SOL UNIT 1 CHAPTER 1 Accounting Process

SOLUTIONS
VCE Accounting Unit 1

Cash based service businesses A multi-media approach
SOLUTIONS David Page
1. The accounting process.
SOLUTIONS

Cash based service businesses A multi-media approach
Chapter Chapter Chapter Chapter Chapter 1 2 3 4 5 ... The accounting process. ... Adding GST to the accounting process. ... Classification of the accounting reports. ... Bank reconciliations. ... Budgeting.
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Chapter 1
The accounting process
SOLUTIONS
Annie is an architect providing professional advice to individuals and businesses. This advice is the revenue activity of her business. At 1/7/19, the business had the following Balance Sheet: Annie the Architect: Balance Sheet at 1/7/19 Assets $ Equities $ Bank 40000 Capital, Annie 95000 Office assets 25000 Vehicle 30000 Total assets 95000 Total equities 95000 Assets
Resources under the control of the business which will provide economic benefits.
Equities
Who has an ownership or interest or claim in the assets.
Assets and equities balance in a Balance Sheet. Annie has 100% ownership in the assets of the business at 1/7/19. Her equity in the business is often called Capital.
Transactions for Annie the Architect, July 2019:

Annie the Architect Receipt # 40
Date: 1/7/19 From: Customers Consulting fees For: $: $3000.00 Thank you
Record in the journals.
Botanical Bank Date: 5/7/19 To: Shelly For: Wages expense

Botanical Bank Date: 12/7/19 To: HotWire For: Internet expenses This cheque $300.00 Cheque number 56 Annie the Architect
This cheque $900.00 Cheque number 55 Annie the Architect Annie the Architect Receipt # 42
Transactions are evidenced by documents. Documents verify the transaction and ensure the data is reliable. Documents are inputs into the accounting system.
Botanical Bank Date: 22/7/19 To: Andersons For: Rent expense This cheque $4500 Cheque number 57 Annie the Architect Annie the Architect Receipt # 43
Date: 31/7/19 From: Customers Consulting fees For: $: $1000.00 Thank you VCE Accounting Unit 1
Botanical Bank Date: 26/7/19 To: Flash in the Pan For: Cleaning expenses This cheque $200.00 Cheque number 58 Annie the Architect
Botanical Bank Date: 28/7/19 To: OfficeWorks For: Office assets (new computer) This cheque $3000 Cheque number 59 Annie the Architect
SOLUTIONS
Journals for July 2019:

revenue activity
Journals record the transactions of the business. Cash receipt transactions are recorded in the Cash Receipts Journal and cash payment transactions are recorded in the Cash Payments Journal.
Cash Receipts Journal (CRJ)

CFS IS BS X calc. rev. X X calc. X calc. X
Date 9/7 17/7 31/7 31/7
Details CONS. FEES CONS. FEES CONS. FEES TOTALS
Doc. 40 41 42 43
Bank 3000 2000 4000 1000 10000
1/7/19 CONS. FEES
Consultation Cash Fees Capital 3000 2000 4000 1000 10000
Loans
Interest Sundry Revenue
Add up the columns at the end of July.
Sundry is used for miscellaneous or infrequent type transactions!
Cash Payments Journal (CPJ)

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X exp. X exp. X ? ?
Date 12/7 22/7 26/7 28/7 31/7
Details INT. EXPS. RENT CLEANING OFF.ASSETS TOTALS
Doc. 55 56 57 58 59
Bank 900 300 4500 200 3000 8900
Wages 900
Internet Drawings Exps. 300
Loan
Interest
Rent
Cleaning
Office Exps.
Sundry
5/7/19 WAGES
4500 200 3000 900 300 4500 200 3000
The design or format of the journals varies from business to business and depends on the information needs of each business. If a particular type of transaction occurs frequently, it usually has its own column in the journals.
Accounting reports for July 2019: 1. Cash Flow Statement:
Annie has decided to prepare accounting reports for July. July is thus the reporting period.
The Cash Flow Statement reports on cash receipts for the reporting period less cash payments for 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.
Annie the Architect: Cash Flow Statement for July 2019 Cash Receipts CONSULTING FEES $ $ 10000 Get the data from the Cash Receipts Journal. Cash Payments WAGES INTERNET EXPS. RENT CLEANING EXPS. OFFICE ASSETS 900 300 4500 200 3000
Get the data from the Cash Payments Journal. 8900
Change in cash + cash bal. at start = cash bal. at end
1100 40000 41100
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. The accounting process.
SOLUTIONS
2. Income Statement:
Annie the Architect: Income Statement for July 2019 Revenue CONSULTING FEES Less Expenses WAGES INTERNET EXPS. RENT CLEANING EXPS. Net Profit $ $ 10000
The definition of profit is revenue less expenses for the reporting period. The Income Statement reports on revenue and expenses for the period to determine profit or loss. The revenue activity for Annie the Architect is Consultation Fees. Annie could call this revenue other names such as Fees or Takings etc. Each business can decide the name it uses for its revenue activity. Source Annie 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. To assist you, see the top section of the Cash Payments Journal and look for items in the IS row with this symbol: ( exp.) (CPJ)
CFS IS BS exp. X
900 300 4500 200
5900 4100
Date
Wages
Calculations/schedules:
Sometimes at the end of the reporting period, calculations have to be done to help prepare 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) Add new office assets (CPJ) Balance at end $ 25000 3000 28000
3. New Balance Sheet:
At the end of the reporting period, a business will prepare a new Balance Sheet to report on the assets and equities at that point in time. The data comes from the Balance Sheet at the start of the reporting period plus any relevant changes that have occurred to assets and equities over the reporting period.
Get the Bank or Cash value from the Cash Flow Statement.
Annie the Architect: Balance Sheet at 31/7/19 Assets $ Equities $ Bank 41100 Capital, Annie 95000 Office assets 28000 Add Net Profit 4100 Vehicle 30000 Total assets 99100 Total equities 99100
Profit belongs to the owner so it is reported with Capital in the Balance Sheet. Get the value from the Income Statement.
Summary of the accounting process so far:

Business transactions are evidenced by documents. Transactions are recorded in journals: Cash Receipts Journal Cash Payments Journal Prepare Accounting Reports: Cash Flow Statement Income Statement Balance Sheet
Start of reporting period
End of reporting period
Input stage
Processing stage
Output stage
The accounting reports are prepared for stakeholders. Stakeholders are individuals 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.
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Accounting for August:

Annie the Architect: Balance Sheet at 1/8/19 Assets $ Equities $ Bank 41100 Capital, Annie 99100 Office assets 28000 Vehicle 30000 Total assets 99100 Total equities 99100 This capital value comes from the last Balance Sheet and is the addition of the original capital plus profit. Annie still has 100% ownership in the assets of the business: will this change during August? Record in the journals.
Transactions for Annie the Architect, August 2019:

Botanical Bank Date: 5/8/19 To: Shelley For: Wages expense

Botanical Bank Date: 12/8/19 To: Andersons For: Rent expense

This cheque $900.00 Cheque number 60 Annie the Architect Botanical Bank Date: 22/8/19 To: OfficeWorks For: Office expenses
This cheque $4500 Cheque number 61 Annie the Architect Annie the Architect Receipt # 47
Date: 31/8/19 From: AMP Bank Loan For: $: $7000 Thank you
Botanical Bank Date: 31/8/19 To: Ace Importers For: Equipment (CAD drawing system) This is an asset. This cheque $6000 Cheque number 64 Annie the Architect
This cheque $850 Cheque number 62 Annie the Architect
Cheque #64 is the purchase of new equipment. This is an asset so do not forget to report this in the Balance Sheet at the end of the month.
Journals for August: Cash Receipts Journal (CRJ)

Date
Details
Doc. 44 45 46 47
1/8/19 CONS. FEES
9/8 CONS. FEES 17/8 CONS. FEES 31/8 AMP LOAN 31/8 TOTALS
Consultation Cash Fees Capital 1000 1000 3000 3000 600 600 7000 Bank 11600 4600
Loans
Add up the columns at the end of August.
7000 7000

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X exp. X exp. X
Date 12/8 22/8 26/8 31/8
Details RENT OFFICE EXPS CLEANING EQUIPMENT
Doc. 60 61 62 63 64
Bank 900 4500 850 170 6000
Wages 900
Internet Drawings Exps.
Loan
Interest Rent 4500
Cleaning
Office Exps.
Sundry
5/8/19 WAGES
850 170 6000
31/8
TOTALS
12420
900
4500
170
850
6000
SOLUTIONS
Accounting reports for August 2019: 1. Cash Flow Statement:

Annie the Architect: Cash Flow Statement for August 2019 Cash Receipts CONSULTING FEES LOAN AMP Cash Payments WAGES RENT CLEANING OFFICE EXPENSES EQUIPMENT $ 4600 7000 $ 11600
See the top section of the cash journals to help you identify the revenue and expenses. Annie the Architect: Income Statement for August 2019 Revenue CONSULTING FEES $ $ 4600
900 4500 170 850 6000
12420
Less Expenses WAGES RENT CLEANING OFFICE EXPENSES Net Loss
900 4500 170 850
6420 (1820)
Change in cash + cash bal. at start = cash bal. at end Cash at start will be cash at end of lat month.
(820) 41100 40280
If expenses are more than revenue, it is a net loss.
The information in the accounting reports is said to be reliable if it is supported by documentary evidence. Stakeholders expect the information in the reports to be reliable.
3. Balance Sheet:
Annie the Architect: Balance Sheet at 31/8/19 Assets $ Equities $ Bank 40280 Liabilities Office assets 28000 AMP Loan Vehicle 30000 Owners Equity Equipment 6000 Capital, Annie 99100 Less net loss (1820) Total assets 104280 Total equities $ 7000 The Balance Sheet now reports liabilities as an equity. Liabilities are obligations to individuals or businesses, in this example, AMP. AMP has an ownership or claim or interest in the assets of the business until the loan is repaid by Annie the Architect.
97280 104280
Most businesses have liabilities, so for most businesses equities is made up of two components: liabilities and owners equity. Liabilities is the external ownership in the assets and owners equity is the internal ownership in the assets.
The Accounting Equation at 31/8/19:

ASSETS $104280
EQUITIES $104280 EQUITIES
ASSETS $104280
LIABILITIES $7000
OWNERS EQUITY $97280
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. 1. The accounting process.
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Accounting for September:
Annie the Architect: Balance Sheet at 1/9/19 Assets $ Equities $ Bank 40280 Liabilities Office assets 28000 AMP Loan 7000 Vehicle 30000 Owners Equity Equipment 6000 Capital, Annie 97280 Total assets 104280 Total equities 104280
Transactions for Annie the Architect, September 2019:

Botanical Bank Date: 4/9/19 To: Shelley For: Wages expense

Botanical Bank Date: 13/9/19 To: Andersons For: Rent expense

This cheque $900.00 Cheque number 65 Annie the Architect Botanical Bank Date: 24/9/19 To: Optus For: iPhone charges (office expenses) This cheque $900 Cheque number 67 Annie the Architect
This cheque $4500 Cheque number 66 Annie the Architect Botanical Bank Date: 30/9/19 To: AMP For: Loan repayment This cheque $500 Cheque number 69 Annie the Architect
Botanical Bank Date: 30/9/19 To: Cash For: Drawings This cheque $2700 Cheque number 70 Annie the Architect
Drawings is when the owner takes assets for personal use. Drawings is usually cash but can be any business asset.
Journals for September: Cash Receipts Journal (CRJ)

Date
Details
Doc. 48 49 50
1/9/19 CONS. FEES
10/9 CONS. FEES 19/9 CONS. FEES 30/9 TOTALS

CFS IS BS
Consultation Cash Bank Fees Capital 2000 2000 1500 1500 800 800 4300 4300
X calc. exp. X exp. X
Loans
Add up the columns at the end of September.

X X calc. exp. X exp. X exp. X exp. X
Date 13/9 24/9 27/9 30/9 30/9 30/9
Details RENT OFFICE EXP. CLEANING LOAN DRAWINGS TOTALS
Doc. 65 66 67 68 69 70
Bank 900 4500 900 190 500 2700 9690
Wages 900
Internet Drawings Exps.
Loan
Interest Rent 4500
Cleaning
Office Exps.
Sundry
4/9/19 WAGES
900 190 500 2700 900 2700 500 4500 190 900
SOLUTIONS
Accounting reports for September 2019: 1. Cash Flow Statement: 2. Income Statement:
See the top section of the cash journals to help you identify the revenue and expenses. Annie the Architect: Income Statement for September 2019 Revenue CONSULTING FEES 900 2700 500 4500 190 900 Less Expenses WAGES RENT CLEANING OFFICE EXPENSES Net Loss Change in cash + cash bal. at start = cash bal. at end Cash at start will be cash at end of last month. (5390) 40280 34890 The owner, who is usually the manager, is the major stakeholder! $ $ 4300
Annie the Architect: Cash Flow Statement for September 2019 Cash Receipts CONSULTING FEES $ $ 4300
Cash Payments WAGES DRAWINGS LOAN AMP RENT CLEANING EXPS. OFFICE EXPS.
9690
900 4500 190 900
6490 (2190)
Calculations/schedules:
Loan schedule at 30/9/19 Use this loan schedule to work out how much is owing to AMP at the end of September. Balance at start (Balance Sheet) Add new loans (CRJ) Sub-total Less loan payments (CPJ) Balance at end $ 7000 0 7000 (500) 6500
3. Balance Sheet:
Annie the Architect: Balance Sheet at 30/9/19 Assets $ Equities $ BANK 34890 Liabilities OFFICE ASSETS 28000 AMP loan VEHICLE 30000 Owners Equity EQUIPMENT 6000 Capital, Annie 97280 LESS LOSS (2190) LESS DRAWINGS (2700) Total assets 98890 Total equities $ 6500 Drawings reduces the owners ownership in the businesses assets thus it is deducted in the owners equity section of the Balance Sheet.
92390 98890
Accounting equation at 30/9/19:

ASSETS $98890
EQUITIES $98890 EQUITIES
ASSETS $98890
=
10
LIABILITIES $6500
OWNERS EQUITY $92390

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Assets Truck Trailer Office assets Stock of paint Equipment Total assets
Pete the Painter: Balance Sheet at 1/1/21 $ Equities $ 30000 Liabilities 2000 ANZ Loan 10000 9000 Bank overdraft 3000 6700 Owners Equity 12000 Capital, Pete 59700 Total equities
13000 46700 59700
Pete the Painters revenue activity is painting!
Transactions for Pete the Painter, January, 2021:

Note that Pete the Painter has a bank overdraft, a liability. This means the business has no money in its bank account and owes the bank money!
Pete the Painter Receipt # 119

Date: 1/1/21 From: Customers Takings For: $: $2000.00 Thank you
Bank of Dandenong Date: 4/1/21 To: Bazza For: Wages expense
Bank of Dandenong Date: 8/1/21 To: Dulux For: Paint (asset)

Bank of Dandenong Date: 14/1/21 To: Garretts For: vehicle expenses
This cheque $670 Cheque number 346 Pete the Painter Bank of Dandenong Date: 17/1/21 To: Telstra For: Telephone expenses This cheque $170 Cheque number 349 Pete the Painter
This cheque $370 Cheque number 347 Pete the Painter Pete the Painter Receipt # 121
Bank of Dandenong Date: 24/1/21 To: Dulux For: Paint (asset) This cheque $490 Cheque number 350 Pete the Painter
This cheque $290 Cheque number 348 Pete the Painter
INTERNET TRANSFER: PAYMENT. 009 DATE: 25/1/21 FROM: PETE THE PAINTER A/C: P98332 TO: PETE A/C: 55743 FOR: DRAWINGS TOTAL: $4500
Pete has used an internet transfer to pay himself drawings. This is an easy and quick way to transfer money from the business account to the owners personal account. It is still recorded in the cash payments journal.
MEMO #26: 31/1/21 Stocktake of paint. $2100.
Memo #26 is an example of a non-cash transaction so it is not recorded in the cash journals. It will be recorded in a new journal called the General Journal. See below:
General Journal (GJ) Date 31/1/21 Details STOCKTAKE OF PAINT, MEMO #26 $ 2100
We have seen 3 journals. Cash receipts, cash payments and now the general journal for non-cash transactions. 1. The accounting process.
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Cash Journals for January: Cash Receipts Journal (CRJ)

Date
1/1/21
Details TAKINGS TAKINGS TAKINGS TOTALS
Doc. 119 120 121
Bank 2000 800 1600 4400
Takings 2000 800 1600 4400
Cash Capital
Loans
Pete the Painter calls his revenue activity Takings.
11/1 21/1 31/1

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X calc. Stock at end exp. X
Date 8/1 14/1 17/1 24/1 25/1 31/1
Details PAINT VEH.EXPS. TELE. EXPS. PAINT DRAWINGS TOTALS
Doc. 346 347 348 349 350 009
Bank 670 370 290 170 490 4500 6490
Wages 670
Teleph. Drawings Exps.
Loan
Interest
Veh. Exps.
Paint 370
Office Exps.
Sundry
4/1/21 WAGES
290 170 490 4500 670 170 4500 290 860
Calculations/schedules for January:

Paint expense schedule at 31/1/21 When Pete buys paint, it is an asset. The paint that is used-up during the reporting period is an expense. At the end of each reporting period, Pete needs to calculate the paint used-up to calculate paint expense. Stock of paint at start (Bal. Sheet) Add purchases of new paint (CPJ) Sub-total Less stocktake of paint (GJ) Paint expense for period $ 6700 860 7560 (2100) 5460
Accounting reports for January 2021: 1. Cash Flow Statement:

Pete the Painter: Cash Flow Statement for January 2021
Cash Receipts TAKINGS $ $ 4400
See the top section of the cash journals to help you identify the revenue and expenses.
Pete the Painter: Income Statement for January 2021

Revenue TAKINGS Less Expenses Paint WAGES VEHICLE EXPS. TELEPHONE EXPS. $ $ 4400
Cash Payments Paint purchases WAGES DRAWINGS VEHICLE EXPS.
860 670 4500 290
6490
5460 670 290 170
6590
Change in cash + cash bal. at start = cash bal. at end
(2090) (3000) (5090)
Net Loss The cash balance at the end is a (negative) which means there is an overdraft.
(2190)
Dont forget the paint expense from the schedule!
Note: there is a difference between paint purchases as reported in the Cash Flow Statement and paint expense as reported in the Income Statement. 1. The accounting process.
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SOLUTIONS
3. Balance Sheet:
Assets are recorded at their historical cost (original cost) which can always be verified by documentary evidence.
All of the reports are expressed in Australian dollars, $A, as per the monetary unit principle. Pete the Painter: Balance Sheet at 31/1/21 Assets $ Equities $ TRUCK 30000 Liabilities TRAILER 2000 ANZ loan 10000 OFFICE ASSETS 9000 BANK OVERDRAFT 5090 STOCK OF PAINT 2100 Owners Equity EQUIPMENT 12000 Capital, Pete 46700 LESS NET LOSS (2190) LESS DRAWINGS (4500) Total assets 55100 Total equities
$ Bank overdraft is a liability.
15090
40010 55100
Transactions for Pete the Painter, February, 2021:


INTERNET TRANSFER: PAYMENT. 010 DATE: 5/2/21 FROM: PETE THE PAINTER A/C: P98332 TO: BAZZA A/C: 776589 FOR: WAGES EXPENSE TOTAL: $690 Bank of Dandenong Date: 18/2/21 To: Dulux For: Paint (asset)

INTERNET TRANSFER: PAYMENT. 011 DATE: 15/2/21 FROM: PETE THE PAINTER A/C: P98332 TO: PETE A/C: 55743 FOR: DRAWINGS TOTAL: $1000 Bank of Dandenong Date: 22/2/21 To: Telstra For: Telephone expenses This cheque $150 Cheque number 353 Pete the Painter Bank of Dandenong Date: 24/2/21 To: AMP For: Insurance expense This cheque $570 Cheque number 354 Pete the Painter
Bank of Dandenong Date: 19/2/21 To: Shell Doveton For: Petrol (vehicle expenses) This cheque $89 Cheque number 352 Pete the Painter

Date: 23/2/21 From: Customers Takings For: $: $3100.00 Thank you MEMO #27: 24/2/21 Owner contributed a personal computer to the business, $2000. Record as office assets.
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: 29/2/21 Stocktake of paint. $830.00
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SOLUTIONS
Journals for February:

Date 11/2 23/2 29/2 29/2
Details TAKINGS TAKINGS CAPITAL TOTALS
Doc. 122 123 124 R776
Bank 2000 1700 3100 2700 9500
Takings 2000 1700 3100 6800
Cash Capital
Loans
Total the cash journals at the end of February.
1/2/21 TAKINGS
2700 2700

Date 15/2 18/2 19/2 22/2 24/2 28/2
Details DRAWINGS PAINT VEH.EXPS. TELE.EXPS. INSURANCE PAINT
Doc. 010 011 351 352 353 354 355
Bank 690 1000 750 89 150 570 210
Wages 690
Teleph. Drawings Exps. 1000
Loan
Veh. Interest Exps.
Paint
Office Exps.
Sundry
5/2/21 WAGES
750 89 150 570 210
29/2 TOTALS
3459
690
150
1000
89
960
570
General Journal (GJ) Date Details 24/2/21 CAPITAL CONTRIBUTION OF PERSONAL COMPUTER (OFFICE ASSETS), MEMO #27 29/2 STOCKTAKE OF PAINT, MEMO #28
$ 2000 830
Calculations/schedules for February:

Paint expense schedule at 29/2/21 Stock of paint at start (Bal. Sheet) Add purchases of new paint (CPJ) Sub-total Less stocktake of paint (GJ) Paint expense for period $ 2100 960 3060 (830) 2230
Office Assets schedule at 29/2/21 $ Balance at start (Bal. Sheet) 9000 Add new office assets 2000 Balance at end 11000 Capital schedule at 29/2/21 Balance at start (Bal. Sheet) Add new capital GJ + CRJ Balance at end $ 40010 4700 44710
Accounting reports for February 2021: 1. Cash Flow Statement:

Pete the Painter: Cash Flow Statement for February 2021
Cash Receipts TAKINGS CAPITAL Cash Payments Paint purchases WAGES TELEPHONE EXPS. DRAWINGS VEHICLE EXPS. INSURANCE Change in cash + cash bal. at start = cash bal. at end 1. The accounting process. $ 6800 2700 $ 9500
See the top section of the cash journals to help you identify the revenue and expenses.
Pete the Painter: Income Statement for February 2021

Revenue TAKINGS Less Expenses Paint WAGES TELEPHONE EXPS. VEHICLE EXPS. INSURANCE Net Profit $ $ 6800 Dont forget the paint expense from the schedule!
960 690 150 1000 89 570
3459 6041 (5090) 951
2230 690 150 89 570
3729 3071
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SOLUTIONS
3. Balance Sheet:
Assets are recorded at their historical cost (original cost) which can always be verified by documentary evidence.
Pete the Painter: Balance Sheet at 29/2/21 Assets $ Equities $ STOCK OF PAINT 830 Liabilities BANK 951 ANZ loan TRUCK 30000 TRAILER 2000 Owners Equity OFFICE ASSETS 11000 Capital, Pete 44710 EQUIPMENT 12000 ADD NET PROFIT 3071 LESS DRAWINGS (1000) Total assets 56781 Total equities
$ 10000
46781 56781
Accounting Equation:
Consider the following transaction of Pete the Painter and the impact on the accounting equation.
1. Cash takings $3000. ASSETS Increase in bank $3000 2. Cash drawings $6000. ASSETS DECREASE CASH $6000 3. Bought office assets $5000 cash. ASSETS DECREASE $5000 CASH. INCREASE $5000 OFF. ASSETS. 4. Paid cash for wages, $600. ASSETS DECREASE CASH $600. 5. Borrowed $3000 from ANZ bank. ASSETS INCREASE $3000 CASH.
LIABILITIES No impact
OWNERS EQUITY
Increase $3000 due to takings revenue.
LIABILITIES NO IMPACT
OWNERS EQUITY DECREASE $6000 DUE TO DRAWINGS (OE).
OWNERS EQUITY NO IMPACT
OWNERS EQUITY DECREASE $600 DUE TO WAGES EXPENSE.
LIABILITIES INCREASE $3000 DUE TO ANZ LOAN.
6. Owner injected $1000 into the business. ASSETS INCREASE $1000 CASH.
OWNERS EQUITY INCREASE $1000 DUE TO CAPITAL CONTRIBUTION.

16
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Pete the Painter: Balance Sheet at 1/3/21 Assets $ Equities Stock of paint 830 Liabilities Bank 951 ANZ loan Truck 30000 Trailer 2000 Owners Equity Office assets 11000 Capital, Pete Equipment 12000 Total assets 56781 Total equities $ 10000
46781
56781
Transactions for Pete the Painter, March, 2021:

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 Pete the Painter Receipt # 126

This cheque $390 Cheque number 356 Pete the Painter Bank of Dandenong Date: 17/3/21 To: Shell Doveton For: Petrol (vehicle expenses) This cheque $117 Cheque number 357 Pete the Painter
INTERNET TRANSFER: PAYMENT. 012 DATE: 13/3/21 FROM: PETE THE PAINTER A/C: P98332 TO: BAZZA A/C: 776589 FOR: WAGES EXPENSES TOTAL: $810 Bank of Dandenong Date: 22/3/21 To: City Sotware For: Accounting packageoffice expenses This cheque $350 Cheque number 358 Pete the Painter
INTERNET TRANSFER: PAYMENT. 013 DATE: 19/3/21 FROM: PETE THE PAINTER A/C: P98332 TO: PETE A/C: 55743 FOR: DRAWINGS TOTAL: $3000

INTERNET TRANSFER: PAYMENT. 014 DATE: 27/3/21 FROM: PETE THE PAINTER A/C: P98332 TO: ANZ BANK: A/C: ANZ99811278 FOR: LOAN REPAYMENT $500, INTEREST $70 TOTAL: $570
Bank of Dandenong Date: 28/3/21 To: Paint Spot For: Spray painting machine (equipment) Asset. This cheque $3000 Cheque number 359 Pete the Painter
MEMO #29: 31/3/21 Stocktake of paint. $600.00
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SOLUTIONS
Journals for March:

Date 3/3 10/3 23/3 31/3
Details TAKINGS TAKINGS TAKINGS TOTALS
Doc. 01 125 126 127
Bank 2900 1400 550 700 5550
Takings 1400 550 700 2650
Cash Capital
Loans 2900
Total the cash journals at the end of March.
1/3/21 LOAN-ANZ
2900

Date 13/3 17/3 19/3 20/3 27/3 28/3 29/3 31/3
Details WAGES VEH.EXPS. DRAWINGS OFF.EXPS. LOAN-ANZ EQUIPMENT PAINT TOTALS
Doc. 356 012 357 013 358 013 359 360
Bank 390 810 117 3000 350 570 3000 160 8397
Wages 810
Teleph. Drawings Exps.
Loan
Veh. Interest Exps.
Paint 390
Office Exps.
Sundry
7/3/21 PAINT
117 3000 350 500 70 3000 810 3000 500 70 117 160 550 350 3000
General Journal (GJ) Date Details 31/3 STOCKTAKE OF PAINT, MEMO #29
$ 600
Calculations/schedules for March:

Paint expense schedule at 31/3/21 Stock of paint at start (Bal. Sheet) Add purchases of new paint (CPJ) Sub-total Less stocktake of paint (GJ) Paint expense for period $ 830 550 1380 (600) 780
Loan schedule at 31/3/21 Balance at start (Bal. Sheet) Add new loans (CRJ) Sub-total Less loan payments (CPJ) Balance at end $ 10000 2900 12900 (500) 12400 $ 12000 3000 15000
Equipment schedule at 31/3/21 Balance at start (Bal. Sheet) Add new equipment (CPJ) Balance at end
Accounting reports for March 2021: 1. Cash Flow Statement:

Pete the Painter: Cash Flow Statement for March 2021 Cash Receipts TAKINGS LOAN-ANZ Cash Payments Purchases of paint WAGES DRAWINGS LOAN-ANZ INTEREST VEHICLE EXPS. OFFICE EXPS. EQUIPMENT Change in cash + cash bal. at start = cash bal. at end 1. The accounting process. $ 2650 2900 550 810 3000 500 70 117 350 3000 $ 5550
See the top section of the cash journals to help you identify the revenue and expenses. Pete the Painter: Income Statement for March 2021 Revenue TAKINGS Less Expenses Paint WAGES INTEREST VEHICLE EXPS. OFFICE EXPS. Net Profit/loss $ $ 2650 Dont forget the paint expense from the schedule!
8397 (2847) 951 (1896)
780 810 70 117 350
2127 523
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SOLUTIONS
3. Balance Sheet:
Pete the Painter: Balance Sheet at 31/3/21 Assets $ Equities $ STOCK OF PAINT 600 Liabilities TRUCK 30000 ANZ loan 12400 TRAILER 2000 BANK OVERDRAFT 1896 OFFICE ASSETS 11000 Owners Equity EQUIPMENT 15000 Capital, Pete 46781 ADD NET PROFIT 523 LESS DRAWINGS (3000) Total assets 58600 Total equities
14296
44304 58600
Accounting Equation:
Consider the following transactions of Pete the Painter and the impact on the accounting equation.
1. Owner contributed vehicle to business, $20000. ASSETS INCREASE $20000 DUE TO VEHICLE 2. Paid rent $4000. ASSETS DECREASE $4000 CASH. NO IMPACT 3. Bought computer $4000 cash. ASSETS DECREASE $4000 CASH. INCREASE $4000 COMPUTER. 4. Cash takings, $3500. ASSETS INCREASE $3500 CASH.
LIABILITIES
OWNERS EQUITY DECREASE $4000 DUE TO RENT EXPENSE.
OWNERS EQUITY INCREASE $3500 DUE TO TAKINGS REVENUE.
5. Borrowed $2000 from Commonwealth Bank. ASSETS INCREASE $2000 CASH.
LIABILITIES
INCREASE $2000 DUE TO C/W LOAN.
6. Owner injected $7000 cash into the business. ASSETS INCREASE $7000 CASH.
7. Repaid $2000 to the Commonwealth Bank. ASSETS DECREASE $2000 CASH.
LIABILITIES DECREASE $2000 DUE TO DECREASE LOAN. 20
OWNERS EQUITY NO IMPACT.
SOLUTIONS
Supplies include fertilizers, chemicals, petrol for mower etc.
Haleys 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 Total assets 49700 Total equities 49700

Date Details 31/7 TOTALS
Doc.
Bank 16900
Takings 6900
Cash Capital 7000
Vic Loan 3000
Gardening is Haleys revenue activity which she calls Takings.

Date Details 31/7 TOTALS
Doc.
Bank 6765
Advertising Expenses 450
Phone Loan Veh. Drawings Interest Supplies costs Repay. Exps. 140 1600 390 75 370 790
Office Exps. 250
Sundry 2700
Sundry, $2700, is for a new trailer, asset. General Journal (GJ) Date 31/7 Details Owner took some office assets for private use, memo #55. Stocktake of supplies, memo#56 $ 600 3800
Capital schedule at 31/7/19 $ 35700 7000 42700 $ 1600 600 2200
Transactions for July have been recorded and totalled above. Complete the following schedules and the accounting reports for July 2019. Supplies expense schedule at 31/7/19 $ Stock at start 4900 Add purchases 790 Sub-total 5690 Less stocktake (3800) Supplies expense 1890 Loan schedule at 31/7/19 Balance at start Add new loans Sub-total Less loan payments Balance at end $ 11000 3000 14000 (390) 13610
Balance at start (Bal.Sheet) Add new capital (CRJ) Balance at end
Drawings schedule at 31/7/19 Cash drawings + other drawings = total drawings
Office assets schedule at 31/7/19 $ Balance at start 15000 + change office assets (600) Balance at end 14400
Haleys Gardening: Cash Flow Statement for July 2019 Cash Receipts TAKINGS CAPITAL VIC LOAN Cash Payments ADVERTISING PHONE COSTS DRAWINGS VIC LOAN INTEREST VEHICLE EXPS. SUPPLIES OFFICE EXPS. TRAILER Change in cash Cash bal. at start Cash bal. at end $ 6900 7000 3000 450 140 1600 390 75 370 790 250 2700 $
Haleys Gardening: Income Statement for July 2019 Revenue TAKINGS Less expenses SUPPLIES ADVERTISING PHONE COSTS INTEREST VEHICLE EXPS. OFFICE EXPS. Net Profit/loss $ $ 6900
Haleys Gardening: Balance Sheet at 31/7/19 Assets BANK STOCK OF SUPP. TRUCK OFFICE ASSETS MOWER TRAILER Total Assets Equities Liabilities LOAN-VIC $ $ 7135 3800 26000 14400 3800 2700 57835
16900
1890 450 140 75 370 250
3175 3725
13610
6765 10135 (3000) 7135
Note the different presentation of the Balance Sheet.
Owners Equity CAPITAL, HALEY 42700 ADD PROFIT 3725 LESS DRAW. (2200) Total Equities
44225 57835
21
SOLUTIONS
Review of the elements

1. A simple definition of an asset would be RESOURCES UNDER THE CONTROL OF THE BUSINESS WHICH WILL PROVIDE FUTURE ECONOMIC 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 THE ASSETS OF THE BUSINESS. 7. A simple explanation of equities would be WHO HAS AN INTEREST, CLAIM OR OWNERSHIP IN THE ASSETS OF THE BUSINESS. INDIVIDUALS OR BUSINESSES. LIABILITIES PLUS OWNERS EQUITY. 8. When does the value of assets = owners equity? WHEN THERE ARE NO LIABILITIES. 9. List four factors that can change the value of owners equity. (i) CAPITAL CONTRIBUTIONS. (ii) DRAWINGS. (iii) PROFIT (OR REVENUE). (iv) LOSS (OR EXPENSES). 10. The owner of a business took $5000 for private use. How would this impact on the accounting equation? DECREASE IN ASSETS, $5000, AND A $5000 DECREASE IN OWNERS EQUITY DUE TO DRAWINGS.
A L
OE
R E
11. A simple definition of revenue would be TRANSACTIONS THAT LEAD TO AN INCREASE IN OWNERS EQUITY, EXCLUDING CAPITAL CONTRIBUTIONS. 12. A simple definition of expenses would be TRANSACTIONS THAT LEAD TO A DECREASE IN OWNERS EQUITY, EXCLUDING DRAWINGS. 13. A business had cash revenue of $2000. Explain how this would impact on the accounting equation. $2000 INCREASE IN ASSETS DUE TO CASH AND A $2000 INCREASE IN OWNERS EQUITY DUE TO REVENUE. 14. At 1/1/17 owners equity was $30000. During January revenue was $19000, drawings $3000, and expenses $12000. The value of owners equity at 31/1/17 would be $30000 + PROFIT $7000 (REVENUE $19000 LESS EXPENSES $12000) DRAWINGS $3000 = $34000. 15. At 1/7/20 owners equity was $60000. During July revenue 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 IS CALCULATED. 18. This type of transaction works to decrease owners equity but excludes drawings. EXPENSES. 19. This type of transaction works to increase owners equity but excludes capital contribution. REVENUE. 20. Three journals are (i) CASH RECEIPTS JOURNAL. (ii) CASH PAYMENTS JOURNAL. (iii) GENERAL JOURNAL.
22
SOLUTIONS
This type of exercise requires you to prepare the 3 accounting reports without the journals! Kim is a hairdresser and her Balance Sheet is provided at 1/6/15: Kims 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 Total assets 73000 Total equities 73000 The following transactions occurred during June 2015: 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. Hairdressing is Kims revenue activity which she calls Takings.
Kims Hairdressing Services Cash Flow Statement for June 2015 Receipts $ $ TAKINGS 44000 CAPITAL 5000 49000 Payments SUPPLIES OTHER EXPENSES AMP LOAN
700 22000 2000
24700
Kims Hairdressing Services Income Statement for June 2015 Revenue $ TAKINGS 44000 Total revenue Less Expenses OTHER EXPENSES SUPPLIES
Change in cash Add balance at start Equals balance at end
24300 10000 34300
22000 3300
Kims Hairdressing Services: Balance Sheet at 30/6/15 Assets $ Equities $ BANK 34300 LIABILITIES STOCK OF SUPPLIES 400 LOANAMP 6000 OFFICE ASSETS 60000 OWNERS EQUITY CAPITAL 70000 ADD NET PROFIT 18700
Total expenses Profit
25300 18700
TOTAL ASSETS
94700
TOTAL EQUITIES
94700
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.
23
SOLUTIONS
From the following list of elements, prepare the Accounting Reports for the 3 months ending 31/3/16.
Complete the classification column using A, L, OE, OE, R or E. Pennys Podiatry: List of elements for the 3 months ending 31/3/16 Item Bank Stock of materials at 1/1/16 Vehicle Office assets Premises AMP Loan Capital, Penny Takings Wages Office expenses Purchases of materials Advertising Drawings $ 31400 1000 25000 40000 90000 25000 136000 60000 12000 4800 6000 1800 9000 Classification A A A A A L OE R E E Do schedule E OE Change in cash + cash bal. at start = cash bal. at end 26400 5000 31400 Cash Payments WAGES OFFICE EXPENSES MATERIALS ADVERTISING DRAWINGS 12000 4800 6000 1800 9000 Pennys Podiatry: Cash Flow Statement for March quarter 2016 Cash Receipts TAKINGS $ $ 60000
Calculations: MATERIALS EXPENSE: STOCK AT START $1000 ADD PURCHASES $6000 LESS $2000 STOCK AT END = $5000 MATERIALS EXPENSE.
33600
A stocktake of materials at 31/3/16 = $2000.
Cash data for March quarter 2016: Cash balance at 1/1/16 = $5000 Cash receipts: Takings $60000. Cash payments: Wages $12000, office expenses $4800, materials $6000, advertising $1800 and drawings $9000.
Pennys Podiatry: Income Statement for March quarter 2016 Revenue TAKINGS Less expenses MATERIALS WAGES OFFICE EXPENSES ADVERTISING $ $ 60000
5000 12000 4800 1800
23600
NET PROFIT Pennys Assets BANK STOCK OF MAT. VEHICLE OFFICE ASSETS PREMISES Podiatry: Balance Sheet at 31/3/16 $ Equities $ 31400 Liabilities 2000 AMP LOAN 25000 40000 Owners Equity 90000 Capital, Penny 136000 ADD NET PROFIT 36400 LESS DRAWINGS (9000)
36400
$ 25000 Profit increases owners equity and a loss decreases owners equity. Alternatively, revenue increases owners equity and expenses decrease owners equity.
163400 188400
Total assets
188400 Total equities
24
SOLUTIONS
From the following list of elements, prepare the Accounting Reports for the 6 months ending 30/6/19.
Complete the classification column using A, L, OE, OE, R or E. Hotwire Electrics: List of elements for the 6 months ending 30/6/19 Item Tools and equipment Stock of supplies at 1/1/19 Truck Furniture Computer Bank overdraft ANZ Loan Capital Takings Office expenses Purchases of supplies Rent Advertising Drawings $ 9000 2800 34000 6400 3200 (38600) 18800 20700 44000 7200 14100 12000 3400 30000 Classification A A A A A L L OE R E Do schedule E E OE Cash Payments SUPPLIES OFFICE EXPENSES RENT ADVERTISING DRAWINGS ANZ LOAN Change in cash + cash bal. at start = cash bal. at end 14100 7200 12000 3400 30000 4200 Hotwire Electrics: Cash Flow Statement for 6 months ending 30/6/19 Cash Receipts TAKINGS $ $ 44000 Calculations: SUPPLIES EXPENSE: STOCK AT START $2800 + PURCHASES $14100 LESS STOCK AT END $6200 = $10700 SUPPLIES EXPENSE.
70900 (26900) (11700) (38600)
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 $44000 Cash payments: Supplies $14100, office expenses $7200, rent $12000, advertising $3400, drawings $30000 and ANZ loan $4200.
Hotwire Electrics: Income Statement for 6 months ending 30/6/19. Revenue TAKINGS Less expenses SUPPLIES OFFICE EXPENSES RENT ADVERTISING $ $ 44000
10700 7200 12000 3400
33300
NET PROFIT Hotwire Electrics: Balance Sheet at 30/6/19 Assets $ Equities $ TOOLS & EQUIPT. 9000 Liabilities STOCK OF SUPP. 6200 LOAN-ANZ 18800 TRUCK 34000 BANK OVERDRAFT 38600 FURNITURE 6400 Owners Equity COMPUTER 3200 Capital 20700 ADD NET PROFIT 10700 LESS DRAWINGS (30000) Total assets 58800 Total equities
10700
57400 Repeating that profit increases owners equity and a loss decreases owners equity. Alternatively, revenue increases owners equity and expenses decrease owners equity.
1400 58800
25
SOLUTIONS
Indicate the impact on the accounting equation for the following transactions:
1. Owner contributed $30000 cash to business.
ASSETS
INCREASE CASH $30000.
LIABILITIES
NO IMPACT.
OWNERS EQUITY
INCREASE $30000 DUE TO CAPITAL CONTRIBUTION.
2. Business bought a computer for $4000 cash.
ASSETS
DECREASE CASH $4000. INCREASE COMPUTER $4000.
LIABILITIES
NO IMPACT.
OWNERS EQUITY
NO IMPACT.
3. Business borrowed $10000 from NAB Bank.
ASSETS
INCREASE $10000 CASH.
LIABILITIES
INCREASE $10000 DUE TO NAB LOAN.
OWNERS EQUITY
NO IMPACT.
4. Owner took $5000 cash for private use.
ASSETS
DECREASE $5000 CASH.
LIABILITIES
NO IMPACT.
OWNERS EQUITY
DECREASE $5000 DUE TO DRAWINGS.
5.
Cash takings $17000 for services provided.
ASSETS
INCREASE $17000 CASH.
LIABILITIES
NO IMPACT.
OWNERS EQUITY
INCREASE $17000 DUE TO REVENUE.
6.
Paid $2000 for wages.
ASSETS
DECREASE CASH $2000 .
LIABILITIES
NO IMPACT.
OWNERS EQUITY
DECREASE $2000 DUE TO WAGES EXPENSE.
7.
Paid $4000 to the NAB Bank to reduce loan.
ASSETS
DECREASE CASH $4000.
LIABILITIES
DECREASE $4000 DUE TO DECREASE IN NAB LOAN.
OWNERS EQUITY
NO IMPACT.
8.
Paid $7000 for new furniture.
ASSETS
DECREASE CASH $7000. INCREASE FURNITURE $7000. 1. The accounting process.
LIABILITIES
NO IMPACT.
OWNERS EQUITY
NO IMPACT.
26
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. 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. 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 .. A. Future obligations of the business. B. Resources under the control of the business which 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 A. Future obligations of the business. B. Resources under the control of the business which 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. B. C. D. Period of time over which assets are determined. Period of time over which profit is determined. Period of time over which liabilities are determined. 1/7/XX to 30/6/XX 14. The owners equity section of the Balance Sheet can report A. B. C. D. Capital plus revenue less drawings. Assets plus profit less drawings. Capital plus profit less drawings. Assets less loss less drawings. 9. Transactions are evidenced by A. B. C. D. Cash Flow Statement. Income Statement. Documents. Journals.
10. An item will usually get its own column in the journals if A. B. C. D. It has a high dollar value. It is a frequent transaction. It is an infrequent transaction. There is enough room.
11. The report that provides stakeholders with detailed information about the businesses cash resources A. B. C. D. Balance sheet Cash receipts journal. Cash flow statement. Income statement.
12. Owners equity can change due to A. B. C. D. Revenue. Expenses. Drawings. All of the above.
13. If drawings exceeds profit for a reporting period, owners equity will A. B. C. D. Increase. Decrease. No impact. Impact cannot be determined from this data.
15. The most likely sequence for a simple accounting process is A. B. C. D. Documents, journals, reports. Journals, documents, reports. Reports, documents, journals. Documents, reports, journals.
7. Equities are best described as A. B. C. D. Assets and liabilities. Assets less liabilities. Liabilities and owners equity. Assets less owners equity.
16. Information in the accounting reports is said to be more reliable if A. The Income Statement reports a profit. C. The reports are prepared frequently. D. The Balance Sheet balances. 17. The accounting equation shows A. B. C. D. Liabilities equals assets plus owners equity. Assets equal liabilities plus owners equity. Owners equity less liabilities equals assets. Assets plus liabilities equals owners equity. VCE Accounting Unit 1
B. The reports are supported by documentary evidence.
8. In a Balance Sheet, the following balance A. B. C. D. Assets and liabilities. Assets and equities. Assets and revenues. Equities and liabilities.
27
SOLUTIONS
Find the errors!
Cash Receipts Takings Capital LoanWestpac Cash Payments Wages Office expenses Advertising Drawings Computer Change in cash + cash bal. at start = cash bal. at end
40000 5000 3000 12000 7000 3000 5000 3600
48000
1. Consider this report or statement for Choice Tree-Loppers for the 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.
30600 17400 (2000) 15400
Income Statement at 30/6/17. Revenue Takings Capital Less payments Wages Office expenses Advertising Drawings Computer Net Profit 40000 5000 12000 7000 3000 5000 3600
2. Consider this Income Statement for Choice Tree-Loppers for the month of June 2017. Identify five errors. 45000 (i) NO BUSINESS NAME GIVEN ON REPORT. (ii) NO REPORTING PERIOD GIVEN ON REPORT. (iii) CAPITAL IS NOT REVENUE. 30600 14400 (iv) LESS EXPENSES NOT LESS PAYMENTS. (v) DRAWINGS AND COMPUTER NOT EXPENSES.
3. Consider this Balance Sheet and then identify 5 errors.
Choice Tree-Loppers: Balance Sheet for June 2017 Assets $ Equities $ $ LoanWestpac 3000 Liabilities Computer 3600 Bank 15400 Vehicle 50000 Owners Equity Tools and equipt. 20000 Capital 70000 net profit 14400 + drawings 5000 60600 Total assets 76600 Total equities 76000
(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 .
28
SOLUTIONS
29
SOLUTIONS
Summary exercise
Complete the records and reports for JetFast Couriers for September 2019.
JetFast Couriers: Balance Sheet at 31/8/19 Assets $ Equities $ Bank 18000 Liabilities Vehicles 94000 Loan: ANZ 9000 Office assets 37000 Owners Equity Stock of supplies 1000 Capital, Harry 141000 Total assets 150000 Total equities 150000
JetFast Couriers Receipt # 88

Bank of Geelong Date: 2/9/19 To: For: Rent expense
INTERNET TRANSFER: PAYMENT. 345 DATE: 3/9/19 FROM: JETFAST COURIERS A/C: J8876 TO: HARRY A/C: H665 FOR: DRAWINGS TOTAL: $2500
This cheque $4500 Cheque number 556 JetFast Couriers

Date: 5/9/19 From: Customers Takings For: $: $4200.00 Thank you Bank of Geelong Date: 9/9/19 To: BusinessWorks For: Supplies
MEMO #49: 4/9/19 Owner contributed a personal computer to the business, $2000. Record as office assets.

Date: 7/9/19 From: Customers Takings For: $: $2700.00 Thank you INTERNET TRANSFER: PAYMENT. 346 DATE: 8/9/19 FROM: JETFAST COURIERS A/C: J8876 TO: ANZ BANK A/C: A9987 FOR: REPAYMENT INC. $400 INTEREST TOTAL: $2400
This cheque $670 Cheque number 557 JetFast Couriers Bank of Geelong Date: 12/9/19 To: Netspace For: Internet fees
INTERNET TRANSFER: PAYMENT. 347 DATE: 10/9/19 FROM: JETFAST COURIERS A/C: J8876 TO: JEN HOANG A/C: H8811 FOR: WAGES TOTAL: $1200

Date: 11/9/19 From: Customers Takings For: $: $3800.00 Thank you Bank of Geelong Date: 16/9/19 To: HiDesign For: Advertising

Bank of Geelong Date: 14/9/19 To: Geelong Auto For: Vehicle expenses
This cheque $590 Cheque number 560 JetFast Couriers VCE Accounting Unit 1
30
SOLUTIONS JetFast Couriers Receipt # 93

Date: 18/9/19 From: Customers Takings For: $: $1400.00 Thank you Bank of Geelong Date: 22/9/19 To: BusinessWorks For: Supplies INTERNET TRANSFER: PAYMENT. 348 DATE: 19/9/19 FROM: JETFAST COURIERS A/C: J8876 TO: HARRY A/C: H665 FOR: DRAWINGS TOTAL: $2000


This cheque $290 Cheque number 561 JetFast Couriers Bank of Geelong Date: 29/9/19 To: Trade Vans For: New Vehicle
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

MEMO #50: 30/9/19 Stocktake of supplies. $1200.
This cheque $22000 Cheque number 562 JetFast Couriers Cash Receipts Journal (CRJ)
CFS IS BS X calc. rev. X
X calc.
X calc.
Date 5/9 7/9 10/9 13/9 18/9 21/9 24/9 27/9 31/9 31/9
Details TAKINGS TAKINGS TAKINGS TAKINGS TAKINGS TAKINGS TAKINGS ANZ LOAN TAKINGS TOTALS
Doc. 88 89 90 91 92 93 94 95 R443 96
Bank 1500 4200 2700 3800 900 1400 2300 800 6000 3600 27200
Takings 1500 4200 2700 3800 900 1400 2300 800
Cash Capital
Loans
Sundry
1/9/19 TAKINGS
Add up the columns at the end of September.
6000 3600 21200 6000

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X exp. at end exp. X
Date 3/9 8/9 9/9 10/9 12/9 14/9 16/9 19/9 22/9 29/9 30/9
Details DRAWINGS ANZ LOAN SUPPLIES WAGES INT.EXPS. VEH.EXPS. ADVERT. DRAWINGS SUPPLIES VEHICLE TOTALS
Doc. 556 345 346 557 347 558 559 560 348 561 562
Bank 4500 2500 2400 670 1200 480 730 590 2000 290 22000 37360
Wages
Internet Drawings Exps. 2500
Loan
Interest Rent 4500
Supplies
Office Exps.
Sundry
2/9/19 RENT
2000 1200 480
400 670
730 590 2000 290 1200 480 4500 2000 400 4500 960 22000 23320
General Date 4/9/19 30/9
Journal (GJ) Details CAPITAL CONTRIBUTION OF OFFICE ASSETS, MEMO #49 STOCKTAKE OF SUPPLIES, MEMO #50
$ 2000 1200 VCE Accounting Unit 1
31
SOLUTIONS
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.
JetFast Couriers: Cash Flow Statement for September 2019. Cash Receipts TAKINGS LOAN ANZ Cash Payments WAGES INTERNET EXPS. DRAWINGS LOAN ANZ INTEREST RENT SUPPLIES VEHICLE EXPS. ADVERTISING VEHICLE Change in cash + cash bal. at start = cash bal. at end $ 21200 6000 $ 27200
JetFast Couriers: Income Statement for September 2019. Revenue TAKINGS Less expenses SUPPLIES WAGES ADVERTISNG INTERNET EXPS. INTEREST RENT VEHICLE EXPS. NET PROFIT $ $ 21200
1200 480 4500 2000 400 4500 960 730 590 22000
760 1200 590 480 400 4500 730
8660 12540
37360 (10160) 18000 7840
JetFast Couriers: Balance Sheet at 30/9/19 Assets $ Equities $ BANK 7840 Liabilities STOCK OF SUPPLIES 1200 ANZ LOAN OFFICE ASSETS 39000 VEHICLES 116000 Owners Equity Capital 143000 ADD NET PROFIT 12540 LESS DRAWINGS (4500) Total assets 164040 Total equities
$ 13000
151040 164040
32

SOL UNIT 1 CHAPTER 1 Accounting Process

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SOL UNIT 1 CHAPTER 1 Accounting Process

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SOLUTIONS

VCE Accounting Unit 1

1. The accounting process.

VCE Accounting Unit 1

VCE Accounting Unit 1

1. The accounting process.

VCE Accounting Unit 1

1. The accounting process.

VCE Accounting Unit 1

Transactions for Annie the Architect, July 2019:

Record in the journals.

Botanical Bank Date: 5/7/19 To: Shelly For: Wages expense

Annie the Architect Receipt # 41

1. The accounting process.

Journals for July 2019:

Cash Receipts Journal (CRJ)

Date 9/7 17/7 31/7 31/7

Details CONS. FEES CONS. FEES CONS. FEES TOTALS

Bank 3000 2000 4000 1000 10000

1/7/19 CONS. FEES

Consultation Cash Fees Capital 3000 2000 4000 1000 10000

Interest Sundry Revenue

Add up the columns at the end of July.

Sundry is used for miscellaneous or infrequent type transactions!

Cash Payments Journal (CPJ)

Date 12/7 22/7 26/7 28/7 31/7

Details INT. EXPS. RENT CLEANING OFF.ASSETS TOTALS

Bank 900 300 4500 200 3000 8900

Internet Drawings Exps. 300

4500 200 3000 900 300 4500 200 3000

Accounting reports for July 2019: 1. Cash Flow Statement:

Get the data from the Cash Payments Journal. 8900

Change in cash + cash bal. at start = cash bal. at end

1100 40000 41100

VCE Accounting Unit 1

900 300 4500 200

3. New Balance Sheet:

Summary of the accounting process so far:

Start of reporting period

End of reporting period

1. The accounting process.

VCE Accounting Unit 1

Accounting for August:

Transactions for Annie the Architect, August 2019:

Botanical Bank Date: 5/8/19 To: Shelley For: Wages expense

Annie the Architect Receipt # 45

Botanical Bank Date: 12/8/19 To: Andersons For: Rent expense

Annie the Architect Receipt # 46

This cheque $850 Cheque number 62 Annie the Architect

Journals for August: Cash Receipts Journal (CRJ)

1/8/19 CONS. FEES

Interest Sundry Revenue

Add up the columns at the end of August.

Cash Payments Journal (CPJ)

Date 12/8 22/8 26/8 31/8

Details RENT OFFICE EXPS CLEANING EQUIPMENT

Bank 900 4500 850 170 6000

Internet Drawings Exps.

Interest Rent 4500

850 170 6000

1. The accounting process.

VCE Accounting Unit 1

Accounting reports for August 2019: 1. Cash Flow Statement: