000

OWNERS EQUITY

TOTAL ASSETS 94700 TOTAL EQUITIES 94700

CAPITAL 70000

ADD NET PROFIT 18700

Working space if required:

SUPPLIES EXPENSE:= STOCK AT START, $3000 + PURCHASES $700 — STOCK AT END $400 = SUPPLIES EXPENSE $3300

LOAN:

BALANCE AT START $8000 — $2000 PAYMENT = $6000 BALANCE AT END.

CAPITAL:BALANCE AT START $65000 + CAPITAL CONTRIBUTION $5000 = $70000 BALANCE AT END.

This type of exercise requires you to prepare the3 accounting reports without the journals!

Hairdressing isKim’s revenueactivity which

she calls

‘Takings’.



SOLUTIONS

From the following list of elements, prepare theAccounting Reports for the 3 months ending 31/3/16.

Item $ Classification

Bank 31400 A

Stock of materials at 1/1/16 1000 A

Vehicle 25000 A

Office assets 40000 A

Premises 90000 A

AMP Loan 25000 L

Capital, Penny 136000 OE

Penny’s Podiatry:List of elements for the 3 months ending 31/3/16

Takings 60000 R

Wages 12000 E

Office expenses 4800 E

Purchases of materials 6000 Do schedule

Advertising 1800 E

Drawings 9000 —OE

Complete the classification column using A, L, OE, —OE, R or E.

A stocktake of materials at 31/3/16 = $2000.

Cash data for March quarter 2016:Cash balance at 1/1/16 = $5000Cash receipts:Takings $60000.Cash payments:Wages $12000, office expenses $4800, materials$6000, advertising $1800 and drawings $9000.

Penny’s Podiatry: Cash Flow

Statement for March quarter 2016

Cash Receipts $ $

TAKINGS 60000

Cash Payments

WAGES 12000

OFFICE EXPENSES 4800

MATERIALS 6000

ADVERTISING 1800

DRAWINGS 9000 33600

Change in cash 26400+ cash bal. at start 5000


Penny’s Podiatry: Income Statementfor March quarter 2016

Revenue $ $

TAKINGS 60000

Less expenses

MATERIALS 5000

WAGES 12000


ADVERTISING 1800 23600

NET PROFIT 36400

Calculations:

MATERIALS EXPENSE:STOCK AT START $1000 ADD PURCHASES $6000LESS $2000 STOCK AT END= $5000 MATERIALS EXPENSE.

Assets $ Equities $


STOCK OF MAT. 2000 AMP LOAN

OFFICE ASSETS 40000 Owners Equity

Penny’s Podiatry: Balance Sheet at 31/3/16


ADD NET PROFIT 36400PREMISES 90000 Capital, Penny 136000

$

25000

188400


VEHICLE 25000

Profit increases owners equity and

a loss decreases owners equity.Alternatively, revenue increasesowners equity and expensesdecrease owners equity.



SOLUTIONS

From the following list of elements, prepare theAccounting Reports for the 6 months ending 30/6/19.

Item $ Classification

Tools and equipment 9000 A

Stock of supplies at 1/1/19 2800 A

Truck 34000 A

Furniture 6400 A

Computer 3200 A

Bank overdraft (38600) L

ANZ Loan 18800 L

Hotwire Electrics:List of elements for the 6 months ending 30/6/19

Capital 20700 OE

Takings 44000 R

Office expenses 7200 E

Purchases of supplies 14100 Do schedule

Rent 12000 E

Advertising 3400 E

Drawings 30000 —OE

Complete the classification column using A, L, OE, —OE, R or E.

A stocktake of supplies at 30/6/19 = $6200

Cash data for 6 months ending 30/6/19:Cash balance at 1/1/19 = ($11700) overdraft

Cash receipts:Takings $44000Cash payments:Supplies $14100, office expenses $7200, rent $12000,advertising $3400, drawings $30000 and ANZ loan$4200.

Hotwire Electrics: Cash Flow Statement

for 6 months ending 30/6/19

Cash Receipts $ $

TAKINGS 44000

Cash Payments

SUPPLIES 14100


RENT 12000

ADVERTISING 3400

DRAWINGS 30000

ANZ LOAN 4200 70900

Change in cash (26900)+ cash bal. at start (11700)


Hotwire Electrics: Income Statement for6 months ending 30/6/19.

Revenue $ $

TAKINGS 44000

Less expenses

SUPPLIES 10700


RENT 12000

ADVERTISING 3400 33300

NET PROFIT 10700

Calculations:SUPPLIES EXPENSE:STOCK AT START $2800 + PURCHASES $14100

LESS STOCK AT END $6200= $10700 SUPPLIES EXPENSE.

Assets $ Equities $

TOOLS & EQUIPT. 9000 Liabilities

STOCK OF SUPP. 6200 LOAN-ANZ 18800

FURNITURE 6400 Owners Equity

Hotwire Electrics: Balance Sheet at 30/6/19


ADD NET PROFIT 10700COMPUTER 3200 Capital 20700

$

58800


TRUCK 34000 BANK OVERDRAFT 38600 57400

Repeating that profit increases owners

equity and a loss decreases ownersequity. Alternatively, revenueincreases owners equity and expensesdecrease owners equity.



SOLUTIONS


INCREASE CASH $30000. NO IMPACT. INCREASE $30000 DUE TOCAPITAL CONTRIBUTION.

= +

1. Owner contributed $30000 cash to business.

Indicate the impact on the accounting equation for the following transactions:


DECREASE CASH $4000.

INCREASE COMPUTER $4000.

NO IMPACT. NO IMPACT.

= +

2. Business bought a computer for $4000 cash.


INCREASE $10000 CASH. INCREASE $10000 DUE TONAB LOAN.

NO IMPACT.

= +

3. Business borrowed $10000 from NAB Bank.


DECREASE $5000 CASH. NO IMPACT. DECREASE $5000 DUE TODRAWINGS.

= +

4. Owner took $5000 cash for private use.


INCREASE $17000 CASH. NO IMPACT. INCREASE $17000 DUE TOREVENUE.

= +

5. Cash takings $17000 for services provided.


DECREASE CASH $2000 . NO IMPACT. DECREASE $2000 DUE TOWAGES EXPENSE.

= +

6. Paid $2000 for wages.


DECREASE CASH $4000. DECREASE $4000 DUE TODECREASE IN NAB LOAN.

NO IMPACT.

= +

7. Paid $4000 to the NAB Bank to reduce loan.


DECREASE CASH $7000.INCREASE FURNITURE $7000.

NO IMPACT. NO IMPACT.

= +

8. Paid $7000 for new furniture.



SOLUTIONS

Questions ...1. Which one of the following is the best description of an asset?

A. Future obligations of the business. B. Resources under the control of the business

which will provide future economic benefits.C. Causes an increase in owners equity. D. Causes a decrease in owners equity.

2. Which one of the following is the best description of a liability?

A. Obligations of the business.B. Resources under the control of the business which

will provide future economic benefits. C. Causes an increase in owners equity. D. Causes a decrease in owners equity.

3. Which one of the following is the best description of

owners equity?

A. Future obligations of the business. B. Resources under the control of the business which

will provide future economic benefits. C. Liabilities less assets. D. Assets less liabilities.

4. Revenue could be defined as ..


will provide future economic benefits. C. Transactions that cause an increase in owners

equity excluding capital contributions.D. Transactions that cause a decrease in owners equity

excluding drawings.

5. Expenses could be defined as …


will provide future economic benefits. C. Transactions that cause an increase in owners equity

excluding capital contributions. D. Transactions that cause a decrease in owners

equity excluding drawings.

6. The reporting period is best described as …

A. Period of time over which assets are determined. B. Period of time over which profit is determined.C. Period of time over which liabilities are determined. D. 1/7/XX to 30/6/XX

7. Equities are best described as …

A. Assets and liabilities. B. Assets less liabilities. C. Liabilities and owners equity.D. Assets less owners equity.

8. In a Balance Sheet, the following ‘balance’ …

A. Assets and liabilities. B. Assets and equities.C. Assets and revenues. D. Equities and liabilities.

9. Transactions are evidenced by …

A. Cash Flow Statement. B. Income Statement. C. Documents.D. Journals.

10. An item will usually get its own column in the journals if …

A. It has a high dollar value. B. It is a frequent transaction.

C. It is an infrequent transaction. D. There is enough room.

11. The report that provides stakeholders with detailedinformation about the businesses cash resources …

A. Balance sheet

B. Cash receipts journal. C. Cash flow statement.

D. Income statement.

12. Owners equity can change due to …

A. Revenue.

B. Expenses. C. Drawings. D. All of the above.

13. If drawings exceeds profit for a reporting period,owners equity will …

A. Increase. B. Decrease.

C. No impact. D. Impact cannot be determined from this data.

14. The owners equity section of the Balance Sheetcan report …

A. Capital plus revenue less drawings. B. Assets plus profit less drawings. C. Capital plus profit less drawings.D. Assets less loss less drawings.

15. The most likely sequence for a simple accountingprocess is …

A. Documents, journals, reports.B. Journals, documents, reports. C. Reports, documents, journals. D. Documents, reports, journals.

16. Information in the accounting reports is said to bemore reliable if …

A. The Income Statement reports a profit. B. The reports are supported by documentary evidence.

C. The reports are prepared frequently.

D. The Balance Sheet balances.

17. The accounting equation shows …

A. Liabilities equals assets plus owners equity. B. Assets equal liabilities plus owners equity.C. Owners equity less liabilities equals assets. D. Assets plus liabilities equals owners equity.



SOLUTIONS

Find the errors!

Cash Receipts

Takings 40000

Capital 5000Loan—Westpac 3000 48000

Cash Payments

Wages 12000

Office expenses 7000

Advertising 3000

Drawings 5000

Computer 3600 30600




1. Consider this report or statement for Choice Tree-Loppers forthe month of June 2017. Identify two errors.

(i) NO BUSINESS NAME GIVEN AT TOP OF REPORT/STATEMENT.

(ii) NO REPORTING PERIOD GIVEN AT TOP OF REPORT/STATEMENT.

Income Statement at 30/6/17.

Revenue

Takings 40000

Capital 5000 45000

Less payments

Wages 12000

Office expenses 7000

Advertising 3000

Drawings 5000

Computer 3600 30600

Net Profit 14400

2. Consider this Income Statement for Choice Tree-Loppers for themonth of June 2017. Identify five errors.

(i) NO BUSINESS NAME GIVEN ON REPORT.

(ii) NO REPORTING PERIOD GIVEN ON REPORT.

(iii) CAPITAL IS NOT REVENUE.

(iv) LESS EXPENSES NOT LESS PAYMENTS.

(v) DRAWINGS AND COMPUTER NOT EXPENSES.

Choice Tree-Loppers: Balance Sheet for June 2017

Assets $ Equities $ $

Loan—Westpac 3000 Liabilities

Computer 3600 Bank 15400

Vehicle 50000 Owners EquityTools and equipt. 20000 Capital 70000

— net profit 14400

+ drawings 5000 60600


3. Consider this Balance Sheet andthen identify 5 errors.

(i) DATE OF BALANCE SHEET NOT GIVEN.

(ii) LOAN IS NOT AN ASSET.

(iii) BANK SHOULD BE REPORTED AS AN ASSET (SEE CASH FLOW STATEMENT).

(iv) NET PROFIT SHOULD BE ADDED NOT SUBTRACTED FROM CAPITAL.

(v) DRAWINGS SHOULD BE DEDUCTED FROM OWNERS EQUITY NOT ADDED .



SOLUTIONS



SOLUTIONS

Summary exercise

Complete the records and reports forJetFast Couriers for September 2019.

Bank of Geelong

Date: 2/9/19

For: Rent expense

This cheque $4500

Cheque number 556

To:

JetFast Couriers

JetFastCouriers

Receipt # 88

Date: 1/9/19

From: Customers

For:Takings

$: $1500.00

Thank you

JetFast Couriers: Balance Sheet at 31/8/19

Assets $ Equities $


Vehicles 94000 Loan: ANZ 9000

Office assets 37000 Owners Equity

Stock of supplies 1000 Capital, Harry 141000



DATE: 3/9/19

FROM: JETFAST COURIERS A/C: J8876

TO: HARRY A/C: H665

FOR: DRAWINGS

TOTAL: $2500

MEMO #49:4/9/19Owner contributed a personalcomputer to the business, $2000.

Record as office assets.JetFastCouriersReceipt # 89

Date: 5/9/19

From: Customers

For:Takings

$: $4200.00

Thank you

JetFastCouriers

Receipt # 90

Date: 7/9/19

From: Customers

For:Takings

$: $2700.00

Thank you


DATE: 8/9/19


TO: ANZ BANK A/C: A9987

FOR: REPAYMENT INC. $400 INTEREST

TOTAL: $2400

Bank of Geelong

Date: 9/9/19

For: Supplies

This cheque $670

Cheque number 557

To: BusinessWorks

JetFast Couriers

INTERNET TRANSFER: PAYMENT. 347DATE: 10/9/19


TO: JEN HOANG A/C: H8811

FOR: WAGES

TOTAL: $1200

JetFast

CouriersReceipt # 91

Date: 11/9/19

From: Customers

For:Takings

$: $3800.00

Thank youBank of Geelong

Date: 12/9/19

For: Internet fees

This cheque $480

Cheque number 558

To: Netspace

JetFast Couriers

JetFastCouriers

Receipt # 92

Date: 13/9/19

From: Customers

For:Takings

$: $900.00

Thank you

Bank of Geelong

Date: 14/9/19

For: Vehicle expenses

This cheque $730

Cheque number 559

To: Geelong Auto

JetFast Couriers

Bank of Geelong

Date: 16/9/19

For: Advertising

This cheque $590

Cheque number 560

To: HiDesign

JetFast Couriers



SOLUTIONS

INTERNET TRANSFER: RECEIPT. R443

DATE: 27/9/19

FROM: ANZ A/C: A9987

TO: JETFAST COURIERS A/C: J8876

FOR: INCREASE IN LOAN

TOTAL: $6000

JetFastCouriers

Receipt # 93

Date: 18/9/19

From: Customers

For:Takings

$: $1400.00

Thank you


DATE: 19/9/19


TO: HARRY A/C: H665

FOR: DRAWINGS

TOTAL: $2000

JetFastCouriers

Receipt # 94

Date: 20/9/19

From: Customers

For:Takings

$: $2300.00

Thank you

Bank of Geelong

Date: 22/9/19

For: Supplies

This cheque $290

Cheque number 561

To: BusinessWorks

JetFast Couriers

JetFast

CouriersReceipt # 95

Date: 24/9/19

From: Customers

For:Takings

$: $800.00

Thank you

Bank of Geelong

Date: 29/9/19

For: New Vehicle

This cheque $22000

Cheque number 562

To: Trade Vans

JetFast Couriers

JetFastCouriers

Receipt # 96


For:Takings

$: $3600.00

Thank you

MEMO #50:30/9/19Stocktake of supplies.

$1200.



BS √ calc. X X √ √ calc. X X √ at end X


Exps.Drawings Loan Interest Rent Supplies

OfficeExps.

Sundry

2/9/19 RENT 556 4500 4500

3/9 DRAWINGS 345 2500 2500

8/9 ANZ LOAN 346 2400 2000 400

9/9 SUPPLIES 557 670 670

10/9 WAGES 347 1200 1200

12/9 INT.EXPS. 558 480 480

14/9 VEH.EXPS. 559 730 730

16/9 ADVERT. 560 590 590

19/9 DRAWINGS 348 2000 2000

22/9 SUPPLIES 561 290 290

29/9 VEHICLE 562 22000 2200030/9 TOTALS 37360 1200 480 4500 2000 400 4500 960 23320

Cash Receipts Journal (CRJ)CFS √ √ √ √

IS X √ rev. X X

BS √ calc. X √ calc. √ calc.


CapitalLoans Sundry

1/9/19 TAKINGS 88 1500 15005/9 TAKINGS 89 4200 4200

7/9 TAKINGS 90 2700 2700

10/9 TAKINGS 91 3800 3800

18/9 TAKINGS 93 1400 1400

21/9 TAKINGS 94 2300 2300

24/9 TAKINGS 95 800 800

27/9 ANZ LOAN R443 6000 6000

31/9 TAKINGS 96 3600 3600

31/9 TOTALS 27200 21200 6000

13/9 TAKINGS 92 900 900

Add up thecolumns at the end

of September.

Date Details $

4/9/19 CAPITAL CONTRIBUTION OF OFFICE ASSETS, MEMO #49 2000


30/9 STOCKTAKE OF SUPPLIES, MEMO #50 1200


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SOLUTIONS

JetFast Couriers: Cash Flow Statement

for September 2019.Cash Receipts $ $

TAKINGS 21200

LOAN ANZ 6000 27200

Cash Payments

WAGES 1200

INTERNET EXPS. 480

DRAWINGS 4500

LOAN ANZ 2000

ADVERTISING 590

VEHICLE 22000 37360




INTEREST 400

VEHICLE EXPS. 730

RENT 4500

SUPPLIES 960

JetFast Couriers: Income Statement for

September 2019.Revenue $ $

TAKINGS 21200

Less expenses

SUPPLIES 760

WAGES 1200

ADVERTISNG 590

INTERNET EXPS. 480

INTEREST 400

RENT 4500

VEHICLE EXPS. 730 8660

NET PROFIT 12540

Assets $ Equities $


STOCK OF SUPPLIES 1200 ANZ LOAN

VEHICLES 116000 Owners Equity

JetFast Couriers: Balance Sheet at 30/9/19


ADD NET PROFIT 12540

Capital 143000

$

13000

164040


OFFICE ASSETS 39000

Calculations:

SUPPLIES EXPENSE:STOCK AT START $1000 + PURCHASES $960 — STOCK AT END $1200 = $760.

OFFICE ASSETS:BALANCE AT START $37000 + CAPITAL CONTRIBUTION $2000 = $39000.

VEHICLES:

BALANCE AT START $94000 + NEW VEHICLE $22000 = $116000.

LOAN:BALANCE AT START $9000 + INCREASE LOAN $6000 — LOAN PAYMENT $2000 = $13000.

CAPITAL:BALANCE AT START $141000 + CAPITAL CONTRIBUTION $2000 = $143000.