Accounting Concepts Solved Revision Questions and Answers

Accounting Concepts Solved Revision Questions and Answers

QUESTION 1: Balance Day Adjustments and Posting to General Ledgers (26 marks)

 

Below is the unadjusted Trial Balance for the year ending 30 June 2022 for “Silver Masts Accommodation”, a business specialising in providing short stay accommodation in newly renovated historical homes. It is owned and operated by Suzanna.

Suzanna is the sole proprietor and keeps records of the business in good order with the help of a bookkeeper.  At year end the bookkeeper sends the required information to Copeland & Johnson Accounting Services who complete the necessary balance day adjustments and prepare the end of year financial statements.

Silver Masts Accommodation

Unadjusted Trial Balance

For the year ending 30 June 2022

  Debit ($) Credit ($)
Cleaning Expense – Accommodation 65 400  
Gas Expense – Office 2 100  
Water Expense – Accommodation  23 752  
Gas Expense – Accommodation 12 884  
Motor Vehicle 45 000  
Cash at Bank 41 896  
Term Deposit – matures 1 August 2025 200 000  
Furniture & Fittings – Accommodation 167 630  
Office Equipment 7 824  
Rental Returns & Allowances 1 060  
Interest expense 9 200  
Electricity Expense – Accommodation 17 400  
Capital, Suzanna   264 475
Accounts Receivable 650  
Loan   78 550
Accumulated Depreciation – Motor Vehicle   9 000
Rent Expense – Office 30 256  
Bookkeepers Wages Expense 41 454  
Laundry Expense 45 490  
Mobile Phone and Internet Expense 3 600  
Advertising Expense 24 700  
Cleaning Expense – Office 20 000  
Accounts Payable   10 233
Office Supplies Expense 2 350  
Drawings, Suzanna 53 065  
Repairs & Maintenance Expense – Accommodation 182 683  
Repairs and Maintenance Payable   10 700
Rental Sales Revenue   636 701
Accumulated Depreciation – Furniture & Fittings   32 625
Accrued Rent – Office   2 250
Discount Allowed – Accommodation 1 300  
Insurance Expense – Office 18 840  
Insurance Expense – Accommodation 26 000  
Totals 1 044 534 1 044 534

 

 

On the following page is additional information that Suzanna has provided to you in relation to the year
ended 30 June 2022.

 

 

QUESTION 1: Balance Day Adjustments and Posting to General Ledgers (continued)

 

 

You are a Graduate Accountant at Copeland & Johnson Accounting Services.  It is now the end of the financial year and based on the information provided below by Suzanna, you have been asked you to prepare any necessary balance day adjusting journals.

 

  1. Bookkeepers’ wages which are payable but have not yet been recorded as at 30 June 2022 are $9,350.

 

 

  1. Both the Furniture & Fittings and the Motor Vehicle are expected to be used evenly over their useful lives. The expected total useful lives and residual values of both assets is as follows:
  Estimated Useful life Estimated Residual
Furniture & Fittings 10 years $5,000
Motor Vehicle 8 years $15,000

 

 

  1. During the year, Suzanna also purchased a new computer and printer package for the office. The package cost $7,824 and was purchased on 1 February 2022.  Suzanna has estimated that the computer and printer package depreciate by 25% per year with no residual value.

 

  1. On 30 June 2022, Suzanna reviewed her outstanding Accounts Receivable balance. Based on her previous experience, she has estimated that 3% of this balance is unlikely to be collected.

 

  1. A customer paid $3,720 on the 25 June 2022 for an accommodation booking commencing on the 25 August 2022. At the time the money was received, Suzanna recorded this amount as Rental Sales Revenue.

 

  1. On 1 November 2021, Suzanna took out a 2-year insurance policy for the office for the first time which cost $18,840. This policy was recorded as Insurance Expense – Office.

 

  1. Suzanna’s last mobile phone and internet bill for the business was for the month ending 31 May 2022, and this account was paid in early June. She has not yet received the June account but has estimated that the cost of her telephone and internet usage up until 30 June 2022 was $300.

 

  1. On the 30th June Suzanna shut the office for the afternoon and met with her friends Mei and Louise at Harbourside Café to celebrate Mei’s birthday. Suzanna paid $120 from her personal bank account for the lunch.

 

Part 1                                                                                                             [20 marks]

 

REQUIRED:

 

  • Use the General Journal document provided on the next page to record the correctly formatted journal entries required and include a narration (explanation) for each entry. If an entry is not required, please state ‘no entry required’ and explain why the entry is not required referring to the appropriate accounting assumption / concept presented in the ACCT1008 course materials.

 

 

QUESTION 1: Balance Day Adjustments and Posting to General Ledgers (continued)

 

General Journal

 

Date Details Debit ($) Credit ($)
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       

 

QUESTION 1: Balance Day Adjustments and Posting to General Ledgers (continued)

 

General Journal

 

Date Details Debit ($) Credit ($)
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       

QUESTION 1: Balance Day Adjustments and Posting to General Ledgers (continued)

 

Part 2                                                                                                                         [6 marks]

 

REQUIRED:

 

  • Suzanna is unsure how to complete the General Ledger accounts and asked for some assistance.

Post the relevant Balance Day Adjustment Journals from Part 1 to the General Ledgers provided. Both ledgers must be footed.

***use the tab function to navigate through the ledgers. It is acceptable to abbreviate account names if required for formatting.

***only complete the ledgers provided – do not create any more ledger accounts.

 

Rental Sales Revenue

Date Details $ Date Details $
           
           
           
           
           
           

 

Insurance Expense – Office

Date Details $ Date Details $
           
           
           
           
           
           

 

 

 

 

 

 

 

QUESTION 2: Financial Statement (34 marks)

Suzanna’s business Silver Masts Accommodation is located in a very popular harbourside tourist area.  Around the corner from Silver Masts Accommodation is a small convenience store called “Just What You Need” which is owned and operated by Mei Chan.  “Just What You Need” has a very small range as it is aimed at tourists who are staying for a short time.  Inventory includes bread, the local paper, milk, chocolate, toilet paper, toothbrushes etc. Mei Chan works very long hours and as a result has very little time to do the bookkeeping for her business. Despite how busy she is Mei does all she can to prepare the business records for the accountants.  Mei has prepared the following Trial Balance for “Just What You Need” but she realises it is not in the correct order.

Just What You Need

Adjusted Trial Balance

For the year ending 30 JUNE 2022

 

                                                                                                           Debit ($)                                   Credit ($)

Shop Furniture & Fittings 39 400  
Accounts Receivable 46 089  
Office Electricity Expense 1 000  
Accumulated Depreciation – Shop Furniture & Fittings                  9 020
Office Rent Expense 3 650  
Cash at Bank 48 487  
Advertising Payable   9 947
Sales   545 000
Shop Electricity Expense 568  
Purchases 386 210  
Mei, Capital   44 810
Depreciation Expense – Shop Furniture & Fittings 3 550  
Interest received   2 310
Freight Inwards 2 820  
Shop Rent Expense 25 650  
Accounts Payable   10 597
Discount Allowed 3 725  
Inventory (1 July 2021)                20 960  
Shop Salaries Expense 28 300  
Loan Payable   33 600
Allowance for Doubtful Debts   1 000
Fuel Expense – Delivery Van 3 200  
Prepaid Advertising 1 540  
Interest Payable   620
Advertising Expense 6 547  
Purchase returns and allowances   5 421
Interest Expense 470  
Doubtful Debts Expense 1 000  
Mei, Drawings 18 500  
Insurance Expense 1 900  
Sales Returns & Allowances 8 630  
Discount Received   3 171
Office Salaries Expense 13 300  
TOTALS 665 496 665 496

 

**The loan was taken out on 30 June 2022 and is payable in equal amounts over 48 months**

**A physical stocktake of inventory at 30th June 2022 revealed $46 750 on hand.

**Insurance was paid to cover the office equipment.

 

 

QUESTION 2: Financial Statement (continued)

 

In your role as a Graduate Accountant at Copeland & Johnson Accounting Services you have been supplied with the following adjusted Trial Balance for “Just What You Need”, prepared at the end of the financial year by Mei Chan.

 

REQUIRED:

 

Using the Trial Balance provided above, prepare the following for the period in question:

  1. Fully classified Income Statement                [16 marks]
  2. Statement of Changes in Equity [4 marks]
  3. Fully classified Balance Sheet (Narrative format)                [14 marks]

 

QUESTION 2: Financial Statement (continued)

Using the Trial Balance provided above, prepare the following for the period in question:

 

Fully classified Income Statement                                                         [16 marks]

 

 
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
     

QUESTION 2: Financial Statement (continued)

Using the Trial Balance provided above, prepare the following for the period in question:

 

Statement of Changes in Equity                                                                            [4 marks]

 

 

 

 

 
   
   
   
   
   

 

 

QUESTION 2: Financial Statement (continued)

Using the Trial Balance provided above, prepare the following for the period in question:

 

Fully classified Balance Sheet (Narrative format)                                             [14 marks]

 

 

 
   
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
 
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       

 

 

 

 

 

 

QUESTION 3: Accounting Concepts (17 marks)

 

As part of your continuing professional development as a graduate accountant at Copeland & Johnson Accounting Services, the Managing Partner (Scott Johnson) has asked you to assist Suzanna the proprietor of Silver Masts Accommodation.

 

Scott Johnson has met with Suzanna, and he advises you that she is quite concerned at the accuracy of Rental Sales Revenue account as a result of the Balance Day Adjustment journal you prepared (see Question 1 transaction 5).

 

Required:

 

  • Identify and explain to Suzanna what element* each account is that you used in the Balance Day Adjustment journal at Question 1 transaction 5 and why you consider them to be these elements. You must use the element definitions presented in Topic 1 to support your answer.

 

 

  • Explain to Suzanna using the accrual accounting concept why you prepared the Balance Day Adjustment at Question 1 transaction 5.

 

 

  • Explain to Suzanna the impact on profit (direction and dollar amount) that would have occurred if you had not prepared the Balance Day Adjustment (see Question 1 transaction 5).

 

*(Element – Asset, Liability, Equity, Income, Expense)

 

Scott Johnson has asked that you prepare your responses in a formal business letter addressed to him (not the client). He will then review your work, and if appropriate your letter will be used as the basis of a response to Suzanna.

 

The remaining 2 marks will be awarded for following the formatting requirements below:

  • Date your letter 11 November 2022
  • Address your letter to Scott Johnson (Managing Partner), Copeland & Johnson Accounting Services, 232 Rush Rd, Glebe, SA, 5333.
  • Any formal business letter format is acceptable. Please note that a template has not been provided. Students are expected to research business letter formats themselves.  Information regarding the structure of business letters is provided in the UniSA Library – Assignment Help guide located in the Assessment menu option on the ACCT1008 learnonline site.
  • Set out your letter with subheadings to separate each part of your letter
  • Use of an appropriate professional way to begin and end your letter. You must consider the context of the letter – who are you writing it to, and how would you communicate with them?
  • The use of appropriate language, accounting terminology and reference in your letter to the specific information presented in the question.
  • No specific word count is prescribed. However, given the nature of the questions, it would be expected that the entire letter (including address and signoff) should require no more than one A4 page.

 

 

 

(Letter to commence overpage)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QUESTION 4:   Closing Entries (25 marks)

 

Louise is the sole proprietor of Louise’s Laundry Service.  Louise is good friends with Suzanna and Mei.  Louise’s Laundry Service is contracted by Silver Masts Accommodation to pick up the sheets, towels and tea towels from each house after a guest party has left, replace them with clean linen and take away the used linen and wash it.  She also offers a dry-cleaning service and Mei’s convenience store is an agent for Louise’s Laundry Service

 

One evening when Suzanna, Mei and Louise were out to dinner, Louise was explaining that she had no idea how to close off the accounts at the end of the financial year.  Suzanna and Mei suggested she contact Copeland & Johnson Accounting Services again and ask for you, as they have both been very happy with the work you have done for them.

 

During her appointment with you, Louise hands over the following Trial Balance she prepared in alphabetical order:

 

Louise’s Laundry Service

Trial Balance

For the year ended 30 June 2022

 

  Debit ($) Credit ($)
Accounts Payable   1 250
Accounts Receivable 11 856  
Accumulated Depreciation – Delivery Van   14 489
Accumulated Depreciation – Washing Machines   15 042
Advertising Expense 1 250  
Capital – Louise’s Laundry Service   153 708
Cash at Bank 49 333  
Computer 1 500  
Delivery Van 31 150  
Discount Allowed 919  
Drawings – Louise’s Laundry Service 40 415  
Electricity Expense 9 165  
Interest Expense 4 429  
Laundry Supplies Expense 1 713  
Loan   23 200
Mobile Phone & Internet Expense 1 555  
Office Gas Expense 2 275  
Rent Expense 52 354  
Repairs and Maintenance 3 637  
Repairs and Maintenance Payable   4 913
Sales   170 731
Sales Returns & Allowances 473  
Washing Machines 168 648  
Water Expense 2 661  
     
Total 383 333 383 333

 

 

REQUIRED

 

The Managing Partner has requested that you assist Louise by preparing the following:

 

  1. Closing entries based on the Trial Balance provided above, and
  2. A post-closing Trial Balance for the year ended 30 June 2022.

 

General Journal – closing entries                                                                                         [18 marks]

 

Date Details Debit ($) Credit ($)
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       
       

 

Post-closing Trial Balance                                                                                                      [7 marks]

 

 

Shiny Bright Cleaners

Post-closing Trial Balance

For the year ended 30 June 2022

 

  Debit ($) Credit ($)
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
Total    

 

 

 

 

 

 

WRITTEN COMMUNICATION SKILLS

The following aspects of students’ written communication skills development are also awarded a total of 15 marks.

PARAPHRASING

  • Presenting ideas and information that student read in their own words,
  • Not simply taking what someone else has written and changing a few words. It is about translating another person’s ideas into the student’s own words.

Mark (maximum 5):

 

BEING RELEVANT

Does what is written contribute to answering the question(s)

  • Setting out to specifically answer the question(s) by using relevant information,
  • Staying ‘on track’ with answers,
  • Avoiding straying from the question and going off on irrelevant tangents.

Mark (maximum 5):

WRITING FOR A PROFESSIONAL BUSINESS AUDIENCE (including good presentation)

  • The written work is clear and understandable,
  • Where applicable, the written work is based on the facts and available evidence,
  • Exaggeration and bold statements which are not supported by the facts and evidence are avoided.

Good presentation

  • The written work contains no spelling and grammatical errors. Obvious evidence of editing displayed. (Where the work contains any spelling and grammatical errors, it cannot be awarded 5 marks),
  • Any headings and subheadings display properly, and are used consistently throughout the document,
  • Page numbering is used. It is usual for page numbering to commence on page 2 of a business document as “2”,
  • Font size and font style are used consistently throughout the document,
  • If applicable, requested templates are used.

Mark (maximum 5):