ACCG100 Lecture Notes - Lecture 3: Accrual, General Ledger, Alore

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rubymosquito883

15 Sep 2018

School

Macquarie University

Department

Accounting and Corporate Governance

Course

ACCG100

Professor

Colly He

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Document Summary

Lecture 3 - setting up accounts, debit & credit rules, general journals. We set up accounts to record transactions of the business and to have a clear presentation of financial events for decision makers to analyse. T - account most popular method of setting up accounts ( used throughout course ). T - account needs name, debit side and credit side ( illustrated below ). Normal balance in t-accounts n. b is the outstanding balance at the end of the account period. It is recorded on the increasing side of each type of account ( this can be credit or debit depending on which side increases the account ). Debit and credit rules for various account types (described by alore) Assets (e. g name of account cash at bank, acc receibale etc) Normal balance recorded to debit (increasing) side. Example : you receive an inflow of funds from one of the owners into the company bank account.

Related Questions

D. Haas, a physical therapist, opened Haas's Clinic. His accountant provided the following chart of accounts: Assets Revenue Cash Professional Fees Accounts Receivable Office Equipment Expenses Office Furniture Salary Expense Rent Expense Liabilities Utilities Expense Accounts Payable Miscellaneous Expense Owner's Equity D. Haas, Capital D. Haas, Drawing The following transactions occurred during July of this year: Haas deposited $34,000 in a bank account in the name of the business. Bought filing cabinets (Office Equipment) on account from Muller Office Supply, $670. Paid cash for chairs and carpeting (Office Furniture) for the waiting room, $825, Ck. No. 1000. Bought a photocopier from Rob's Office Equipment, $770, paying $285 in cash and placing the balance on account, Ck. No. 1001. Received and paid the telephone bill, which included installation charges, $180, Ck. No. 1002. Sold professional services on account, $2,765. Received and paid the bill for the state physical therapy convention, $495, Ck. No. 1003 (Miscellaneous Expense). Received and paid the electric bill, $245, Ck. No. 1004. Received cash on account from credit customers, $1,585. Paid on account to Muller Office Supply, $360, Ck. No. 1005. Paid the office rent for the current month, $1,365, Ck. No. 1006. Sold professional services for cash, $2,395. Paid the salary of the receptionist, $990, Ck. No. 1007. Haas withdrew cash for personal use, $1,470, Ck. No. 1008. Requirements: Under each of the following T accounts, select either a plus or minus sign on the left side to indicate whether a Debit increases or decreases the classification or account and select either a plus or minus sign on the right side to indicate whether a credit increases or decreases the classification or account. Record the amounts in the proper positions in the T accounts. Record the amounts in the order given (letters 'a' through 'n'). Foot the T accounts and show the balances.

ultramarinemouse823

Periodic inventory system. Each of the following four horizontal lines represents data taken from a separate multiple-step income statement. Insert the missing amounts in the space (empty box) provided. Indicate any net loss by placing brackets around the amount.

Hint: Not all parts of the income statement are shown, so be careful with your arithmetic.

	Beginning Inventory	Purchases	Cost of Goods Available for Sale	Ending Inventory	Cost of Goods Sold
a.	$180,000		$325,000	$80,000

	Sales (Revenue)	Cost of Goods Sold	Gross Profit	Operating Expenses	Net Income
b.	$240,000	$145,000			$32,000

	Revenue (Sales)	Cost of Goods Available for Sale	Ending Inventory	Cost of Goods Sold	Gross Profit	Operating Expenses	Net Income
c.	$515,000	$240,000		$145,000		$225,000	$145,000

. For each question below, circle the best answer from the choices given. (

1 : Under the periodic inventory system the purchases of merchandise are recorded at their selling prices.
a. True b. False

2 : Inventory shrinkage does not include the loss of merchandise through shoplifting.
a. True b. False

3 : Only under the periodic inventory system is a physical count of the inventory necessary.
a. True b. False

4 : It is not possible to have more inventory at the end of a period then at the beginning of a period.
a. True b. False

5) True and false. Indicate whether each of the following is True (T) or False (F). (5 POINTS)

T F 1. US Treasury bills that mature within 120 days are cash equivalents.

T F 2. Financial assets describe not just cash, but all assets that are easily and directly convertible into known amounts of cash.

T F 3. Good cash mgmt. dictates that any cash and checks received each day should be deposited the same day.

T F 4. The income statement approach to estimating Bad debts Expense emphasizes the aging of accounts receivable and the adjustment of the Allowance for Doubtful Accounts account to the level of the estimated uncollectible amount.

T F 5. When I use the allowance method for accounts receivable, I will recognize a Bad Debt Expense at the same time the account is taken off the Accounts Receivable Subsidiary Ledger.

. For each question below, circle the best answer from the choices given.

1. Which of the following items would cause the ending balance on the bank statement to be larger than the ending balance of cash shown in the accounting records (checkbook)?

A) Bank service charges.

B) Deposits in transit.

C) Outstanding checks.

D) NSF check from one of the depositor's customers.

2. When a bank reconciliation has been satisfactorily completed, the only related entries to be made in the companyâs records are:

A) To correct errors made by the bank in recording the dollar amounts of cash transactions during the period.

B) To reconcile items explaining the difference between the balance per books and the balance per bank stmt.

C) To record outstanding checks and bank service charges.

D) To record items explaining the difference between the balance per accounting records and the adj. cash bal.

3. The Allowance for Doubtful Accounts represents:

A) Cash set aside to make up for bad debt losses.

B) The amount of uncollectible accounts written off to date.

C) The difference between total credit sales and collections on credit sales.

D) The difference between the face value of A/R and the net realizable value of A/R.

4. In preparing a bank reconciliation, a service charge shown on the bank statement should be:

A) Added to the balance per the bank statement.

B) Deducted from the balance per the bank statement.

C) Added to the balance per the depositor's records.

D) Deducted from the balance per the depositor's records.

5. During preparation of a bank reconciliation, outstanding checks should be:

A) Added to the balance per the bank statement.

B) Deducted from the balance per the bank statement.

C) Added to the balance per the depositor's records.

D) Deducted from the balance per the depositor's records.

Bank reconciliation. Indicate what effect each situation will have on the bank reconciliation process (Match the situation with the bank reconciliation process below by placing the number of the process next to the situation). Note that there are more situations than processes, so some processes may be used more than once, but not all processes have to be used. Only one process is required for each situation. Hint: Determine if Cash is increasing or decreasing

Process

Deduct from bank balance 2. Add to bank balance

3. Deduct from checkbook balance 4. Add to checkbook balance

Situation

_______ Bank received $2,750 from one of your customers (Terms: Cash in advance)

_______ Bank collection (wire) fee was $15

_______ Check number 111 was outstanding for $55

_______ A $400 check was written, but recorded on the books as $40

_______ Interest received from your bank for the month was $16.55

ceriseraccoon894

Henriettaâs Pine Bakery

Background

You are an Analyst for the professional service firm, BUSI 1043LLP. Your firm specializes in providing a wide variety of internalbusiness solutions for different clients. Given the outstandingfeedback you received on your first engagement working for BigSpenders Inc., a Senior Manager in the Financial Advisory grouprequested your support on a compilation engagement.

Additional Information

Henriettaâs was established in 1963 when it first opened itsdoors in Dwight, Muskoka on highway 60. Over the past 50 years,there have been four owners and is currently owned by Carine &Geoff Harris who incorporated and took over the store on January 1,2013. Their sons, Kyle and Nicholas have been an intricate part ofthe business from dishwashing to head bakers. Henrietta's has grownover the years with the addition of new items all the time, but the"Sticky Buns and Clouds" remain the most popular items amongst the150 varieties of breads and pastries.

Henriettaâs runs out of 90 square meters (1,000 share feet) ofspace. It has one entrance into the bakery and doors leading out tohighway 60. Henriettaâs pays $5,000 per month for the rental of thespace. Carine and Geoff were able to negotiate with the landlordand were not required to pay the first monthâs rend in advance. Allof the rental payments are current and up to date. For the last twoyears, Henriettaâs has had a very reliable accountant prepare itsyear-end financial statements and everything has been correct. Thisyear, Henriettaâs accountant retired and Geoff did the best hecould recording his own financial information. For the informationhe was not sure about, he kept all of the required supportingdocumentation. Geoff hired your firm, BUSI 1043 LLP to prepare hisfinancial statements for the year. Geoff supplied you with hisunadjusted trial balance and the information in Exhibit I to assistyou.

Supplementary information:

The amount currently sitting in prepaids arose due the insurancepolicy last year. Geoff didnât know how to correct it, so he leftit. This yearâs insurance policy was purchased on November 1 for$9,000. The policy runs from November 1 to October 31 of eachyear.

Geoff has a note that he owed $900 in wages to his employees forthe period ending December 31^st.

The loan was incurred when the bakery was opened. The loancarried an interest rate of 8%. The interest is payable two monthsafter year end and the principal is due in 2019.

Henriettaâs will sometimes book special events with smallorganizations that are allowed to pay after the event has takenplace. On December 29^th, a small company had a gatheringat the bakery. The company was billed $1,089 and has 30 days to payit. Geoff has not yet recorded this in his financial records.

Henriettaâs declared a dividend of $5,000 on December30^th.

Geoff didnât know how to record amortization for the year and soleft it for you to record. Amortization for all assets is chargedusing a straight-line method by taking the cost of the asset anddividing it by its expected useful life. The assets have expecteduseful lives as follows:

Computer: 5 years

Bakery equipment: 10 years

Furniture and fixtures: 20 years

The information shows that Henriettaâs owes $400 for a telephonebill and $400 for electricity for December. These amounts have notbeen recorded yet.

Exhibit I

Henriettaâs Pine Bakery

Unadjusted Trial Balance

December 31, 2015

Account Name	Debit	Credit
Cash	$35,000
Accounts Receivable	5,600
Food Inventory	21,000
Merchandise Inventory	62,500
Prepaids	3,400
Computers	30,000
Accumulated Amortization â Computers		12,000
Bakery Equipment	90,000
Accumulated Amortization â Bakery Equipment		18,000
Furniture and Fixtures	150,000
Accumulated Amortization â Furniture and Fixtures		15,000
Accounts Payable		18,000
Accrued Liabilities		-
Interest Payable
Dividend Payable		-
Long-term Loan		220,000
Common Shares		50,000
Retained Earnings		22,000
Food Revenue		468,500
Internet Revenue		127,000
Merchandise Revenue		103,000
Food Expense	240,000
Internet Expense	54,000
Electricity Expense	65,000
Telephone Expense	20,000
Interest Expense	0
Salary Expense	200,000
Insurance Expense	9,000
Supplies Expense	8,000
Depreciation Expense	-
Rent Expense	60,000
	1,053,500	1,053,500

Required

Based on the information you have, prepare the adjusting journalentries, an adjusting trial balance, the statement of earnings(income statement), statement of financial position (balancesheet), and statement of retained earnings. After you havecompleted the statements, prepare the closing journal entries andthe posting closing trial balance. Ensure you show all of yourwork, and prepare proper journal entries and properly formattedfinancial statements.

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ACCG100 Lecture Notes - Lecture 3: Accrual, General Ledger, Alore

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