Unit 1-Chapter 1-Color Version

8/3/2019 Unit 1-Chapter 1-Color Version

1/321 VCE Accounting Unit 11. The accounting process.

VCE Accounting Unit 1Cash based service businesses

A multi-media approachDavid Page



VCE Accounting Unit 1Cash based service businesses

A multi-media approach

Chapter 1 ... The accounting process.Chapter 2 ... Adding GST to the accounting process.Chapter 3 ... Classification of the accounting reports.Chapter 4 ... Bank reconciliations.Chapter 5 ... Budgeting.



Chapter 1The accounting process



Annie is an architect providing professional advice to individuals and businesses. Thisadvice is the revenue activity of her business. At 1/7/19, the business had the

following Balance Sheet:

Annie the Architect: Balance Sheet at 1/7/19

Assets $ Equities $

Bank 40000 Capital, Annie 95000

Office assets 25000

Vehicle 30000

Total assets 95000 Total equities 95000Assets and equitiesbalance in aBalance Sheet. Annie has 100%ownership in the assets of thebusiness at 1/7/19. Her equity in thebusiness is often called Capital.

Transactions for Annie the Architect, July 2019:

Annie the ArchitectReceipt # 40

Date: 1/7/19

From: Customers

For:Consulting fees

$: $3000.00

Thank you

Botanical Bank

Date: 5/7/19

To: Shelly

For: Wages expense

This cheque $900.00

Cheque number 55

Annie the Architect


Date: 9/7/19

From: Customers

For:Consulting fees

$: $2000.00

Thank youBotanical Bank

Date: 12/7/19

To: HotWire

For: Internet

expenses

This cheque $300.00

Cheque number 56Annie the Architect


Date: 17/7/19

From: Customers

For:Consulting fees

$: $4000.00

Thank you

Botanical Bank

Date: 22/7/19

To: Andersons

For: Rent expense

This cheque $4500

Cheque number 57

Annie the Architect

Botanical Bank

Date: 26/7/19

To: Flash in the Pan

For: Cleaning

expenses

This cheque $200.00

Cheque number 58

Annie the Architect

Botanical Bank

Date: 28/7/19

To: OfficeWorks

For: Office assets(new computer)

This cheque $3000

Cheque number 59Annie the Architect


Date: 31/7/19

From: Customers

For:Consulting fees

$: $1000.00

Thank you

Transactions are evidenced by documents.Documents verify the transaction and ensurethe data is reliable. Documents are inputs intothe accounting system.

AssetsResources under the controlof the business which willprovide economic benefits.

Record in the journals.

Equities

Who has an ownership orinterest or claim in the assets.



Cash Receipts Journal (CRJ)CFS

IS X rev. X X

BS calc. X calc. calc. X

Date Details Doc. BankConsultation

FeesCash

CapitalLoans

InterestRevenue

Sundry

Journals for July 2019: Journals record the transactions of the business. Cash receipttransactions are recorded in the Cash Receipts Journal and cashpayment transactions are recorded in the Cash Payments Journal.

The design or format of the journals varies from business to business anddepends on the information needs of each business. If a particular type of

transaction occurs frequently, it usually has its own column in the journals.

Add up thecolumns at the

end of July.

Accounting reports for July 2019:

Annie has decided to prepare accounting reports for

July. July is thus the reporting period.

Annie the Architect:Cash Flow Statement for July 2019

Cash Receipts $ $

Cash Payments

Change in cash

+ cash bal. at start= cash bal. at end

The Cash Flow Statement reports on cash receipts for the reporting period less cash paymentsfor the reporting period and calculates the cash balance at the end of the reporting period. Most ofthe data for the Cash Flow Statement comes from the cash journals.

Get the data from the Cash Receipts Journal.

Get the data from the Cash Payments Journal.

Get the cash at start from the Balance Sheet

at the start of the reporting period.

This is the most important value the cash balance at the end.

1. Cash Flow Statement:

revenue activity

Cash Payments Journal (CPJ)CFS

IS X exp. exp. X X exp. exp. exp. exp. ?

BS calc. X X calc. X X X X ?

Date Details Doc. Bank WagesInternet

Exps.Drawings Loan Interest Rent Cleaning

OfficeExps.

Sundry

Sundry is used formiscellaneous or infrequent

type transactions!



2. Income Statement: The definition ofprofit is revenue less expenses for the reportingperiod. The Income Statement reports on revenue and expensesfor the period to determine profit or loss.

Annie the Architect:Income Statement for July 2019

Revenue $ $

Less Expenses

Net Profit

The revenue activity for Annie the Architect is

Consultation Fees. Annie could call this revenue othernames such as Fees or Takings etc. Each business candecide the name it uses for its revenue activity. SourceAnnie the Architects revenue data from the Cash Flow

Statement or Cash Receipts Journal.

Expenses work to reduce profit. Overtime, youwill become skilled at identifying expenses. Toassist you, see the top section of the CashPayments Journal and look for items in the ISrow with this symbol: ( exp.)

3. New Balance Sheet:

At the end of the reporting period, a business will prepare a new

Balance Sheet to report on the assets and equities at thatpoint in time. The data comes from the Balance Sheet at thestart of the reporting period plus any relevant changes that haveoccurred to assets and equities over the reporting period.


Assets $ Equities $

Bank Capital, Annie

Office assets Add Net Profit

Vehicle

Total assets Total equities

Get the Bank or Cashvalue from the Cash

Flow Statement.

Profit belongs to theowner so it is reported

with Capital in theBalance Sheet. Get thevalue from the Income

Statement.

Summary of the accounting process so far:

Start ofreporting

period

Businesstransactions are

evidenced bydocuments.

Transactions arerecorded in journals:

Cash Receipts JournalCash Payments Journal

End ofreporting

period

Prepare AccountingReports:

Cash Flow StatementIncome Statement

Balance Sheet

Input stage Processing stage Output stage

The accounting reports are prepared for stakeholders. Stakeholders areindividuals or businesses that are interested in the performance of the business.Examples of stakeholders include the owner, manager, potential owner, people/businesses who are owed money, employees, Australian Taxation Office etc.

Calculations/schedules:

Sometimes at the end of the reporting

period, calculations have to be done to helpprepare the new Balance Sheet. Calculations

are usually done in a schedule like this:

Office Assets Schedule at 31/7/19

$

Balance at start (Balance Sheet)Add new office assets (CPJ)

Balance at end

(CPJ)CFS

IS exp.

BS X

Date Wages



Accounting for August:


Assets $ Equities $

Bank 41100 Capital, Annie 99100

Office assets 28000

Vehicle 30000

Total assets 99100 Total equities 99100

This capital value comes from the lastBalance Sheet and is the addition of theoriginal capital plus profit. Annie still has100% ownership in the assets of thebusiness: will this change during August?

Transactions for Annie the Architect, August 2019:


Date: 1/8/19

From: Customers

For:Consulting fees

$: $1000.00

Thank you

Botanical Bank

Date: 5/8/19

To: Shelley

For: Wages expense

This cheque $900.00

Cheque number 60

Annie the Architect


Date: 9/8/19

From: Customers

For:Consulting fees

$: $3000.00

Thank you

Botanical Bank

Date: 12/8/19

To: Andersons

For: Rent expense

This cheque $4500

Cheque number 61

Annie the Architect

Annie the Architect

Receipt # 46

Date: 17/8/19

From: Customers

For:Consulting fees

$: $600.00

Thank you

Botanical Bank

Date: 22/8/19

To: OfficeWorks

For: Office expenses

This cheque $850

Cheque number 62

Annie the Architect

Botanical BankDate: 26/8/19


For: Cleaning

expenses

This cheque $170.00

Cheque number 63

Annie the ArchitectBotanical Bank

Date: 31/8/19

To: Ace Importers

For: Equipment (CAD

drawing system)This is an asset.

This cheque $6000

Cheque number 64

Annie the Architect


Date: 31/8/19

From: AMP Bank

For:Loan

$: $7000

Thank you


IS X rev. X X



Fees

Cash

Capital

LoansInterest

Revenue

Sundry

Journals for August:

Add up thecolumns at theend of August.

Cheque #64 is the purchase of new equipment. This is an asset so donot forget to report this in the Balance Sheet at the end of the month.


IS X exp. exp. X X exp. exp. exp. exp.

BS calc. X X calc. X X X X



OfficeExps.

Sundry




Accounting reports for August 2019:

Annie the Architect:Cash Flow Statement for August 2019

Cash Receipts $ $

Cash Payments

Change in cash

+ cash bal. at start

= cash bal. at end


Cash at start will be cashat end of lat month.

2. Income Statement:

Annie the Architect:Income Statement for August 2019

Revenue $ $

Less Expenses

Net Loss

See the top section of the cash journals to helpyou identify the revenue and expenses.

3. Balance Sheet:


Assets $ Equities $ $

Bank Liabilities

Office assets AMP Loan

Vehicle Owners Equity

Equipment Capital, Annie

Less net loss


The Balance Sheet now reports

liabilities as an equity. Liabilitiesare obligations to individuals or

businesses, in this example, AMP.AMP has an ownership or claim or

interest in the assets of thebusiness until the loan is repaid by

Annie the Architect.

Most businesses have liabilities, so for most businesses equities is made up of twocomponents: liabilities and owners equity. Liabilities is the external ownership in the

assets and owners equity is the internal ownership in the assets.

The information in the accounting reports is saidto be reliable if it is supported by documentary

evidence. Stakeholders expect the informationin the reports to be reliable.

ASSETS EQUITIES

$ $

=

ASSETS

$ =EQUITIES

LIABILITIES$

OWNERS EQUITY$

The Accounting Equation at 31/8/19:

The equality between assets and equities or the relationship between the values of assets,liabilities and owners equity is often called the accounting equation. The accounting

equation is really just the Balance Sheet, that is, assets equals liabilities plus owners equity.

If expensesare more

than revenue,it is a net

loss.



Accountingfor September:

Transactions for Annie the Architect, September 2019:


Date: 1/9/19

From: Customers

For:Consulting fees

$: $2000.00

Thank you

Botanical Bank

Date: 4/9/19

To: Shelley

For: Wages expense

This cheque $900.00

Cheque number 65

Annie the Architect


Date: 10/9/19

From: Customers

For:Consulting fees

$: $1500.00

Thank you

Botanical Bank

Date: 13/9/19

To: Andersons

For: Rent expense

This cheque $4500

Cheque number 66

Annie the ArchitectAnnie the ArchitectReceipt # 50

Date: 19/9/19

From: Customers

For:Consulting fees

$: $800.00

Thank you

Botanical Bank

Date: 24/9/19

To: Optus

For: iPhone charges

(office expenses)

This cheque $900

Cheque number 67

Annie the Architect

Botanical BankDate: 27/9/19


For: Cleaning

expenses

This cheque $190.00

Cheque number 68

Annie the Architect

Botanical Bank

Date: 30/9/19

To: AMP

For: Loan repayment

This cheque $500

Cheque number 69

Annie the Architect


IS X rev. X X



FeesCash

CapitalLoans

InterestRevenue

Sundry

Journals for September:

Add up thecolumns at the end

of September.


Assets $ Equities $

Bank 40280 Liabilities

Office assets 28000 AMP Loan 7000

Vehicle 30000 Owners Equity

Equipment 6000 Capital, Annie 97280


Botanical Bank

Date: 30/9/19

To: Cash

For: Drawings

This cheque $2700

Cheque number 70

Annie the Architect

Drawings is when the owner takes assets for personal use.Drawings is usually cash but can be any business asset.



BS calc. X X calc. X X X X



OfficeExps.

Sundry




Loan schedule at 30/9/19

$

Balance at start (Balance Sheet)Add new loans (CRJ)

Sub-total

Less loan payments (CPJ)

Balance at end

Accounting reports for September 2019:

Annie the Architect:Cash Flow Statement for September 2019

Cash Receipts $ $

Cash Payments

Change in cash+ cash bal. at start

= cash bal. at end


Cash at start will be cashat end of last month.

2. Income Statement:

Annie the Architect:

Income Statement for September 2019

Revenue $ $

Less Expenses

Net Loss


3. Balance Sheet:



BANK Liabilities

OFFICE ASSETS AMP loanVEHICLE Owners Equity

EQUIPMENT Capital, Annie

LESS LOSS

LESS DRAWINGS


Drawings reduces the ownersownership in the businesses assetsthus it is deducted in the owners

equity section of the Balance Sheet.

Calculations/schedules:

Use this loan schedule to workout how much is owing to AMP at

the end of September.

Accounting equation at 30/9/19:

The owner, who is usually themanager, is the major stakeholder!

ASSETS EQUITIES

$ $

=

ASSETS

$ =EQUITIES

LIABILITIES$

OWNERS EQUITY$



INTERNET TRANSFER: PAYMENT. 009

DATE: 25/1/21

FROM: PETE THE PAINTER A/C: P98332

TO: PETE A/C: 55743

FOR: DRAWINGS

TOTAL: $4500

MEMO #26:31/1/21Stocktake of paint. $2100.

Pete the Painter: Balance Sheet at 1/1/21


Truck 30000 Liabilities

Trailer 2000 ANZ Loan 10000

Office assets 9000 Bank overdraft 3000 13000

Stock of paint 6700 Owners Equity

Equipment 12000 Capital, Pete 46700Total assets 59700 Total equities 59700

Note that Pete the Painter has

a bank overdraft,a liability.This means the business hasno money in its bank accountand owes the bank money!

Transactions for Pete the Painter, January, 2021:

Bank of Dandenong

Date: 4/1/21

To: Bazza

For: Wages expense

This cheque $670

Cheque number 346

Pete the Painter

Pete the PainterReceipt # 119

Date: 1/1/21

From: Customers

For:Takings

$: $2000.00

Thank you

Bank of Dandenong

Date: 8/1/21To: Dulux

For: Paint (asset)

This cheque $370

Cheque number 347

Pete the Painter


Date: 11/1/21From: Customers

For:Takings

$: $800.00

Thank youBank of Dandenong

Date: 14/1/21

To: Garretts

For: vehicle expenses

This cheque $290

Cheque number 348Pete the Painter

Bank of Dandenong

Date: 17/1/21

To: Telstra

For: Telephone

expenses

This cheque $170

Cheque number 349

Pete the Painter



For:Takings

$: $1600.00

Thank you

Bank of Dandenong

Date: 24/1/21

To: Dulux

For: Paint (asset)

This cheque $490

Cheque number 350

Pete the Painter

Pete has used an internet transfer to pay himselfdrawings. This is an easy and quick way to transfer

money from the business account to the owners personalaccount. It is still recorded in the cash payments journal.

Memo #26 is an example of a non-cash transaction so itis not recorded in the cash journals. It will be recorded in a

new journal called the General Journal. See below:

General Journal (GJ)

Date Details $

We have seen 3 journals. Cash receipts, cash payments andnow the general journal for non-cash transactions.

Pete thePaintersrevenue

activity ispainting!




When Pete buys paint, it is an asset.The paint that is used-up during thereporting period is an expense.At the end of each reporting period,Pete needs to calculate the paintused-up to calculate paint expense.


IS X exp. exp. X X exp. exp. calc. exp.

BS calc. X X calc. X X Stock at end X

Date Details Doc. Bank WagesTeleph.Exps.

Drawings Loan InterestVeh.Exps.

PaintOfficeExps.

Sundry

Pete the Painter calls hisrevenue activity Takings.

Cash Journals for January:

Calculations/schedules for January:

Paint expense schedule at 31/1/21

$

Stock of paint at start (Bal. Sheet)

Add purchases of new paint (CPJ)

Sub-total

Less stocktake of paint (GJ)

Paint expense for period

Accounting reports for January 2021:

Pete the Painter: Cash FlowStatement for January 2021

Cash Receipts $ $

Cash Payments

Paint purchases 860

Change in cash


= cash bal. at end

1. Cash Flow Statement: 2. Income Statement:

Pete the Painter: Income State-ment for January 2021

Revenue $ $

TAKINGS

Less Expenses

Paint

Net Loss


Note: there is a difference between paint purchases as reported in the Cash FlowStatement and paint expense as reported in the Income Statement.

Dont forgetthe paintexpensefrom theschedule!

The cash balance at the end

is a (negative) which meansthere is an overdraft.


IS X rev. X X


Date Details Doc. Bank TakingsCash

CapitalLoans

InterestRevenue

Sundry



3. Balance Sheet:



Liabilities

ANZ loan

BANK OVERDRAFT

Owners EquityCapital, Pete


All of the reports are expressedin Australian dollars, $A, as perthe monetary unit principle.

Assets are recorded at

their historical cost(original cost) which canalways be verified bydocumentary evidence.

Transactions for Pete the Painter, February, 2021:

INTERNET TRANSFER: PAYMENT. 011DATE: 15/2/21


TO: PETE A/C: 55743

FOR: DRAWINGS

TOTAL: $1000


Date: 1/2/21

From: Customers

For:Takings

$: $2000.00

Thank you

Bank of Dandenong

Date: 18/2/21

To: Dulux

For: Paint (asset)

This cheque $750

Cheque number 351

Pete the Painter


Date: 11/2/21

From: Customers

For:Takings

$: $1700.00

Thank you

Bank of Dandenong

Date: 19/2/21

To: Shell DovetonFor: Petrol (vehicleexpenses)

This cheque $89

Cheque number 352

Pete the Painter

Bank of Dandenong

Date: 22/2/21

To: Telstra

For: Telephone

expenses

This cheque $150

Cheque number 353

Pete the Painter


Date: 23/2/21

From: Customers

For: Takings

$: $3100.00

Thank you

Bank of Dandenong

Date: 24/2/21

To: AMP

For: Insurance

expense

This cheque $570Cheque number 354

Pete the Painter


DATE: 5/2/21


TO: BAZZA A/C: 776589

FOR: WAGES EXPENSE

TOTAL: $690

MEMO #27:24/2/21

Owner contributed a personalcomputer to the business, $2000.Record as office assets.

Bank of Dandenong

Date: 28/2/21

To: Dulux

For: Paint (asset)

This cheque $210


INTERNET TRANSFER: RECEIPT. R776

DATE: 29/2/21

FROM: PETE A/C: 55743

TO: PETE THE PAINTER A/C: P98332

FOR: CAPITAL INJECTION OF CASH

TOTAL: $2700

MEMO #28:29/2/21Stocktake of paint. $830.00

Bank

overdraftis a

liability.




Journals for February:


Date Details $

Total the cash journals atthe end of February.

Calculations/schedules for February:


$



Sub-total



Accounting reports for February 2021:

Pete the Painter: Cash FlowStatement for February 2021

Cash Receipts $ $

Cash Payments

Paint purchases

Change in cash


= cash bal. at end


Pete the Painter: IncomeStatement for February 2021

Revenue $ $

Less Expenses

Paint

Net Profit


Dont forget

the paintexpensefrom theschedule!

Office Assets schedule at 29/2/21$

Balance at start (Bal. Sheet)

Add new office assets

Balance at end


IS X rev. X X



CapitalLoans

InterestRevenue

Sundry






PaintOfficeExps.

Sundry

Capital schedule at 29/2/21

$


Add new capital

Balance at end



3. Balance Sheet: Pete the Painter: Balance Sheet at 29/2/21Assets $ Equities $ $

Liabilities

ANZ loan

Owners Equity

Capital, Pete


Accounting Equation:

Consider the following transaction ofPete the Painter and the impact on the accounting equation.

1. Cash takings $3000.

ASSETS LIABILITIES OWNERS EQUITY

Increase in bank $3000 No impact Increase $3000 due to takingsrevenue.

= +

2. Cash drawings $6000.

ASSETS LIABILITIES OWNERS EQUITY= +

3. Bought office assets $5000 cash.


4. Paid cash for wages, $600.


5. Borrowed $3000 from ANZ bank.


6. Owner injected $1000 into the business.


Assets are recorded at

their historical cost(original cost) which canalways be verified bydocumentary evidence.



Transactions for Pete the Painter, March, 2021:



TO: PETE A/C: 55743

FOR: DRAWINGS

TOTAL: $3000


Date: 3/3/21

From: Customers

For:

Takings

$: $1400.00

Thank you

Bank of Dandenong

Date: 7/3/21

To: Dulux

For: Paint (asset)

This cheque $390



Date: 11/3/21

From: Customers

For:Takings

$: $550.00

Thank you

Bank of Dandenong

Date: 17/3/21

To: Shell Doveton

For: Petrol (vehicle

expenses)

This cheque $117

Cheque number 357

Pete the PainterBank of DandenongDate: 22/3/21

To: City Sotware

For: Accountingpackageofficeexpenses

This cheque $350

Cheque number 358

Pete the PainterPete the PainterReceipt # 127

Date: 23/3/21

From: Customers

For: Takings

$: $700.00

Thank you

Bank of Dandenong

Date: 28/3/21

To: Paint Spot

For: Spray painting

machine (equipment)Asset.

This cheque $3000Cheque number 359

Pete the Painter


DATE: 13/3/21


TO: BAZZA A/C: 776589

FOR: WAGES EXPENSES

TOTAL: $810

Bank of Dandenong

Date: 29/3/21

To: Dulux

For: Paint (asset)

This cheque $160

Cheque number 360

Pete the Painter

MEMO #29:

31/3/21Stocktake of paint. $600.00


Assets $ Equities $

Stock of paint 830 Liabilities

Bank 951 ANZ loan 10000

Truck 30000

Trailer 2000 Owners Equity

Office assets 11000 Capital, Pete 46781

Equipment 12000


INTERNET TRANSFER: RECEIPT. 01

DATE: 1/3/21

FROM: ANZ BANK: A/C: ANZ99811278

TO: PETE THE PAINTER A/C: P98332

FOR: INCREASE IN LOAN

TOTAL: $2900


DATE: 27/3/21

FROM: PETE THE PAINTER A/C: P98332TO: ANZ BANK: A/C: ANZ99811278

FOR: LOAN REPAYMENT $500, INTEREST $70

TOTAL: $570









PaintOfficeExps.

Sundry

Journals for March:


Date Details $

Total the cash journals atthe end of March.

Calculations/schedules for March:


$



Sub-total



Accounting reports for March 2021:

Pete the Painter: Cash FlowStatement for March 2021

Cash Receipts $ $

Cash Payments

Purchases of paint

Change in cash


= cash bal. at end


Pete the Painter: IncomeStatement for March 2021

Revenue $ $

Less Expenses

Paint

Net Profit/loss


Dont forgetthe paintexpensefrom theschedule!


$


Add new loans (CRJ)Sub-total

Less loan payments (CPJ)

Balance at end


IS X rev. X X



CapitalLoans

InterestRevenue

Sundry

Equipment schedule at 31/3/21

$


Add new equipment (CPJ)

Balance at end





Liabilities

ANZ loan

BANK OVERDRAFT

Owners Equity

Capital, Pete


3. Balance Sheet:

Accounting Equation:

Consider the following transactions ofPete the Painter and the impact on the accounting equation.

1. Owner contributed vehicle to business, $20000.


2. Paid rent $4000.


3. Bought computer $4000 cash.


4. Cash takings, $3500.


5. Borrowed $2000 from Commonwealth Bank.


6. Owner injected $7000 cash into the business.


7. Repaid $2000 to the Commonwealth Bank.




Haleys Gardening: Balance Sheet at 30/6/19Assets $ Equities $

Stock of supplies 4900 Liabilities

Truck 26000 Vic Finance Co. 11000

Office assets 15000 Bank overdraft 3000

Mower 3800 Owners Equity

Capital, Haley 35700


Supplies includefertilizers, chemicals,petrol for mower etc.


IS X rev. X X



CapitalVic

LoanInterestRevenue

Sundry

31/7 TOTALS 16900 6900 7000 3000


Date Details $

31/7 Owner took some office assets for private use, memo #55. 600

Stocktake of supplies, memo#56 3800

Sundry, $2700, is for a new trailer, asset.

Transactions for July have been recorded and totalled above. Completethe following schedules and the accounting reports for July 2019.

Supplies expense schedule at31/7/19

$

Stock at start

Add purchases

Sub-total

Less stocktake

Supplies expense


$

Balance at start

Add new loans

Sub-total

Less loan payments

Balance at end

Drawings schedule at 31/7/19

$

Cash drawings

+ other drawings

= total drawings

Office assets schedule at 31/7/19

$

Balance at start

+ change office assets

Balance at end

Haleys Gardening: Cash FlowStatement for July 2019

Cash Receipts $ $

Cash Payments

Change in cash

Cash bal. at start

Cash bal. at end

Haleys Gardening:Income Statement for July 2019

Revenue $ $

Less expenses

Net Profit/loss

Haleys Gardening:Balance Sheet at 31/7/19

Assets $ $

Total Assets

Equities

Liabilities

Owners Equity

Total Equities

Note the differentpresentation of the

Balance Sheet.

Gardening is Haleysrevenue activity which

she calls Takings.




Date Details Doc. BankAdvertisingExpenses

Phonecosts

DrawingsLoan

Repay.Interest

Veh.Exps.

SuppliesOfficeExps.

Sundry

31/7 TOTALS 6765 450 140 1600 390 75 370 790 250 2700

Capital schedule at 31/7/19

$

Balance at start (Bal.Sheet)Add new capital (CRJ)

Balance at end



Review of the elements

1. A simple definition of an asset would be RESOURCES UNDER THE CONTROL OF THEBUSINESS WHICH WILL PROVIDE FUTUREECONOMIC BENEFITS.

2. List 5 examples of assets.____________________________________________________________________________________________________________________________________________________________________________________________________________________________

3. A simple definition of a liability would be ____________________________________________________________________________________________________________________________________________________________________________________________________________________________

4. Three examples of liabilities are ...

____________________________________________________________________________________________________________________________________

5. An asset which can sometimes become a liability is____________________________________________

6. A simple definition ofowners equity would be ASSETS LESS LIABILITIES. THE OWNERSINTEREST, CLAIM OR OWNERSHIP IN THEASSETS OF THE BUSINESS.

7. A simple explanation ofequities would be____________________________________________

____________________________________________________________________________________________________________________________________

____________________________________________

8. When does the value of assets = owners equity?____________________________________________________________________________________________________________________________________

9. List four factors that can change the value of ownersequity.(i) ____________________________________

(ii) ____________________________________(iii) ___________________________________(iv) ___________________________________

10. The owner of a business took $5000 for privateuse. How would this impact on the accountingequation?____________________________________________________________________________________________________________________________________________________________________________________________________________________________

11. A simple definition ofrevenue would be ____________________________________________________________________________________________________________________________________

________________________________________________________________________________________

12. A simple definition ofexpenses would be ____________________________________________________________________________________________________________________________________

________________________________________________________________________________________

13. A business had cash revenue of $2000. Explainhow this would impact on the accounting equation.________________________________________________________________________________________________________________________________________________________________________________

____________________________________________

14. At 1/1/17 owners equity was $30000. DuringJanuary revenue was $19000, drawings $3000, andexpenses $12000. The value of owners equity at31/1/17 would be ________________________________________________________________________________________________________________________________________________________________________________

15. At 1/7/20 owners equity was $60000. During Julyrevenue was $20000, capital contribution $4000,expenses $15000 and drawings $9000. The value of

owners equity at 31/7/20 would be ________________________________________________________________________________________

________________________________________________________________________________________

16. A business borrowed $5000 from the ANZ Bank.How would this impact on the accounting equation?________________________________________________________________________________________

____________________________________________________________________________________________________________________________________

17. Explain the term reporting period.________________________________________________________________________________________

____________________________________________________________________________________________________________________________________

18. This type of transaction works to decrease ownersequity but excludes drawings.____________________________________________

19. This type of transaction works to increase ownersequity but excludes capital contribution.

____________________________________________

20. Three journals are (i) ____________________________(ii) ____________________________(iii) ____________________________

A L OE R E



Kim is a hairdresser and her Balance Sheet is provided at 1/6/15:

Kims Hairdressing Services: Balance Sheet at 1/6/15Assets $ Equities $

Bank 10000 AMP Loan 8000

Stock of supplies 3000 Capital, Kim 65000

Other assets 60000


The following transactions occurred during June2015:

Takings, $44000.

Capital contribution of cash $5000.

Purchases of more supplies $700.

Other expenses $22000.

Paid $2000 off the AMP loan principal.

Stocktake of supplies at 30/6 = $400.

Prepare the following 3 reports.

Kims Hairdressing ServicesCash Flow Statement for June 2015

Receipts $ $

Payments

Change in cash

Add balance at start

Equals balance at endKims Hairdressing ServicesIncome Statement for June 2015

Revenue $

Total revenue

Less Expenses

Total expenses

Profit

Kims Hairdressing Services: Balance Sheet at 30/6/15Assets $ Equities $

Working space if required:

This type of exercise requires you to prepare the3 accounting reports without the journals!

Hairdressing isKims revenueactivity which

she callsTakings.



From the following list of elements, prepare theAccounting Reports for the 3 months ending 31/3/16.

Pennys Podiatry:List of elements for the 3 months ending 31/3/16

Item $ Classification

Bank 31400

Stock of materials at 1/1/16 1000

Vehicle 25000

Office assets 40000

Premises 90000

AMP Loan 25000

Capital, Penny 136000

Takings 60000

Wages 12000

Office expenses 4800

Purchases of materials 6000 Do schedule

Advertising 1800

Drawings 9000

Complete the classification column using A, L, OE, OE, R or E.

A stocktake of materials at 31/3/16 = $2000.

Cash data for March quarter 2016:Cash balance at 1/1/16 = $5000Cash receipts:Takings $60000.Cash payments:Wages $12000, office expenses $4800, materials$6000, advertising $1800 and drawings $9000.

Pennys Podiatry: Cash Flow

Statement for March quarter 2016

Cash Receipts $ $

Cash Payments


= cash bal. at end

Pennys Podiatry: Income Statementfor March quarter 2016

Revenue $ $

Less expenses

NET PROFIT

Calculations:

Pennys Podiatry: Balance Sheet at 31/3/16Assets $ Equities $ $

Liabilities

Owners Equity

Capital, Penny


Profit increases owners equity and

a loss decreases owners equity.Alternatively, revenue increases

owners equity and expensesdecrease owners equity.



From the following list of elements, prepare theAccounting Reports for the 6 months ending 30/6/19.

Hotwire Electrics:List of elements for the 6 months ending 30/6/19

Item $ Classification

Tools and equipment 9000

Stock of supplies at 1/1/19 2800

Truck 34000

Furniture 6400

Computer 3200

Bank overdraft (38600)

ANZ Loan 18800

Capital 20700

Takings 44000


Purchases of supplies 14100 Do schedule

Rent 12000

Advertising 3400

Drawings 30000

Complete the classification column using A, L, OE, OE, R or E.

A stocktake of supplies at 30/6/19 = $6200

Cash data for 6 months ending 30/6/19:Cash balance at 1/1/19 = ($11700) overdraftCash receipts:Takings $44000Cash payments:Supplies $14100, office expenses $7200, rent $12000,advertising $3400, drawings $30000 and ANZ loan$4200.

Hotwire Electrics: Cash Flow Statement

for 6 months ending 30/6/19

Cash Receipts $ $

Cash Payments


= cash bal. at end

Hotwire Electrics: Income Statement for6 months ending 30/6/19.

Revenue $ $

Less expenses

NET PROFIT

Calculations:

Hotwire Electrics: Balance Sheet at 30/6/19


Liabilities

Owners Equity

Capital


Repeating that profit increases owners

equity and a loss decreases ownersequity. Alternatively, revenue

increases owners equity and expensesdecrease owners equity.




1. Owner contributed $30000 cash to business.

Indicate the impact on the accounting equation for the following transactions:


2. Business bought a computer for $4000 cash.


3. Business borrowed $10000 from NAB Bank.


4. Owner took $5000 cash for private use.


5. Cash takings $17000 for services provided.


6. Paid $2000 for wages.


7. Paid $4000 to the NAB Bank to reduce loan.


8. Paid $7000 for new furniture.



Questions ...1. Which one of the following is the best description ofan asset?

A. Future obligations of the business.

B. Resources under the control of the business whichwill provide future economic benefits.

C. Causes an increase in owners equity.D. Causes a decrease in owners equity.

2. Which one of the following is the best description ofa liability?

A. Future obligations of the business.B. Resources under the control of the business which

will provide future economic benefits.C. Causes an increase in owners equity.D. Causes a decrease in owners equity.

3. Which one of the following is the best description ofowners equity?


will provide future economic benefits.C. Liabilities less assets.D. Assets less liabilities.

4. Revenue could be defined as ..


will provide future economic benefits.C. Transactions that cause an increase in owners equity

excluding capital contributions.D. Transactions that cause a decrease in owners equity

excluding drawings.

5. Expenses could be defined as


will provide future economic benefits.C. Transactions that cause an increase in owners equity

excluding capital contributions.

D. Transactions that cause a decrease in owners equityexcluding drawings.

6. The reporting period is best described as

A. Period of time over which assets are determined.B. Period of time over which profit is determined.

C. Period of time over which liabilities are determined.D. 1/7/XX to 30/6/XX

7. Equities are best described as

A. Assets and liabilities.

B. Assets less liabilities.C. Liabilities and owners equity.D. Assets less owners equity.

8. In a Balance Sheet, the following balance

A. Assets and liabilities.

B. Assets and equities.C. Assets and revenues.D. Equities and liabilities.

9. Transactions are evidenced by

A. Cash Flow Statement.B. Income Statement.

C. Documents.D. Journals.

10. An item will usually get its own column in thejournals if

A. It has a high dollar value.

B. It is a frequent transaction.C. It is an infrequent transaction.D. There is enough room.

11. The report that provides stakeholders with detailedinformation about the businesses cash resources

A. Balance sheetB. Cash receipts journal.C. Cash flow statement.

D. Income statement.

12. Owners equity can change due to

A. Revenue.B. Expenses.C. Drawings.D. All of the above.

13. If drawings exceeds profit for a reporting period,

owners equity will

A. Increase.B. Decrease.C. No impact.D. Impact cannot be determined from this data.

14. The owners equity section of the Balance Sheetcan report

A. Capital plus revenue less drawings.B. Assets plus profit less drawings.C. Capital plus profit less drawings.

D. Assets less loss less drawings.

15. The most likely sequence for a simple accountingprocess is

A. Documents, journals, reports.B. Journals, documents, reports.

C. Reports, documents, journals.D. Documents, reports, journals.

16. Information in the accounting reports is said to bemore reliable if

A. The Income Statement reports a profit.B. The reports are supported by documentary evidence.C. The reports are prepared frequently.D. The Balance Sheet balances.

17. The accounting equation shows

A. Liabilities equals assets plus owners equity.B. Assets equal liabilities plus owners equity.C. Owners equity less liabilities equals assets.D. Assets plus liabilities equals owners equity.



Find the errors!

Cash Receipts

Takings 40000

Capital 5000LoanWestpac 3000 48000Cash Payments

Wages 12000


Advertising 3000

Drawings 5000

Computer 3600 30600

Change in cash 17400

+ cash bal. at start (2000)

= cash bal. at end 15400

1. Consider this report or statement for Choice Tree-Loppers forthe month of June 2017. Identify two errors.

(i) __________________________________________________________________________________________________________________________________________________________________

(ii) _________________________________________________________________________________________________________________________________________________________________

Income Statement at 30/6/17.

Revenue

Takings 40000

Capital 5000 45000

Less payments

Wages 12000


Advertising 3000

Drawings 5000

Computer 3600 30600

Net Profit 14400

2. Consider this Income Statement for Choice Tree-Loppers for themonth of June 2017. Identify five errors.

(i) ___________________________________________________

______________________________________________________________________________________________________________

(ii) _________________________________________________________________________________________________________________________________________________________________

(iii) _________________________________________________________________________________________________________________________________________________________________

(iv) _________________________________________________________________________________________________________________________________________________________________

(v) _________________________________________________________________________________________________________________________________________________________________

Choice Tree-Loppers: Balance Sheet for June 2017


LoanWestpac 3000 LiabilitiesComputer 3600 Bank 15400

Vehicle 50000 Owners EquityTools and equipt. 20000 Capital 70000

net profit 14400+ drawings 5000 60600


3. Consider this Balance Sheet andthen identify 5 errors.

(i) ______________________________________________________________________________________________________________________________________________________________________________________

(ii) ______________________________________________________________________________________________________________________________________________________________________________________

(iii)_________________________________________________________________________________________

_____________________________________________________________________________________________(iv) _____________________________________________________________________________________________________________________________________________________________________________________

(v) ______________________________________________________________________________________________________________________________________________________________________________________



Summary exercise

Complete the records and reports forJetFast Couriers for September 2019.

Bank of Geelong

Date: 2/9/19

To:

For: Rent expense

This cheque $4500

Cheque number 556

JetFast Couriers

JetFastCouriers

Receipt # 88

Date: 1/9/19

From: Customers

For:Takings

$: $1500.00

Thank you

JetFast Couriers: Balance Sheet at 31/8/19

Assets $ Equities $

Bank 18000 Liabilities

Vehicles 94000 Loan: ANZ 9000

Office assets 37000 Owners Equity

Stock of supplies 1000 Capital, Harry 141000



DATE: 3/9/19

FROM: JETFAST COURIERS A/C: J8876

TO: HARRY A/C: H665

FOR: DRAWINGS

TOTAL: $2500

MEMO #49:4/9/19Owner contributed a personalcomputer to the business, $2000.

Record as office assets.JetFastCouriers

Receipt # 89

Date: 5/9/19

From: Customers

For:Takings

$: $4200.00

Thank you

JetFastCouriers

Receipt # 90

Date: 7/9/19

From: Customers

For:Takings

$: $2700.00

Thank you


DATE: 8/9/19


TO: ANZ BANK A/C: A9987

FOR: REPAYMENT INC. $400 INTEREST

TOTAL: $2400

Bank of Geelong

Date: 9/9/19

To: BusinessWorksFor: Supplies

This cheque $670

Cheque number 557

JetFast Couriers



TO: JEN HOANG A/C: H8811

FOR: WAGES

TOTAL: $1200

JetFast

CouriersReceipt # 91

Date: 11/9/19

From: Customers

For:Takings

$: $3800.00

Thank youBank of Geelong

Date: 12/9/19

To: Netspace

For: Internet fees

This cheque $480

Cheque number 558

JetFast Couriers

JetFastCouriers

Receipt # 92

Date: 13/9/19

From: Customers

For:Takings

$: $900.00

Thank you

Bank of Geelong

Date: 14/9/19

To: Geelong Auto

For: Vehicle expenses

This cheque $730

Cheque number 559

JetFast Couriers

Bank of Geelong

Date: 16/9/19

To: HiDesign

For: Advertising

This cheque $590

Cheque number 560

JetFast Couriers



INTERNET TRANSFER: RECEIPT. R443

DATE: 27/9/19

FROM: ANZ A/C: A9987

TO: JETFAST COURIERS A/C: J8876

FOR: INCREASE IN LOAN

TOTAL: $6000

JetFastCouriers

Receipt # 93

Date: 18/9/19

From: Customers

For:Takings

$: $1400.00

Thank you


DATE: 19/9/19


TO: HARRY A/C: H665

FOR: DRAWINGS

TOTAL: $2000

JetFastCouriers

Receipt # 94

Date: 20/9/19

From: Customers

For:Takings

$: $2300.00

Thank you

Bank of Geelong

Date: 22/9/19

To: BusinessWorks

For: Supplies

This cheque $290

Cheque number 561

JetFast Couriers

JetFast

CouriersReceipt # 95

Date: 24/9/19

From: Customers

For:Takings

$: $800.00

Thank you

Bank of Geelong

Date: 29/9/19

To: Trade VansFor: New Vehicle

This cheque $22000

Cheque number 562

JetFast Couriers

JetFastCouriers

Receipt # 96


For:Takings

$: $3600.00

Thank you

MEMO #50:30/9/19Stocktake of supplies.$1200.



BS calc. X X calc. X X at end X


Exps.Drawings Loan Interest Rent Supplies

OfficeExps.

Sundry


IS X rev. X X

BS calc. X calc. calc.


CapitalLoans Sundry

Add up thecolumns at the end

of September.


Date Details $


32/32

JetFast Couriers: Cash Flow Statement

for September 2019.Cash Receipts $ $

Cash Payments

Change in cash


= cash bal. at end

JetFast Couriers: Income Statement for

September 2019.Revenue $ $

Less expenses

JetFast Couriers: Balance Sheet at 30/9/19


Liabilities

Owners Equity

Capital


Calculations: