Question 3: Preparation of Financial Reports

Jane Lent from Janes Design World has provided you with the final Trial Balance for the reporting period. Using the information provided you are required to:

1. Prepare a statement of comprehensive income for the year ended 30 June 2021.
2. Prepare a statement of financial position as at 30 June 2021.

Before preparing the required financial reports, Jane has asked you to the check the Trial Balance as she is aware that there are some errors, and as a result she cant get the Trial Balance to balance!

When you have identified the errors, make a note of them in the space provided below, and make the alterations in the Trial Balance, so that it balances and can then be relied on to prepare the Financial Reports.

Errors identified

Error	Correction Required

Jane Design World
Trial Balance as at June 30, 2021.
	Debit	Credit
	$	$
Accounts Receivable	54,690
Accounts Payable	32,875
Accrued Income	3,450
Accrued expenses		5,450
Accumulated Depreciation Motor Vehicles		42,000
Accumulated Depreciation Computer equipment		12,900
Allowances for Doubtful Debts		2,125
Advertising	10,560
Bank Fees and Charges	780
Bad Debts	925
Capital: Jane Lent		285,700
Cartage Inward	15,400
Cash at bank	16,990
Commission Income		6,200
Computer Equipment	33,000
Customs Duty	9,600
Delivery expenses	112,500
Depreciation Motor Vehicles	21,000
Depreciation Computer equipment	6,525
Discount Expense	4,350
Doubtful Debts	2,125
Drawings: Jane Lent	13,800
Goodwill	20,000
GST Collected		6,980
GST Paid	3,250
Insurance General	4,950
Interest on Loan	6,850
Insurance on stock	5,400
Land and buildings	475,000
Long Term Loan		65,000
Loss on Sale of Motor Vehicles	5,800
Motor Vehicles	65,000
Motor Vehicle Expenses	11,350
Mortgage on Land		150,000
Office Wages	23,600
Petty Cash	500
Prepaid Income		8,750
Prepaid Expenses		6,500
Profit on Sale of Non-Current Asset		9,500
Provision for Annual Leave		12,000
Provision for Long Service Leave		38,000
Purchases Returns and Allowances	6,750
Purchases	275,640
Rental Income		9,750
Rates expense	1,395
Sales Returns and Allowances	6,850
Sales		696,700
Stock (1/7/19)	45,300
Shares in HBP Pty Ltd	80,000
Wages salespersons	47,600
Total	$1,423,805.00	$1,357,555.00

Balance Day Adjustment
Stock on hand (30/6/2021)	$ 85,700.00

Question 4: Theory Questions:

a) provide an explanation of the principles of double entry bookkeeping. b) describe the purpose of Balance Day Adjustments. What is the importance of the Matching principle in relation to Balance Day Adjustments?

c) Which Accounting standard sets out the guidelines for the presentation of Financial Reports?

d) What is the objective of the Accounting Standard you listed in Q3, and how does it aim to achieve this?

e) What is the purpose of the General Ledger

f) List 2 (two) basic functions of an organisations accounting (information) system.

g) What accounting controls should be in place to assist to minimise and detect errors?

h) An accounting system must be designed to meet the needs of the users of the accounting information it provides. What 3 (three) factors will help to determine how the system should be designed?