Business School

ACCT1501 Accounting and Financial Management 1A

Session 1 2016

TUTORIAL WEEK 4 Solutions to Tutorial Questions

Tutorial Questions:
DQ 3.3, 3.6, 3.9, P3.6, P3.12, P3.20

DQ3.3
Revenues increase profit, and profit increases retained profits, which is a part of shareholders
equity. It is likely that revenues (sales) also increase an asset, such as cash, or accounts
receivable.
DQ3.6
Assets normally have a debit balance, whilst liabilities and equity normally have a credit
balance. Revenues have a credit balance, and expenses have a debit balance
Therefore, some examples of accounts that normally have a debit balance are:
Cash
Accounts receivable
Inventory
Furniture, fittings & fixtures
Land & buildings
Investments
Intangibles
Prepayments
Some liability accounts that normally have a credit balance are:
Accounts payable
Loan
Other payables (income tax, wages, etc.)
Revenue received in advance (unearned revenue)
Mortgage
Provisions
Some equity accounts that normally have a credit balance are:
Share capital
Retained profits
Reserves
Some revenue accounts that have a credit balance are:
Sales
Dividends received from investments
Other revenue
Some expense accounts that normally have a debit balance are:
Electricity expense
Income tax expense
Salaries and wages expense
Rent expense
1

 Sundry expenses
Depreciation expense
DQ3.9
a. Woolworths cost of goods sold, transport expense, wages
b. Commonwealth Bank interest expense, rent expense
c. Red Cross Charity telephone costs, wages (e.g. counsellors, administration)
d. Australian Navy fuel, maintenance
P3.6
Retained profits 30/6/16

Liabilities 1/7/15

Assets 30/6/16

=
=
=
=
=
=
=
=
=

Retained profits 1/7/15 + Net profit Dividends

200 + 150 50
300
Assets (Share capital + Retained profits)
600 (180 + 200)
220
Liabilities + (Share capital + Retained profits)
300 + (190 + 300)
790

P3.12
1 Revenue
Sales
Interest Revenue

$
70,000
8,000
78,000

2 Expense
Depreciation (50% *200,000* 20%)
Rent
Interest (200,000*10%*50%)
COGS
Salaries (10,000 + 3,000)

20,000
4,000
10,000
30,000
13,000
77,000

P3.20
Dragons Ltd
Journal entries
1
Dr
Cr

Accounts receivable
Sales revenue

Dr
Cr

Cash
Sales revenue

Dr
Cr

Cash
Accounts receivable

200,000
200,000

2
6,000
6,000

3
150,000
150,000

4
Dr
Cr

Inventory
Accounts payable

70,000

Dr
Cr

Accounts payable
Cash

50,000

Dr
Cr

COGS
Inventory

80,000

Dr
Cr

Wages expense
Wages payable

90,000

Dr
Cr

Wages payable
Cash

22,000

Dr
Cr

Tax payable
Cash

Dr
Cr

Retained Profits
Cash

70,000

5
50,000

6
80,000

7
90,000

8
22,000

9
6,000
6,000

10
20,000
20,000

Dragons Ltd
Income Statement for the year ended 30 June 2016
Sales revenue
Less: Cost of goods sold
Gross profit

$
206,000
(80,000)
126,000

Less: Other expenses

Wages expense
Net profit

(90,000)
36,000

Dragons Ltd
Note of changes to retained profits for the year ended 30 June 2016
$
Retained profits, 1 July 2015
34,000
Net profit after tax
36,000
70,000
Dividends declared
(20,000)
Retained profits, 30 June 2016
50,000
Dragons Ltd
Balance Sheet as at 30 June 2016
$
Current assets
Cash
Accounts receivable
Inventory

72,000
86,000
32,000

Total assets

190,000

Current liabilities
Accounts payable
Income tax payable
Wages payable
Total liabilities

32,000
0
68,000
100,000

Shareholders equity
Share capital
Retained profits
Total shareholders' equity
Total liabilities and shareholders equity

40,000
50,000
90,000
190,000