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Copyright © 2011 Cengage Learning Australia Pty Limited
Contents Page
Chapter 1: Partnerships 2
Chapter 2: Incomplete or single-entry systems 140
Chapter 3: Not-for-profit organisations 160
Chapter 4: Primary producers 177
Chapter 5: Statement of cash flows 191
Chapter 6: Standard financial analysis techniques 201
Chapter 7: Inventories 209
Copyright © 2011 Cengage Learning Australia Pty Limited
Chapter 1: Partnerships
1.1 In accordance with the Partnership Act, for a partnership to exist, the following three conditions must
be present:
1. a business must be carried on
2. the business must be carried on by persons in common
3. the business must be carried on with a view of profit.
1.2 A partnership is a group of people (normally up to 20) who have joint ownership of a business.
Members of a partnership share the responsibility for the conduct of the partnership business, as well
as the liability for partnership debts. Partners also share profits and losses made by the partnership
business.
1.3 a) An active partner is one who, as well as contributing capital to a partnership, shares the liability
for partnership debts and takes an active role in the management of the partnership business.
b) A sleeping partner is one who contributes capital and shares the liability for partnership debts,
but takes no role in the management of the partnership business.
c) A limited partner is one who contributes capital to the partnership, but has no further liability for
partnership debts and is not permitted to take an active role in the conduct of the partnership.
1.4 Advantages of partnerships (any four, with brief explanation as per text):
– Formation is simple and inexpensive.
– More capital available.
– Sharing of workload and risks.
– Specialisation of skills.
– Elimination of competition.
– Possible income tax savings for a family partnership.
Disadvantages of partnerships (any four, with brief explanation as per text):
– Unlimited liability.
– Partners’ acts binding on the other partners.
– Possibility of disputes between partners.
– Limited life (death or resignation of a partner).
– Profits must be shared.
1.5 For the purposes of accounting for partnerships, the Entity Convention is observed in the same way as
in a single ownership business. The partnership business is viewed as a separate entity to the partners,
and each partner’s equity is recorded by maintaining a separate Capital account for the partner.
1.6 Ways in which a partnership may come into existence (any two):
– Two (or more) people may decide to commence a new business together.
– An existing business owner may decide to take in a partner.
– Two existing business owners may decide to combine their businesses.
1.7
Solution in textbook.
1.8 Solution in textbook.
3
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1.9 Items of importance that should be covered on a partnership agreement (any eight):
– Date of formation of the partnership.
– Name and address of each partner.
– Nature of the partnership business.
– Duration of the partnership.
– Business name of the firm.
– Partners’ capital contributions.
– Partners’ profit and other entitlements.
– Partners’ rights and duties.
– Management arrangements.
– Accounting records.
– Dissolution.
– Procedure for settling disputes.
1.10
Goode & Proper
Cash Receipts Journal (simplified)
Goode & Proper
General Ledger
Date Particulars Folio Debit
$
Credit
$
Balance
$
Capital – Charles Goode Account
2017
15 Jul Cash at bank CRJ 20 000 20 000 Cr
Capital – Cyril Proper Account
2017
15 Jul Cash at bank CRJ 10 000 10 000 Cr
Loan from Charles Goode Account
2017
15 Jul Cash at bank CRJ 10 000 10 000 Cr
Cash at Bank Account
2017
15 Jul Sundries CRJ 40 000 40 000 Dr
Date Particulars Folio Ref. Sundries GST Bank
Amount Account collected
2017 $ $ $ $ $
15 Jul Charles Goode 001 20 000 Capital – Charles Goode
Cyril Proper 002 10 000 Capital – Cyril Proper
Charles Goode 003 10 000 Loan from Charles Goode 40 000
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1.11
Peake & Thomas
Cash Receipts Journal (simplified) Date Particulars Folio Ref. Sundries GST Bank
Amount Account collected
2017 $ $ $ $ $
20 Mar H. Peake 001 9 000 Capital – H. Peake
B. Thomas 002 5 050 Capital – B. Thomas
B. Thomas 003 40 000 Loan from B. Thomas 54 050
General Journal Date Particulars Folio Debit Credit
2017 $ $
20 Mar Premises – at cost 95 000
Equipment – at cost 15 000
GST paid
Capital – H. Peake
11 000
121 000
Assets contributed by Hayden Peake at agreed values.
Office furniture – at cost 4 500
Equipment – at cost 50 000
GST paid
Capital – B. Thomas
5 450
59 950
Assets contributed by Breanna Thomas at agreed values.
1.12
Solution in textbook.
1.13
Alan & Fiona
General Journal Date Particulars Folio Debit Credit
2018 $ $
1 Feb Accounts receivable control 8 000
Stock 10 000
Franchise 10 000
Premises – at cost 8 000
Goodwill 6 000
Allowance for doubtful debts 400
Accounts payable control 10 000
Capital – Alan 31 600
Assets and liabilities contributed by Alan at agreed values.
Stock 10 000
Accounts receivable control 16 000
Motor vehicles – at cost 8 000
Goodwill 4 000
Allowance for doubtful debts 800
Bank overdraft 6 000
Accounts payable control 8 000
Capital – Fiona 23 200
Assets and liabilities contributed by Fiona at agreed values.
Capital – Alan 3 600
Loan from Alan 3 600
Transfer to fix capital at $40 000 as per agreement.
5
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Alan & Fiona
Cash Receipts Journal (simplified)
1.14
Solution in textbook.
1.15
Doors Music
General Journal Date Particulars Folio Debit Credit
2016 $ $
1 Jun Accounts receivable 2 000
Stock of sheet music 250
Grand piano – at cost 6 000
Instruments and equipment – at cost 12 000
Goodwill 7 000
Allowance for doubtful debts 100
Capital – Morrison 27 150
Assets and liabilities contributed by John Morrison
at agreed values.
Cash on hand 50
Accounts receivable 2 500
Stock of sheet music 350
Instruments and equipment – at cost 5 000
Premises – at cost 50 000
Goodwill 5 000
Allowance for doubtful debts 500
Bank overdraft 1 500
Accounts payable 3 500
Mortgage loan on premises 45 000
Capital – Densmore 12 400
Assets and liabilities contributed by James
Densmore at agreed values.
Capital – Morrison 7 900
Loan from Morrison 7 900
Transfer to fix capital at $20 000 as per agreement.
Doors Music
Cash Receipts Journal (simplified) Date Particulars Folio Ref. Sundries GST Bank
Amount Account collected
2016 $ $ $ $ $
1 Jun John Morrison 001 750 Capital – Morrison
James Densmore 002 2 600 Capital – Densmore 3 350
Date Particulars Folio Ref. Sundries GST Bank
Amount Account collected
2018 $ $ $ $ $
1 Feb Alan 001 12 000 Capital – Alan
Fiona 002 1 800 Capital – Fiona 13 800
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1.16
Joe & Rob
Statement of Financial Position (simplified) as at 1 July 2017 $ $ $
OWNERS’ EQUITY
Capital – Joe 40 000
Capital – Rob 40 000
Total owners’ equity 80 000
This is represented by:
ASSETS
Current assets
Cash at bank 5 000
Accounts receivable 25 000
less Allowance for doubtful debts 2 000 23 000
Total current assets 28 000
Non-current assets
Property, plant and equipment
Factory premises – at cost 65 000
Furniture and equipment – at cost 32 000
Motor vehicles – at cost 12 000
Total property, plant and equipment 109 000
Total non-current assets 109 000
Total assets 137 000
less LIABILITIES
Current liabilities
Accrued expenses 7 000
Mortgage loan on premises 2 000
Total current liabilities 9 000
Non-current liabilities
Mortgage loan on premises 43 000
Loan from Joe 5 000
Total non-current liabilities 48 000
Total liabilities 57 000
Net assets 80 000
1.17
Solution in textbook.
7
Copyright © 2011 Cengage Learning Australia Pty Limited
1.18
Burke & Wills
General Journal Date Particulars Folio Debit Credit
2017 $ $
30 Jun Current – Burke 80
Profit and loss 80
Interest on advance at 8% p.a. as per Partnership Agreement.
Profit and loss 420
Current – Wills 420
Interest on loan at 7% p.a. as per Partnership Act.
Profit and loss 79 390
Profit and loss appropriation 79 390
Transfer of Net Profit for the year ended 30 June 2017.
Current – Burke 340
Current – Wills 270
Profit and loss appropriation 610
Interest on drawings at 12% p.a. as per Partnership Agreement.
Profit and loss appropriation 45 000
Salary – Burke 25 000
Salary – Wills 20 000
Transfer of salaries paid.
Profit and loss appropriation 5 000
Current – Wills 5 000
Unpaid salary entitlement as per Partnership Agreement.
Profit and loss appropriation 6 000
Current – Burke 4 000
Current – Wills 2 000
Interest on capitals at 5% p.a. as per Partnership Agreement.
Profit and loss appropriation 24 000
Current – Burke 16 000
Current – Wills 8 000
Distribution of profit after entitlements & charges, in ratio of capitals contributed.
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Burke & Wills
General Ledger (extract)
Date Particulars Folio Debit
$
Credit
$
Balance
$
Current – Burke Account
2017 $ $ $
30 Jun Balance 5 000 Dr
Profit and loss (Int. on adv.) GJ 80 5 080 Dr
P & L appro. (Int. on draw.) GJ 340 5 420 Dr
P & L appro. (Int. on cap.) GJ 4 000 1 420 Dr
P & L appro. (Profit share) GJ 16 000 14 580 Cr
Profit and Loss Account
2017
30 Jun Balance 79 730 Cr
Current – Burke (Int. on adv.) GJ 80 79 810 Cr
Current – Wills (Int. on loan) GJ 420 79 390 Cr
P & L appro. (Net profit) GJ 79 390 Nil
Current – Wills Account
2017
30 Jun Balance 4 000 Cr
Profit and loss (Int. on loan) GJ 420 4 420 Cr
P & L appro. (Int. on draw.) GJ 270 4 150 Cr
P & L appro. (Unpaid salary) GJ 5 000 9 150 Cr
P & L appro. (Int. on cap.) GJ 2 000 11 150 Cr
P & L appro. (Profit share) GJ 8 000 19 150 Cr
Profit and Loss Appropriation Account
2017
30 Jun Profit and loss (Net profit) GJ 79 390 79 390 Cr
Sundries (Int. on Draw.) GJ 610 80 000 Cr
Sundries (Salaries paid) GJ 45 000 35 000 Cr
Current – Wills (Unpaid salary) GJ 5 000 30 000 Cr
Sundries (Int. on cap.) GJ 6 000 24 000 Cr
Sundries (Profit share) GJ 24 000 Nil
Salary – Burke Account
2017
30 Jun Balance 25 000 Dr
P & L appro. GJ 25 000 Nil
Salary – Wills Account
2017
30 Jun Balance 20 000 Dr
P & L appro. GJ 20 000 Nil
1.19
Solution in textbook.
9
Copyright © 2011 Cengage Learning Australia Pty Limited
1.20 a)
Trevor & Jan
Statement of Comprehensive Income for the Year ended 30 June 2018 $ $ $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Sales 268 000
less Sales returns 12 000
Total sales revenue 256 000
less Cost of sales
Stock, 1 July 2017 42 000
Purchases 96 000
less Purchases returns 6 000
Net purchases 90 000
Cost of goods available for sale 132 000
less Stock, 30 June 2018 33 600
Total cost of sales 98 400
Gross profit 157 600
add Other income (from ordinary activities)
Rent income 4 400
Commission income 2 700
Interest on advance to Jan 2 400
Total other income (from ordinary activities) 9 500
Gains (outside ordinary business activities) Nil
Total income 167 100
less Expenses and losses
Expenses (from ordinary activities)
Selling and distribution expenses
Cartage outwards 1 440
Advertising 3 900
Depreciation – vehicles (see note 1 below) 16 000
Total selling and distribution expenses 21 340
Administrative and general expenses
Printing and stationery 2 580
Donations 300
Long service leave 2 000
Legal costs 600
Office salaries 24 000
Rates and taxes 3 120
Total administrative & general expenses 32 600
Financial expenses
Bad debts (see note 1 below) 17 200
Discount expense 960
Interest expense 2 300
Doubtful debts 1 160
Interest on loan from Trevor 960
22 580
less Discount income 720
Total financial expenses 21 860
Total expenses (from ordinary activities) 75 800
Losses (outside ordinary business activities)
Loss on sale of business segment (see note 1 below) 20 000
Fire losses (see note 1 below) 12 000
Total losses (outside the ordinary activities of the business) 32 000
Total expenses and losses 107 800
Net profit 59 300
OTHER COMPREHENSIVE INCOME Gain on revaluation of premises 10 000
Comprehensive income 69 300
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Notes to Statement of Comprehensive Income
Note 1 – Material items of expenses and losses Depreciation of delivery vehicles
During the year the business reassessed the effective life of its delivery vehicles resulting in an
additional amount of $10 000 depreciation.
Bad debts
Included in bad debts is an amount of $12 000 caused by the bankruptcy of a major debtor.
Loss on sale of business segment
During the year the business disposed of its branch in Bendigo at a loss of $20 000.
Fire losses
A fire in the stationery store at the firm’s head office during the year caused losses of $12 000.
1.20 b)
Trevor & Jan
Appropriation Statement for the Year ended 30 June 2018 $ $
Net profit 59 300
add Charges to partners
Interest on overdrawn current – Jan 700
60 000
less Partners’ entitlements
Salary – Trevor 15 000
– Jan 15 000
Interest on capital – Trevor 4 800
– Jan 3 200 38 000
Profit available for distribution 22 000
Distributed as follows: Trevor (60%) 13 200
Jan (40%) 8 800 22 000
11
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1.20 c)
Trevor & Jan
Statement of Financial Position as at 30 June 2018 $ $ $ $ OWNERS’ EQUITY
Capital – Trevor 60 000
Current – Trevor 48 500 108 500
Capital – Jan 40 000
Current – Jan 8 900 48 900
Total owners’ equity 157 400
This is represented by:
ASSETS
Current assets
Bank 17 528
Petty cash advance 180
Stock of stationery 420
Accounts receivable 35 760
less Allowance for doubtful debts 1 788 33 972
Prepaid expenses 300
Accrued income 700
Stock 33 600
Total current assets 86 700
Non-current assets
Property, plant and equipment
Vehicles – at cost 32 000
less Accumulated depreciation 24 000 8 000
Premises – at valuation 101 700
Total property, plant and equipment 109 700
Intangibles
Goodwill 15 000
Total intangibles 15 000
Other financial assets
Advance to Jan 30 000
Total other financial assets 30 000
Total non-current assets 154 700
Total assets 241 400
less LIABILITIES
Current liabilities
Accounts payable 36 000
GST collected 7 000
less GST paid 4 500 2 500
Prepaid income 500
Total current liabilities 39 000
Non-current liabilities
Loan from Trevor 12 000
Mortgage loan on premises 25 000
Provision for long service leave 8 000
Total non-current liabilities 45 000
Total liabilities 84 000
Net assets 157 400
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1.21
Solution in textbook.
1.22 a)
Raye & Ivan
Appropriation Statement for the Year ended 30 June 2016 $ $
Net profit 143 760
add Charges to partners
Interest on drawings – Raye 150
– Ivan 300 450
144 210
less Partners’ entitlements
Salary – Raye 40 000
– Ivan 40 000
Interest on capital – Raye 12 000
– Ivan 10 000 102 000
Profit available for distribution 42 210
Distributed as follows: Raye (50%) 21 105
Ivan (50%) 21 105 42 210
1.22 b)
Raye & Ivan
General Ledger (extract) Date Particulars Folio Debit Credit Balance
Current – Raye Account
2015 $ $ $
1 Jul Balance 4 000 Dr
2016
1 Jan Bank (Drawings) CPJ 2 000 6 000 Dr
31 Mar Bank (Drawings) CPJ 2 000 8 000 Dr
30 Jun Profit and loss (Int. on loan) GJ 1 680 6 320 Dr
P & L appro. (Int. on draw.) GJ 150 6 470 Dr
P & L appro. (Unpaid salary) GJ 8 000 1 530 Cr
P & L appro. (Int. on cap.) GJ 12 000 13 530 Cr
P & L appro. (Profit share) GJ 21 105 34 635 Cr
1.23
Solution in textbook.
13
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1.24 a)
Luke, Kris & Miles
General Journal Date Particulars Folio Debit Credit
2017 $ $
30 Jun Profit and loss 1 400
Current – Kris 1 400
Interest on loan at 7% p.a. as per Partnership Act.
Profit and loss 38 600
Profit and loss appropriation 38 600
Transfer of Net Profit for the year ended 30 June 2017.
Profit and loss appropriation 22 000
Current – Luke 9 000
Current – Kris 8 000
Current – Miles 5 000
Interest on capitals at 10% p.a. as per Partnership Agreement.
Profit and loss appropriation 32 000
Current – Luke 32 000
Salary entitlement as per Partnership Agreement.
Current – Luke 1 000
Current – Kris 600
Current – Miles 200
Profit and loss appropriation 1 800
Interest on drawings at 5% p.a. as per Partnership Agreement.
Current – Luke 5 440
Current – Kris 5 440
Current – Miles 2 720
Profit and loss appropriation 13 600
Distribution of loss after entitlements and charges, in the ratio
of capital account balances at 30 June 2016.
1.24 b)
Luke, Kris & Miles
General Ledger (extract) Date Particulars Folio Debit Credit Balance
Current – Miles Account
2016 $ $ $
1 Jul Balance 4 000 Dr
2017
30 Jun Drawings GJ 4 000 8 000 Dr
P & L appro. (Int. on cap.) GJ 5 000 3 000 Dr
P & L appro. (Int. on draw.) GJ 200 3 200 Dr
P & L appro. (Loss share) GJ 2 720 5 920 Dr
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1.25 b)
Mitchell & O’Shea
General Journal Date Particulars Folio Debit Credit
2017 $ $
30 Jun Prepaid expenses 200
Advertising 200
Prepaid rates and taxes.
Insurance 100
GST paid 10
Accrued expenses 110
Accrued insurance.
Bad debts 600
GST collected 60
Accounts receivable control 660
Additional bad debt written off.
Depreciation – vehicles 14 720
Accumulated depreciation – vehicles 14 720
Depreciation charged at 20% p.a. using the reducing balance method.
Depreciation – equipment 5 400
Accumulated depreciation – equipment 5 400
Depreciation charged at 10% p.a. using the straight-line method.
Long service leave 10 300
Provision for long service leave 10 300
Accrued long service leave.
Annual leave 1 000
Provision for annual leave 1 000
Accrued annual leave.
Accrued revenue 200
Interest on investments 200
Interest earned but not received.
Doubtful debts 360
Allowance for doubtful debts 360
Increase in allowance for doubtful debts.
Salaries – office 2 000
Accrued expenses 2 000
Accrued office salaries.
Sales 929 270
Purchases returns 1 740
Trading 931 010
Transfer to Trading account.
Trading 567 060
Purchases 454 960
Cartage inwards 7 000
Sales returns 1 100
Stock (1 July 2016) 104 000
Transfer to Trading account.
Stock (30 June 2017) 96 000
Trading 96 000
Stock on hand at 30 June 2017.
Trading 459 950
Profit and loss 459 950
Transfer of Gross Profit.
Discount received 2 840
Interest on investments 600
Profit and loss 3 440
Transfer to Profit and Loss account.
15
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Date Particulars Folio Debit Credit
Profit and loss 329 220
Discount allowed 2 520
Cartage outwards 10 200
Advertising 9 400
Vehicle expenses 22 520
Rates and taxes 2 600
Insurance 1 200
Bad debts 2 400
Salaries – selling 124 000
Salaries – office 52 000
Salaries – delivery 30 000
Office expenses 15 200
Interest on mortgage loan 25 400
Depreciation – vehicles 14 720
Depreciation – equipment 5 400
Long service leave 10 300
Annual leave 1 000
Doubtful debts 360
Transfer to Profit and Loss account.
Current – Mitchell 10 000
Current – O’Shea 12 000
Drawings – Mitchell 10 000
Drawings – O’Shea 12 000
Transfer to Current accounts.
Current – O’Shea 500
Profit and loss 500
Interest on advance at 10% p.a. as per Partnership Agreement.
Profit and loss 1 050
Current – Mitchell 1 050
Interest on loan at 7% p.a. as per Partnership Act.
Profit and loss 133 620
Profit and loss appropriation 133 620
Transfer of Net Profit for the year ended 30 June 2017.
Current – Mitchell 400
Current – O’Shea 480
Profit and loss appropriation 880
Interest on drawings at 8% p.a. as per Partnership Agreement.
Profit and loss appropriation 7 800
Current – Mitchell 4 800
Current – O’Shea 3 000
Interest on capitals at 6% p.a. as per Partnership Agreement.
Profit and loss appropriation 22 000
Salary – Mitchell 15 000
Salary – O’Shea 7 000
Transfer of salaries paid.
Profit and loss appropriation 8 000
Current – Mitchell 5 000
Current – O’Shea 3 000
Unpaid salary entitlement as per Partnership Agreement.
Profit and loss appropriation 96 700
Current – Mitchell 48 350
Current – O’Shea 48 350
Equal distribution of profit after entitlements and charges as per
Partnership Act.
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Mitchell & O’Shea
General Ledger Date Particulars Folio Debit Credit Balance
Bank Account
2017 $ $ $
30 Jun Balance 4 500 Dr
Capital – Mitchell Account
2017
30 Jun Balance 80 000 Cr
Capital – O’Shea Account
2017
30 Jun Balance 50 000 Cr
Current – Mitchell Account
2017
30 Jun Balance 9 150 Cr
Drawings – Mitchell GJ 10 000 850 Dr
Profit and loss (Int. on loan) GJ 1 050 200 Cr
P & L appro. (Int. on draw.) GJ 400 200 Dr
P & L appro. (Int. on cap.) GJ 4 800 4 600 Cr
P & L appro. (Unpaid salary) GJ 5 000 9 600 Cr
P & L appro. (Profit share) GJ 48 350 57 950 Cr
Current – O’Shea Account
2017
30 Jun Balance 5 500 Dr
Drawings – O’Shea GJ 12 000 17 500 Dr
Profit and loss (Int. on adv.) GJ 500 18 000 Dr
P & L appro. (Int. on draw.) GJ 480 18 480 Dr
P & L appro. (Int. on cap.) GJ 3 000 15 480 Dr
P & L appro. (Unpaid salary) GJ 3 000 12 480 Dr
P & L appro. (Profit share) GJ 48 350 35 870 Cr
Sales Account
2017
30 Jun Balance 929 270 Cr
Trading GJ 929 270 Nil
Purchases Account
2017
30 Jun Balance 454 960 Dr
Trading GJ 454 960 Nil
Investments – Best Bonds Account
2017
30 Jun Balance 4 000 Dr
Drawings – Mitchell Account
2017
30 Jun Balance 10 000 Dr
Current – Mitchell GJ 10 000 Nil
Drawings – O’Shea Account
2017
30 Jun Balance 12 000 Dr
Current – O’Shea GJ 12 000 Nil
17
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Salary – Mitchell Account
2017
30 Jun Balance 15 000 Dr
P & L appro. GJ 15 000 Nil
Salary – O’Shea Account
2007
30 Jun Balance 7 000 Dr
P & L appro. GJ 7 000 Nil
Discount Income Account
2017
30 Jun Balance 2 840 Cr
Profit and loss GJ 2 840 Nil
Discount Expense Account
2017
30 Jun Balance 2 520 Dr
Profit and loss GJ 2 520 Nil
Accounts Receivable Control Account
2017
30 Jun Balance 29 600 Dr
Bad debts & GST collected GJ 660 28 940 Dr
Accounts Payable Control Account
2017
30 Jun Balance 21 400 Cr
Cartage Inwards Account
2017
30 Jun Balance 7 000 Dr
Trading GJ 7 000 Nil
Purchases Returns Account
2017
30 Jun Balance 1 740 Cr
Trading GJ 1 740 Nil
Cartage Outwards Account
2017
30 Jun Balance 10 200 Dr
Profit and loss GJ 10 200 Nil
Sales Returns Account
2017
30 Jun Balance 1 100 Dr
Trading GJ 1 100 Nil
Interest on Investments Account
2017
30 Jun Balance 400 Cr
Accrued income GJ 200 600 Cr
Profit and loss GJ 600 Nil
Land and Buildings – at Cost Account
2017
30 Jun Balance 280 000 Dr
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Mortgage Loan on Land and Buildings Account
2017
30 Jun Balance 130 000 Cr
Advance to O’Shea Account
2017
30 Jun Balance 5 000 Dr
Loan from Mitchell Account
2017
30 Jun Balance 15 000 Cr
Advertising Account
2017
30 Jun Balance 9 600 Dr
Prepaid expenses GJ 200 9 400 Dr
Profit and loss GJ 9 400 Nil
Vehicle Expenses Account
2017
30 Jun Balance 22 520 Dr
Profit and loss GJ 22 520 Nil
Rates and Taxes Account
2017
30 Jun Balance 2 600 Dr
Profit and loss GJ 2 600 Nil
Insurance Account
2017
30 Jun Balance 1 100 Dr
Accrued expenses GJ 100 1 200 Dr
Profit and loss GJ 1 200 Nil
Bad Debts Account
2017
30 Jun Balance 1 800 Dr
Accounts receivable control GJ 600 2 400 Dr
Profit and loss GJ 2 400 Nil
Vehicles – at Cost Account
2017
30 Jun Balance 92 000 Dr
Accumulated Depreciation – Vehicles Account
2017
30 Jun Balance 18 400 Cr
Depreciation – vehicles GJ 14 720 33 120 Cr
Salaries – Selling Account
2017
30 Jun Balance 124 000 Dr
Profit and loss GJ 124 000 Nil
Salaries – Office Account
2017
30 Jun Balance 50 000 Dr
Accrued expenses GJ 2 000 52 000 Dr
Profit and loss GJ 52 000 Nil
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Salaries – Delivery Account
2017
30 Jun Balance 30 000 Dr
Profit and loss GJ 30 000 Nil
Office Expenses Account
2017
30 Jun Balance 15 200 Dr
Profit and loss GJ 15 200 Nil
Equipment – at Cost Account
2017
30 Jun Balance 54 000 Dr
Accumulated Depreciation – Equipment Account
2017
30 Jun Balance 21 600 Cr
Depreciation – equipment GJ 5 400 27 000 Cr
Allowance for Doubtful Debts Account
2017
30 Jun Balance 800 Cr
Doubtful debts GJ 360 1 160 Cr
GST Paid Account
2017
30 Jun Balance 150 000 Dr
Accrued expenses GJ 10 150 010 Dr
GST Collected Account
2017
30 Jun Balance 250 000 Cr
Accounts receivable control GJ 60 249 940 Cr
Stock Account
2017
30 Jun Balance (1 July 2016) 104 000 Dr
Trading GJ 104 000 Nil
Trading GJ 96 000 96 000 Dr
Interest on Mortgage Loan Account
2017
30 Jun Balance 25 400 Dr
Profit and loss GJ 25 400 Nil
Prepaid Expenses Account
2017
30 Jun Advertising GJ 200 200 Dr
Accrued Expenses Account
2017
30 Jun Insurance GJ 110 110 Cr
Salaries – office GJ 2 000 2 110 Cr
Depreciation – Vehicles Account
2017
30 Jun Accum. deprec. – vehicles GJ 14 720 14 720 Dr
Profit and loss GJ 14 720 Nil
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Depreciation – Equipment Account
2017
30 Jun Accum. deprec. – equipment GJ 5 400 5 400 Dr
Profit and loss GJ 5 400 Nil
Long Service Leave Account
2017
30 Jun Provision for long service leave GJ 10 300 10 300 Dr
Profit and loss GJ 10 300 Nil
Provision for Long Service Leave Account
2017
30 Jun Long service leave GJ 10 300 10 300 Cr
Annual Leave Account
2017
30 Jun Provision for annual leave GJ 1 000 1 000 Dr
Profit and loss GJ 1 000 Nil
Provision for Annual Leave Account
2017
30 Jun Annual leave GJ 1 000 1 000 Cr
Accrued Income Account
2017
30 Jun Interest on investments GJ 200 200 Dr
Doubtful Debts Account
2017
30 Jun Allowance for doubtful debts GJ 360 360 Dr
Profit and loss GJ 360 Nil
Trading Account
2017
30 Jun Sales GJ 929 270 929 270 Cr
Purchases returns GJ 1 740 931 010 Cr
Purchases GJ 454 960 476 050 Cr
Cartage inwards GJ 7 000 469 050 Cr
Sales returns GJ 1 100 467 950 Cr
Stock (1 July 2016) GJ 104 000 363 950 Cr
Stock (30 June 2017) GJ 96 000 459 950 Cr
Profit and loss GJ 459 950 Nil
Profit and Loss Account
2017
30 Jun Trading GJ 459 950 459 950 Cr
Discount income GJ 2 840 462 790 Cr
Interest on investments GJ 600 463 390 Cr
Discount expense GJ 2 520 460 870 Cr
Cartage outwards GJ 10 200 450 670 Cr
Advertising GJ 9 400 441 270 Cr
Vehicle expenses GJ 22 520 418 750 Cr
Rates and taxes GJ 2 600 416 150 Cr
Insurance GJ 1 200 414 950 Cr
Bad debts GJ 2 400 412 550 Cr
Salaries – selling GJ 124 000 288 550 Cr
Salaries – office GJ 52 000 236 550 Cr
Salaries – delivery GJ 30 000 206 550 Cr
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Office expenses GJ 15 200 191 350 Cr
Interest on mortgage loan GJ 25 400 165 950 Cr
Depreciation – vehicles GJ 14 720 151 230 Cr
Depreciation – equipment GJ 5 400 145 830 Cr
Long service leave GJ 10 300 135 530 Cr
Annual leave GJ 1 000 134 530 Cr
Doubtful debts GJ 360 134 170 Cr
Current – O’Shea GJ 500 134 670 Cr
Current – Mitchell GJ 1 050 133 620 Cr
P & L appro. GJ 133 620 Nil
Profit and Loss Appropriation Account
2017
30 Jun Profit and loss GJ 133 620 133 620 Cr
Sundries (Interest on drawings) GJ 880 134 500 Cr
Sundries (Interest on capitals) GJ 7 800 126 700 Cr
Sundries (Salaries paid) GJ 22 000 104 700 Cr
Sundries (Unpaid salaries) GJ 8 000 96 700 Cr
Sundries (Profit share) GJ 96 700 Nil
c) Mitchell & O’Shea
Statement of Financial Position as at 30 June 2017 $ $ $ $
OWNERS’ EQUITY
Capital – Mitchell 80 000
Current – Mitchell 57 950 137 950
Capital – O’Shea 50 000
Current – O’Shea 35 870 85 870
Total owners’ equity 223 820
This is represented by:
ASSETS
Current assets
Bank 4 500
Accounts receivable 28 940
less Allowance for doubtful debts 1 160 27 780
Stock 96 000
Prepaid expenses 200
Accrued income 200
Total current assets 128 680
Non-current assets
Property, plant and equipment
Land and buildings – at cost 280 000
Vehicles – at cost 92 000
less Accumulated depreciation 33 120 58 880
Equipment – at cost 54 000
Less Accumulated depreciation 27 000 27 000
Total property, plant and equipment 365 880
Investments
Investments – Best Bonds 4 000
Total investments 4 000
Other financial assets
Advance to O’Shea 5 000
Total other financial assets 5 000
Total non-current assets 374 880
Total assets 503 560
less LIABILITIES
Current liabilities
Accounts payable 21 400
GST collected 249 940
22 TAFE Accounting: Financial Accounting Applications Solutions Manual
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less GST paid 150 010 99 930
Accrued expenses 2 110
Provision for annual leave 1 000
Total current liabilities 124 440
Non-current liabilities
Mortgage loan on land and buildings 130 000
Loan from Mitchell 15 000
Provision for long service leave 10 300
Total non-current liabilities 155 300
Total liabilities 279 740
Net assets 223 820
1.26 Reasons for the admission of a new partner (any four):
– Incoming partner’s capital will enable expansion of the business.
– Incoming partner may have special skills.
– A new partner may be admitted to ease the workload of the existing partners.
– Admitting a competitor into the partnership will increase market share.
– Admission of an employee into the partnership will provide career progression.
– Replacement of a retiring partner.
1.27 AASB 3 Business Combinations requires that the assets contributed by the new partner be recorded in the
books of the partnership at fair value. Any difference between the total value of the net assets contributed
by the new partner and the agreed purchase consideration paid by the new partner is treated as goodwill in
the books of the partnership. In subsequent, goodwill should be reduced in value if it can be established
that the future economic benefits arising from goodwill have been impaired in any way.
1.28 When a new partner is admitted to an existing partnership, that partner may:
1) make a personal payment to the existing partners in return for a share in the equity of the
partnership,
2) purchase a share in the equity of the partnership by contributing capital in cash, or
3) purchase a share in the equity of the partnership by contributing capital in the form of assets and
liabilities from an existing business.
1.29
Roger, Wally & Graeme
General Journal Date Particulars Folio Debit Credit
2017 $ $
1 Nov Capital – Roger 30 000
Capital – Wally 15 000
Capital – Graeme 45 000
Admission of Graeme for a one-third equity in the
partnership.
23
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1.30
Pierre, Louise & Marcel
Cash Receipts Journal (simplified) Date Particulars Folio Ref. Sundries GST
collected
Bank
Amount Account
2018 $ $ $ $ $
1 May Marcel 10 000 Capital – Marcel 10 000
1.31
Solution in textbook.
1.32 It is necessary to revalue the assets of an existing partnership prior to the admission of a new partner
because:
1) The existing partners are entitled to reap the benefits of any unrecorded increase in the value of
their business.
2) It would be unfair to an incoming partner if any assets of the existing partnership were over-
valued, and that partner was required to share in any subsequent loss incurred on the disposal of
such assets.
1.33 The Capital Adjustment account is used to record any increases or decreases in the values of assets of an
existing partnership prior to the admission of a new partner, and to transfer the net gain or loss on
revaluation to the existing partners’ Capital accounts.
1.34
Solution in textbook.
1.35 a)
John, Henry & Charles
General Journal Date Particulars Folio Debit Credit
2017 $ $
1 Jan Goodwill 20 000
Capital adjustment 20 000
Creation of goodwill prior to the admission of Charles.
Capital Adjustment 22 000
Stock 8 000
Accum. depreciation – motor vehicles 2 000
Allowance for doubtful debts 12 000
Decreases in asset values prior to the admission of Charles.
Capital – John 1 500
Capital – Henry 500
Capital adjustment 2 000
Loss on revaluation of assets shared in the ratio John 3:Henry 1.
Accounts receivable control 24 000
Stock 34 000
Goodwill 14 000
Allowance for doubtful debts 2 000
Accounts payable control 10 000
Capital – Charles 60 000
Assets and liabilities contributed by Charles at agreed values.
Current – John 10 000
Capital – John 10 000
Current account balance transferred.
24 TAFE Accounting: Financial Accounting Applications Solutions Manual
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Capital – Henry 6 000
Current – Henry 6 000
Current account balance transferred.
Capital – John 8 500
Loan from John 8 500
Transfer of excess capital to loan account, to fix capitals in
agreed ratio.
Cash Receipts Journal (simplified) Date Particulars Folio Ref. Sundries GST
collected
Bank
Amount Account
2017 $ $ $ $ $
1 Jan Charles Deakin 20 000 Capital – Charles
Henry Latrobe 6 500 Capital – Henry 26 500
b)
(Extract from) General Ledger
Date Particulars Folio Debit Credit Balance
Capital Adjustment Account
2017 $ $ $
1 Jan Goodwill GJ 20 000 20 000 Cr
Sundries GJ 22 000 2 000 Dr
Sundries GJ 2 000 Nil
Capital – John Account
2017
1 Jan Balance 80 000 Cr
Capital adjustment GJ 1 500 78 500 Cr
Current – John GJ 10 000 88 500 Cr
Loan from John GJ 8 500 80 000 Cr
Capital – Henry Account
2017
1 Jan Balance 80 000 Cr
Capital adjustment GJ 500 79 500 Cr
Current – Henry GJ 6 000 73 500 Cr
Cash at bank CRJ 6 500 80 000 Cr
Capital – Charles Account
2017
1 Jan Cash at bank CRJ 20 000 20 000 Cr
Sundries GJ 60 000 80 000 Cr
Cash at Bank Account
2017
1 Jan Balance 20 000 Cr
Capital – Charles CRJ 20 000 Nil
Capital – Henry CRJ 6 500 6 500 Dr
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c) John, Henry & Charles
Statement of Financial Position as at 1 January 2017 $ $ $ $
OWNERS’ EQUITY
Capital – John 80 000
Capital – Henry 80 000
Capital – Charles 80 000
Total owners’ equity 240 000
This is represented by:
ASSETS
Current assets
Cash at bank 6 500
Accounts receivable 84 000
less Allowance for doubtful debts 14 000 70 000
Stock 110 000
Total current assets 186 500
Non-current assets
Property, plant and equipment
Freehold land & buildings – at cost 130 000
Motor vehicles – at cost 32 000
less Accumulated depreciation 14 000 18 000
Furniture & fittings – at cost 40 000
less Accumulated depreciation 10 000 30 000
Total property, plant and equipment 178 000
Intangibles
Goodwill 34 000
Total intangibles 34 000
Total non-current assets 212 000
Total assets 398 500
less LIABILITIES
Current liabilities
Accounts payable 47 500
GST collected 6 000
less GST Paid 3 500 2 500
Total current liabilities 50 000
Non-current liabilities
Mortgage loan on land and buildings 100 000
Loan from John 8 500
Total non-current liabilities 108 500
Total liabilities 158 500
Net assets 240 000
1.36
Solution in textbook.
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1.37
Shelley, Norman & Ada
Statement of Financial Position as at 1 November 2017 $ $ $ $
OWNERS’ EQUITY
Capital –Shelley 288 000
Capital – Norman 192 000
Capital – Ada 96 000
Total owners’ equity 576 000
This is represented by:
ASSETS
Current assets
Cash at bank 42 400
Accounts receivable 56 800
less Allowance for doubtful debts 6 400 50 400
Stock 79 200
Total current assets 172 000
Non-current assets
Property, plant and equipment
Premises – at cost 424 000
Equipment – at cost 48 000
less Accumulated depreciation 8 000 40 000
Motor vehicles – at cost 32 000
Total property, plant and equipment 496 000
Intangibles
Goodwill 60 000
Total intangibles 60 000
Total non-current assets 556 000
Total assets 728 000
less LIABILITIES
Current liabilities
Accounts payable 61 800
GST collected 12 000
less GST paid 9 000 3 000
Accrued expenses 7 200
Total current liabilities 72 000
Non-current liabilities
Mortgage loan 80 000
Total non-current liabilities 80 000
Total liabilities 152 000
Net assets 576 000
1.38
Solution in textbook.
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1.39
Ivan, Penny & Marcus
General Ledger Date Particulars Folio Debit Credit Balance
Capital Adjustment Account
2018 $ $ $
1 Feb Sundries (asset increases) GJ 70 000 70 000 Cr
Sundries (asset decreases) GJ 16 000 54 000 Cr
Accounts payable control GJ 24 000 30 000 Cr
Sundries (gain) GJ 30 000 Nil
Capital – Ivan Account
2018
1 Feb Balance 240 000 Cr
Capital adjustment GJ 18 000 258 000 Cr
Current – Ivan GJ 50 000 308 000 Cr
Loan from Ivan GJ 8 000 300 000 Cr
Capital – Penny Account
2018
1 Feb Balance 160 000 Cr
Capital adjustment GJ 12 000 172 000 Cr
Current – Penny GJ 10 000 162 000 Cr
Cash at bank CRJ 38 000 200 000 Cr
Capital – Marcus Account
2018
1 Feb Sundries GJ 200 000 200 000 Cr
1.40
Glenn, Mark, Steve & Luke
General Ledger Date Particulars Folio Debit Credit Balance
Capital Adjustment Account
2017 $ $ $
1 Jul Sundries (asset increases) GJ 30 000 30 000 Cr
Sundries (asset decreases) GJ 10 000 20 000 Cr
Sundries (gain) GJ 20 000 Nil
Capital – Glenn Account
2017
30 Jun Balance 150 000 Cr
1 Jul Capital adjustment GJ 10 000 160 000 Cr
Capital – Mark Account
2017
30 Jun Balance 70 000 Cr
1 Jul Capital adjustment GJ 5 000 75 000 Cr
Cash at bank CRJ 5 000 80 000 Cr
Capital –Steve Account
2017
30 Jun Balance 90 000 Cr
1 Jul Capital adjustment GJ 5 000 95 000 Cr
Loan from Steve GJ 15 000 80 000 Cr
Capital – Luke Account
2017
1 Jul Sundries GJ 84 000 84 000 Cr
Loan from Luke GJ 4 000 80 000 Cr
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1.41
Fitzgibbon, Mullen & Mann
Statement of Financial Position as at 1 December 2016 $ $ $ $
OWNERS’ EQUITY
Capital –Fitzgibbon 156 000
Capital – Mullen 104,000
Capital – Mann 104 000
Total owners’ equity 364 000
This is represented by:
ASSETS
Current assets
Cash at bank 128 000
Accounts receivable 50 000
less Allowance for doubtful debts 1 000 49 000
Stock 86 000
Total current assets 263 000
Non-current assets
Property, plant and equipment
Land and buildings – at cost 110 000
Delivery vehicles – at cost 30 000
less Accumulated depreciation 20 000 10 000
Furniture & equip. – at cost 24 000
less Accumulated depreciation 13 000 11 000
Total property, plant & equipment 131 000
Intangibles
Goodwill 36 000
Total intangibles 36 000
Total non-current assets 167 000
Total assets 430 000
less LIABILITIES
Current liabilities
Accounts payable 57 000
GST collected 7 000
less GST paid 4 000 3 000
Accrued expenses 4 000
Total current liabilities 64 000
Non-current liabilities
Loan from Mullen 2 000
Total non-current liabilities 2 000
Total liabilities 66 000
Net assets 364 000
1.42 Reasons for a general dissolution of partnership (any five):
a) The death of a partner.
b) The retirement of a partner due to age or ill-health.
c) Cessation of the partnership business due to:
– inadequate profitability
– increased competition
– difficulty in hiring employees or acquiring materials
– economic downturn
– cessation of the market for its products or services
– incompatibility of the partners.
– insolvency of one or more partners.
– a change of ownership structure to a company.
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1.43 In a general dissolution, partnership assets must be distributed in the following order:
1. In paying the debts and liabilities of the firm to persons other than the partners.
2. In paying to each partner what is due from the firm for loans provided by the partner in addition to
capital.
3. In paying to each partner what is due from the firm in respect of capital contributed.
4. Any residue is to be distributed to partners in the proportion in which they share profits and losses.
1.44 The general dissolution process involves the following steps:
1. Partnership assets are disposed of.
2. Partnership liabilities are paid.
3. Any cash remaining is distributed to the partners.
1.45 The Realisation account is a special-purpose account that is opened when a partnership is dissolved. The
account is used to record all transactions related to the disposal of partnership assets, and to distribute the
profit or loss arising from the realisation process to partners’ Capital accounts.
1.46
Gary & Leonie
General Journal Date Particulars Folio Debit Credit
2018 $ $
1 Nov Cash at bank 2 000
Cash in registers 2 000
Transfer of balance due to dissolution of partnership.
Realisation 298 000
Accounts receivable control 56 050
Stock 135 950
Shop premises – at cost 60 000
Motor vehicles – at cost 30 000
Shop furniture and equipment – at cost 16 000
Transfer of asset balances to Realisation account.
Allowance for doubtful debts 1 700
Accum. deprec. – motor vehicles 14 000
Accum. deprec. – shop furniture and equipment 8 000
Realisation 23 700
Transfer of account balances to Realisation account.
30 GST collected 50
Realisation 50
GST adjustment – uncollected debts.
GST adjusted – uncollected debts
Realisation 20 850
Capital – Gary 13 900
Capital – Leonie 6 950
Profit on realisation of assets shared between the partners in
the ratio 2:1.
Capital – Gary 6 000
Current – Gary 6 000
Current account balance transferred.
Current – Leonie 4 000
Capital – Leonie 4 000
Current account balance transferred.
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Cash Receipts Journal (simplified) Date Particulars Folio Ref. Sundries GST
collected
Bank
Amount Account
2008 $ $ $ $ $
15 Nov Realisation of assets
Accounts
receivable
55 500 Realisation
Stock 131 000 Realisation 13 100
Shop premises 88 500 Realisation 8 850
Motor vehicles 15 000 Realisation 1 500
Shop furn. & equip. 7 500 Realisation 750 321 700
297 500 24 200 321 700
Cash Payments Journal (simplified) Date Particulars Discount income Accounts
payable
control
Sundries GS
T
paid
Bank
Accounts
payable
control
GST
paid
Discount
income Amount
Account
2018 $ $ $ $ $ $ $
30 Nov Accounts
payable
550 50 500 99 450 99 450
Accrued
expenses
14 000 Accrued expenses 14 000
Realisation
expenses
2 900 Realisation 290 3 190
ATO 25 050 GST collected
(840) GST paid 24 210
Gary 135 900 Capital – Gary 135
900
Leonie 70 950 Capital – Leonie 70 950
550 50 500 99 450 223 750 290 323
490
* GST collected: $ $
Balance in account 1 November 900
GST collected to 15 November (CRJ) 24 200
GST adjustment on accounts receivable collections:
Accounts receivable balance 1 November 56 050
less Realisation proceeds (accounts receivable) 55 500
= Uncollected debts 550
divide by 11 (GST adjustment required) (50)
Final balance of account 25 050
# GST paid: $
Balance in account 1 November 600
GST paid to 30 November (CPJ) 290
GST adjustment on discount received (50)
Final balance of account 840
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General Ledger Date Particulars Folio Debit Credit Balance
Realisation Account
2018 $ $ $
1 Nov Sundries (Assets) GJ 298 000 298 000 Dr
Sundries (Allow. D.D., etc.) GJ 23 700 274 300 Dr
15 Cash at bank (Asset proceeds) CRJ 297 500 23 200 Cr
30 Accounts payable control (Discount
income)
CPJ 500 23 700 Cr
Cash at bank (Realisation exp.) CPJ 2 900 20 800 Cr
GST collected (adjustment) GJ 50 20 850 Cr
Sundries (Profit share) GJ 20 850 Nil
Capital – Gary Account
2018
1 Nov Balance 128 000 Cr
30 Realisation (Profit) GJ 13 900 141 900 Cr
Current – Gary GJ 6 000 135 900 Cr
Cash at bank CPJ 135 900 Nil
Current – Gary Account
2018
1 Nov Balance 6 000 Dr
30 Capital – Gary GJ 6 000 Nil
Capital – Leonie Account
2018
1 Nov Balance 60 000 Cr
30 Realisation (Profit) GJ 6 950 66 950 Cr
Current – Leonie GJ 4 000 70 950 Cr
Cash at bank CPJ 70 950 Nil
Current – Leonie Account
2018
1 Nov Balance 4 000 Cr
30 Capital – Leonie GJ 4 000 Nil
Cash at Bank Account
2018
1 Nov Balance 24 000 Dr
Cash in registers GJ 2 000 26 000 Dr
15 Realisation (Asset proc. + GST) CRJ 321 700 347 700 Dr
30 Accounts payable control CPJ 99 450 248 250 Dr
Accrued expenses CPJ 14 000 234 250 Dr
Realisation expenses + GST CPJ 3 190 231 060 Dr
GST collected CPJ 25 050 206 010 Dr
GST paid CPJ 840 206 850 Dr
Capital – Gary CPJ 135 900 70 950 Dr
Capital – Leonie CPJ 70 950 Nil
GST Collected Account
2018
1 Nov Balance 900 Cr
15 Cash at bank CRJ 24 200 25 100 Cr
30 Realisation GJ 50 25 050 Cr
Cash at bank CPJ 25 050 Nil
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GST Paid Account
2018
1 Nov Balance 600 Dr
30 Cash at bank CPJ 290 890 Dr
Accounts payable control CPJ 50 840 Dr
Cash at bank CPJ 840 Nil
1.47
Solution in textbook.
1.48
Lyndal, Rebecca & Hayden
General Ledger Date Particulars Folio Debit Credit Balance
Accumulated Depreciation – Furniture Account
2007 $ $ $
16 Aug Balance 7 000 Cr
Realisation GJ 7 000 Nil
Accumulated Depreciation – Motor Vehicles Account
2007
16 Aug Balance 6 000 Cr
Realisation GJ 6 000 Nil
Advance – Hayden Account
2007
16 Aug Balance 6 000 Dr
9 Sep Capital – Hayden GJ 6 000 Nil
Accounts Receivable Account
2007
16 Aug Balance 9 040 Dr
Realisation GJ 9 040 Nil
Accounts Payable Account
2007
16 Aug Balance 13 000 Cr
7 Sep Cash at bank CPJ 12 450 550 Cr
Realisation (Disc. rec. + GST)) CPJ 550 Nil
Furniture and Fittings – at cost Account
2007
16 Aug Balance 19 000 Dr
Realisation GJ 19 000 Nil
Allowance for Doubtful Debts Account
2007
16 Aug Balance 500 Cr
Realisation GJ 500 Nil
Loan – Lyndal Account
2007
16 Aug Balance 16 500 Cr
9 Sep Cash at bank CPJ Nil
Stock Account
2017
16 Aug Balance 20 000 Dr
Realisation GJ 20 000 Nil
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Land and Buildings – at cost Account
2017
16 Aug Balance 154 960 Dr
Realisation GJ 154 960 Nil
Mortgage Loan on Land and Buildings Account
2017
16 Aug Balance 103 000 Cr
7 Sep Cash at bank CPJ 103 000 Nil
Capital – Lyndal Account
2017
16 Aug Balance 40 000 Cr
9 Sep Realisation (Loss) GJ 8 980 31 020 Cr
Current – Lyndal GJ 1 500 32 520 Cr
Cash at bank CPJ 32 520 Nil
Current – Lyndal Account
2017
16 Aug Balance 1 500 Cr
9 Sep Capital – Lyndal GJ 1 500 Nil
Capital – Rebecca Account
2017
16 Aug Balance 20 000 Cr
9 Sep Realisation (Loss) GJ 4 490 15 510 Cr
Current – Rebecca GJ 500 16 010 Cr
Cash at bank CPJ 16 010 Nil
Current – Rebecca Account
2017
16 Aug Balance 500 Cr
9 Sep Capital – Rebecca GJ 500 Nil
Capital – Hayden Account
2017
16 Aug Balance 10 000 Cr
9 Sep Realisation (Loss) GJ 4 490 5 510 Cr
Advance – Hayden GJ 6 000 490 Dr
Current – Hayden GJ 8 000 8 490 Dr
Cash at bank CPJ 8 490 Nil
Current – Hayden Account
2017
16 Aug Balance 8 000 Dr
9 Sep Capital – Hayden GJ 8 000 Nil
Cash at Bank Account
2017
16 Aug Balance 36 000 Cr
31 Realisation (Asset proc. + GST) CRJ 233 440 197 440 Dr
7 Sep Accounts payable CPJ 12 450 184 990 Dr
Mortgage loan CPJ 103 000 81 990 Dr
Accrued expenses CPJ 3 700 78 290 Dr
9 Realisation expenses + GST CPJ 1 100 77 190 Dr
Loan – Lyndal CPJ 16 500 60 690 Dr
GST collected CPJ 21 100 39 590 Dr
GST paid CPJ 450 40 040 Dr
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Capital – Lyndal CPJ 32 520 7 520 Dr
Capital – Rebecca CPJ 16 010 8 490 Cr
Capital – Hayden CRJ 8 490 Nil
Goodwill Account
2017
16 Aug Balance 20 000 Dr
Realisation GJ 20 000 Nil
Accrued Expenses Account
2017
16 Aug Balance 3 700 Cr
7 Sep Cash at bank CPJ 3 700 Nil
Motor Vehicles – at cost Account
2017
16 Aug Balance 21 000 Dr
Realisation GJ 21 000 Nil
Realisation Account
2017
16 Aug Sundries (Assets) GJ 244 000 244 000 Dr
Sundries (Accum. deprec., etc.) GJ 13 500 230 500 Dr
31 Cash at bank (Asset proceeds) CRJ 213 000 17 500 Dr
7 Sep Accounts payable control (Disc. inc.) CPJ 500 17 000 Dr
9 Cash at bank (Real. exp. + GST) CPJ 1 000 18 000 Dr
GST collected (Adjustment) GJ 40 17 960 Dr
Sundries (Loss share) GJ 17 960 Nil
GST Collected Account
2017
16 Aug Balance 700 Cr
31 Cash at bank CRJ 20 440 21 140 Cr
7 Sep Realisation GJ 40 21 100 Cr
9 Cash at bank CPJ 21 100 Nil
GST paid Account
2017
16 Aug Balance 400 Dr
7 Sep Accounts payable control CPJ 50 350 Dr
9 Cash at bank CPJ 100 450 Dr
Cash at bank CPJ 450 Nil
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1.49
Cheryl & John
General Journal Date Particulars Folio Debit Credit
2018 $ $
1 Jul Cash at bank 2 000
Cash on hand 2 000
Transfer of balance due to dissolution of partnership.
Realisation 500 400
Accounts receivable control 96 300
Land and buildings – at cost 234 700
Stock 84 100
Motor vehicle – at cost 36 000
Furniture and equipment – at cost 25 300
Goodwill 24 000
Transfer of asset balances to Realisation account.
Allowance for doubtful debts 3 500
Accumulated deprec. – motor vehicle 11 000
Accumulated deprec. – furniture and equip. 19 000
Realisation 33 500
Transfer of account balances to Realisation account.
Accounts payable control 81 500
Accrued expenses 17 300
Mortgage loan on land and buildings 180 000
Loan from Cathcart Finance 41 000
Capital – Cheryl 319 800
Liabilities taken over by Cheryl as per agreement.
Capital – Cheryl 445 900
Realisation 445 900
Assets taken over by Cheryl as per agreement.
Capital – John 29 700
Realisation 27 000
GST collected 2 700
Motor vehicle taken over by John as per agreement.
GST collected 300
Realisation 300
GST adjustment – uncollected debts.
Realisation 6 300
Capital – Cheryl 4 200
Capital – John 2 100
Profit on realisation of assets shared between the partners
in the ratio 2:1.
Loan from Cheryl 50 000
Capital – Cheryl 50 000
Loan balance transferred as per agreement.
Capital – John 70 000
Advance to John 70 000
Advance balance transferred as per agreement.
Current – Cheryl 26 500
Capital – Cheryl 26 500
Current account balance transferred.
Capital – John 8 600
Current – John 8 600
Current account balance transferred.
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Cash Receipts Journal (simplified) Date Particulars Folio Ref. Sundries GST
collected
Bank
Amount Account
2018 $ $ $ $ $
1 Jul John 46 200 Capital – John 46 200
46 200 46 200
Cash Payments Journal (simplified) Date Particulars Discount income Accounts
payable
control
Sundries GST
paid
Bank
Accounts
payable
control
GST
paid
Discount
income Amount
Account
2018 $ $ $ $ $ $ $
1 Jul ATO 4 400 GST collected
(1 000) GST paid 3 400
Cheryl 74 600 Capital – Cheryl 74 600
78 000 78 000
* GST collected: $ $
Balance in account 1 July 2 000
GST collected – motor vehicle 2 700
GST adjustment on debtor collections:
Accounts receivable balance 1 July 96 300
less Realisation proceeds (accounts receivable) 93 000
= Uncollected debts 3 300
x 10% (GST adjustment required) (300)
Final balance of account 4 400
General Ledger Date Particulars Folio Debit Credit Balance
Cash at Bank Account
2018 $ $ $
30 Jun Balance 29 800 Dr
1 Jul Cash on hand GJ 2 000 31 800 Dr
GST collected CPJ 4 400 27 400 Dr
GST paid CPJ 1 000 28 400 Dr
Capital – John CRJ 46 200 74 600 Dr
Capital – Cheryl CPJ 74 600 Nil
Capital – Cheryl Account
2018
30 Jun Balance 120 000 Cr
1 Jul Sundries (Liabilities) GJ 319 800 439 800 Cr
Realisation (Assets + GST) GJ 445 900 6 100 Dr
Realisation (Profit) GJ 4 200 1 900 Dr
Loan from Cheryl GJ 50 000 48 100 Cr
Current – Cheryl GJ 26 500 74 600 Cr
Cash at bank CPJ 74 600 Nil
Current – Cheryl Account
2018
30 Jun Balance 26 500 Cr
1 Jul Capital – Cheryl GJ 26 500 Nil
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Capital – John Account
2018
30 Jun Balance 60 000 Cr
1 Jul Realisation (Motor vehicle + GST) GJ 29 700 30 300 Cr
Realisation (Profit) GJ 2 100 32 400 Cr
Advance to John GJ 70 000 37 600 Dr
Current – John GJ 8 600 46 200 Dr
Cash at bank CRJ 46 200 Nil
Current – John Account
2018
30 Jun Balance 8 600 Dr
1 Jul Capital – John GJ 8 600 Nil
Cash on Hand Account
2018
30 Jun Balance 2 000 Dr
1 Jul Cash at bank GJ 2 000 Nil
Accounts Receivable Control Account
2018
30 Jun Balance 96 300 Dr
1 Jul Realisation GJ 96 300 Nil
Accounts Payable Control Account
2018
30 Jun Balance 81 500 Cr
1 Jul Capital – Cheryl GJ 81 500 Nil
Land and Buildings – at cost Account
2018
30 Jun Balance 234 700 Dr
1 Jul Realisation GJ 234 700 Nil
Allowance for Doubtful Debts Account
2018
30 Jun Balance 3 500 Cr
1 Jul Realisation GJ 3 500 Nil
Stock Account
2018
30 Jun Balance 84 100 Dr
1 Jul Realisation GJ 84 100 Nil
Motor Vehicle – at cost Account
2018
30 Jun Balance 36 000 Dr
1 Jul Realisation GJ 36 000 Nil
Accumulated Depreciation – Motor Vehicle Account
2018
30 Jun Balance 11 000 Cr
1 Jul Realisation GJ 11 000 Nil
Furniture and Equipment – at Cost Account
2018
30 Jun Balance 25 300 Dr
1 Jul Realisation GJ 25 300 Nil
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Accumulated Depreciation – Furniture and Equipment Account
2018
30 Jun Balance 19 000 Cr
1 Jul Realisation GJ 19 000 Nil
Accrued Expenses Account
2018
30 Jun Balance 17 300 Cr
1 Jul Capital – Cheryl GJ 17 300 Nil
GST Collected Account
2018
30 Jun Balance 2 000 Cr
1 Jul Capital – John GJ 2 700 4 700 Cr
Realisation GJ 300 4 400 Cr
Cash at bank CPJ 4 400 Nil
GST Paid Account
2018
30 Jun Balance 1 000 Dr
1 Jul Cash at bank CPJ 1 000 Nil
Mortgage Loan on Land and Buildings Account
2018
30 Jun Balance 180 000 Cr
1 Jul Capital – Cheryl GJ 180 000 Nil
Loan from Cheryl Account
2018
30 Jun Balance 50 000 Cr
1 Jul Capital – Cheryl GJ 50 000 Nil
Goodwill Account
2018
30 Jun Balance 24 000 Dr
1 Jul Realisation GJ 24 000 Nil
Advance to John Account
2018
30 Jun Balance 70 000 Dr
1 Jul Capital – John GJ 70 000 Nil
Loan from Cathcart Finance Account
2018
30 Jun Balance 41 000 Cr
1 Jul Capital – Cheryl GJ 41 000 Nil
Realisation Account
2018
1 Jul Realisation (Assets) GJ 500 400 500 400 Dr
Sundries (Accum. deprec., etc.) GJ 33 500 466 900 Cr
Capital – Cheryl (Assets) GJ 445 900 21 000 Dr
Capital – John (Motor vehicle) GJ 27 000 6 000 Cr
GST collected (Adjustment) GJ 300 6 300 Cr
Sundries (Profit share) GJ 6 300 Nil
1.50 Solution in textbook.
134 TAFE Accounting: Financial Accounting Applications Solutions Manual
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1.51
Janie, Edith & Gilbert
General Ledger Date Particulars Folio Debit Credit Balance
Motor Vehicles – at cost Account
2018 $ $ $
1 Jan Balance 42 000 Dr
Realisation GJ 42 000 Nil
Accumulated Depreciation – Motor Vehicles Account
2018
1 Jan Balance 12 000 Cr
Realisation GJ 12 000 Nil
Accrued Expenses Account
2018
1 Jan Balance 7 300 Cr
8 Cash at bank CPJ 7 300 Nil
Goodwill Account
2018
1 Jan Balance 40 000 Dr
Realisation GJ 40 000 Nil
Cash at Bank Account
2018
1 Jan Balance 72 000 Cr
8 Sundry liabilities CPJ 32 530 104 530 Cr
31 Realisation (Asset sales + GST) CRJ 66 000 38 530 Cr
GST collected CPJ 42 440 80 970 Cr
GST paid CPJ 730 80 240 Cr
Capital – Janie CRJ 67 420 12 820 Cr
Capital – Edith CPJ 5 790 18 610 Cr
Capital – Gilbert CRJ 18 610 Nil
Capital – Janie Account
2018
1 Jan Balance 70 000 Cr
Realisation (Shop prem. + GST) GJ 363 000 293 000 Dr
Mortgage loan GJ 206 000 87 000 Dr
31 Realisation (Loss) GJ 16 420 103 420 Dr
Loan from Janie GJ 33 000 70 420 Dr
Current – Janie GJ 3 000 67 420 Dr
Cash at bank CRJ 67 420 Nil
Capital – Edith Account
2018
1 Jan Balance 35 000 Cr
Realisation (Shop furniture + GST) GJ 22 000 13 000 Cr
31 Realisation (Loss) GJ 8 210 4 790 Cr
Current – Edith GJ 1 000 5 790 Cr
Cash at bank CPJ 5 790 Nil
Capital – Gilbert Account
2018
1 Jan Balance 35 000 Cr
Realisation (Accounts receivable) GJ 17 400 17 600 Cr
31 Realisation (Loss) GJ 8 210 9 390 Cr
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Advance to Gilbert GJ 12 000 2 610 Dr
Current – Gilbert GJ 16 000 18 610 Dr
Cash at bank CRJ 18 610 Nil
Current – Janie Account
2018
1 Jan Balance 3 000 Cr
31 Capital – Janie GJ 3 000 Nil
Current – Edith Account
2018
1 Jan Balance 1 000 Cr
31 Capital – Edith GJ 1 000 Nil
Current – Gilbert Account
2018
1 Jan Balance 16 000 Dr
31 Capital – Gilbert GJ 16 000 Nil
Shop Premises – at cost Account
2018
1 Jan Balance 309 940 Dr
Realisation GJ 309 940 Nil
Mortgage Loan on Shop Premises Account
2018
1 Jan Balance 206 000 Cr
Capital – Janie GJ 206 000 Nil
Stock Account
2018
1 Jan Balance 40 000 Dr
Realisation GJ 40 000 Nil
Loan from Janie Account
2018
1 Jan Balance 33 000 Cr
31 Capital – Janie GJ 33 000 Nil
Accounts Receivable Control Account
2018
1 Jan Balance 18 060 Dr
Realisation GJ 18 060 Nil
Allowance for Doubtful Debts Account
2018
1 Jan Balance 1 000 Cr
Realisation GJ 1 000 Nil
Accounts Payable Control Account
2018
1 Jan Balance 26 000 Cr
8 Cash at bank CPJ 25 230 770 Cr
Realisation (Disc. rec. + GST) CPJ 770 Nil
Furniture and Equipment – at cost Account
2018
1 Jan Balance 38 000 Dr
Realisation GJ 38 000 Nil
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Accumulated Depreciation – Furniture and Equipment Account
2018
1 Jan Balance 14 000 Cr
Realisation GJ 14 000 Nil
Advance to Gilbert Account
2018
1 Jan Balance 12 000 Dr
31 Capital – Gilbert GJ 12 000 Nil
Realisation Account
2008
1 Jan Sundries (Assets) GJ 488 000 488 000 Dr
Sundries (Accum. deprec., etc.) GJ 27 000 461 000 Dr
Capital – Janie (Shop premises) GJ 330 000 131 000 Dr
Capital – Edith (Shop furniture) GJ 20 000 111 000 Dr
Capital – Gilbert (Accounts
receivable)
GJ 17 400 93 600 Dr
8 Accounts payable (Discount) CPJ 700 92 900 Dr
31 Cash at bank (Asset proceeds) CRJ 60 000 32 900 Dr
GST collected (Adjustment) GJ 60 32 840 Dr
Sundries (Loss share) GJ 32 840 Nil
GST Collected Account
2018
1 Jan Balance 1 500 Cr
Capital – Janie (Shop premises) GJ 33 000 34 500 Cr
Capital – Edith (Shop. furn. &
equip.)
GJ 2 000 36 500 Cr
31 Cash at bank CRJ 6 000 42 500 Cr
Realisation GJ 60 42 440 Cr
Cash at bank CPJ 42 440 Nil
GST Paid Account
2018
1 Jan Balance 800 Dr
8 Accounts payable control (Disc.
inc.)
CPJ 70 730 Dr
31 Cash at bank CPJ 730 Nil
Workings – GST adjustment on uncollected debts:
$
Accounts receivable balance 1 January 18 060
less Realisation proceeds (accounts receivable) 17 400
= Uncollected debts 660
÷ 11 (GST adjustment required) = (60)
1.52
Solution in textbook.
137
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1.53
Steven & Justine
General Ledger Date Particulars Folio Debit Credit Balance
Realisation Account
2017 $ $ $
1 Jul Sundries (Assets) GJ 89 600 89 600 Dr
Sundries (Accum. deprec., etc.) GJ 40 800 48 800 Dr
Capital – Steven (Assets) GJ 21 000 27 800 Dr
Capital – Justine (Assets) GJ 15 000 12 800 Dr
Accounts payable (Discount) CPJ 90 12 710 Dr
31 Cash at bank (Asset proceeds*) CRJ 4 400 8 310 Dr
GST collected (Adjustment) GJ 60 8 250 Dr
Sundries (Loss share) GJ 8 250 Nil
Capital – Steven Account
2017
1 Jul Balance 20 000 Cr
Realisation (Assets + GST) GJ 23 100 3 100 Dr
31 Realisation (Loss) GJ 5 500 8 600 Dr
Current – Steven GJ 14 300 5 700 Cr
Cash at bank CPJ 5 700 Nil
Capital – Justine Account
2017
1 Jul Balance 10 000 Cr
Realisation (Assets + GST) GJ 16 500 6 500 Dr
Loan from Glenmark Inv. GJ 7 000 500 Cr
Advance to Justine GJ 11 100 10 600 Dr
31 Realisation (Loss) GJ 2 750 13 350 Dr
Current – Justine GJ 3 200 16 550 Dr
Cash at bank CRJ 16 550 Nil
Cash at Bank Account
2017
1 Jul Balance 9 000 Cr
Cash on hand GJ 100 8 900 Cr
Sundry liabilities CPJ 2 701 11 601 Cr
31 Realisation (Accounts receivable – net) CRJ 4 370 7 231 Cr
GST collected CPJ 3 940 11 171 Cr
GST paid CPJ 321 10 850 Cr
Capital – Steven CPJ 5 700 16 550 Cr
Capital – Justine CRJ 16 550 Nil
GST Collected Account
2017
1 Jul Balance 400 Cr
Capital – Steven GJ 2 100 2 500 Cr
Capital – Justine GJ 1 500 4 000 Cr
31 Realisation # GJ 60 3 940 Cr
Cash at bank CPJ 3 940 Nil
GST Paid Account
2017
1 Jul Balance 300 Dr
Accounts payable control (Discount) CPJ 9 291 Dr
31 Cash at bank (Realisation exp.) CPJ 30 321 Dr
Cash at bank CPJ 321 Nil
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*Net asset proceeds $4 700 – $300 = $4 400.
#GST adjustment on debtor collections:
$
Accounts receivable balance 1 July 5 360
less Realisation proceeds (accounts receivable) 4 700
= Uncollected debts 660
divide by 11 (GST adjustment) = (60)
1.54 When a partnership is dissolved and one partner is insolvent, the Rule in Garner v. Murray states that
where the insolvent partner has a capital deficiency, the other partners should bear that deficiency in the
ratio of their capitals immediately before dissolution.
1.55
Wally, Roger & Ron a) Share of Ron’s capital deficiency: $ %
Ratio of capitals before dissolution:
Wally 50 000 62.5
Roger 30 000 37.5
80 000 100.0
Share of Ron’s deficiency:
Wally (62.5% of $16 000) 10 000
Roger (37.5% of $16 000) 6 000
16 000
b)
General Journal Date Particulars Folio Debit Credit
2018 $ $
30 Jun Capital – Wally 10 000
Capital – Roger 6 000
Capital – Ron 16 000
Transfer of Ron’s capital deficiency.
c)
Final amounts payable:
Wally $ Roger $
Capital balance (after dissolution entries) 42 500 24 000
less Share of Ron’s deficiency 10 000 6 000
= Final amount payable to partners 32 500 18 000
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d)
General Ledger Date Particulars Folio Debit Credit Balance
Capital – Wally Account
2018 $ $ $
30 Jun Balance 42 500 Cr
Capital – Ron GJ 10 000 32 500 Cr
Cash at bank CPJ 32 500 Nil
Capital – Roger Account
2018
30 Jun Balance 24 000 Cr
Capital – Ron GJ 6 000 18 000 Cr
Cash at Bank CPJ 18 000 Nil
Capital – Ron Account
2018
30 Jun Balance 16 000 Dr
Sundries GJ 16 000 Nil
1.56
Solution in textbook.
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Chapter 2: Incomplete or single-entry systems
2.1 Naomi’s Needlework Shop
Date Particulars $ Date Particulars $
Accounts Receivable Control Account (Sales of Needlework Supplies)
2017 2018
1 Jul Balance 47 575 30 Jun Bank ($313 500 + GST) 344 850
2018 Bad debts & GST collected 9 240
30 Jun Sales of needlework
supplies & GST collected*
362 835 Balance 56 320
410 410 410 410
Sales of needlework supplies (excluding GST) = $362 835 x 10/11
= $329 850
Date Particulars $ Date Particulars $
Accounts Receivable Control Account (Alterations Income)
2017 2018
1 Jul Balance 4 400 30 Jun Bank ($31 000 + GST) 34 100
2018
30 Jun Alterations income & GST
collected*
33 000 Balance 3 300
37 400 37 400
Alterations income (excluding GST) = $33 000 x 10/11
= $30 000
2.2
Solution in textbook.
2.3
Asian Gourmet Products Date Particulars $ Date Particulars $
Accounts Payable Control Account (Purchases of Stock)
2018 2017
30 Jun Bank ($14 500 plus GST) 15 950 1 Jul Balance 7 095
2018
Balance 5 665 30 Jun Purchases & GST paid* 14 520
21 615 21 615
Purchases of stock (excluding GST) = $14 520 x 10/11
= $13 200
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Date Particulars $ Date Particulars $
Accounts Payable Control Account (Import Taxes)
2018 2017
30 Jun Bank ($5 500 plus GST) 6 050 1 Jul Balance 550
2018
Balance nil 30 Jun Import taxes & GST paid* 5 500
6 050 6 050
Import taxes (excluding GST) = $5 500 x 10/11
= $5 000
Date Particulars $ Date Particulars $
Accounts Payable Control Account (Telephone)
2018 2017
30 Jun Bank ($12 000 plus GST) 13 200 1 Jul Balance 1 100
2018
Balance 1 320 30 Jun Telephone & GST paid* 13 420
14 520 14 520
Telephone (excluding GST) = $13 420 x 10/11
= $12 200
2.4 a)
Steer Stores Date Particulars $ Date Particulars $
Accounts Receivable Control Account (Sale of Stock)
2017 2018
1 Jul Balance 96 800 30 Jun Bank ($820 000 plus GST) 902 000
2018
30 Jun Sales & GST collected* 909 700 Balance 104 500
1 006 500 1 006 500
Sales of stock (excluding GST) = $909 700 x 10/11
= $827 000
b) Date Particulars $ Date Particulars $
Accounts Payable Control Account (Purchases of Stock)
2018 2017
30 Jun Bank ($541 000 plus GST) 595 100 1 Jul Balance 83 600
2018
Balance 77 000 30 Jun Purchases & GST paid* 588 500
672 100 672 100
Purchases of stock (excluding GST) = $588 500 x 10/11
= $535 000
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c) Date Particulars $ Date Particulars $
Accounts Payable Control Account (Advertising)
2018 2017
30 Jun Bank ($48 000 plus GST) 52 800 1 Jul Balance nil
2018
Balance 550 30 Jun Advertising & GST paid* 53 350
53 350 53 350
Advertising (excluding GST) = $53 350 x 10/11
= $48 500
2.5
Vin Wodeski Date Particulars $ Date Particulars $
Insurance Account
2016 2017
1 Jul Prepaid insurance 500 30 Jun Prepaid insurance 150
2017
30 Jun Bank 2 700 Profit and loss* 3 050
3 200 3 200
Prepaid Insurance Account
2016 2016
1 Jul Balance 500 1 Jul Insurance 500
2017
30 Jun Insurance 150
Insurance expense for year ended 30 June 2017 = $3 050
2.6
Solution in textbook.
2.7 a)
Rayes Mini Mart Date Particulars $ Date Particulars $
Wages Account
2018 2017
30 Jun Bank 460 000 1 Jul Accrued wages 9 000
2018
Accrued wages 10 000 30 Jun Profit and loss* 461 000
470 000 470 000
Accrued Wages Account
2017 2017
1 Jul Wages 9 000 1 Jul Balance 9 000
2018
30 Jun Wages 10 000
Wages expense for year ended 30 June 2018 = $461 000
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b) Date Particulars $ Date Particulars $
Advertising Account
2017 2018
1 Jul Prepaid advertising 1 500 30 Jun Prepaid advertising 1 800
2018
30 Jun Bank 16 000 Profit and loss* 15 700
17 500 17 500
Prepaid Advertising Account
2017 2017
1 Jul Balance 1 500 1 Jul Advertising 1 500
2018
30 Jun Advertising 1 800
Advertising expense for year ended 30 June 2018 = $15 700
c) Date Particulars $ Date Particulars $
Rent Income Account
2018 2017
30 Jun Prepaid rent income 500 1 Jul Prepaid rent income 300
2018
Profit and loss* 8 000 30 Jun Bank 8 200
8 500 8 500
Prepaid Rent Income Account
2017 2017
1 Jul Rent income 300 1 Jul Balance 300
2018
30 Jun Rent income 500
Rent income for year ended 30 June 2018 = $8 000
2.8
Milley Industries
Workings:
Sales of stock Date Particulars $ Date Particulars $
Accounts Receivable Control Account (Sales of Stock)
2017 2018
1 Jul Balance 1 760 30 Jun Bank ($80 750 plus GST) 88 825
2018 Bad debts & GST collected 440
30 Jun Sales & GST collected* 89 705 Balance 2 200
91 465 91 465
Sales (excluding GST) = $89 705 x 10/11
= $81 550
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Purchases of stock Date Particulars $ Date Particulars $
Accounts Payable Control Account (Purchases of Stock)
2018 2017
30 Jun Bank ($38 100 plus GST) 41 910 1 Jul Balance 1 100
2018
Balance 1 430 30 Jun Purchases & GST paid* 42 240
43 340 43 340
Purchases (excluding GST) = $42 240 x 10/11
= $38 400 Advertising expense Date Particulars $ Date Particulars $
Accounts Payable Control Account (Advertising)
2018 2017
30 Jun Bank ($500 plus GST) 550 1 Jul Balance 110
2018
Balance 220 30 Jun Advertising & GST paid* 660
770 770
Purchases (excluding GST) = $660 x 10/11
= $600 Final balances of GST accounts
$
GST collected:
GST owed to ATO (extracted from BAS) 2 215
add GST included in accounts receivable balance at 30 June 2018 200
GST collected for inclusion in statement of financial position 2 415
GST paid:
GST owed by ATO (extracted from BAS) 2 050
add GST included in accounts payable balance at 30 June 2018 150
GST paid for inclusion in statement of financial position 2 200
Cash at bank
$
Bank balance 1 July 2017 1 540
add Receipts for year ended 30 June 2108 88 825
90 365
less Payments for year ended 30 June 2018 76 260
Bank balance 30 June 2018 14 105
Depreciation
$
Motor vehicles ($8 000 x 25%) 2 000
Buildings ($40 000 x 2%) 800
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Accumulated depreciation – motor vehicles
$
Balance 1 July 2017 4 000
Depreciation for year ended 30 June 2018 2 000
Balance 30 June 2018 6 000
Accumulated depreciation – buildings
$
Balance 1 July 2017 10 000
Depreciation for year ended 30 June 2018 800
Balance 30 June 2018 10 800
Loan
$
Balance 1 July 2017 20 000
Less principal repayments during the year ended 30 June 2018 1 800
Balance 30 June 2018 18 200
2.8
a)
Milley Industries
Statement of Comprehensive Income for year ended 30 June 2018 $ $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Sales 81 550
less Cost of sales
Stock, 1 July 2017 3 000
Purchases 37 400
Cost of goods available for sale 40 400
less Stock, 30 June 2018 3 300
Total cost of sales 37 100
Gross profit 41 270
Other income (from ordinary activities) nil
Gains (outside the ordinary activities of the business) nil
Total Income 41 270
less Expenses and losses
Expenses (from ordinary activities)
Wages 6 700
Advertising 600
Interest on loan 200
Bad debts 400
Depreciation – motor vehicles 2 000
Depreciation – buildings 800
Total expenses from ordinary activities 10 700
Losses (outside the ordinary activities of the business) Nil
Total expenses and losses 10 700
Net profit 32 750
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 32 750
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b)
Milley Industries
Statement of Financial Position for year ended 30 June 2018 $ $ $ $
OWNERS’ EQUITY
Capital – A Milley 41 990
Add Comprehensive income 32 750
74 740
less Drawings – A Milley 20 000
Total owner’s equity 54 740
This is represented by:
ASSETS
Current assets
Bank 14 105
Accounts receivable 2 200
Stock 3 300
Total current assets 19 605
Non-current assets
Property, plant and equipment
Motor vehicles – at cost 12 000
less Accumulated depreciation 6 000 6 000
Land and buildings – at cost 60 000
less Accumulated depreciation 10 800 49 200
Total property, plant and equipment 55 200
Total non-current assets 55 200
Total assets 74 805
less LIABILITIES
Current liabilities
Accounts payable 1 650
GST collected 2 415
less GST paid 2 200 215
Total current liabilities 1 865
Non-current liabilities
Loan (due 2026) 18 200
Total non-current liabilities 18 200
Total liabilities 20 065
Net assets 54 740
c)
Milley Industries
General Journal Date Particulars Debit Credit
2018 $ $
1 Jul Bank 14 105
Accounts receivable 2 200
Stock 3 300
Motor vehicles – at cost 12 000
Land and buildings – at cost 60 000
GST paid 2 200
Accumulated depreciation – motor vehicles 6 000
Accumulated depreciation – buildings 10 800
Accounts payable 1 650
GST collected 2 415
Loan 18 200
Capital – A Milley 54 740
To convert accounting system to a double-entry system.
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2.9
Solution in textbook.
2.10
Galvin Products
Workings:
Sales of stock Date Particulars $ Date Particulars $
Accounts Receivable Control Account (Sales of Stock)
2016 2017
1 Jul Balance 1 980 30 Jun Bank ($100 000 + GST) 110 000
2017 Bad debts & GST collected 110
30 Jun Sales & GST collected* 111 100 Balance 2 970
113 080 113 080
Sales (excluding GST) = $111 100 x 10/11
= $101 000
Freight income Date Particulars $ Date Particulars $
Accounts Receivable Control Account (Freight Income)
2016 2017
1 Jul Balance 220 30 Jun Bank ($4 000 + GST) 4 400
2017
30 Jun Sales & GST collected* 4 290 Balance 2 970
4 510 4 510
Freight income (excluding GST) = $4 290 x 10/11
= $3 900
Final balances of GST accounts
GST collected:
GST owed to ATO (extracted from BAS) 2 880
GST collected for inclusion in statement of financial position 2 880
GST paid:
GST owed by ATO (extracted from BAS) 1 100
GST paid for inclusion in statement of financial position 1 100
Wages expense Date Particulars $ Date Particulars $
Wages Account
2017 2016
30 Jun Bank 15 000 1 Jul Accrued wages 200
2017
Accrued wages 250 30 Jun Profit and loss* 15 050
15 250 15 250
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Accrued Wages Account
2016 2016
1 Jul Wages 200 1 Jul Balance 200
2017
30 Jun Wages 250
Wages expense for year ended 30 June 2017 = $15 050
Mortgage loan
$
Balance 1 July 2016 10 000
Less principal repayments during the year ended 30 June 2017 1 000
Balance 30 June 2017 9 000
Depreciation – equipment
$
$15 000 x 10% 1 500
Accumulated depreciation – equipment
$
Balance 1 July 2016 Nil
Depreciation for year ended 30 June 2017 1 500
Balance 30 June 2017 1 500
Bank balance at 30 June 2017
$
Balance 1 July 2016 1 800
add Receipts for year ended 30 June 2017 114 400
116 200
less Payments for year ended 30 June 2017 109 000
Balance 30 June 2017 7 200
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a)
Galvin Products
Statement of Comprehensive Income for year ended 30 June 2017
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
$ $ $
Sales 101 000
less Cost of sales
Stock, 1 July 2016 3 200
Purchases 48 000
Cost of goods available for sale 51 200
less Stock, 30 June 2017 4 000
Total cost of sales 47 200
Gross profit 57 700
Other income (from ordinary activities) Nil
Gains (outside the ordinary activities of the business) Nil
Total income 57 700
less Expenses and losses
Expenses (from ordinary activities)
Wages 15 050
Interest on loan 900
Rates and taxes 1 200
Bad debts 100
Depreciation – equipment 1 500
Total expenses from ordinary activities 18 750
Losses (outside the ordinary activities of the business) Nil
Total expenses and losses 18 750
Net profit 38 950
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 38 950
b)
Galvin Products
Statement of Financial Position as at 30 June 2017 $ $ $ $
OWNERS’ EQUITY
Capital – P Galvin 10 800
add Comprehensive income 38 950
49 750
less Drawings – P Galvin 33 000
Total owner’s equity 16 750
This is represented by:
ASSETS
Current assets
Bank 7 200
Accounts receivable 3 080
Stock 4 000
Total current assets 14 280
Non-current assets
Property, plant and equipment
Equipment – at cost 15 000
less Accumulated depreciation 1 500 13 500
Total property, plant and equipment 13 500
Total non-current assets 13 500
Total assets 27 780
less LIABILITIES
Current liabilities
Accrued wages 250
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GST collected 2 880
less GST paid 1 100 1 780
Total current liabilities 2 230
Non-current liabilities
Mortgage loan (due 2027) 9 000
Total non-current liabilities 9 000
Total liabilities 11 030
Net assets 16 750
c)
Galvin Products
General Journal Date Particulars Debit Credit
2017 $ $
1 Jul Bank 7 200
Accounts receivable 3 080
Stock 4 000
Equipment – at cost 15 000
GST paid 1 100
Accumulated depreciation – equipment 1 500
Accrued wages 250
GST collected 2 880
Mortgage loan 9 000
Capital – P Galvin 16 750
To convert accounting system to double a double-entry system.
2.11
Redline Office Supplies
Workings:
Sales of stock Date Particulars $ Date Particulars $
Accounts Receivable Control Account (Sales of Stock)
2017 2017
1 Jan Balance 8 250 30 Jun Bank ($135 000 + GST) 148 500
Bad debts & GST collected 660
30 Jun Sales and GST collected* 147 180 Balance 6 270
155 430 155 430
Sales (excluding GST) = $147 180 x 10/11
= $133 800
Purchases of stock Date Particulars $ Date Particulars $
Accounts Payable Control Account (Purchases of Stock)
2017 2017
30 Jun Bank ($86 000 + GST) 94 600 1 Jan Balance 5 390
Balance 6 160 30 Jun Purchases & GST paid* 95 370
100 760 100 760
Purchases (excluding GST) = $95 370 x 10/11
= $86 700
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Vehicle expenses Date Particulars $ Date Particulars $
Accounts Payable Control Account (Vehicle Expenses)
2017 2017
30 Jun Bank ($4 000 + GST) 4 400 1 Jan Balance 550
Balance 440 30 Jun Vehicle expenses & GST
paid*
4 290
4 840 4 840
Purchases (excluding GST) = $4 290 x 10/11
= $3 900
Final balances of GST accounts
$
GST collected:
GST owed to ATO (extracted from BAS) 2 820
GST collected for inclusion in statement of financial position 2 415
GST paid:
GST owed by ATO (extracted from BAS) 3 130
add GST included in accrued power and light at 30 June 2018 42
GST paid for inclusion in statement of financial position 3 172
Rent expense Date Particulars $ Date Particulars $
Rent Account
2017 2017
30 Jun Bank 5 300 30 Jun Prepaid rent 200
Profit and loss 5 100
5 300 5 300
Prepaid Rent Account
2017
30 Jun Rent 200
Rent expense for 6 months ending 30 June 2017 = $5 100
Depreciation
$
Equipment ($15 500 x 10% x 6 months) 775
Vehicles ($10 000 x 15% x 6 months) 750
Accumulated Depreciation – equipment
$
Balance 1 Jan 2017 1 500
Depreciation for 6 months ended 30 June 2017 775
Balance 30 June 2017 2 275
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Accumulated Depreciation – vehicles
$
Balance 1 Jan 2017 Nil
Depreciation for 6 months ended 30 June 2017 750
Balance 30 June 2007 750
Bank balance at 30 June 2017
Balance 1 Jan 2017 13 500
add Receipts for 6 months ended 30 June 2017 148 500
162 000
less Payments for 6 months ended 30 June 2017 147 300
Balance 30 June 2017 14 700
a)
Redline Office Supplies
Statement of Comprehensive Income for 6 months ended 30 June 2017
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
$ $ $
Sales 133 800
less Cost of sales
Stock, 1 Jan 2017 15 800
Purchases 86 700
Cost of goods available for sale 102 500
less Stock, 30 June 2017 17 200
Total cost of sales 85 300
Gross profit 48 500
Other income (from ordinary activities) Nil
Gains (outside the ordinary activities of the business) Nil
Total income 48 500
less Expenses and losses
Expenses (from ordinary activities)
Rent 5 100
Wages 18 000
Rates 1 500
Vehicle expenses 3 900
Power and light 4 820
Depreciation – equipment 775
Depreciation – vehicles 750
Bad debts 600
Total expenses from ordinary activities 35 445
Losses (outside the ordinary operations of the business) Nil
Total expenses and losses 35 445
Net profit 13 055
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 13 055
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b)
Redline Office Supplies
Statement of Financial Position as at 30 June 2017 $ $ $ $
OWNERS’ EQUITY
Capital – A Douglas 57 580
add Comprehensive income 13 055
70 635
less Drawings – A Douglas 15 000
Total owner’s equity 55 635
This is represented by:
ASSETS
Current assets
Bank 14 700
Accounts receivable 6 270
Stock 17 200
Prepaid rent 200
GST paid 3 172
less GST collected 2 820 352
Total current assets 38 722
Non-current assets
Property, plant and equipment
Equipment – at cost 17 000
less Accumulated depreciation 2 275 14 725
Vehicles – at cost 10 000
less Accumulated depreciation 750 9 250
Total property, plant and equipment 23 975
Total non-current assets 23 975
Total assets 62 697
less LIABILITIES
Current liabilities
Accounts payable 6 600
Accrued power and light 462
Total current liabilities 7 062
Total liabilities 7 062
Net assets 55 635
2.12
Travis Stores
Workings
Sales of stock Date Particulars $ Date Particulars $
Accounts Receivable Control Account
2017 2018
1 Jul Balance 4 400 30 Jun Bank ($170 000 + GST) 187 000
2018 Bad debts & GST collected 110
30 Jun Sales and GST collected* 188 320 Balance 5 610
192 720 192 720
Credit sales (excluding GST) = $188 320 x 10/11
= $171 200
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Commission income Date Particulars $ Date Particulars $
Commission Income Account
2017 2018
1 Jul Accrued commission income
($880 x 10/11)
800 30 Jun Bank 10 500
2018 Accrued commission
income ($682 x 10/11)
620
30 Jun Profit and loss* 10 320
11 120 11 120
Accrued Commission Income Account
2017 2017
1 Jul Balance 880 1 Jul Commission income & GST
collected
880
2008
30 Jun Accrued commission income
and GST collected
682
Commission income for year ended 30 June 2018 = $10 320
Final balances of GST accounts
$
GST collected:
Amount owed to ATO (extracted from BAS) 4 670
add GST included in accounts receivable at 30 June 2018 ($5 610 ÷ 11) 510
GST included in accrued commission at 30 June 2018 ($682 ÷ 11) 62
GST collected for inclusion in statement of financial position 5 242
GST paid:
Amount owed by ATO (extracted from BAS) 2 700
GST paid for inclusion in statement of financial position 2 700
Wages expense Date Particulars $ Date Particulars $
Wages Account
2018 2017
30 Jun Bank 30 000 1 Jul Accrued wages 398
Accrued wages 500 2018
30 Jun Profit and loss* 30 102
30 500 30 500
Accrued Wages Account
2017 2017
1 Jul Advertising & GST paid 398 1 Jul Balance 398
2018
30 Jun Wages 500
Wages expense for year ended 30 June 2018 = $30 102
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Loan
$
Balance 1 July 2017 40 000
less Principal repayments during the year ended 30 June 2018 3 500
Balance 30 June 2018 36 500
Depreciation
$
Fittings ($26 400 x 15%) 3 960
Buildings ($60 000 x 2%) 1 200
Accumulated depreciation – fittings
$
Balance 1 July 2017 3 600
Depreciation for year ended 30 June 2018 3 960
Balance 30 June 2018 7 560
Accumulated depreciation - buildings
$
Balance 1 July 2017 10 000
Depreciation for year ended 30 June 2018 1 200
Balance 30 June 2018 11 200
Bank balance
$
Balance 1 July 2017 3 980
add Receipts for year ended 30 June 2018 198 550
202 530
Less Payments for year ended 30 June 2018 214 670
Bank overdraft 30 June 2018 12 140
a)
Travis Stores
Statement of Comprehensive Income for the year ended 30 June 2018 $ $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Sales 171 200
less Cost of sales
Stock, 1 June 2017 33 600
Purchases 95 000
Cost of goods available for sale 128 600
less Stock, 30 June 2008 34 000
Total cost of sales 94 600
Gross profit 76 600
Other income (from ordinary activities)
Commission income 10 320
Total other income (from ordinary activities) 10 320
Gains (outside the ordinary operations of the business) Nil
Total income 86 920
less Expenses and losses
Expenses (from ordinary activities)
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Advertising 4 500
Insurance 1 200
Interest 3 500
Wages 30 102
Bad debts 100
Depreciation – fittings 3 960
Depreciation – buildings 1 200
Total expenses (from ordinary activities) 44 562
Losses (outside the ordinary activities of the business) Nil
Total expenses and losses 44 562
Net Profit 42 358
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 42 358
b)
Travis Stores
Statement of Financial Position as at 30 June 2018 $ $ $ $
OWNERS’ EQUITY
Capital – T Beaumont 107 562
add Comprehensive income 42 358
Total owner’s equity 149 920
This is represented by:
ASSETS
Current assets
Accounts receivable 5 610
Stock 34 000
Accrued commission income 682
Total current assets 40 292
Non-current assets
Property, plant and equipment
Fittings – at cost 30 000
less Accumulated depreciation 7 560 22 440
Land and buildings – at cost 90 000
less Accumulated depreciation 11 200 78 800
Total property, plant and equipment 101 240
Investments
Shares in HPL Ltd 60 000
Total investments 60 000
Total non-current assets 161 240
Total assets 201 532
less LIABILITIES
Current liabilities
Bank overdraft 12 140
GST collected 5 242
less GST paid 2 770 2 472
Accrued wages 500 15 112
Total current liabilities
Non-current liabilities
Loan (due 2050) 36 500
Total non-current liabilities 36 500
Total liabilities 51 612
Net assets 149 920
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2.13
Solution in textbook.
2.14
Pina Wallis Workings
Sales of stock Date Particulars $ Date Particulars $
Accounts Receivable Control Account (Sales of Stock)
2017 2017
1 Jan Balance 2 750 30 Jun Bank ($39 000 + GST) 42 900
Bad debts & GST collected 275
30 Jun Sales & GST collected* 43 725 Balance 3 300
46 475 46 475
Sales (excluding GST) = $43 725 x 10/11
= $39 750
Freight income Date Particulars $ Date Particulars $
Accounts Receivable Control Account (Freight Income)
2017 2017
1 Jan Balance 220 30 Jun Bank ($4 500 + GST) 4 950
30 Jun Freight income & GST
collected*
5 060 Balance 330
5 280 5 280
Freight income (excluding GST) = $5 060 x 10/11
= $4 600
Office expenses Date Particulars $ Date Particulars $
Office Expenses Account
2017 2017
30 Jun Bank 1000 30 Jun Profit and loss* 1 030
Accrued office expenses ($33
x 10/11)
30
1 030 1 030
Accrued Office Expenses Account
2017
30 Jun Office expenses & GST
paid
33
Office expenses for the six months ended 30 June 2017 = $1 030
Depreciation – plant and equipment
$
$10 000 x 10% x 6 months 500
$3 000 x 10% x 4 months 100
600
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2.14 2)
Pina Wallis
Statement of Comprehensive Income for six months ended 30 June 2017 $ $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Sales 39 750
less Cost of sales
Stock, 1 Jan 2017 3 500
Purchases 22 500
Cost of goods available for sale 26 000
less Stock, 30 June 2017 4 000
Total cost of sales 22 000
Gross profit 17 750
Other income (from ordinary activities)
Freight income 4 600
Total other income (from ordinary activities) 4 600
Gains (outside the ordinary operations of the business) Nil
Total income 22 350
less Expenses and losses
Expenses (from ordinary activities)
Rates and taxes 750
Depreciation – plant and equipment 600
Discount expense 210
Office expenses 1 030
Total expenses (from ordinary activities) 2 630
Losses (outside the ordinary activities of the business) Nil
Total expenses and losses 2 630
Net profit 19 720
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 19 720
2.15
Gus’s Clothing Shop
Workings
Charge account customer sales Date Particulars $ Date Particulars $
Unpaid Charge Account Customers Control Account
2018 2018
1 Jul Balance 880 31 Jul Bank 1 397
Bad debts & GST collected 55
31 Jul Charge account sales & GST
collected*
1 639 Balance 1 067
2 519 2 519
Charge account sales (excluding GST) = $1 639 x 10/11
= $1 490
Total sales $
Cash sales ($1 320 + $1 595 + $1 353 + $1 650) x 10/11 5 380
Charge account sales 1 490
6 870
Sales returns
$
Cash sales returns ($44 + $22 + $33 + $11) x 10/11 100
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Purchases of stock Date Particulars $ Date Particulars $
Unpaid Supplier Accounts Control Account
2018 2018
31 Jul Bank 3 520 1 Jul Balance 495
Balance 440 31 Purchases & GST paid* 3 465
3 960 3 960
Purchases (excluding GST) = $3 465 x 10/11
= $3 150
Insurance
11/12 of the GST-exclusive amount is prepaid, i.e. ($132 x 10/11) x 11/12 = $110.
Therefore insurance expense for the month of July 2018 is $10.
Advertising
The GST-exclusive amount of cheque 3547 ($80) is a prepaid expense.
Depreciation – furniture and equipment
$
$5 000 x 18% x 1 month 75
2.14 2)
Gus’s Clothing Shop
Statement of Comprehensive Income for month of July 2018 $ $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Sales 6 870
less Sales returns 100 6 770
less Cost of sales
Stock, 1 Jul 2018 6 800
Purchases 3 150
Cost of goods available for sale 9 950
less Stock, 31 Jul 2018 7 000
Total cost of sales 2 950
Gross profit 3 820
Gains (outside the ordinary operations of the business) Nil
Total income 3 820
less Expenses and losses
Expenses (from ordinary activities)
Advertising 90
Bad debts 50
Rent 250
Insurance 10
Wages 750
Depreciation - furniture and equipment 75
Total expenses (from ordinary activities) 1 225
Losses (outside the ordinary activities of the business) Nil
Total expenses and losses 1 225
Net profit 2 595
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 2 595
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Chapter 3: Not-for-profit organisations
3.1 Not-for-profit organisations are clubs and associations that are formed for the benefit of their
members and the community generally, and are not operated for the purpose of generating a profit.
3.2 Not-for-profit organisations are formed for a variety of purposes. They include sporting bodies
(bowling clubs, athletics clubs, etc.) and other common-interest groups (service clubs, field naturalist
clubs, etc.).
3.3 Solution in textbook.
3.4 a) President:
chairperson of meetings, chief representative of the organisation.
b) Secretary:
responsible for detailed administrative matters (minutes of meetings, correspondence, etc.).
c) Treasurer:
maintains financial records, prepares financial reports.
d) Public officer:
represents an incorporated association in its dealings with the Government department
responsible for Incorporated associations (in Victoria this department is Consumer Affairs
Victoria).
3.5 Not-for-profit organisations belong to the community in general and as such are not owned by
individuals.
3.6 Accumulated funds in a not-for-profit organisation is the organisation’s accumulated ‘net worth’.
Accumulated funds change in the following circumstances:
Increase –
1. by the contribution of joining fees from new members of the organisation
2. by the organisation earning a profit on its operations.
Decrease –
1. by the refunding of joining fees to departing members
2. by the organisation incurring a loss on its operations.
3.7 Solution in textbook.
3.8 The members of an unincorporated not-for-profit organisation can be held personally liable for the
debts of the organisation and for any harm caused to others by persons acting on behalf of the
organisation. On the other hand, the members of an incorporated association do not by reason of their
membership alone become liable to contribute towards the payment of the debts and liabilities of the
organisation.
3.9
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a) Joining fees are amounts contributed by members when they first join an organisation. They are
of a non-recurrent nature and are added to Accumulated Funds in the accounting records.
b) Subscriptions are amounts paid annually by members who wish to renew their membership.
Subscriptions are treated as revenue in the accounting records.
3.10 a) A register of members is a record containing the name, address and subscription, and other details
relating to each member of an organisation.
b) A minute book is a record of the proceedings at all meetings of an organisation.
c) A correspondence file is a file containing copies of all inward and outward correspondence for an
organisation, as well as other important documents, such as the constitution and past financial
reports.
3.11 The implications of the New Tax System for not-for-profit organisations:
– Most not-for-profit organisations require an Australian Business Number (ABN).
– Organisations whose annual turnover is $150 000 or more must register for GST.
– Organisations are required to deduct PAYG Withholding from wages and salaries paid to
employees and from payments to suppliers who do not quote an ABN on an invoice.
– The above taxes must be reported by the submission of a periodic Business Activity Statement.
3.12 A cash book is a detailed record of all receipts and payments. It is the principal financial record
maintained by organisations that use a single entry recording system, and is part of the double-entry
accounting system used by other organisations.
3.13 Solution in textbook.
3.14
North Sydney Chess Club
General Ledger Date Particulars Folio Debit Credit Balance
Subscriptions Income Account
2016 $ $ $
1 Jul Prepaid subscriptions income 140 140 Cr
Accrued subscriptions income 310 170 Dr
2017
30 Jun Bank (subscriptions received) 1 940 1 770 Cr
Prepaid subscriptions income 230 1 540 Cr
Accrued subscriptions income 260 1 800 Cr
The final balance in this account ($1 800 Cr) represents subscriptions income for the year ended 30
June 2017.
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3.15
Solution in textbook.
3.16
Mount Adelaide Gun Club
General Ledger Date Particulars Folio Debit Credit Balance
Profit and Loss Account
2018 $ $ $
30 Jun Loss on kiosk 600 600 Dr
Subscriptions income 4 210 3 610 Cr
Donations received 500 4 110 Cr
Profit from fund-raising 1 200 5 310 Cr
Casual wages 2 680 2 630 Cr
Rent of premises 2 600 30 Cr
Insurance 900 870 Dr
Gun hire income 3 700 2 830 Cr
Competition entry fees income 6 300 9 130 Cr
Bank interest 140 8 990 Cr
Honorariums 1 000 7 990 Cr
Administration expenses 860 7 130 Cr
Law suit costs 8 000 870 Dr
Miscellaneous expenses 330 1 200 Dr
The final balance in this account ($1 200 Dr) indicates that the Mount Adelaide Gun Club made a $1
200 operating loss for the year ended 30 June 2018.
3.17
North Sydney Chess Club
Statement of Receipts and Payments for the year ended 30 June 2017 $ $
Bank balance, 1 July 2016 580
add Receipts for year
Subscriptions 1 940
Supper takings 210
Entry fees 740
Bank interest 75
GST collected 289
Donations 200
Joining fees 80 3 534
4 114
less Payments for year
Room rental 480
Refreshments 180
Postage 375
Photocopying 620
Chess sets purchased 800
Advertising 110
Administration expenses 35
GST paid 260
GST remitted to ATO 40 2 900
= Bank balance, 30 June 2017 1 214
3.18 Solution in textbook.
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3.19
Bogong Valley View Workings:
Subscriptions Income Account
2016 $ 2016 $
1 Jul Accrued subs. (reversal) ($330
x 10/11)
300 1 Jul Prepaid subs. (reversal) 180
2017 2017
30 Jun Prepaid subs. 220 30 Jun Bank (subs. received) 8 300
Subscriptions revenue * 8 060 Accrued subs ($110 x 10/11). 100
8 580 8 580
* Balancing item
Accounts Payable Account (Bar Purchases)
2017 2016
30 Jun Bank ($23 000 + GST) 25 300 1 Jul Balance 1 540
2017
Balance 1 760 30 Jun Purchases & GST paid* 25 520
27 060 27 060
* Balancing item
Purchases (excluding GST) = $25 520 x 10/11
= $23 200
Accounts Payable Account (Light and Power)
2017 2016
30 Jun Bank ($380 + GST) 418 1 Jul Balance 220
2017
Balance 330 30 Jun Light & power & GST paid* 528
748 748
* Balancing item
Light and power (excluding GST) = $528 x 10/11
= $480
Bar Trading Account
2017 2017
30 Jun Bar stocks 1.7.16 13 000 30 Jun Bar sales 59 250
Purchases 23 200 Poker machine takings 6 700
Bar wages 12 000 Bar stocks 30.6.17 12 500
Profit * 30 250
78 450 78 450
* Balancing item
Note – it has been assumed that the operation of poker machines was an activity associated with the bar.
Annual Competition Trading Account
2007 2007
30 Jun Prizes 1 000 30 Jun Entry fees 4 000
Advertising 500
Profit * 2 500
4 000 4 000
* Balancing item
Rent (expense) Account
2017 $ 2017 $
30 Jun Bank 8 000 30 Jun Prepaid rent 350
Rent expense * 7 650
8 000 8 000
* Balancing item
* Balancing item
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$
GST collected:
GST owed to ATO (extracted from Business Activity Statement) 2 071
add GST component of accrued subscriptions income at 30 June 2017 ($110 ÷ 11) 10
GST collected for inclusion in statement of financial position 2 081
GST paid:
GST owed by ATO (extracted from Business Activity Statement) 840
add GST component of accounts payable at 30 June 2017 ($2 090 ÷ 11) 190
GST collected for inclusion in statement of financial position 1 030
a)
Bogong Valley View
Statement of Receipts and Payments for the year ended 30 June 2017 $ $
Bank balance, 1 July 2016 13 400
add Receipts for year
Subscriptions 8 300
Bar sales 59 250
Poker machine takings 6 700
Entry fees – annual competition 4 000
GST collected 7 875
Joining fees 500 86 625
100 025
less Payments for year
Bar purchases 23 000
Bar wages 12 000
Rent 8 000
Light and power 380
Annual competition – prizes 1 000
– advertising 500
Investments 20 000
GST paid 3 288
GST remitted to ATO 4 186 72 354
= Bank balance, 30 June 2017 27 671
b)
Bogong Valley View
Statement of Comprehensive Income for the Year ended 30 June 2017 $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Subscriptions revenue 8 060
Bar profit 30 250
Profit from annual competition 2 500
Total revenue (from ordinary activities) 40 810
Gains (outside the ordinary activities of the club) Nil
Total income 40 810
less Expenses and losses
Expenses (from ordinary activities)
Rent 7 650
Light and power 480
Total expenses (from ordinary activities) 8 130
Losses (outside the ordinary activities of the club) Nil
Total expenses and losses 8 130
Net profit 32 680
OTHER COMPREHENSIVE INCOME Nil
Net profit 32 680
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c)
Bogong Valley View
Statement of Financial Position as at 30 June 2017
$ $ $ $
ACCUMULATED FUNDS
Balance, 1 July 2016 19 090
Add Joining fees 500
Comprehensive income 32 680
Total accumulated funds 52 270
This is represented by:
ASSETS
Current assets
Cash at bank 27 671
Bar stocks 12 500
Accrued subscriptions income 110
Prepaid rent 350
Total current assets 40 631
Non-current assets
Investments 20 000
Total non-current assets 20 000
Total assets 60 631
less LIABILITIES
Current liabilities Accounts payable 2 090
Prepaid subscriptions income 220
GST collected 2 081
less GST paid 1 030 1 051
Total current liabilities 3 361
Non-current liabilities
Loan 5 000
Total non-current liabilities 5 000
Total liabilities 8 361
Net assets 52 270
3.20 Solution in textbook.
3.21
Bullseye Rifle Club Workings:
Subscriptions Income Account
2016 $ 2017 $
1 Jul Accrued subs. (reversal) ($22
x 10/11)
20 30 Jun Bank (subs. received) 1 780
2017 Accrued subs. ($66 x 10/11) 60
30 Jun Prepaid subs. 20
Subscriptions revenue * 1 800
1 840 1 840
* Balancing item
Accounts Receivable (Shooting Equipment Sales) Account
2016 $ 2017 $
1 Jul Balance 693 30 Jun Bank ($7 120 + GST) 7 832
2017 Bad debts & GST collected 33
30 Jun Sales + GST collected* 7 964 Balance 792
8 657 8 657
* Balancing item
Sales of shooting equipment (excluding GST) = $7 964 x 10/11
= $7 240
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Shooting Equipment Trading Account
2017 2017
30 Jun Stocks 1.7.16 7 500 30 Jun Sales 7 240
Purchases 6 200 Stocks 30.6.17 7 800
Bad debts 30
Profit * 1 310
15 040 15 040
* Balancing item
Calculation of stock loss – rental equipment:
$
Stock 1.7.16 5 300
+ Purchases 400
5 700
Stock 30.6.17 5 500
= Deficiency (stock loss) for year 200
Equipment Rental Trading Account 2017 2017
30 Jun Stock loss 200 30 Jun Rental receipts 740
Repairs 320
Profit * 220
740 740 * Balancing item
Calculation of cost of trophies used:
$
Trophies on hand 1.7.16 250
+ Purchases 510
760
Trophies on hand 30.6.17 180
= Cost of trophies used 580
Calculation of Depreciation of Furniture:
$2 000 X 12% = $240
Wages Account 2017 $ 2016 $
30 Jun Bank 700 1 Jul Accrued wages (reversal) 41
Accrued wages 50 2017
30 Jun Wages expense * 709
750 750
* Balancing item
Rent of Premises Account
2017 $ 2017 $
Jun 30 Bank 1 400 Jun 30 Prepaid rent 200
Rent expense * 1 200
1 400 1 400
* Balancing item
GST collected:
GST owed to ATO (extracted from Business Activity Statement) 181
add GST component of accrued subscriptions income at 30 June 2017 ($66 ÷ 11) 6
GST component of accounts receivable at 30 June 2017 ($792 ÷ 11) 72
GST collected for inclusion in statement of financial position 259
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GST paid:
GST owed by ATO (extracted from Business Activity Statement) 201
GST collected for inclusion in statement of financial position 201
a)
Bullseye Rifle Club
Statement of Comprehensive Income for the Year ended 30 June 2017 $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Subscriptions income 1 800
Profit on equipment sales 1 310
Profit on equipment rental 220
Interest on investments 210
Total revenue (from ordinary activities) 3 540
Gains (outside the ordinary operations of the club) Nil
Total income 3 540
less Expenses and losses
Expenses (from ordinary activities)
Cost of trophies used 580
Wages 709
Depreciation of furniture 240
Insurance 160
Rent of premises 1 200
Bank charges 10
Total expenses (from ordinary activities) 2 899
Losses (outside the ordinary operations of the club) Nil
Total expenses and losses 2 899
Net profit 641
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 641
b)
Bullseye Rifle Club
Statement of Financial Position as at 30 June 2017 $ $ $ $
ACCUMULATED FUNDS
Balance, 1 July 2016 20 930
Add Joining fees 100
Net profit 641
Total accumulated funds 21 671
This is represented by:
ASSETS
Current assets
Cash at bank 2 501
Stocks – shooting equipment 7 800
Stocks – trophies 180
Accounts receivable 792
Accrued subscriptions income 66
Prepaid rent 200
Total current assets 11 539
Non-current assets
Property, plant and equipment
Rental equipment – at cost 5 500
Furniture – at cost 2 000
less Accumulated
depreciation 240 1 760
Total property, plant & equipment 7 260
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Other financial assets
Investments 8 000
Total other financial assets 8 000
Total non-current assets 15 260
Total assets 26 799
less LIABILITIES
Current liabilities Prepaid subscriptions income 20
Accrued wages 220
GST collected 259
less GST paid 201 58
Total current liabilities 128
Non-current liabilities
Loan 5 000
Total non-current liabilities 5 000
Total liabilities 5 128
Net assets 21 671
3.22
Torquay Bay Sporting Club Workings:
Subscriptions Income Account 2018 $ 2018 $
1 Jul Accrued subs. (reversal) ($550
x 10/11)
500 1 Jul Prepaid subs. (reversal) 350
2019 2019
30 Jun Prepaid subs. 250 30 Jun Bank (subs. received) 13 500
Subscriptions income * 13 700 Accrued subs. ($660 x 10/11) 600
14 450 14 450
* Balancing item
Sporting Goods Trading Account 2019 2019
30 Jun Stock 1.7.18 6 500 30 Jun Sales 93 100
Purchases 54 000 Stock 30.6.19 7 300
Profit * 39 900
100 400 100 400
* Balancing item
GST collected:
GST owed to ATO (extracted from Business Activity Statement) 2 000
add GST component of accrued subscriptions income at 30 Jun 2019 ($660 ÷ 11) 60
GST collected for inclusion in statement of financial position 2 060
GST paid:
GST owed by ATO (extracted from Business Activity Statement) 1 820
GST collected for inclusion in statement of financial position 1 820
Calculation of Depreciation of Plant and Equipment:
$74 000 X 15% = $11 100
Calculation of Accumulated Funds at 1 July 2018:
$ $ $
Assets at 1 July 2018
Accrued subscriptions income 550
Stock of sporting goods 6 500
Cash at bank 1 800
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Plant and equipment (carrying amount) 57 350 66 200
less Liabilities at 1 July 2018
Prepaid subscriptions revenue 350
GST collected 2 700
GST paid (1 800) 900 1 250
= Accumulated Funds at 1 July 2018 64 950
a)
Torquay Bay Sporting Club
Statement of Receipts and Payments for the year ended 30 June 2019 $ $
Bank balance, 1 July 2018 1 800
add Receipts for year
Sales of sporting goods 93 100
Subscriptions 13 500
GST collected 11 060
Joining fees 1 500
Levies 2 500 121 660
123 460
less Payments for year
Purchases of sporting goods 54 000
Repairs and maintenance 3 000
Management expenses 18 000
Affiliation fees 1 200
GST paid 7 620
GST remitted to ATO 4 110
Investment in 5-year bonds 28 000 115 930
= Bank balance, 30 June 2019 7 530
b)
Torquay Bay Sporting Club
Statement of Comprehensive Income for the Year ended 30 June 2019 $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Subscriptions income 13 700
Profit on sales of sporting goods 39 900
Total revenue (from ordinary activities) 53 600
Gains (outside the ordinary activities of the club) Nil
Total income 53 600
less Expenses and losses
Expenses (from ordinary activities)
Depreciation of plant and equipment 11 100
Repairs and maintenance 3 000
Management expenses 18 000
Affiliation fees 1 200
Total expenses (from ordinary activities) 33 300
Losses (outside the ordinary activities of the club) Nil
Total expenses and losses 33 300
Net profit 20 300
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 20 300
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c)
Torquay Bay Sporting Club
Statement of Financial Position as at 30 June 2019
$ $ $ $
ACCUMULATED FUNDS
Balance, 1 July 2018 64 950
Add Joining fees 1 500
Levies 2 500
Comprehensive income 20 300
Total accumulated funds 89 250
This is represented by:
ASSETS
Current assets
Accrued subscriptions income 660
Stock of sporting goods 7 300
Cash at bank 7 530
Total current assets 15 490
Non-current assets
Property, plant and equipment
Plant and equipment
– at cost 74 000
less Accumulated
depreciation 27 750 46 250
Total property, plant and equipment 46 250
Other financial assets
Investments in 5 year
bonds 28 000
Total other financial assets 28 000
Total non-current assets 74 250
Total assets 89 740
less LIABILITIES
Current liabilities Prepaid subscriptions income 250
GST collected 2 060
less GST paid 1 820 240
Total current liabilities 490
Total liabilities 490
Net assets 89 250
3.23
Royal Axedale Golf Club a) Income from Subscriptions:
Subscriptions Income Account 2016 $ 2017 $
1 Jul Accrued subs. (reversal) (10 x
$100)
1 000 30 Jun Bank (subs. received) (140 x
$100)
14 000
2017
30 Jun Prepaid subs. (10 x $100) 1 000
Subscriptions income * 12 000
14 000 14 000
* Balancing item
Note that the above answer could also be obtained by multiplying the total number of members by the
subscription fee per member (excluding GST), i.e. 120 X $100 = $12 000.
171
Copyright © 2011 Cengage Learning Australia Pty Limited
b) Profit from Pro Shop trading:
Pro Shop Accounts Receivable Account 2016 2017
1 Jul Balance 2 120 30 Jun Bank 104 500
2017 Bad debts 220
30 Jun Sales + GST collected * 108 900 Balance 1 800
111 020 111 020
*Balancing item
Sales (excluding GST) = $108 900 x 10/11
= $99 000
Pro Shop Trading Account 2017 2017
30 Jun Stock 1.7.16 5 000 30 Jun Sales 99 000
Purchases 45 000 Stock 30.6.17 5 800
Bad debts 200
Wages of professional 25 000
Profit * 29 600
104 800 104 800
*Balancing item
Profit from pro shop trading $22 800.
c) Overall Net Profit or Net Loss for the year:
$ $
Income for year
Subscriptions income 12 000
Profit from pro shop trading 29 600
Green fees 14 700
Fund raising 1 800
Interest 750 58 850
less Expenses for year
Greenkeeper’s wages 26 800
Sundry administration costs 1 200 28 000
Net profit/Comprehensive income 30 850
3.24 Solution in textbook.
3.25
Image Weight Control Club
Workings:
Subscriptions Income Account 2017 $ 2017 $
1 Jul Accrued subs. (reversal) ($132
x 10/11)
120 1 Jul Prepaid subs. (reversal) 90
2018 2018
30 Jun Subscriptions income * 1 560 30 Jun Bank (subs. received) 1 500
Accrued subs. (3 x $33 x
10/11)
90
1 680 1 680
* Balancing item
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Diet Literature Trading Account 2018 2018
30 Jun Stock 1.7.17 85 30 Jun Sales [$800 + ($11 * 10/11) ] 810
Purchases 430 Stock 30.6.18 70
Profit * 365
880 880
*Balancing item
Accounts Payable (Prizes) Account 2018 $ 2017 $
30 Jun Bank ($1 200 + GST) 1 320 1 Jul Balance 66
Balance 77 2018
30 Jun Purchases + GST paid * 1 331
1 397 1 397
* Balancing item
Cost of Prizes Account 2018 $ 2018 $
30 Jun Stock 1.7.17 350 30 Jun Stock 30.6.18 200
Purchases
(10/11 x $1 331)
1 210
Cost of prizes * 1 360
1 560 1 560
* Balancing item
Rent (expense) Account 2018 $ 2017 $
30 Jun Bank 500 1 Jul Accrued rent (reversal) ($33 x
10/11)
30
2018
30 Jun Rent expense * 470
500 500
* Balancing item
Calculation of depreciation of furniture:
$1 000 X 15% = $150
Image Weight Control Club
Statement of Comprehensive Income for the Year ended 30 June 2018 $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Subscriptions income 1 560
Profit in diet literature 365
Members’ fines 250
Total revenue (from ordinary activities) 2 175
Gains (outside the ordinary operations of the club) Nil
Total income 2 175
less Expenses and losses
Expenses (from ordinary activities)
Cost of prizes 1 360
Rent 470
Depreciation of furniture 150
Repairs 210
Total expenses (from ordinary activities) 2 170
Losses (outside the ordinary operations of the club) Nil
Total expenses and losses 2 170
Net profit 5
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 5
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3.26
Rockers Football Club Workings:
Calculation of Accumulated Funds at 1 January 2017:
$ $
Assets at 1 January 2017 Cash at bank 1 000
Accrued subscriptions income 297
Equipment (carrying amount) 11 000
Bar stock 1 200 13 497
less Liabilities at 1 January 2017
Accounts payable – bar purchases 770
Prepaid subscriptions income 300
GST collected 1 100
GST paid (1 000)
Debentures 5 500 6 670
= Accumulated Funds at 1 January 2007 6 827
Accounts Payable (Bar Purchases) Account 2017 $ 2017 $
31 Dec Bank ($12 000 + GST) 13 200 1 Jan Balance 770
Balance 990 31 Dec Purchases & GST paid* 13 420
14 190 14 190
* Balancing item
Bar purchases (excluding GST) = $13 420 x 10/11
= $12 200
Debenture Interest (expense) Account 2017 $ 2017 $
31 Dec Bank 700 31 Dec P & L (expense) 750
Accrued interest * 50
750 750
* Balancing item
Equipment: Accumulated depreciation of equipment:
$ $
Balance 1.1.17 12 500 Balance 1.1.17 1 500
+ Purchases 7 000 + Depreciation 1 150
+ Balance 31.12.17 19 500 + Balance 31.12.17 2 650
GST collected: $
GST owed to ATO (extracted from Business Activity Statement) 1 219
add GST component of accrued subscriptions income at 30 June 2017 ($176 ÷ 11) 16
GST collected for inclusion in statement of financial position 1 235
GST paid:
GST owed by ATO (extracted from Business Activity Statement) 1 010
add GST component of accounts payable at 30 June 2017 ($990 ÷ 11) 90
GST collected for inclusion in statement of financial position 1 100
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Rockers Football Club
Statement of Financial Position as at 31 December 2017 $ $ $ $
ACCUMULATED FUNDS
Balance, 1 January 2017 6 827
Add Joining fees 400
Comprehensive income 11 900
Total accumulated funds 19 127
This is represented by:
ASSETS
Current assets
Cash at bank 7 366
Accrued subscriptions income 176
Bar stocks 1 500
Total current assets 9 042
Non-current assets
Property, plant and equipment Equipment – at cost 19 500
less Accum. deprec. 2 650
Total property, plant and equipment 16 850
Total non-current assets 16 850
Total assets 25 892
less LIABILITIES
Current liabilities Prepaid subscriptions income 90
Debenture interest accrued 50
GST collected 1 235
less GST paid 1 100 135
Total current liabilities 1 265
Non-current liabilities
Debentures 5 500
Total non-current liabilities 5 500
Total liabilities 6 715
Net assets 19 127
3.27
Riverside Bowling Club Workings:
Subscriptions Income Account 2018 $ 2018 $
1 Jul Accrued subs. (reversal) 110 1 Jul Prepaid subs. (reversal) 150
2019 2019 Bank (subs. received) 6 500
30 Jun Prepaid subs 175 30 Jun
Subscriptions income* 6 505 Accrued subs. 140
6 790 6 790
* Balancing item
Accounts Receivable (Bowling Equipment Sales) Account 2018 $ 2019 $
1 Jul Balance 1 650 30 Jun Bank ($42 350 + GST) 46 585
2019 Balance 2 090
30 Jun Sales + GST collected * 47 025
48 675 48 675
* Balancing item
Bowling equipment sales (excluding GST) = $47 025 x 10/11
= $42 750
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Bowling Equipment Trading Account 2019 2019
30 Jun Stock 1.7.18 4 200 30 Jun Sales 42 750
Purchases 22 000 Stock 30.6.19 4 500
Sales returns 1 150
Profit 19 900
45 400 45 400
*Balancing item
Riverside Bowling Club
Statement of Comprehensive Income for the Year ended 30 June 2019 $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Subscriptions income 6 505
Profit from sales of bowling equipment 19 900
Total revenue (from ordinary activities) 26 405
Income (outside the ordinary activities of the club) Nil
Total income 26 405
less Expenses and losses
Expenses (from ordinary activities)
Repairs and maintenance 2 500
Administration expenses 2 300
Total expenses (from ordinary activities) 4 800
Losses (outside the ordinary activities of the club) Nil
Total expenses and losses 4 800
Net profit 21 605
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 21 605
3.28 Solution in textbook.
3.29
Southend Golf Club
a) Subscriptions income for the year ended 30 June 2018:
Subscriptions Income Account 2017 $ 2017 $
1 Jul Accrued subs. (reversal) 1 650 1 Jul Prepaid subs. (reversal) 210
2018 2018
30 Jun Prepaid subs 300 30 Jun Bank (subs. received) 38 000
Subscriptions income * 37 760 Accrued subs. 1 500
39 710 39 710
* Balancing item
b) Profit from Bar Trading for the year ended 30 June 2018:
Accounts Receivable (Bar Sales) Account 2017 $ 2018 $
1 Jul Balance 440 30 Jun Bank ($108 300 + GST) 119 130
2018
30 Jun Sales + GST collected * 119 350 Balance 660
119 790 119 790
* Balancing item
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Bar sales (excluding GST) = $119 350 x 10/11
= $108 500
Bar Trading Account 2008 2018
30 Jun Stock 1.7.18 3 500 30 Jun Sales 108 500
Purchases 88 500 Gaming machine takings 46 000
Wages 40 000 Stock 30.6.18 3 900
Profit * 26 400
158 400 158 400
*Balancing item
177
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Chapter 4: Primary producers
4.1
A primary producer is a person who engages in a business of primary production. Primary production
involves farming activities and includes the growing of crops through the cultivation of the land and
the breeding of animals for the purpose of selling their bodily produce.
4.2
The three main problems in accounting for primary producers are:
1. primary production is seasonal in nature
2. the nature of the product is continually changing
3. lack of economic date on which to make comparisons.
4.3 Primary producer diary – a chronological record of things such as paddock usage, crop statistics,
weather details, livestock prices and other information considered relevant.
Livestock books – record details of purchases, sales, deaths and natural increase of livestock as well
as numbers killed for consumption on the property.
Shearers’ Tally book – records the number of sheep shorn by each shearer each day.
Wool book – records the number of bales of wool from each shearing, a description of the wool and
its class.
Wages book – records details of wages paid to employees.
4.4
A primary producer maintains the same journals as a wholesale/retail business. The column headings
are tailored to suit individual circumstances. In addition, a primary producer also maintains a Stores
Issues Journal to record issues of stores.
4.5
Agistment – one primary producer provides grazing rights to another in return for a fee.
Natural increase – offspring of livestock.
Rations – livestock killed for consumption by the owner, employees or contractors.
Stores – food, household items and other supplies kept on a primary production property.
Average cost – the method used to value livestock on hand at the end of an accounting period. It is the
weighted average cost of the livestock on hand at the beginning of the period plus purchases and
natural increase during the period.
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4.6 a)
Cruickshank Farm
General Journal Date Particulars Debit Credit
2017 $ $
30 Jun Rations 1 532
Cattle working 1 532
To record 24 cattle killed for rations
Skins and hides 300
Cattle working 300
To record skins and hides recovered from dead cattle
b)
Cruickshank Farm
Cattle Working Account Date Particulars Debit Credit Balance
No. $ No. $ No. $
2017
30 Jun Stock 1/7/16 1 120 78 400 1 120 78 400 Dr
Purchases 440 35 200 1 560 113 600 Dr
Natural increase 320 1 880 113 600 Dr
Sales 640 96 000 1 240 17 600 Dr
Deaths 20 1 220 17 600 Dr
Skins and hides 300 1 220 17 300 Dr
Rations 24 1 532 1 196 15 768 Dr
Missing 6 1 190 15 768 Dr
Stock 30/6/17 1 190 79 957 Nil 60 189 Cr
Profit and loss 60 189 Nil
Stock 30/6/18
No. $
Stock 1/7/17 1 120 78 400
Purchases 440 35 200
Natural increase 320 6 400
1 880 120 000
Average cost = $120 000 divided by 1 880
= $63.8298 per head
Stock 30/6/18 = 1 190 x $63.8298
= $75 957
4.7
Solution in textbook.
179
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4.8 a)
Argus Tuft
General Journal Date Particulars Debit Credit
2017 $ $
30 Jun Wages payable 7 460
Rations 8 360
Drawings 1 980
Growing wheat 20 350
Other operating expenses 4 980
Stores 42 950
GST paid 180
Issues of stores for the year ended 30 June 2017
b)
Argus Tuft
General Ledger
Stores Account Date Particulars Debit Credit Balance
2017 $ $ $
30 Jun Stock - stores 1/7/16 11 950 11 950 Dr
Purchases of stores 42 460 54 590 Dr
Wages payable 7 460 47 130 Dr
Rations 8 360 38 770 Dr
Drawings – A Tuft 1 800 36 970 Dr
Growing wheat 20 350 16 620 Dr
Other operating expenses 4 980 11 640 Dr
Stock - stores 30/6/17 13 740 2 100 Cr
Profit and loss 2 100 Nil
4.9 a)
Barron’s Cattle Station
General Journal Date Particulars Debit Credit
2017 $ $
30 Jun Rations 6 165
Cattle working 6 165
To record cattle killed for rations
Wages payable 6 360
Accounts payable (fencing contractor) 2 120
Drawings - Barron 5 460
Rations 13 740
GST paid 200
To record issues of rations
Skins and hides 1 650
Rations 1 650
To record skins and hides recovered from cattle killed
for rations
Stock – rations 1 800
Rations 1 800
Stock of rations on hand 30/6/17
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b)
Barron’s Cattle Station
General Ledger
Rations Account Date Particulars Debit Credit Balance
2017 $ $ $
30 Jun Stock – rations 1/7/16 1 510 1 510 Dr
Stores 6 200 7 710 Dr
Cattle working 6 165 13 875 Dr
Wages payable 6 360 7 515 Dr
Accounts payable (fencing contractor) 2 120 5 395 Dr
Skins and hides 1 650 3 745 Dr
Drawings - Barron 5 260 1 515 Cr
Stock – rations 30/6/17 1 800 3 315 Cr
Profit and loss 3 315 Nil
4.10
Solution in textbook.
4.11
Julie Adams
General Ledger
Wool Working Account Date Particulars Debit Credit Balance
2018 $ $ $
30 Jun Stock – wool 1/7/17 22 360 22 360 Dr
Shearing costs 19 650 42 010 Dr
Depreciation – shearing equipment 5 200 47 210 Dr
Rations 1 300 48 510 Dr
Stores 800 49 310 Dr
Sales 65 480 16 170 Cr
Freight – wool 3 100 13 070 Dr
Agents fees – sale of wool 5 250 7 820 Dr
Stock – wool 30/6/18 14 500 22 320 Dr
Profit and loss 22 320 Nil
4.12
Goulburn Valley Cattle Grazing
General Ledger
Skins and Hides Account Date Particulars Debit Credit Balance
2017 $ $ $
30 Sep Stock – skins and hides 1/10/16 2 200 2 200 Dr
Rations 1 900 4 100 Dr
Sales – skins and hides 3 250 850 Dr
Agents fees – sales of skins and hides 260 1 110 Dr
Other expenses – sales of skins and hides 350 1 460 Dr
Stock – skins and hides 30/9/17 3 100 1 640 Cr
Profit and loss 1 640 Nil
4.13 Solution in textbook.
181
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4.14
Jenny Wong
Growing Wheat (2016 Crop) Date Particulars Debit Credit Balance
2016 $ $ $
30 Jun Stock – seed 74 600 74 600 Dr
Soil preparation expenses 62 600 137 200 Dr
Stores 94 300 231 500 Dr
Planting costs 68 500 300 000 Dr
2017
30 Jun Harvesting costs 125 000 425 000 Dr
Wheat working 425 000 Nil
Wheat Working Account Date Particulars Debit Credit Balance
2017 $ $ $ 30 Jun Growing wheat – 2016 crop 425 000 425 000 Dr
Delivery expenses 12 000 437 000 Dr
Sales 810 000 373 000 Cr
Stock – seed 78 400 451 400 Cr
Profit and loss 451 400 Nil
4.15 a)
Flashwood Farm
General Ledger
Growing Wheat Account (2017 Crop) Date Particulars Debit Credit Balance
2017 $ $ $
31 Dec Stock – seed 10 200 10 200 Dr
Stores 13 600 23 800 Dr
Soil preparation expenses 3 800 27 600 Dr
Planting expenses 5 100 32 700 Dr
Depreciation- plant 4 200 36 900 Dr
Depreciation – harvester 5 200 42 100 Dr
2018
31 Dec
Wheat working 42 100 Nil
Growing Wheat Account (2018 Crop) Date Particulars Debit Credit Balance
2018 $ $ $
31 Dec
Stock – seed 11 000 11 000 Dr
Stores 14 700 25 700 Dr
Soil preparation expenses 4 100 29 800 Dr
Planting expenses 4 800 34 600 Dr
Depreciation- plant 3 900 38 500 Dr
Depreciation – harvester 4 800 43 300 Dr
b)
Wheat Working Account Date Particulars Debit Credit Balance
2018 $ $ $
31 Dec
Growing wheat (2017 crop) 42 100 42 100 Dr
Stock – seed 11 200 30 900 Dr
Sales – wheat 28 000 2 900 Dr
Profit and loss 2 900 Nil
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4.16
Graham Pemberton
General Ledger
Hay and Chaff Working Account Date Particulars Debit Credit Balance
2017 $ $ $
31 Dec
Stock – hay and chaff 1/1/17 3 600 3 600 Dr
Hay cutting & baling expenses 18 450 22 050 Dr
Depreciation – equipment 6 200 28 250 Dr
Freight and storage of hay 1 600 29 850 Dr
Sales – hay and chaff 22 400 7 450 Dr
Stock – hay and chaff 31/12/17 6 300 1 150 Dr
Profit and loss 1 150 Nil
4.17
Woolly Wilson
General Ledger
Profit and Loss Account Date Particulars Debit Credit Balance
2017 $ $ $
31 Mar Sheep working 14 935 14 935 Dr
Stores 2 880 12 055 Dr
Wool working 69 500 57 916 Cr
Skins and hides 1 010 58 926 Cr
Interest received 480 59 406 Cr
Interest 8 280 51 126 Cr
Rates and taxes 5 210 45 916 Cr
Insurance 8 680 37 236 Cr
Salaries and wages 32 000 5 236 Cr
General farm operating expenses 30 650 25 414 Dr
Vehicle expenses 8 410 33 824 Dr
Depreciation – plant & equipment 7 100 40 924 Dr
Depreciation – motor vehicles 7 978 48 902 Dr
Depreciation – buildings 4 400 53 302 Dr
Capital – W Wilson 53 302 Nil
4.18 a)
J Steer
Statement of Comprehensive Income for year ended 30 June 2017 $ $ $
INCOME
Income
Revenue (from ordinary activities)
Profit from cattle trading 220 600
Stores 2 400
Hay and chaff 25 600
Skins and hides 12 520
Agistment 23 450
Total revenue (from ordinary activities) 284 570
Gains (outside the ordinary activities of the business) Nil
Total income 284 750
less Expenses and losses
Expenses (from ordinary activities)
General working expenses
Rations 500
Wages 48 600
Repairs and maintenance – vehicles 8 200
Repairs and maintenance – general 5 200
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Depreciation – vehicles 12 500
Depreciation – plant and equipment 11 200
Depreciation – fences, gates and grids 2 300
Depreciation – buildings 8 420
General farm expenses 4 000
Total general working expenses 100 920
Administrative expenses
Office expenses 5 600
Rates and taxes 6 100
Total administrative expenses 11 700
Financial expenses
Interest 9 600
Total financial expenses 9 600
Total expenses (from ordinary activities) 122 220
Losses (outside the ordinary activities of the business) Nil
Total expenses and losses 122 220
Net profit 162 350
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 162 350
b)
J Steer
Statement of Financial Position as at 30 June 2017 $ $ $ $
OWNER’S EQUITY
Capital – J Steer 486 560
add Comprehensive income 162 350
648 910
less Drawings – J Steer 20 000
Total owner’s equity 628 910
This is represented by:
ASSETS
Current assets
Cattle on hand 325 000
Hay and chaff on hand 8 420
Stores on hand 3 640
Rations on hand 800
Prepaid expenses 5 600
Accounts receivable 11 250
Total current assets 354 710
Non-current assets
Property, plant and equipment
Land – at cost 520 000
Buildings – at cost 225 000
less Accumulated depreciation 45 600 179 400
Plant and equipment – at cost 83 900
less Accumulated depreciation 28 100 55 800
Motor vehicles – at cost 75 600
less Accumulated depreciation 21 500 54 100
Fences, gates and grids – at cost 45 800
less Accumulated depreciation 29 400 16 400
Total property, plant and equipment 825 700
Total non-current assets 825 700
Total assets 1 180 410
Less LIABILITIES
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Current liabilities
Bank overdraft 88 600
Accounts payable 33 400
GST collected 12 200
less GST paid 9 500 2 700
Accrued expenses 6 800
Total current liabilities 131 500
Non-current liabilities
Loan – Bank of Moula (due 2030) 420 000
Total non-current liabilities 420 000
Total liabilities 551 500
Net assets 628 910
4.19 a)
Ahmed Hussein
General Ledger
Sheep Working Account Date Particulars Debit Credit Balance
No. $ No. $ No. $
2017
31 Mar Sheep on hand 1/4/16 500 12 500 500 12 500 Dr
Purchases – sheep 1 500 45 000 2 000 57 500 Dr
Natural increase 800 2 800 57 500 Dr
Sales – sheep 2 000 20 000 800 37 500 Dr
Agent’s fees –sheep sales 1 000 800 38 500 Dr
Rations 5 108 795 38 392 Dr
Deaths 500 5 000 295 33 392 Dr
Missing 5 290 33 392 Dr
Sheep on hand 31/3/17 290 6 287 Nil 27 105 Dr
Profit and loss 27 105 Nil
Sheep on hand 31/3/17
No. $
Stock 1/4/16 500 12 500
Purchases 1 500 45 000
Natural increase 800 3 200
2 800 60 700
Average cost = $60 700 divided by 2 800
= $21.6786 per head
Stock 31/3/17 = 290 x $21.6786
= $6 287
Rations = 5 x $21.6786
= $108
185
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Cattle Working Account Date Particulars Debit Credit Balance
No. $ No. $ No. $
2017
31 Mar Cattle on hand 1/4/16 200 28 000 200 28 000 Dr
Purchases – cattle 600 87 000 800 115 000 Dr
Natural increase 400 1 200 115 000 Dr
Sales – cattle 1 000 150 000 200 35 000 Cr
Agent’s fees – cattle sales 6 300 200 28 700 Cr
Rations 5 513 195 29 213 Cr
Missing 5 190 29 213 Cr
Cattle on hand 31/3/17 190 19 475 Nil 48 688 Cr
Profit and loss 48 688 Nil
Cattle on hand 31/3/7
No. $
Stock 1/4/66 200 28 000
Purchases 600 87 000
Natural increase 400 8 000
1 200 123 000
Average cost = $123 000 divided by 1 200
= $102.50 per head
Stock 31/3/17 = 190 x $102.50
= $19 475
Rations = 5 x $102.50
= $513
Wool Working Account Date Particulars Debit Credit Balance
2017 $ $ $
31 Mar Wool on hand 1/4/16 5 000 5 000 Dr
Shearing expenses 8 900 13 900 Dr
Rations 124 14 024 Dr
Depreciation – shearing plant and equipment 3 450 17 474 Dr
Sales – wool 22 000 4 526 Cr
Agent’s fees – wool sales 1 200 3 326 Cr
Wool on hand 31/3/17 4 200 7 526 Cr
Profit and loss 7 526 Nil
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b)
Ahmed Hussein
Statement of Comprehensive Income for year ended 31 March 2017 $ $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Profit – cattle 48 688
Profit – wool 7 526
56 214
less Loss - sheep 27 105
Total revenue (from ordinary activities) 29 109
Gains (outside the ordinary activities of the business) Nil
Total income 29 109
less Expenses and losses
Expenses (from ordinary activities)
General working expenses
Agistment 4 000
Power 1 890
Depreciation – plant and equipment 4 800
Depreciation – fences and gates 540
Depreciation – buildings 640
Fuel, oil and lubricants 2 900
Fodder expenses 18 600
General farm operating expenses 4 200
Total general working expense 37 570
Administrative expenses
Accounting fees 1 050
Rates and taxes 3 680
Insurance 2 600
Office expenses 1 600
Total administrative expenses 8 930
Financial expenses
Interest 8 000
Total financial expenses 8 000
Total expenses (from ordinary activities) 54 500
Losses (outside the ordinary activities of the business) Nil
Total expenses and losses 54 500
Net Loss 25 391
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income (loss) (25 391)
c)
Ahmed Hussein
Statement of Financial Position as at 31 March 2017 $ $ $ $
OWNERS’ EQUITY
Capital – A Hussein 133 380
less Comprehensive income (loss) (25 391)
107 989
less Drawings – A Hussein 19 057
Total owner’s equity 88 932
This is represented by:
ASSETS
Current assets
Cattle on hand 19 475
Sheep on hand 6 287
Wool on hand 4 200
187
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GST paid 6 000
less GST collected 5 000 1 000
Total current assets 30 962
Non-current assets
Property, plant and equipment
Shearing plant and equipment – at cost 23 000
less Accumulated depreciation 17 100 5 900
Plant and equipment – at cost 32 000
less Accumulated depreciation 13 000 19 000
Land and buildings – at cost 142 000
less Accumulated depreciation 20 640 121 360
Fences and gates – at cost 18 000
less Accumulated depreciation 13 140 4 860
Total property, plant and equipment 151 120
Total non-current assets 151 120
Total assets 182 082
Less LIABILITIES
Current liabilities
Bank 13 150
Total current liabilities 13 150
Non-current liabilities
Loan – Rural Finances (due 2022) 80 000
Total non-current liabilities 80 000
Total liabilities 93 150
Net assets 88 932
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4.20 a)
Brian Balmer
Growing Wheat (2016 Crop) Account Date Particulars Debit Credit Balance
2016 $ $ $
30 Jun Balance 22 250 Dr
2017
30 Jun Depreciation – plant and equipment 7 200 29 450 Dr
Fertilisers and chemicals 1 116 30 566 Dr
Fuel and lubricants 5 868 36 434 Dr
Crop dusting expenses 8 125 44 559 Dr
Wheat working 44 559 Nil
Growing Wheat (2017 Crop) Account Date Particulars Debit Credit Balance
2017 $ $ $
30 Jun Stock –wheat seed 13 300 13 300 Dr
Depreciation – plant and equipment 4 800 18 100 Dr
Fertilisers and chemicals 2 232 20 332 Dr
Fuels and lubricants 3 912 24 244 Dr
Wheat Working Account Date Particulars Debit Credit Balance
2017 $ $ $
30 Jun Growing wheat (2016 crop) 44 559 44 559 Dr
Stock – wheat seed 14 500 30 059 Dr
Selling expenses – wheat 12 000 42 059 Dr
Sales – wheat 220 000 177 941 Cr
Profit and loss 177 941 Nil
Growing Barley (2016 Crop) Account Date Particulars Debit Credit Balance
2016 $ $ $
30 Jun Balance 14 200 Dr
2017
30 Jun Depreciation – plant and equipment 4 800 19 000 Dr
Fertilisers and chemicals 744 19 744 Dr
Fuel and lubricants 3 912 23 656 Dr
Crop dusting expenses 4 375 28 031 Dr
Barley working 20 031 Nil
Growing Barley (2017 Crop) Account Date Particulars Debit Credit Balance
2017 $ $ $
30 Jun Stock – barley seed 7 900 7 900 Dr
Depreciation – plant and equipment 4 800 12 700 Dr
Fertilisers and chemicals 1 488 14 188 Dr
Fuels and lubricants 2 912 18 100 Dr
Barley Working Account Date Particulars Debit Credit Balance
2017 $ $ $
30 Jun Growing barley (2006 crop) 28 031 28 031 Dr
Stock – barley seed 8 400 19 631 Dr
Selling expenses – barley 8 000 27 631 Dr
Sales – barley 130 000 102 369 Cr
Profit and loss 102 369 Nil
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b)
Brian Balmer
Statement of Comprehensive Income for year ended 30 June 2017 $ $ $
PROFIT AND LOSS
Income
Revenue (from ordinary activities)
Profit – wheat 177 941
Profit – barley 102 369
Total revenue (from ordinary activities) 280 130
Gains (outside the ordinary activities of the business) Nil
Total income 280 130
less Expenses and losses
Expenses (from ordinary activities)
General working expenses
Depreciation – plant and equipment 2 400
Depreciation – buildings 1 250
Depreciation – fences 400
Fuels and lubricants 1 956
Wages 48 000
Superannuation – employees 2 400
General farm operating expenses 12 400
Total general working expenses 68 806
Administrative expenses
Accounting fees 2 100
Insurance 4 600
Office expenses 4 600
Total administrative expenses 11 300
Financial expenses
Interest 2 000
Total financial expenses 2 000
Total expenses (from ordinary activities) 82 106
Losses (outside the ordinary activities of the business) Nil
Total expenses and losses 82 106
Net profit 198 204
OTHER COMPREHENSIVE INCOME Nil
Comprehensive income 198 204
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c)
Brian Balmer
Statement of Financial Position as at 30 June 2017
$ $ $ $
OWNER’S EQUITY
Capital – B Balmer 125 840
add Comprehensive income 198 204
324 044
less Drawings – B Balmer 38 000
Total owner’s equity 286 044
This is represented by:
ASSETS
Current assets
Bank 20 650
Accounts receivable 14 200
Stock – fuel and lubricants 2 100
Stock – fertiliser and chemicals 1 600
Stock – wheat seed 3 600
Stock – barley seed 1 700
Growing wheat (2017 crop) 24 244
Growing barley (2017 crop) 18 100
Total current assets 86 194
Non-current assets
Property, plant and equipment
Land – at cost 100 000
Plant and equipment – at cost 240 000
less Accumulated depreciation 54 000 186 000
Buildings – at cost 25 000
less Accumulated depreciation 17 750 7 250
Fences – at cost 12 400
less Accumulated depreciation 8 800 3 600
Total property, plant and equipment 296 850
Total non-current assets 296 850
Total assets 383 044
less LIABILITIES
Current liabilities
Accounts payable 64 800
GST collected 13 700
less GST paid 1 500 12 200
Total current liabilities 77 000
Non-current liabilities
Loan – Megabucks Finance Company (due 2035) 20 000
Total non-current liabilities 20 000
Total liabilities 97 000
Net assets 286 044
4.21
Solution in textbook.
191
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Chapter 5: Statement of cash flows
5.1
ITEM CLASSIFICATION
(a) Cash sales Operating activity
(b) Payment of damages in a major law suit Operating activity
(c) Dividends received from investments Operating activity
(d) Purchase of investments Investing activity
(e) Sale of property, plant and equipment Investing activity
(f) Purchase of property, plant and equipment Investing activity
(g) Receipts from customers Operating activity
(h) Payments to suppliers Operating activity
(i) Increase in mortgage loan Financing activity
(j) Repayment of borrowings Financing activity
(k) Additional capital contributed Financing activity
(l) Interest paid Operating activity
(m) Rent paid Operating activity
(n) Wages paid Operating activity
(o) Interest received Investing activity
(p) Sale of investments Investing activity
(q) Loans given to employees Investing activity
5.2 Workings:
Bank Loans Account 2016 $ 2016 $
1 Aug Cash at bank * 5 000 1 Jul Balance 15 000
2017 2017
30 Jun Balance 20 000 1 Jun Cash at bank # 10 000
25 000 25 000
* Cash flow to repay loan: $5 000.
# Cash flow from acquisition of new loan: $10 000.
Capital – Antoinette Account $ 2016 $
1 Jul Balance 120 000
2017
2017 30 Jun Net profit 10 000
30 Jun
Balance 180 000 Cash at bank * 50 000
180 000 180 000
* Cash flow from additional capital contribution.
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Payments to suppliers and employees:
$
Cost of sales 420 000
Advertising 35 000
Rates 20 000
Motor vehicle expenses 18 400
Wages 200 000
Total 693 400
Antoinette Industries
Statement of Cash Flows for the year ended 30 June 2017 $ $
Cash flows from operating activities Receipts from customers 700 000
Payments to suppliers and employees (693 400)
Cash generated from operations 6 600
Interest paid (6 600)
Net cash from operating activities Nil
Cash flows from investing activities Interest received 10 000
Payment for purchase of property, plant and equipment (40 000)
Net cash used in investing activities (30 000)
Cash flows from financing activities Proceeds from capital contributions 50 000
Proceeds from borrowings 10 000
Repayment of borrowings * (7 000)
Net cash from financing activities 53 000
Net increase in cash held 23 000
Cash at 1 July 2016 10 000
Cash at 30 June 2017 33 000
* Repayment of borrowings consists of: $ $
Repayment of bank loan 5 000
Repayment of Loan from David Ltd 2 000 7 000
Notes to the statement of cash flows
1. Cash and cash equivalents
Cash and cash equivalents included in the statement of cash flows comprises the following amounts in
the statement of financial position:
30 June 2016 30 June 2017
Cash at bank $10 000 $33 000
2. Reconciliation of net cash from operating activities to profit or loss $
Profit 10 000
Adjustments for:
Investment income
Interest income 10 000
Net cash from operating activities Nil
5.3 Solution in textbook.
193
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5.4 Ledger account reconstructions:
Accounts Payable Control Account
2019 $ 2018 $
30 Jun Discount income & GST paid 1 000 1 Jul Balance 13 200
Cash at bank * 510 400 2019
Balance
16 500
30 Jun Purchases & GST paid ($468
000 + GST)
514 800
528 000 528 000
Payment to accounts payable (excluding GST) = $510 400 x 10/11
= $464 000
Wages Expense Account 2019 2018
30 Jun Cash at bank * 111 500 1 Jul Accrued wages (reversal) 4 000
Accrued wages 2 500 2019
30 Jun Profit & loss (expense) 170 000
174 000 174 000
Advertising Account 2018 2019
1 Jul Prepaid advertising (reversal) 2 000 30 Jun Prepaid advertising 2 400
2019
30 Jun Cash at bank * 30 400 Profit & loss (expense) 30 000
32 400 32 400
Provision for Long Service Leave Account 2019 $ 2018 $
30 Jun Cash at bank * 6 000 1 Jul Balance 42 000
2019
Balance 50 000 30 Jun Long service leave expense 14 000
56 000 56 000
Capital – Tim Robinson Account 2019 $ 2018 $
30 Jun Drawings 43 000 1 Jul Balance 1 275 000
2019
Balance 1 532 000 30 Jun Cash at bank* 84 000
P & L (net profit) 216 000
1 575 000 1 575 000
Payments to suppliers and employees:
$
Payments to accounts payable 464 000
Wages 171 500
Advertising 30 400
Long service leave paid 6 000
Rent 5 000
676 900
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Tim’s Garden Supplies
Statement of Cash Flows for the year ended 30 June 2019 $ $
Cash flows from operating activities Receipts from customers 900 000
Payments to suppliers and employees (676 900)
Cash from operations 223 100
Interest paid (6 000)
Net GST paid (200)
Net cash from operating activities 216 900
Cash flows from investing activities Interest received 10 000
Payment for purchase of property, plant and equipment (200 000)
Net cash used in investing activities (190 000)
Cash flows from financing activities Proceeds from capital contributions 84 000
Owner’s drawings (43 000)
Net cash from financing activities 41 000
Net increase in cash held 67 900
Cash at 1 July 2018 (overdraft) (96 800)
Cash at 30 June 2019 (overdraft) (28 900)
Notes to the statement of cash flows 1. Cash and cash equivalents
Cash and cash equivalents included in the statement of cash flows comprises the following amounts in
the statement of financial position: 30 June 2018 30 June 2019
Bank overdraft $96 800 $28 900
2. Reconciliation of net cash from operating activities to profit or loss $
Profit 216 000
Adjustments for:
Investment income
Interest income (10 000)
add/(subtract) Movements in current assets and current liabilities
Increase in prepaid advertising (400)
Decrease in stock 2 000
Increase in creditors 3 300
Decrease in accrued wages (1 500)
Increase in GST collected 2 500
Increase in GST paid (3 000)
Increase in provision for annual leave 8 000
Net cash from operating activities 216 900
5.5 Solution in textbook.
195
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5.6
Item
Activity Reconciliation
Operating Investing Financing Adjustments Movement
in current
assets and
current
liabilities
1 Cash sales X
2 Interest paid X
3 New capital contribution X
4 Borrowings repaid X
5 Increase in accounts receivable X
6 Net GST paid X
7 Annual leave paid X
8 Increase in GST collected X
9 Dividends received X
10 Doubtful debts expense X
11 Purchase of equipment X
12 Depreciation expense X
13 Increase in borrowings X
14 Decrease in accounts payable X
15 Increase in accrued expenses X
16 Wages paid X
17 Net GST refunded X
18 Increase in inventory X
19 Receipts from debtors X
20 Interest received X X
21 Bank loan received X
22 Loan given to employee X
23 Decrease in GST paid X
24 Proceeds from asset sale X
25 Profit on asset sale X
26 Owner’s drawings X
27 Advertising paid X
5.7 Ledger account reconstructions:
Accounts Receivable Control Account 2017 $ 2018 $
1 Jul Balance 30 800 30 Jun Cash at bank * 369 600
2018 Bad debts & GST collected
($4 000 + GST)
4 400
30 Jun Fees income & GST
collected ($385 000 + GST)
385 000 Balance
41 800
415 800 415 800
Receipts from customers (excluding GST) = $369 600 x 10/11
= $336 000
Equipment – at Cost Account 2017 2018
1 Jul Balance 150 000 30 Jun Sale of assets * 110 000
2018
1 Feb Purchase of equipment 160 000 Balance 200 000
310 000 310 000
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Accumulated Depreciation - Equipment Account 2018 $ 2017 $
30 Jun Sale of assets * 5 000 1 Jul Balance 60 000
Balance 75 000 2018
30 Jun Depreciation – equip. 20 000
80 000 80 000
Sale of Assets Account 2018 $ 2018 $
30 Jun Equipment 110 000 30 Jun Accum. dep. – equip. 5 000
Loss on sale 48 000
Cash at bank * 57 000
110 000 110 000
Loan from Gould & Co Account 2017 $ 2017 $
1 Dec Cash at bank 30 000 1 Jul Balance 100 000
2018 2018
30 Jun Balance 140 000 30 Jun Cash at bank * 70 000
170 000 170 000
Capital – Peter Richardson Account 2017 $ 2017 $
31 Dec Cash at bank (drawings) 40 000 1 Jul Balance 500 000
2018 2018
30 Jun Profit & loss (loss) 40 000 Feb 12 Cash at bank * 140 000
Balance 560 000
640 000 640 000
Payments to suppliers and employees:
$
Wages 296 000
Rent 15 000
311 000
The statement of cash flows can now be prepared as follows:
Richo’s Landscaping Services
Statement of Cash Flows for the year ended 30 June 2018 $ $
Cash flows from operating activities Receipts from customers 336 000
Payments to suppliers and employees (311 000)
Cash from operations 25 000
Interest paid (5 000)
Net GST paid (2 000)
Net cash from operating activities 18 000
Cash flows from investing activities Payment for purchase of property, plant and equipment (160 000)
Proceeds from disposal of property, plant and equipment 57 000
Payment for purchase of investment in shares (50 000)
Net cash used in investing activities (153 000)
Cash flows from financing activities Proceeds from capital contribution 140 000
Owner’s drawings (40 000)
Repayment of borrowings (30 000)
Proceeds from borrowings 70 000
Net cash from financing activities 140 000
Net increase in cash held 5 000
Cash at 1 July 2017 88 200
Cash at 30 June 2018 93 200
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Notes to the statement of cash flows
1. Cash and cash equivalents
Cash and cash equivalents included in the statement of cash flows comprises the following amounts in
the statement of financial position: 30 June 2017 30 June 2018
Cash at bank 58 200 48 200
Deposits at call 30 000 45 000
$88 200 $93 200
2. Reconciliation of net cash from operating activities profit or loss: $
Loss (40 000)
Adjustments for:
Loss on sale of equipment 48 000
Doubtful debts 2 000
Depreciation of equipment 20 000
30 000
add/(subtract) Movements in current assets and current liabilities
Increase in accounts receivable (11 000)
Increase in GST collected 2 000
Increase in GST paid (3 000)
Net cash from operating activities 18 000
5.8 Solution in textbook.
5.9
Hoskins & Andrea
Ledger account reconstructions:
Accounts Receivable Control Account 2017 $ 2018 $
1 Jul Balance 35 530 30 Jun Cash at bank * 316 030
2018
30 Jun Sales & GST collected
($290 000 + GST)
319 000 Balance 38 500
354 430 354 430
Receipts from customers (excluding GST) = $316 030 x 10/11
= $287 300
Wages Account 2017 $ 2018 $
1 Jul Prepaid wages 200 30 Jun Prepaid wages 400
2018 P & L (wages expense) 86 000
30 Jun Cash at bank* 86 200
86 400 86 400
Provision for Annual Leave Account 2018 $ 2017 $
30 Jun Cash at bank* 24 000 1 Jul Balance 60 000
Balance 42 000 2018
30 Jun Annual leave expense 6 000
66 000 66 000
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Loan from Boucher Finance Account 2017 $ 2017 $
15 Aug Cash at bank 10 000 1 Jul Balance 50 000
2018 2018
30 Jun Balance 55 000 31 May Cash at bank * 15 000
65 000 65 000
Payments to suppliers and employees: $
Purchases 91 000
Wages 86 200
Annual leave 24 000
201 200
The statement of cash flows can now be prepared as follows:
Hoskins & Andrea
Statement of Cash Flows for the year ended 30 June 2008 $ $
Cash flows from operating activities Receipts from customers 287 300
Payments to suppliers and employees (201 200)
Cash from operations 86 100
Interest paid (4 000)
Net GST paid (170)
Net cash from operating activities 81 930
Cash flows from financing activities Proceeds from capital contribution 20 000
Partners’ drawings (45 200)
Partners’ salaries paid (20 000)
Repayment of borrowings (10 000)
Proceeds from borrowings 15 000
Net cash used in financing activities (40 200)
Net increase in cash held 41 730
Cash at 1 July 2017 (15 725)
Cash at 30 June 2018 26 005
Notes to the statement of cash flows
1. Cash and cash equivalents
Cash and cash equivalents included in the statement of cash flows comprises the following amounts in
the statement of financial position: 30 June 2017 30 June 2018 Bank overdraft (15 725)
Cash at bank 26 005
($15 725) $26 005
2. Reconciliation of net cash from operating activities to profit or loss $
Profit 80 000
Adjustments for:
Interest on loan to Hoskins (1 000)
Depreciation on vehicles 25 000
add/(subtract) Movements in current assets and current liabilities
Increase in stock (1 000)
Increase in debtors (2 970)
Increase in prepaid wages (200)
Decrease in provision for annual leave (18 000)
Increase in GST collected 1 100
Increase in GST paid (1 000)
Net cash from operating activities 81 930
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5.10 Solution in textbook.
5.11
Ballarat Aces Athletics Club Calculation of net GST paid for the year:
$ $
GST collected in cash 710
less GST paid in cash:
Input tax credits 495
Remitted to ATO 106 601
= Net GST received for the year 109
Payments to suppliers and employees: $
Barbecues – purchases of food/liquor 3 400
– liquor licence 125
– advertising 75
Annual carnival – trophies 300
– refreshments 120
– printing/stationery 30
Rent of premises 500
Equipment repairs 250
Affiliation fees 150
Travelling subsidies 1 800
6 750
Receipts from customers:
$ Barbecues – sales of food/liquor 4 400
– raffle proceeds 200
Annual carnival – sponsorship 900
– entry fees 600
6 100
Ballarat Aces Athletics Club
Statement of Cash Flows for the year ended 30 June 2018 $ $
Cash flows from operating activities Receipts from customers 6 100
Payments to suppliers and employees (6 750)
Members’ subscriptions received 1 200
Cash from operations 450
Net GST received 109
Net cash from operating activities 659
Cash flows from investing activities Interest received 50
Net cash from investing activities 50
Net increase in cash held 709
Cash at 1 July 2017 1 200
Cash at 30 June 2018 1 909
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Notes to the statement of cash flows
1. Cash and cash equivalents
Cash and cash equivalents included in the statement of cash flows comprises the following amounts in
the statement of financial position: 30 June 2017 30 June 2018
Cash at bank 1 200 1 909
$1 200 $1 909
2. Reconciliation of net cash from operating activities to profit or loss $
Profit 205
Adjustments for:
Investment income
Interest income (50)
Depreciation of equipment 350
add/(subtract) Movements in current assets and current liabilities
Increase in barbecue stocks (75)
Increase in prepaid rent (15)
Increase in accrued subscriptions revenue (11)
Increase in accounts payable 55
Decrease in prepaid subscriptions revenue (5)
Increase in GST collected 20
Increase in GST paid (30)
Net cash from operating activities 589
5.12
Solution in textbook.
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Chapter 6: Standard financial analysis techniques
6.1
Solution in textbook.
6.2 a)
Birabella Enterprises
2016 2017 2018
Gross
profit
($400 000 – $175 000)
= $225 000
($465 000 – $180 000)
= $285 000
($440 000 – $195 000)
$245 000
Net
profit
$225 000 – $120 000
= $105 000
$285 000 – $160 000
= $125 000
$245 000 – $136 000
= $109 000
Gross
profit
ratio
1
100
000,400$
000,225$
= 56.25 %
1
100
000,465$
000,285$
= 61.29 %
1
100
000,440$
000,245$
= 55.68 %
Net
profit
ratio
1
100
000,400$
000,105$
= 26.25%
1
100
000,465$
000,125$
= 26.88%
1
100
000,400$
000,109$
= 24.77%
Return
on
owners’
equity
1
100
2)000,480$000,520($
000,105$
= 21.00%
1
100
2)000,460$000,480($
000,125$
= 26.59%
1
100
2)000,490$000,460($
000,109$
= 22.95%
b)
2017—The gross profit ratio improved by approximately 5c in the dollar during 2017 compared to
2016 due to:
– a $65 000 increase in sales
– cost of sales was only marginally higher in 2017 compared to 2016 despite the significant
increase in sales.
Despite the improvement in the gross profit ratio in 2017 (up from 56.25% in 2016 to 61.29% in
2017), the net profit ratio for that year was only marginally higher in 2017 (rising from 25.25% in
2016 to 26.88% in 2017). This was due to a significant increase of $40 000 in expenses from ordinary
activities in 2017 which means that expenses from ordinary activities as a percentage of sales were
much higher in 2017 and negated the improvement in the gross profit ratio.
The return on owners’ equity improved from 21.00% in 2016 to 26.56% in 2017. This was mainly due
to a decrease in owner’s equity of $40 000 during 2017.
2018—The gross profit ratio declined from 61.29% in 2017 to 55.68% in 2018 due to:
– a $25 000 decrease in sales
– a $15 000 increase in cost of sales despite the lower sales.
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The reduction in the gross profit ratio in 2018 (of over 4 cents in the dollar) was partly offset by a
reduction in expenses from ordinary activities as a percentage of sales, meaning that the net profit
ratio declined by just over 2c in the dollar (from 26.88% in 2017 to 24.77% in 2018).
The return on owners’ equity also declined in 2018 due to the decline in profitability and an increase
in owner’s equity of $30 000 during 2018.
6.3
a)
Jay’s Pet Food Supplies 2016 2017
Gross profit ratio
1
100
000,320$
000,136$
= 42.5%
1
100
600,307$
000,146$
= 45.71%
Net profit ratio
1
100
000,320$
700,98$
= 30.84%
1
100
600,307$
400,85$
= 27.76%
b)
The gross profit ratio has increased from 42.5% in 2016 to 45.71% in 2017, despite a reduction in
sales revenue. This is due to cost of sales as a percentage of sales being less in 2017 than in 2016.
Possible reasons for this include:
– price reductions by suppliers
– better buying practices
– a combination of both of the above.
Despite the improvement in gross margins in 2017, the net profit ratio declined from 20.84% in 2016
to 27.76% in 2017. The reason for this decline was an increase in expenses from ordinary activities as
a percentage of sales. The reason for the blow-out in expenses was an increase of $18 000 in bad
debts in 2017 as compared to 2016.
6.4
a)
Radical Gear Bendigo Branch Eaglehawk Branch
2017 2018 2017 2018
Gross profit ratio
1
100
000,174$
000,96$
= 55.17%
1
100
000,187$
500,109$
= 58.56%
1
100
000,101$
000,58$
= 57.43%
1
100
000,132$
500,78$
= 59.47%
Net profit ratio
1
100
000,174$
750,11$
= 6.75%
1
100
000,187$
850,21$
= 11.68%
1
100
000,101$
900,17$
= 17.72%
1
100
000,132$
150,26$
= 19.81%
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b) The gross profit ratio of the Bendigo branch improved slightly in 2018 (up from 55.71% in 2017 to
58.56% in 2018). This indicates that during 2018 the branch has been able to sell at higher prices or
buy at better prices or a combination of both. The net profit ratio of the Bendigo branch improved
considerably in 2018 (from 6.75% in 2017 to 11.68% in 2018). This was due to the improvement in
the gross profit ratio and also to the fact that expenses from ordinary activities as a percentage of sales
in 2018 were less than in 2017.
The gross profit ratio of the Eaglehawk branch increased from 57.43% in 2017 to 59.47% in 2018.
This also indicates that the branch has been able to sell at higher prices or buy at better prices or a
combination of both. The net profit ratio improved from 17.72% in 2017 to 19.81% in 2018 which
reflects the improvement in the gross profit ratio and therefore indicates that expenses from ordinary
activities as a percentage of sales was fairly constant in both 2017 and 2018.
The gross profit ratios for both branches are similar for both years, with the Eaglehawk branch having
a slightly higher gross margin in both years. This indicates that the relationship between buying and
selling prices is approximately the same for both branches.
However, there is a significant difference in the net profit ratios, with the Bendigo branch’s ratio
being much lower than that of the Eaglehawk branch. This indicates that expenses from ordinary
activities as a percentage of sales are much higher at the Bendigo branch that at the Eaglehawk
branch.
6.5
a) Gross profit ratio 35.6%
Net profit ratio 7.2%
Return on owner’s equity 17.6%
b)
The gross profit ratio of Quality Electricals is 35.6% compared to the industry average of 28.3%. This
indicates that the business is able to sell at higher prices or buy at lower prices than other businesses
in the industry, or a combination of both.
However, Quality Electricals’ net profit ratio is significantly less than the average of its competitors
(7.2% compared to 9.2%), despite having a better gross profit ratio. This means that the business’
expenses from ordinary activities as a percentage of sales are significantly higher than the industry
average. This has negated any advantage in gross margins.
Quality Electricals’ return on owners’ equity is also significantly below the industry average (17.6%
compared to 26.7%). This is due, in part, to the lower net profit ratio discussed in the previous
paragraph. It may also indicate that Quality Electricals has a higher than average level of owners’
equity, meaning that it places less reliance on borrowed funds to finance its operations.
c)
To improve the profitability of the business management should tighten control over expenses from
ordinary activities, which would in turn improve the net profit ratio and the return on owner’s equity.
Returns to owners could also be improved if the business made more use of borrowed funds to finance
its operations.
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6.6
a) Working capital = Current assets – Current liabilities
= $274 000 - $180 000
= $94 000
b)
Working capital ratio = 1
100
000,180$
000,274$
= 152.2%
Quick asset ratio = 1
100
)000,50$000,180($
)000,110$000,274($
= 126.2%
c)
The quick asset ratio is an indicator of the business’s ability to a sudden financial emergency as it
expresses the assets that can be realised quickly as a percentage of ‘urgent liabilities’.
d)
The working capital ratio of 152.2% indicates that the business has $1.52 in current assets for every
$1 of current liabilities which indicates that the business has sufficient current assets to meet its
current liabilities. The quick asset ratio of 126.2% indicates that the business has $1.26 in liquid assets
for each $1 of urgent liabilities and so has sufficient liquid assets available to meet its immediate
commitments. Thus it appears that the business, in the short-term, should not experience difficulty
meeting its commitments as and when they fall due.
6.7
Bazza Enterprises 2018
Inventory turnover rate = 1
365
000,76$
)000,24$000,20($2
1
= 105.7 days
Accounts receivable turnover rate = 95.547$
)000,24$000,20($2
1
= 40.1 days
2019
Inventory turnover rate = 1
365
000,74$
)000,50$000,24($2
1
= 182.5 days
Accounts receivable turnover rate = 92.821$
)000,90$000,24($2
1
= 69.3 days
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a)
The business’ management of both stock and debtors has deteriorated markedly during 2018.
Stock turnover has deteriorated from 106 days (approximately 3 times p.a.) to almost 183 days
(approximately 2 times p.a.). This means that in 2018 the business is holding a considerably higher
level of stock, relative to its sales, than in 2017.
Accounts receivable turnover has deteriorated from 40 days in 2017 to 69 days in 2018. When
compared with the business’ terms of trade, neither of these results is satisfactory. It appears that the
business’ policies and procedures in relation to granting of credit to customers and collection of
amounts outstanding have become lax.
Both of these weaknesses mean that the business has had to utilise additional working capital to
finance the blow-out in its accounts receivable and inventory. This would have an adverse effect on
the profitability of the business and on its ability to meet its commitments as they fall due.
6.8
Solution in textbook.
6.9
Jack Frost
a) 2017
Proprietary ratio = 1
100
000,163$
000,88$
= 54%
2018
Proprietary ratio = 1
100
800,202$
800,94$
= 46.7%
The additional plant and equipment acquired during 2018 appears to have been financed by short-term
sources, viz. accounts payable. This has an adverse effect on the liquidity of the business and has
affected the ability of the business to meet its short-term and immediate commitments (see working
capital and quick asset ratios in the answer to 6.8).
The percentage of total funds provided by owners’ equity has fallen from 54% in 2007 to 46.7% in
2018. This is due to the large increase in accounts payable in 2018. However, with almost half the
total assets financed by owners’ equity, the business is not considered to be highly geared and
consequently its survival in the long-term is not in danger.
6.10
Commercial Business Machines
a) Working capital ratio = 1
100
850,110$
200,168$
= 151.7%
Quick asset ratio = 1
100
)400,12$850,110($
)000,82$200,168($
= 87.6%
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Accounts receivable turnover = 67.287,1$
)000,80$200,78($2
1
= 61.4 days
Inventory turnover = 1
365
000,457$
)000,82$000,75($2
1
= 62.7 days
Proprietary ratio = 1
100
600,340$
350,84$
= 24.8%
The ability of the business to meet both its immediate and short-term commitments, as evidenced by
the working capital and quick asset ratios, is below the industry average. In particular, the quick asset
ratio is 87.6% compared to the industry average of 120%. This indicates that the business could
experience liquidity problems in the immediate future in attempting to meet its obligations.
The average time taken to collect debtors’ accounts, as evidenced by the accounts receivable turnover
rate, is 61.4 days compared to the industry average of 47.8 days. Offsetting the poor accounts
receivable turnover is an inventory turnover of 62.7 days compared to the industry average of 96.2
days. Overall, the operating cycle is 124.1 days (61.4 days + 62.7 days) compared to the industry
average of 144 days (47.8 days + 96.2 days), which means that the business would require less
working capital than the average for the industry.
The proportion of total assets financed by owner’s equity is 24.8% compared to the industry average
of 39.2%. This indicates that the business relies more on borrowed funds than other businesses in the
industry. An over-reliance on borrowed funds may result in the business experiencing liquidity
problems in the long-term in repaying the borrowed funds and associated interest.
b)
The financial stability of the business could be improved by the following action:
Short-term financial stability
– Review policies and procedures relating to the granting of credit to customers and follow-up of
debtors accounts so as to reduce the debtors turnover and free up working capital.
– Review stock holdings to ensure that the business is not holding excess stock. Any reduction in
stock holdings will also free up working capital.
Long-term financial stability
– Apply any surplus working capital to repayment of borrowings so as to reduce the reliance on
borrowed funds.
6.11
a)
Rate/Ratio 2017 2018
Return on owners’ equity 29.1% 28.1%
Gross profit ratio 50.0% 55.4%
Net profit ratio 33.8% 33.7%
Proprietary ratio 58.9% 61.5%
207
Copyright © 2011 Cengage Learning Australia Pty Limited
b) REPORT TO: The proprietor, HiTech Imports
FROM:
SUBJECT: Trend in profitability 2017 to 2018
The overall profitability of the business declined slightly during 2018. This is reflected in the return
on owner’s equity which fell from 29.1% in 2017 to 28.1% in 2018.
The decline in profitability occurred despite an improvement in the gross profit ratio from 50% in
2017 to 55.4% in 2018. This indicates that the business has been able to achieve an increase in selling
prices, a reduction in purchase prices or a combination of both.
Despite the improved gross margin in 2018, the net profit ratio declined slightly from 33.8% in 2017
to 33.7% in 2018. This indicates that, as a percentage of sales, expenses from ordinary activities were
higher in 2018. An examination of the statement of comprehensive income confirms this, with
expenses from ordinary activities increasing from $58 700 in 2017 to $79 000 in 2018, despite only a
marginal increase in sales in 2018. This indicates that control of expenses from ordinary activities has
become lax in 2018. The increase in interest expense is probably due to increased interest rates as
there does not appear to have been any additional borrowings during 2018.
Also contributing to the lower return on owner’s equity is an increased reliance on funds provided by
the proprietor. The proprietary ratio increased from 58.9% in 2017 to 61.1% in 2018.
Recommendations to improve profitability
Monitor expenses from ordinary activities to ensure that they are kept to a minimum.
Ensure borrowed funds are obtained at the lowest available interest rate.
Ensure that goods are purchased at the best possible prices and review selling prices that
profitability is maximised.
6.12
a)
Rate/Ratio 2017 2018
Working capital ratio 154.1% 150.0%
Quick asset ratio 115.3% 95.4%
Inventory turnover rate 4.3 times p.a. 3.6 times p.a.
Accounts receivable turnover rate 60.1 days 53.3 days
Proprietary ratio 56.2% 55.1%
b)
REPORT TO: The proprietor, Fantasia Wholesalers
FROM:
SUBJECT: Trend in financial stability 2017 to 2018
Short-term financial stability
The short-term financial stability of the business has deteriorated during 2018.
208 TAFE Accounting: Financial Accounting Applications Solutions Manual
Copyright © 2011 Cengage Learning Australia Pty Limited
Although the working capital ratio (154.1% in 2017 and 150% in 2018) indicates that the business has
sufficient current assets to meet its short-term commitments, the ability of the business to meet its
immediate commitments is of some concern. The quick asset ratio has fallen from 115.3% in 2017 to
95.4% in 2018, indicating that the business does not have sufficient liquid assets to cover its
immediate commitments.
The reason for the deterioration in the ability of the business to meet its immediate commitments is
that the working capital is less liquid in 2018 due to a large increase in inventories. In other words, a
greater proportion of working capital, in 2018, is tied up in inventories which cannot be quickly and
profitably converted into cash. This is also reflected in the deterioration in the inventory turnover rate
from 4.3 times in 2017 to 3.6 times in 2018.
On the positive side, the average time taken to collect amounts owed by debtors improved from 60.1
days in 2017 to 53.3 days in 2018. However, there is still room for improvement here. Even if the
business’ terms of trade are 30 days from the end of the month in which the goods are sold, an
average collection period of 45 days is achievable.
Long-term financial stability
The balance between owners’ equity and borrowed funds has not changed significantly during 2018.
The proportion of total assets financed by owners’ equity fell marginally from 56.2% in 2017 to
55.1% in 2018. With more than half of the total funds invested in the business being provided by the
owner, the business is not considered to be highly geared and is not at risk of being unable to pay its
debts in the long-term.
Recommendations for improvement
1. Review stock holdings to ensure that the optimum level of stock is held with the aim of reducing
inventory turnover and improving the liquidity of the business’ working capital.
2. Improve the debtors collection rate by:
– reviewing procedures for the granting of credit to customers; and
– ensuring that outstanding debtors accounts are followed up and collected as quickly as possible.
6.13
Solution in textbook.
209
Copyright © 2011 Cengage Learning Australia Pty Limited
Chapter 7: Inventories
7.1 Inventories consist of:
– goods held for sale in the normal course of business;
– work in process (i.e. goods in the course of production); and
– raw materials and supplies to be consumed in the production of goods or services for sale.
7.2
The inventories of Glad’s Bags would consist of:
– raw materials—leather, studs, clasps, buckles, threads;
– work in process— partly-completed handbags; and
– finished goods—handbags completed and ready for sale.
7.3 1. Examples of inventory include spare parts and oils and lubricants.
2. Tools and diagnostic equipment are not inventories as they are not consumed in the provision of
motor vehicle repair services. These items are non-current assets and are subject to depreciation.
7.4 Solution in textbook.
7.5 $ $
Estimated realisable value 100 chairs @ $50 5 000
less Estimated additional costs
Production costs 600
Selling expenses 500 1 100
Net realisable value 3 900
As the net realisable value ($3 900) of the chairs on hand at 30 June 2019 is less than their cost ($10
500), the chairs would be valued at $3 900.
7.6 Net realisable value of an item of inventory is the estimated selling price in the ordinary course of
business the estimated costs of completion and the estimated costs necessary to make the sale.
7.7
It may be appropriate to record inventories at net realisable value in the following circumstances
where:
– the inventories are damaged
– the inventories have become wholly or partially obsolete
– selling prices have declined, or
– the estimated cost of completion or costs incurred to make the sale have increased.
7.8 $
Nicknacks – cost (1 200 @ $40) 48 000
Whatnots – net realisable value (550 @ $22.50) 12 375
Doodads – cost (3 600 @ $10) 36 000
Poopah – net realisable value (100 @ $4) 400
Total inventory value at 30 June 2018 96 775
210 TAFE Accounting: Financial Accounting Applications Solutions Manual
Copyright © 2011 Cengage Learning Australia Pty Limited
7.9 Quantity on hand 8 August 2017 = Opening balance + Purchases – Sales
= 100 + 450 – 200
= 350
a)
Under FIFO the units on hand would consist of the latest-purchased items. $
200 @ $12 2 400
150 @ $11 1 650
4 050
b)
Under weighted average cost, the units on hand are valued at the weighted average cost of the opening
inventory and the purchases for the month. Boxes $
Opening inventory 100 1 000
Purchases
Aug 5 250 2 750
Aug 8 200 2 400
550 6 150
Average cost = $6 150 divided by 550
= $11.18
Inventory value = 350 x $11.18
= $3 913
7.10 Under absorption costing the cost of inventories includes an appropriate share of both fixed and
variable costs of production.
Chapter 7: Inventories 211
Copyright © 2011 Cengage Learning Australia Pty Limited
7.11 a)
STOCK CARD
Item No: 656 Location: Description: Fold-up chair Valuation Method: FIFO
Date Particulars Document no IN OUT BALANCE
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
2017 Jul 1 Balance 200 20.00 4 000
2 Chairmakers 445 230 22.00 5 060 200 20.00 4 000 230 22.00 5 060
4 Effenberg 889 90 20.00 1 800 110 20.00 2 200 230 22.00 5 060
6 Salisbury 890 110 20.00 2 200 30 22.00 660 200 22.00 4 400
10 Chairmakers 460 190 21.00 3 990 200 22.00 4 400 190 21.00 3 990
12 Salisbury 58 (10) 22.00 (220) 210 22.00 4 620 190 21.00 3 990
15 Walters 891 210 22.00 4 620 90 21.00 1 890 100 21.00 2 100
21 Chairmakers 471 100 22.00 2 200 100 21.00 2 100 100 22.00 2 200
22 Chairmakers 26 (20) 22.00 (440) 100 21.00 2 100 80 22.00 1 760
Cost of sales 10 950
31 Stock loss 10 21.00 210 90 21.00 1 890 80 22.00 1 760
212 TAFE Accounting: Financial Accounting Applications Solutions Manual
Copyright © 2004 Nelson Australia Pty Limited
b)
STOCK CARD
Item No: 656 Location: Description: Fold-up chair Valuation Method: Weighted average cost
Date Particulars Document no IN OUT BALANCE
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
2017 Jul 1 Balance 200 20.00 4 000
2 Chairmakers 445 230 22.00 5 060 430 21.07 9 060
4 Effenberg 889 90 21.07 1 896 340 21.07 7 164
6 Salisbury 890 140 21.07 2 950 200 21.07 4 214
10 Chairmakers 460 190 21.00 3 990 390 21.036 8 204
12 Salisbury 58 (10) 21.07 (211) 400 21.038 8 415
15 Walters 891 300 21.038 6 311 100 21.04 2 104
21 Chairmakers 471 100 22.00 2 200 200 21.52 4 304
22 Chairmakers 26 (20) 22.00 (440) 180 21.467 3 864
Cost of sales 10 946
31 Stock loss 10 21.467 215 170 21.465 3 649
Chapter 6: Inventories 213
Copyright © 2004 Nelson Australia Pty Limited
7.12 a)
STOCK CARD
Item No: RS100 Location: Description: Valuation Method: FIFO
Date Particulars Document no IN OUT BALANCE
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
2018 Nov 1 Balance 300 12.00 3 600
2 Issues 606 150 12.00 1 800 150 12.00 1 800
3 Purchases 569 40 13.00 520 150 12.00 1 800 40 13.00 520
4 Returns to store 254 (20) 12.00 (240) 170 12.00 2 040 40 13.00 520
15 Purchases 873 150 12.50 1 875 170 12.00 2 040 40 13.00 520 150 12.50 1 875
18 Issues 625 110 12.00 1 320 60 12.00 720 40 13.00 520 150 12.50 1 875
20 Purchases 586 30 12.50 375 60 12.00 720 40 13.00 520 180 12.50 2 250
21 Purchases returns 111 (10) 12.50 (125) 60 12.00 720 40 13.00 520 170 12.50 2 125
26 Issues 632 60 12.00 720 40 13.00 520 50 12.50 625 120 12.50 1 500
28 Purchases 591 270 14.00 3 780 120 12.50 1 500 270 14.00 3 780
Cost of sales 4 745
30 Stock gain 10 14.00 140 120 12.50 1 500 280 14.00 3 920
Note: It has been assumed that the extra units on hand, as revealed by the physical stocktake, were purchased at the latest price.
214 TAFE Accounting: Financial Accounting Applications Solutions Manual
214
b)
STOCK CARD
Item No: RS100 Location: Description: Valuation Method: Weighted average cost
Date Particulars Document no IN OUT BALANCE
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
2017 Nov 1 Balance 300 12.00 3 600
2 Issues 606 150 12.00 1 800 150 12.00 1 800
3 Purchases 569 40 13.00 520 190 12.211 2 320
4 Returns to store 254 (20) 12.00 (240) 210 12.19 2 560
15 Purchases 573 150 12.50 1 875 360 12.319 4 435
18 Issues 625 110 12.319 1 355 250 12.32 3 080
20 Purchases 586 30 12.50 375 280 12.339 3 455
21 Purchases returns 111 (10) 12.50 (125) 270 12.333 3 330
26 Issues 632 150 12.333 1 850 120 12.33 1 480
28 Purchases 591 270 14.00 3 780 390 13.487 5 260
Cost of sales 4 765
31 Stock gain 10 13.487 135 400 13.488 5 395
7.13
Solution in textbook.
Chapter 7: Inventories XX
Copyright © 2011 Cengage Learning Australia Pty Limited
7.14 a)
STOCK CARD
Item No: X1356 Location: Description: Valuation Method: Weighted average cost
Date Particulars Document no IN OUT BALANCE
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
2016 Jan 1 Balance 200 18.00 3 600
4 Suppliers Ltd 5478 200 20.00 4 000 400 19.00 7 600
12 Mavis Moore 6546 250 19.00 4 750 150 19.00 2 850
15 Suppliers Ltd 5489 100 25.00 2 500 250 21.40 5 350
16 Suppliers Ltd 55 (50) 25.00 (1 250) 200 20.50 4 100
20 Daryl’s Diner 6547 50 20.50 1 025 150 20.50 3 075
Cost of sales 5 775
31 Stock gain 10 20.50 205 160 20.50 3 280
STOCK CARD
Item No: V9087 Location: Description: Valuation Method: Weighted average cost
Date Particulars Document no IN OUT BALANCE
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
2016 Jan 1 Balance 300 40.00 12 000
2 Doug Hawk 6545 100 40.00 4 000 200 40.00 8 000
10 Davis Pty Ltd 845 300 50.00 15 000 500 46.00 23 000
21 Doug Hawk 654 (50) 40.00 (2 000) 550 45.455 25 000
28 Doug’s World X457 200 48.00 750 46.133 34 600
31 Doug Hawk 6548 150 46.133 6 920 600 46.133 27 680
Cost of sales 8 920
Stock loss 20 46.133 923 580 46.133 26 757
XX TAFE Accounting: Financial Accounting Applications Solutions Manual
216
b)
O’Connell Wholesalers
Purchases Journal Date Particulars Ref. Stock
Control Sundries GST
Paid Accounts
Payable
Control Amount Account
2016 $ $ $ $
4 Jan Suppliers Ltd 5478 4 000 400 4 400
10 Davis Pty Ltd 845 15 000 1 500 16 500
15 Suppliers Ltd 5489 2 500 250 2 750
28 Doug’s World X457 9 600 960 10 560
31 100 3 110 34 210
Purchases Returns Journal Date Particulars Ref. Stock
Control Sundries GST
Paid Accounts
Payable
Control Amount Account
2016 $ $ $
16 Jan Suppliers Ltd X1356 1 250 125 1 375
Sales Journal Date Particulars Ref. Sales Sundries GST
Coll Accounts
Receivable
Control Amount Account
2016 $ $ $ $
2 Jan Doug Hawk 6545 10 000 1 000 11 000
12 Mavis Moore 6546 12 500 1 250 13 750
20 Daryl’s Diner 6547 2 500 250 2 750
31 Doug’s World 6548 15 000 1 500 16 500
40 000 4 000 44 000
Sales Returns Journal Date Particulars Ref. Sales
Returns Sundries GST
Coll Accounts
Receivable
Control Amount Account
2016 $ $ $
21 Jan Doug Hawk V9087 5 000 500 5 500
General Journal Date Particulars Debit Credit
2016 $ $
31 Jan Cost of sales 14 695
Stock control 14 695
Cost of sales for January.
Stock gain/loss 718
Stock control 718
Stock loss as per physical stocktake conducted 31 January.
Chapter 7: Inventories XX
Copyright © 2011 Cengage Learning Australia Pty Limited
c)
O’Connell Wholesalers
General Ledger
Stock Control Account Date Particulars Folio Debit Credit Balance
2016 $ $ $
1 Jan Balance 15 600 Dr
31 Accounts payable control PJ 31 100 46 700 Dr
Accounts payable control PRJ 1 250 45 450 Dr
Cost of sales GJ 14 695 30 755 Dr
Stock gain/loss GJ 718 30 037 Dr
Accounts Payable Control Account Date Particulars Folio Debit Credit Balance
2016 $ $ $
1 Jan Balance 4 000 Cr
31 Stock control & GST paid PJ 34 210 38 210 Cr
Stock control & GST paid PRJ 1 375 36 835 Cr
GST Paid Account Date Particulars Folio Debit Credit Balance
2016 $ $ $
1 Jan Accounts payable control PJ 3 110 3 110 Dr
Accounts payable control PRJ 125 2 985 Dr
Purchases Returns Account Date Particulars Folio Debit Credit Balance
2006 $ $ $
31 Jan Accounts payable control SJ 1 250 1 250 Cr
Sales Account Date Particulars Folio Debit Credit Balance
2016 $ $ $
31 Jan Accounts receivable control SJ 40 000 40 000 Cr
GST Collected Account Date Particulars Folio Debit Credit Balance
2016 $ $ $
31 Jan Accounts receivable control SJ 4 000 4 000 Cr
Accounts receivable control SRJ 500 3 500 Cr
Accounts Receivable Control Account Date Particulars Folio Debit Credit Balance
2016 $ $ $
1 Jan Balance 6 000 Dr
31 Sales & GST collected SJ 44 000 50 000 Dr
Sales returns & GST collected SRJ 5 500 44 500 Dr
Sales Returns Account Date Particulars Folio Debit Credit Balance
2016 $ $ $
31 Jan Accounts receivable control SRJ 5 000 5 000 Dr
XX TAFE Accounting: Financial Accounting Applications Solutions Manual
218
Cost of Sales Account Date Particulars Folio Debit Credit Balance
2016 $ $ $
31 Jan Stock control GJ 14 695 14 695 Dr
Stock Gain/Loss Account Date Particulars Folio Debit Credit Balance
2016 $ $ $
31 Jan Stock control GJ 718 718 Dr
d)
Stock Reconciliation as at 31 January 2016 Item No. Description Total
Value
$
X1356 3 280
V9087 26 757
Total as per Stock Control account 30 037
7.15 a)
Hancock Industries
Purchases Journal Date Particulars Ref. Stock
Control Sundries GST
Paid Accounts
Payable
Control Amount Account
2018 $ $ $ $
4 Jun Jack Ltd 547 6 600 660 7 260
5 Suppliers Ltd 8649 4 400 440 4 840
Nick Ltd F2546 5 200 520 5 720
16 Suppliers Ltd 8689 4 500 450 4 950
17 Nick Ltd F2591 1 680 168 1 848
22 380 2 238 24 618
Purchases Returns Journal Date Particulars Ref. Stock
Control Sundries GST
Paid Accounts
Payable
Control Amount Account
2018 $ $ $
10 Jun Suppliers Ltd 6547 220 22 242
12 Nick Ltd 5741 1 300 130 1 430
1 520 152 1 672
Sales Journal Date Particulars Ref. Sales Sundries GST
Coll’d Accounts
Receivable
Control Amount Account
2018 $ $ $
3 Jun Ace Ltd X125 8 750 875 9 625
9 Daryl Ltd X126 9 800 980 10 780
10 John Ltd X127 10 000 1 000 11 000
12 Josie Ltd X128 14 000 1 400 15 400
18 Geoff Ltd X129 7 500 750 8 250
19 Ace Ltd X130 9 800 980 10 780
24 Geoff Ltd X131 4 550 455 5 005
64 400 6 440 70 840
Chapter 7: Inventories XX
Copyright © 2011 Cengage Learning Australia Pty Limited
Sales Returns Journal Date Particulars Ref. Sales
Returns Sundries GST
Coll’d Accounts
Receivable
Control Amount Account
2018 $ $ $ $
24 Jun Ace Ltd 124 1 400 140 1 540
26 Geoff Ltd 125 700 70 770
2 100 210 2 310
General Journal
Date Particulars Debit Credit
2018 $ $
30 Jun Cost of sales 34 920
Stock control 34 920
Cost of sales for June.
Stock gain/loss 542
Stock control 542
Stock loss as per physical stocktake conducted 30 June.
b)
Hancock Industries
General Ledger
Stock Control Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
1 Jun Balance 27 900 Dr
30 Accounts payable control PJ 22 380 50 280 Dr
Accounts payable control PRJ 1 520 48 760 Dr
Cost of sales GJ 34 920 13 840 Dr
Stock gain/loss GJ 542 13 298 Dr
Cost of Sales Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
1 Jun Balance 400 000 Dr
30 Accounts receivable control GJ 34 920 434 920 Dr
Sales Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
1 Jun Balance 600 000 Cr
30 Accounts receivable control SJ 64 400 664 400 Cr
Sales Returns Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
1 Jun Balance 10 000 Dr
30 Accounts receivable control SRJ 2 100 12 100 Dr
Stock Gain/Loss Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
1 Jun Balance 2 500 Dr
30 Stock control GJ 542 3 042 Dr
c)
XX TAFE Accounting: Financial Accounting Applications Solutions Manual
220
Stock Reconciliation as at 30 June 2018 Item No. Description Total Value
$
64026 Whatnots 4 430
26697 Doodads 6 788
45987 Poopah 2 080
Total as per Stock Control account 13 298
7.16
Solution in textbook.
7.17
Solution in textbook.
7.18 (a)
Saeed Furniture Retailers
General Journal Date Particulars Debit Credit
2017 $ $
30 Jun Loss on write-down of inventory 310
Stock control 310
Write down of inventory to net realisable value
Calculation of write down: $ $
Cost (2 x $480) + (1 x $490) 1 450
less Net realisable value
Estimated selling price (3 x $390) 1 170
less Shipping costs (3 x $10) 30 1 140
310
b)
Saeed Furniture Retailers
General Ledger
Loss on Write-Down of Inventory Account Date Particulars Folio Debit Credit Balance
2017 $ $ $
30 Jun Stock control GJ 310 310 Dr
Stock Control Account Date Particulars Folio Debit Credit Balance
2017 $ $ $
30 Jun Balance 52 000 Dr
Loss on write-down of inventory GJ 310 51 690 Dr
Chapter 7: Inventories XX
Copyright © 2011 Cengage Learning Australia Pty Limited
c)
STOCK CARD Item No: Location: Description: Comfy Rockers Valuation Method: FIFO
Date Particulars Document no IN OUT BALANCE
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
Qty
Unit Cost
$
Total Cost
$
2007 Jun 30 Balance 2 480 960 8 490 3 920
Loss on write-down of inventory
310 3 380* 1 140*
7 490 3 430
* Net realisable value
Chapter 7: Inventories 222
Copyright © 2011 Cengage Learning Australia Pty Limited
7.19 a)
Daggy’s Animal Supplies
General Journal Date Particulars Debit Credit
2018 $ $
30 Jun Sales 142 000
Trading 142 000
Transfer to Trading account
Trading 100 150
Sales returns 1 800
Cost of sales 94 000
Stock gain/loss 1 200
Loss on write-down of inventory 3 150
Transfer to Trading account
Profit and loss 41 850
Trading 41 850
Transfer gross profit for the year ended 30 June 2018
General Ledger
Sales Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
30 Jun Balance 142 000 Cr
Trading GJ 142 000 Nil
Sales Returns Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
30 Jun Balance 1 800 Dr
Trading GJ 1 800 Nil
Cost of Sales Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
30 Jun Balance 94 000 Dr
Trading GJ 94 000 Nil
Stock Gain/Loss Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
30 Jun Balance 1 200 Dr
Trading GJ 1 200 Nil
Loss on Write-Down of Inventory Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
30 Jun Balance 3 150 Dr
Trading GJ 3 150 Nil
Chapter 7: Inventories XX
Copyright © 2011 Cengage Learning Australia Pty Limited
Trading Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
30 Jun Sales GJ 142 000 142 000 Cr
Sales returns GJ 1 800 140 200 Cr
Cost of sales GJ 94 000 46 200 Cr
Stock gain/loss GJ 1 200 45 000 Cr
Loss on write-down of inventory GJ 3 150 41 850 Cr
Profit and loss GJ 41 850 Nil
Profit and Loss Account Date Particulars Folio Debit Credit Balance
2018 $ $ $
30 Jun Trading GJ 41 850 41 850 Cr
7.20
Solution in textbook.
7.21
Advantages of the physical inventory system:
– As no detailed records of inventory movements are maintained, it is the simplest and least
expensive method of accounting for inventory.
– It can be used by any business and it is totally adequate for a small business or a business with
relatively few items of inventory
Disadvantages of the physical inventory system:
– Neither the statement of comprehensive income nor the statement of financial position can be
prepared unless a business can determine the total value of its inventories at the end of the
reporting period. Under the physical inventory system, this necessitates a full physical
stocktake. Consequently, the ability of a business to prepare regular financial statements is
severely hampered.
– As no perpetual records of inventories are maintained, a physical stocktake will not reveal
any inventory shortages or gains.
– Physical stocktakes require considerable organisation and effort. It is desirable that no stock
movements occur while the count is performed. This often means that a business has to close
its doors for the period of the stocktake.
– Inventory and working capital management is difficult under a physical inventory system
as there is a lack of information available relating to inventory movements and levels.
Advantages of the perpetual inventory system:
– As the total value of inventories on hand and cost of sales can be readily ascertained, the
perpetual inventory system facilitates the preparation of regular interim financial statements.
– The results of a physical stocktake can be compared with the perpetual inventory records to
reveal any discrepancies. Stock losses or gains can arise as a result of theft, spoilage or poor
record-keeping.
– Rather than conducting a full stocktake at the end of the financial year, stocktaking can be
performed on a rolling basis throughout the year: each item of stock is counted and compared
against the relevant inventory record at least once during the year. This minimises any
disruption to the ordinary operations of the business.
– A perpetual inventory system assists a business in managing its inventories. Perpetual
inventory records can assist management in a number of ways including:
a) determining when individual inventory items should be reordered
b) highlighting items of inventory that are slow-moving or unprofitable
c) determining inventory turnover rates for individual items and groups of items as well
as the overall inventory turnover
d) assisting in the management of working capital by indicating the total funds invested
in inventories.
XX TAFE Accounting: Financial Accounting Applications Solutions Manual
224
Disadvantages of the perpetual inventory system:
– A perpetual inventory system requires detailed records to be maintained of all inventory
movements and inventories on hand. To establish and maintain such a system is expensive
and time-consuming. However, modern computer accounting software has eliminated much
of the cost and effort in establishing and maintaining a perpetual inventory system.
– A greater knowledge of accounting is required than for the physical inventory system.