Question 1 Balance Day Adjustments

Jane Lent, has provided you with the following information in relation to her business Janes Design World, for the year ended 30 June 2021.

You are required to: Prepare General Journal entries to record the balance day adjustments at 30 June 2021

include a brief narration for each journal

All work must be carried out in accordance with Janes Design Worlds policies and procedures which are available in Canvas.

Information regarding the balance day adjustments:

Tax Invoice No. JZ620 for the sale of stock - dated 31 May 2021, for $825 (incl. GST) was omitted from the Sales Journal and needs to be recorded before year end.

Business Insurance expense of $6,600 (incl. GST) was paid on the 1st May 2021 for the next 12-month period: May 1st, 2021 April 30th, 2022.

Jane rents out a section of her showroom to a 3rd party for $220 (incl. GST) per month for some extra income. As at June 30th the tenant owes Jane 3 months rent.

The business owes its employees unpaid wages for the period 25th 30th June 2021: This amounts to a total of $3,275

Water Rates expense owing but not yet paid by the business, $730 (GST Free)

A client has prepaid a deposit for work that is to be carried out in August 2021 (the next financial year!) The amount is $1,650 (incl. GST). This affects the Consultancy Fees (Income) Account.

Debtors total was $23,995, however, an additional bad debt of $495 (incl. GST) still needs to be accounted for. This amount relates to goods sold during the current year.

Allowance for Doubtful Debts was $790. This now needs to be at 4% of total debtors after additional bad debts have been recorded.

Depreciate motor vehicles at 20% p.a. Straight Line. (Original Cost is $37,000 and accumulated depreciation to date is $7,400).

Computer equipment is to be depreciated at 33%p.a. reducing balance (Original Cost is $25 000; Accumulated Depreciation is $8,000).

Currently the Provision for Long Service Leave is at $6,200. This needs to be increased to $7,500.

Create a provision for annual leave of $4,250.

Question 2 Closing the Ledger

You have been asked to help a friend of Janes close off their accounts for the year to determine if they have made a profit. They have presented you with the following trial balance, after all entries for balance day adjustments had been recorded in the general ledger. Using the information, you are required to:

Prepare general journal entries to close the ledger as 30 June 2021

Post the closing entries to the Capital, Trading and Profit & Loss ledger accounts Samnangs Trading Co. Adjusted Trial Balance as at 30 June 2021

Samnangs Trading Co. Adjusted Trial Balance as at 30 June 2021	Debit	Credit
Accounts Receivable	35,400.00
Accounts Payable		17,200.00
Accrued Income	2,650.00
Accrued expenses		3,580.00
Accumulated Depreciation Motor Vehicles		15,000.00
Accumulated Depreciation Computer Equip		5,200.00
Allowances for Doubtful Debts		1,320.00
Annual leave expense	3,400.00
Advertising	8,700.00
Bank Fees and Charges	820.00
Bad Debts	1,300.00
Capital: S Khmer		183,400.00
Cartage Inward	4,250.00
Cash at bank	14,890.00
Commission Income		6,500.00
Computer Equipment	33,000.00
Customs Duty	3,875.00
Delivery expenses	5,252.00
Depreciation Motor Vehicles	10,000.00
Depreciation Computer equipment	2,200.00
Discount Expense	3,450.00
Doubtful Debts	2,500.00
Drawings	7,230.00
GST Collected		7,907.00
GST Paid	5,450.00
Insurance General	5,600.00
Interest on Loan	6,400.00
Land and buildings	375,000.00
Long Term Loan		35,000.00
Motor Vehicles	65,000.00
Motor Vehicle Expenses	9,250.00
Office Wages	23,600.00
Petty Cash	500.00
Prepaid Income		2,400.00
Prepaid Expenses	6,700.00
Provision for Annual Leave		12,000.00
Provision for Long Service Leave		23,000.00
Purchases Returns and Allowances		4,800.00
Purchases	275,650.00
Rental Income		8,870.00
Rates expense	1,850.00
Sales Returns and Allowances	7,860.00
Sales		675,000.00
Stock (1/7/20)	79,400.00
Total	1,001,177	1,001,177
Additional Information: Stock as per stocktake 30 June 2021 is $87,500

Listed below are the policies and procedures that must be followed when preparing Financial Reports for Janes Design World

• Balance Day is 30 June
• The business uses the Periodic System of recording inventory
• Each year a stocktake must be done to ascertain the value of closing stock.
• General Journal entries are to be checked and verified prior to entering into the accounting system

• Depreciate Motor Vehicles at 20% p.a. using the Straight-line method
• Depreciate Machinery & Equipment at 25% p.a. using the Reducing balance method
• Depreciate Computer Equipment at 33% p.a. using the Reducing balance method
• Allowance for Doubtful Debts is to be 4% of the Accounts Receivable balance as at the end of the financial year (after all bad debts have been written off).

• The preparation of reports must adhere to the accounting standards and the layouts of a Classified Income Statement, and a Classified Balance Sheet as specified in AASB101: Presentation of Financial Statements

• The rules of double entry accounting principles must be followed.
• At balance day all accrued income and expenses must be brought to account.
• At balance day all prepaid income and expenses must be adjusted so that accounts
• are not overstated.
• Provision for employee entitlements must be brought to account at the end of the financial year in accordance with AASB119: Employee Benefits

Asset Acquisition Procedure is as follows:

• All asset purchases and disposals will be accounted for in accordance with the accounting standard AASB116: Property, Plant and Equipment.
• Jane Lent, the business owner will be responsible for the purchase of assets. At the time of receiving the goods, items which are to be tracked in the fixed asset system must be tagged with an asset label for identification purposes.
• A file is kept for each asset purchased. This file should include the Tax Invoice, warranties, loan arrangements and any other documentation regarding the purchase. When sold, sale documentation should be added to the file.
• The purchase must then be entered in the computerised fixed asset register system, entering as much detail as possible about the asset.

Depreciation

• The Straight-line calculation method will be used in depreciating Motor Vehicles, and
• The Reducing balance calculation method will be used for all other assets Asset Maintenance
• Maintenance of assets will be recorded in the fixed asset system, along with all other details related to the fixed assets, such as acquisition and disposal data, warranty information and depreciation.

Asset Disposal

• Depreciate the asset to the date of sale
• Create a Disposal of Non-Current Asset (NCA) account and a Profit/Loss on Sale of Asset account
• Transfer any amounts remaining in the applicable asset account (representing the cost of the asset sold) to a Disposal of NCA account
• Transfer any amounts remaining in the Accumulated Depreciation Account (applicable to the asset sold) to the Disposal of NCA account
• Record the proceeds from the sale of the asset
• Transfer any profit or loss on the sale of the asset to a Profit/Loss on Sale of Asset account