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business
accounting for business

Questions and Answers of Accounting for Business

(b) It’s now the end of the next financial year after purchase of the new truck. That is, Murph’s been using his new truck for 15 months. Nothing’s changed, but now Leo wants to see how his
3.6 LO3 Fill in the values (a) to (f) in the following table on the assumption that there were no opening balances involved.Relating to period At end of period Paid/Received$Expense/Revenue for
3.7 LO4 Following on from Exercise 3.4, Murph’s expanding his business and has just bought another truck.Details of the purchase are:Dealer charge $290,000 Installation of GPS, safety devices, etc
3.8 LO5 The Triad Trading Co recently prepared draft financial statements for the most recent year. A profit for the year of ec125,000 was reported. Subsequent investigation found that one item of
3.9 LO2/3/5 The following information was prepared by a trainee accountant for Bise Co for Year 9.$Sales revenue 855,000 Interest receivable 37,000 Salaries and wages 75,000 Heat and light 37,000
3.10 LO1/3 Clean and Maintain Ltd is a supplier of building maintenance services. It signed a contract with a major university on 1 August 2014, under which it will provide services for five years
3.11 LO1/3 Joe’s profit and loss records for the year ended 30 June 2017 have been lost. However, you are able to extract the following statement of financial position information, together with
3.12 LO7/8 (a) Prepare an income statement for Mostyn Company for the year ended 30 June 2017, given the following account balances. (Note: Some accounts may not be relevant.)$Accounting and audit
(b) Consider the resulting statement of financial performance. Provide a review and interpretation of this statement, giving indications of what further information is required to conduct a proper
(c) What questions might be raised regarding the accounting treatment chosen for (a) insurance and (b) equipment repairs?
3.13 LO5 Spratley Ltd is a builders’ merchant. On 1 September the business had 20 tonnes of sand in stock at a cost of $18 per tonne, a total cost of $360. During the first week in September the
(b) The closing inventory based on periodic inventory and weighted average cost allocation.Copyright © Pearson Australia (a division of Pearson Australia Group Pty Ltd) 2018 — 9781488616570 —
3.14. LO5 Glen River Ltd is a supplier of trusses to the construction industry. On 1 January, the company’s inventory of pre-made roof trusses consisted of 50 trusses in stock at a cost of $25 per
(b) Prepare a partial income statement showing the gross profit earned by Glen River on the January sale when the FIFO method is used.
(c) Would the January gross profit be more or less if Glen River used a periodic inventory with a weighted average cost inventory system? Why?
3.15 LO7 Prepare an income statement for the year ended 30 June 2017 given the following account balances.(Note: Some accounts may not be relevant.)Cash 3,000 Sales 280,000 Salary and wages 37,000
3.16 LO3–6 On what basis would the following expenses be measured or calculated (i.e. what does the amount for each represent)?Expense account Amount $ Basis of measurement A Insurance 2,400 B
3.17 LO7 Calculate depreciation expense for each asset group for the year ended 30 June 2017.Asset Delivery trucks Office equipment Computers Building Acquisition cost $250,000 $16,000 $14,200 Useful
3.18 LO3/4 After the accountant of Samaras Co. had prepared the financial statements for the year ended 31 January 2017, the following errors came to light:1 A motor van purchased at a cost of
3.19 LO6 Dixon Supplies Co. has recently prepared draft financial statements for the most recent year. A profit for the year of $290,000 was reported. Subsequent investigation found that one item of
3.20 LO7/8 The following is the statement of financial position of WW Associates as at 31 December 2016.WW ASSOCIATES Statement of financial position as at 31 December 2016$ASSETS Current assets Cash
3.21 LO3–7 Ambrose prepares his income statement on a cash basis.Sales 100,000 Less inventory purchases 30,000 Equals gross profit 70,000 Less expenses Salary and wages 20,000 Rent 15,000 Insurance
3.22 LO4 Equipment was acquired on 1 July 2012 for $50,000 by HiLite Ltd. Its life was determined as being:• useful—5 years• economic—8 years• physical—10 years.The estimated residual
(b) What would be the difference in the depreciation expense for the year ending 30 June 2014 based on using either the straight-line method or the reducing-balance method?
(c) On what basis should management select from these two methods to depreciate the equipment?
3.23 LO4 You review the notes to the property, plant and equipment account and observe the items listed in the reconciliation between the opening and closing balance of various property, plant and
3.24 LO5 The following schedule represents the inventory movements for product ‘xtra’ for the year. Inventory is assumed to be purchased on the first day of each quarter before any sales for that
3.25 LO6 The following table summarises the inventory movements of a particular product for the year under the perpetual inventory recording system.Opening balance 100 @ $1 1st quarter 2nd quarter
(b) Determine cost of goods sold using FIFO cost allocation.
(c) Determine the value of closing inventory using LIFO cost allocation.
(d) Determine the value of inventory loss (shortage) using average-cost allocation.
3.26 LO6 The following information directly relates to sales and is obtained from the records of the first year of operation of JustCo Ltd.Account Amount $For the year balances Net sales—cash
(b) What would be the difference for the period in recognising uncollectable accounts receivable amounts on the basis of ‘bad debts realised expense’ compared with recognising both‘bad and
(c) For the next year, management decides to recognise ‘bad and doubtful debts expense’ on the basis of net credit sales. Provide the appropriate rate for this calculation, basing it on the first
(d) What are the relative merits of the aged listing approach and the percentage of credit sales approach to determining the ‘bad and doubtful debts expense’ for the year?(e) The firm seemed
3.27 LO7 The following is the statement of financial position of TT Motors at the end of its first year of trading(from Self-assessment Question 3.1):TT MOTORS Statement of financial position as at
LO1 Provide an overview of the recording process, including the nature of business transactions, steps in the recording process, the role of the general journal and ledger accounts, through to the
LO2 Explain how the use of double-entry bookkeeping mirrors the first-principles approach, and use the general journal and ledger accounts to record a set of basic business transactions
LO3 Explain the importance of a trial balance and use one as part of the accounting process
LO4 Close off a simple set of accounts using the profit and loss account and complete a balance sheet from the ledger accounts
LO5 Record a series of period-end adjustments in the accounts, relating to prepayments and accruals, deferred revenues and revenues outstanding, depreciation, bad and doubtful debts, and transactions
LO6 Use a manufacturing account and a trading account where appropriate
LO7 Use an adjusted trial balance and a worksheet to complete a set of final accounts
LO8 Describe a chart of accounts and explain its importance.
Journalise the year-end adjustments relating to the following transactions and then post them to the ledger accounts (incorporating any balances from the year). Show clearly any transfers to the
(b) Stock of writing materials and stationery costing $5,000 was purchased during the year.On 31 December 2017, $500 worth remained in hand.
(c) Rates amounting to $5,800 were paid on 30 September, covering the period 1 July 2017 to 30 June 2018
Journalise the following adjustments and record them (and any opening balances) in ledger accounts.Show clearly any transfers to the profit and loss account. You should assume that the financial year
(b) At the end of the financial year the receivables balances totalled $154,000. Bad debts amounting to $4,000 were written off. The accounts show an opening doubtful debts provision amounting to
The following adjustments are to be brought into account:(a) Amounts outstanding at 30 June Factory wages $5,000 Advertising $3,000(b) Amounts prepaid General expenses $22,000(c) $5,000 of the
(a) From Table 4.3, what codes would give you a total figure for the three sections of the business for receivables and wages?
(b) How easy would it be to prepare a profit and loss account for the entire business in Table 4.3?
(c) Why do you think that it is important that the chart of accounts facilitates reporting of the separate sections of the business?
(d) Can you think of any areas of the restaurant business that might need more detailed reporting? Identify the accounts and suggest a code or codes for these in line with those in Table 4.3
(e) For a retailer with a huge range of inventories, such as a supermarket, how might the chart of accounts reflect the need for a detailed system of coding for sales and cost of sales?
1 If possible, obtain a variety of charts of accounts and compare them. What similarities do they have?
2 What differences do they have? Can you suggest reasons for these differences?
4.1 LO1 Outline the purpose of the general journal. How likely is it that it will be used for all transactions? Is it a necessary part of the recording process?
4.2 LO1 Discuss the importance of the narrative and folio sections of the journal.
4.3 LO2–5 What are the main advantages of the double-entry system?
4.4 LO2–5 What are the main disadvantages of the double-entry system?
4.5 LO1/2 What is the typical range of accounts kept in a ledger accounting system?
4.6 LO1/2 What is the difference between journalising a transaction and posting it?INTERMEDIATE
4.7 LO3/7 Explain the role of a trial balance.
4.8 LO3 List the kind of errors in record-keeping that might prevent a trial balance from agreeing.
4.9 LO7 Discuss the reasons for use of an adjusted trial balance.CHALLENGING
4.10 LO7 How useful is the worksheet approach?
4.11 LO8 Discuss the importance of the chart of accounts.
4.12 LO8 How might you design a chart of accounts for the exciting business ventures that you plan? How might you deal with uncertainty regarding future directions?
4.13 LO6 Identify and explain the way in which the expenses of a manufacturing business will be split into the manufacturing, trading and profit and loss accounts in deriving profit.
4.1 LO2 Show how the following would be recorded in the general journal.January 1 A. Dele invests $100,000 in a business.January 2 The business buys stock/inventory for $40,000 cash.January 3 It buys
4.2 LO2 The opening balance on the receivables account of a business was $40,000.The following transactions occur, all of which relate to receivables:(a) Sales on credit amounted to $25,000.(b) Cash
4.3 LO2 D. Harvey started business on 1 April with $150,000. He also borrowed $50,000 from A. Veck on a long-term loan. Both amounts were paid into a business bank account. During the next three
4.4 LO2–5 On 30 November Martin Webb extracted the following trial balance from his ledger.Debit Credit Capital 23,000 Drawings 20,000 Receivables 16,000 Payables 14,000 Inventory (1 January)
Journalise the December transactions and post them to the above accounts. All receipts are paid into the bank and all payments are made by cheque.Martin Webb balances his accounts on 31 December each
4.5 LO2/5 The balance sheet of a company contained the following:2016 (end) 2017 (end)Plant at cost $870,000 $920,000 Less Accumulated depreciation $210,000 $250,000$660,000 $670,000 During 2017
4.6 LO2/5 Tiger Trucks purchases a truck on 1 July 2015 for $90,000. The business decides that the truck ought to last for 5 years, after which it is likely to be sold for 10,000. Tiger Trucks’
4.7 LO2/5 The following items appear in the balance sheet of a business as at 31 December 2016:Current assets Prepaid insurance $3,000 Prepaid heating $1,500 Current liabilities Accrued wages $8,000
4.8 LO2/5 From the information given below, you are required to show the ‘Rent and insurance’ account for the business for the year ended 30 June 2017, indicating clearly the prepayments and
4.10 LO2/4/5 On 31 March 2016 the balance brought forward in the books of a business included the following:Debit Credit Equipment at cost 50,000 Accumulated depreciation as at 31 March 2016 10,000
(b) On 1 January 2017 a new piece of equipment was purchased at a cost of $8,000—$4,000 was paid in cash and the rest was satisfied by part exchange of a piece of equipment which had cost $5,000
(c) On 1 December 2016 rates were paid for the year ending 30 June 2017, amounting to $2,500.
(d) The total of receivables as at 30 March 2017 amounted to $55,000. It was decided that one debt of $1,000 was irrecoverable, and that the provision for doubtful debts should remain at 5% of
4.11 LO2/4/5 A firm makes up its accounts each year to 31 December, and the following transactions took place in respect of motor vehicles:2015 1 January Truck 1 purchased for cash $40,000 30 July
4.12 LO2/5 On 1 January loose tools to the value of $4,000 were held by a business. During the year wages of$200,000 were paid, of which $2,000 related to work on loose tools for the business’s own
4.13 LO2–5 The following items appear in the balance sheet of a business as at 31 December 2017:$Current assets Prepaid insurance 500 Prepaid administration 1,000 Current liabilities Accrued wages
4.14 LO3–5 The following trial balance was extracted from the accounts of Wiggs Ltd as at 31 December 2017.Wiggs Ltd Trial balance as at 31 December 2017$ $Sales 800,000 Purchases 500,000 Wages and
4.15 LO3–5 The following trial balance was prepared from the accounts of a business as at 30 June 2017.Trial balance as at 30 June 2017$ $Sales 270,000 Purchases 140,000 Inventory 1 July 2016
4.16 LO3–5 The following is the trial balance of a sole trading business at the end of its financial year.Trial balance as at 30 June 2017 Debit Credit$ $Motor vehicles (cost) 17,500 Motor vehicles
4.18 LO3/4/5/7 The following balances appeared in the records of James Golding’s furniture business at 31 May 2017:$Delivery truck 1 25,000 Delivery truck 2 15,000 Capital 300,000 Creditors 54,000
7 The following payments were also made in the year:(a) Delivery van expenses $10,000(b) Administration expenses $15,000(c) Wages $70,000 (including $3,000 a month for James Golding)(d) Loan interest
Prepare a profit and loss account for the year and a balance sheet at the year-end. You might like to modify the worksheet approach used in Learning Objective 7 to do this.
LO1 Explain the nature and role of accounting
LO2 List the main groups that use the accounting reports of a business entity, and summarise the different uses that can be made of accounting information
LO3 Compare and contrast financial and management accounting
LO4 Identify the main purpose of a business (while recognising a range of other influences), and explain the traditional risk–return relationship
LO5 Provide an overview of the main financial reports prepared by a business
LO6 Outline the main types of business ownership, describe the way in which a business is typically organised and managed, and explain the importance of accounting in a business context
LO7 Identify ways in which business and accounting have been changing, together with some current issues confronting businesses and their associated reporting, including current thinking on ethics in
LO8 Explain why accounting information is generally considered to be useful, and why you need to know the basics of accounting

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