Overview Background information MOOND OLLARS COFFEE Assume it is currently June 30, 20XX. You are working for the temporary accounting employment agency known as Tempters. Today you have been asked to work at Moondollars, a small coffee supplies store that operates in the city and is owned by Adrian Bartos. Your task here is to complete the accounting cycle for Moondollars for the month of June 20XX. To assist you in this task, Adrian tells you to read the company's accounting policies and procedures. Note that you will be required to follow these policies and procedures when completing the accounts for Moondollars. Accounting policies a. Business operations: Moondollars is set up as a private non-listed corporation based in the city with Adrian Bartos as the sole stockholder. The business derives its main source of revenue from retail sales of coffee supplies. To assist in managing the business, Moondollars rents a small office space. Note that the business is required to pay for the rent for this premises in advance. The electricity and water expenses incurred during the month relate to the running of the office. Additional expenses include an insurance policy to protect the equipment in the office in the event of theft or fire. All costs associated with the office are classified as general and administrative expenses. Adrian is the only full-time employee and his role is to handle all administrative tasks. Adrian's salary is paid once at the end of each month. All other employees are sales staff who are employed on a part-time basis. The sales staff receive their wages every two weeks. b. Accounting cycle: The business adopts a monthly accounting cycle. c. Purchases: Purchases are recorded when the business receives the goods. All items purchased are received on the same day as recorded in the transaction list, except for purchase orders which are received at a later date. Note that the business uses the gross method of recording purchases and receives trade discounts and early payment discounts from some suppliers. d. Purchase returns: To allow Adrian to separately track and analyze the value of goods returned to suppliers, all purchase returns are recorded in the Purchase Returns and Allowances account rather than directly in the Purchases account. e. Revenue recognition: The business recognizes revenues when goods sold are delivered to customers. All items sold are delivered on the same day as recorded in the transaction list except for sales orders, which are delivered at a later date as agreed with the customer. Note that the business uses the gross method of recording sales and sometimes grants trade discounts to customers. Past experience has shown that offering early payment discounts did not increase the likelihood of accounts receivable being paid promptly. Therefore, discounts for early payment of accounts are not normally offered to credit customers except in exceptional circumstances. f. Sales returns: So that the business can easily track the level of sales returns in relation to overall sales, all sales returns are recorded using a contra revenue account (Sales Returns and Allowances) rather than being recorded directly in the Sales Revenue account.