Tutorial Week 5 – Chapter 3: Recording transactions

DQ3.1 Indicate whether each of the following events is an internal transaction, an

external transaction, or a non-transaction event. Explain your answer in each case.
(a) Receipt of money from a customer in payment of services to be provided early in
the next accounting period.
External transaction because it is an exchange of economic resources (money) with outside
party – customer.
(b) Equipment is used to provide a service for a customer.
Internal transaction because the usage of equipment is a depreciation on the entity’s asset and
equity. It is also external transaction because providing services is an exchange of economic
resources with an outside party – customer.
(c) The human resources department provided services to the customer service
department.
Non valid transactionInternal transaction because it is an exchange of service between two
internal department and the cost of running department should be accurately determined.
(d) A building owned by the business increased in value.
Non-transaction event Unrealised holding gains Internal
(e) Received payment from a customer on account for services provided in the
previous accounting period.
External transaction
(f) A prospective employee is interviewed and hired for a job.
Non-transaction event
(g) Stationery supplies are used by an employee.
Internal transaction
DQ3.6 Give an example of a transaction that results in:
(a) an increase in one asset and an increase in a liability
Purchase of stationery on credit from a supplier which would increase Stationery Supplies
Inventory and increase Accounts Payable.
(b) a decrease in one asset but no change in the total assets
Purchase of supplies for cash - account receivable
(c) an increase in one asset and an increase in equity
Income
(d) a decrease in one asset and a decrease in a liability
Pay supplier for goods/services
(e) a decrease in one asset and a decrease in equity
Drawings
(f) an increase in one asset, a decrease in another asset and an increase in one liability
Purchase of an asset (such as equipment or a building) in which a part payment is made and
the balance of the purchase price is borrowed from a bank or finance company
(g) a decrease in equity and an increase in a liability.
Wages expense and wages payable.
Ex3.1 Identifying account categories LO2
The following is a list of ledger account titles extracted from the general ledger of J.
Wendall, marketing consultant.
Wages and Salaries Expense Motor Vehicles A
Interest - Revenue Income Rent – Revenue Income
Interest - Expense Expense Rent – Expense Expense
Cash at Bank E Mortgage Payable Expense
J. Wendall, Capital L Consultancy Fees Income
Accounts Payable A Investments A
Land (Under Mortgage) A Computers A
Furniture A Inventory, Marketing Materials
Accounts Receivable

Increases are recorded Normal balance

Wages and Salaries Debit Debit
Interest - Revenue Credit Credit
Interest - Expense Debit Debit
Cash at Bank Debit Debit
J. Wendall, Capital Credit Credit
Accounts Payable Credit Credit
Land (Under Mortgage) Debit Debit
Furniture Debit Debit
Accounts Receivable Debit Debit
Motor Vehicles Debit Debit
 Rent – Revenue Debit Debit
Rent – Expense Debit Debit
Mortgage Payable Credit Credit
Consultancy Fees Credit Credit
Investments Debit Debit
Computers Debit Debit
Inventory, Marketing Materials Debit Debit

Ex3.5 Recording transactions in general journal and analysis LO3, 4 The chart of
accounts of Pellham Poster Printers contained the following accounts: Cash at Bank;
Accounts Receivable; Equipment; Accounts Payable; K. Pellham, Drawings; Printing
Fees; Salaries Expense; and Advertising Expense. Ignore GST.
The following transactions occurred during the month of June.
June 1 K. Pellham withdrew $850 cash for personal use.
5 Purchased new equipment for $5000. Paid $500 deposit with the balance to be
paid within 60 days.
9 Paid for advertising in the local newspaper, $510.
14 Paid $320 to creditors for office supplies that had been purchased on credit in the
previous month.
18 Paid salaries of $970.
22 Received $500 from customers to reduce their account balances.
30 Printing fees of $12 000 were due during the month. Of this, 20% of the fees
were collected in cash and 80% will be paid within 60 days

Date Particulars Debit Credit

June 1 K.pellham, Drawings 850
Cash at bank 850
(K. Pellham withdrew $850 cash for personal
use)
5 Office equipment 5000
Cash at bank 500
Accounts payable 4500
(Paid $500 deposit with the balance to be paid
within 60 days)
9 Advertising Expense 510
Cash at bank 510
(Payment of advertising in the local newspaper)
14 Office supplies A/P 320
 Accounts payable Cash 320
(Office supplies purchased on credit)
18 Salaries Expense 970
Cash at bank 970
(Salaries paid to employee)
22 Cash at bank 500
Accounts receivable 500
(Receipt received from customer)
Cash at bank 2400
30 Accounts receivable 9600
Printing fee- revenue 12000
(Printing fee received 20% by cash, and 80%
receivable in 60 days)

Ex3.6 Each of the following items describes aspects of the business of Lenny Linnehan,
lawyer.
1. Cash which Lenny Linnehan has withdrawn from the business for personal use
L.Linnehan, Drawings – Contra- Equity
2. Photocopiers, document binding machine and computers
Office equipment – Asset
3. Amounts owed by the business to suppliers of an online legal database
Account payable - Liability
4. Amounts owed by customers for cases completed
Accounts receivable - Asset
5. Tables, wall shelving and book cabinets for staff offices
Office equipment - Asset
6. GST charged to clients for legal services
GST receivable – Liability GST payable to ATO _ liability
7. Money borrowed from a bank
Loan payable – Liability bank loan
8. Lease rental on premises which should have been paid 1 month ago
Rent payable – Liabilities
9. Supplies held for future document preparation
Office supplies – Asset
10. Insurance premium paid in advance to cover the next 6 months
Prepaid insurance – Asset
Ex 3.10
General Journal
Date Particular Debit Credit
2016 Land 1 200 000
Dec 2 Building 1 000 000
Coffee roasting equipment 420 000
Office equipment 60 000
Accounts payable 30 000
Michael Macchiato, Capital 2 650 000
(Assets and liabilities contributed by the owner)
5 New roasting equipment 160 000
Accounts payable 160 000
(Purchase equipment on credit)
6 Cash at bank 220 000
Coffee sales 220 000
(Receipt from customers)
12 Accounts Payable 30 000
Cash at bank 30 000
(Cash paid for creditors on equipment)
14 Prepaid Insurance 6000
Cash at bank 6000
(Purchase insurance policy)
18 Prepaid Tele advertising expenses 8000
Cash at bank 8000
(Purchase tele ads paid in 30 days)
23 Cash at bank 46 000
Fees – Revenue 46 000
(Cash received from customers)
30 Michael, Drawings 8000
Cash at bank 8000
(Micheal withdrew $8000 cash for private Chr.
presents)
B.T account
Cash at bank
Dec 6 Coffee sales 220 000 12 Accounts Payable 30 000
14 Prepaid Insurance 6 000
policy
23 Coffee sales 46000 30 Micheal Drawings 8000
266000 44000
Balance 222000 222000

Land
Dec 2 Macchiato, Capital 1 200 000
 Building
Dec 2 Macchiato, Capital 1 000 000

Coffee Roasting Equipment

Dec 2 Macchiato, Capital 420 000
5 Accounts Payable 160 000
580 000
Office Equipment
Dec 2 Macchiato, Capital 60 000

Prepaid Insurance
Dec 14 Cash at bank 6000

Ads Expense
Dec 18 Cash at bank 8 000

Accounts Payable
Dec 12 Accounts payable 30 000 Dec 2 Account payable 30 000
Dec 5 Roasting equipment 160 000
Dec 18 Tele Ads 8000
198 000
Balance 168000

Drawings
Dec 30 Cash at bank 8000