ch06 SM Carlon 5e

Solutions Manual
to accompany
Financial
Accounting:
Recording, Analysis
and Decision Making
Fifth Edition
Prepared by
Lorena Mitrione
John Wiley & Sons Australia, Ltd 2016

Chapter 6: Accounting information systems
CHAPTER 6 – ACCOUNTING INFORMATION SYSTEMS
ASSIGNMENT CLASSIFICATION TABLE
Brief
Learning Objectives Exercises Exercises Problems
1. Identify the basic principles of 1
accounting information differences.
2. Explain the major phases in the 2

development of an accounting system.
3. Define internal control.
4. Appreciate managements’
responsibility in relation to internal
control.
5. Identify the principles and limitations of 3 1,2

internal control.
6. Understand the accounting processes

underlying the generation of financial
reports.
7. Describe the sales and receivables

cycle and the purchases and payments
cycle.
8. Apply internal control principles to the 1,2

sales and receivables and purchases
and payments cycle for transforming
data.
9. Describe the nature and purposes of 3,4,5,6,10, 1A,2A,3A,

control accounts and subsidiary 12,13,14,1 4A,5A,6A,7A,
ledgers. 5 8A,9A,10A
1B,2B,3B,4B,
5B,6B,7B,8B,
9B,10B
10. Explain how special journals are used 3,4,5,6,7,8, 1A,2A,3A,4

in recording transactions. 9,11,13,14, A,5A,6A,7A
15 ,8A,9A,10A
1B,2B,3B,4
B,5B,6B,7B
,8B,9B,10B
11. Understand the basic features of
computerised accounting systems
including an introduction to MYOB.
12. Appreciate the role of and use of non-

integrated systems.
© John Wiley and Sons Australia Ltd, 2016 6.2

Solutions manual to accompany Financial Accounting: Reporting, Analysis and Decision Making 5e
13. Identify the advantages and

disadvantages of computerised
accounting systems.
14. Record transactions for sales, 5,6,7,8,11 1A,2A,3A,4A,

purchases, cash receipts and cash 5A,6A,7A,8A,
payments in special journals. 9A,10A
1B,2B,3B,4B,
5B,6B,7B,8B,
9B,10B
15. Understand how multi-column special 3,4,8,12,13 1A, 2A, 3A,

journals are posted. ,14,15 4A, 5A, 6A,
7A, 8A, 9A,
10A, 1B, 2B.
3B, 4B, 5B,
6B, 7B, 8B,
9B, 10B

CHAPTER 6 – ACCOUNTING SUBSYSTEMS
ANSWERS TO QUESTIONS
1. (a) An accounting information system involves collecting and processing data

and disseminating financial information.
(b) Disagree. An accounting information system applies regardless of whether
manual or computerised procedures are used to process the transaction
data.
2. There are four phases when developing an accounting information system:
Analysis
First determine the information needs of internal and external users. Then a
system analyst identifies the sources of the required information and the records
and procedures for collecting and reporting the data (if an existing system is being
analysed - its strengths and weaknesses must be identified).
Design
In this phase forms and documents designed, methods and procedures selected,
job descriptions prepared, controls integrated, reports formatted and equipment
selected. (Redesigning an existing system may require minor modification or a
major overhaul).
Implementation
Requires that documents, procedures and processing equipment be installed and
made operational. Personnel must be trained in the start-up period.
Follow-up
Once the system is up and running it must be monitored for weaknesses or
breakdowns. Effectiveness should be compared with design and organisational
objectives. Changes in design or implementation may be necessary.
3. Corporate governance can be defined as the system in which entities are directed or
controlled, managed and administered. It influences how the objectives of a company
are set and achieved, how risk is monitored and assessed, and how performance of the
entity is optimised. It is largely about the decision-making process of the entity, ensuring
that the goals and hence the decisions made by management are aligned with those of
the shareholders.
4. No, corporate governance applies to all forms of entities regardless of how large or
small. Family businesses, for example, still need to focus on strategic business issues
and clear lines of responsibility.

5. An internal auditor is an employee of the business who evaluates on a continuous

and regular basis the effectiveness of the business’s system of internal control.
6. Disagree. Internal control is also concerned with the effectiveness and efficiency of
operations, compliance with laws and regulations, and the safeguarding of company
assets from employee theft, robbery and unauthorised use.
7. Data is transformed into accounting reports through the following sequence:

(1) Identify the transaction from source documents, such as receipts, cheque butts etc.
(2) Analyse each transaction for its effect on the accounts.
(3) Enter the transaction information in a journal (book of original entry).
(4) Transfer the journal information to the appropriate accounts in the ledger (book of
accounts).
(5) Prepare a trial balance.
(6) Prepare the financial reports.
8. The following internal control principles apply to both the sales and receivables cycle and
the purchases and payments cycle.
 Establishment of responsibility.
 Segregation of duties.
 Documentation procedures.
 Physical, mechanical and electronic controls
 Independent internal verification.
With regard to both the sales and receivables cycle, it is important to ensure that each
employee is authorised to carry out their task and has the required skills to do so. For
example, the warehouse clerk needs to have the authority to fill a customer order and to
update the inventory records. It is important to also ensure there is segregation of
duties. So in the sales and receivables cycle it would be important to have different
personnel recording the sale and filling and despatching the sales order. It would also
be important to have another staff member, say within the accounting department,
sending the invoice to the customer. It is important to have documented procedures in
place, for example, a requirement that the warehouse clerk signs the sales order to
confirm that the goods have been despatched. This will ensure that the sales order does
not get filled twice and also enables identification of the person who filled the order.
Many businesses will also have security for their inventory such as allowing only
authorised personnel in to the warehouse and many would also have security cameras
as recall inventory is an important asset for the business. Internal auditors will also
perform checks within the business to ensure the process is being followed correctly.
With regard to the purchases and payments cycle, again, it is important to ensure that
staff are appropriately trained and have the responsibility to carry out each of their
assigned tasks. For example, the warehouse clerk needs to know when to re-order stock
when stock levels are low and how to fulfil the completion of the customer order.
Related activities also need to assign to different personnel. For example, the
purchasing clerk will place the order for goods, whilst the warehouse clerk will receive
the goods and ensure that the goods match the order. This latter task, that is, of
checking that the goods ordered has been received is an example of independent
internal verification. Further segregation is required in this cycle with regard to payment
for the goods; we would expect an accounts payable clerk to pay the supplier and not
personnel within the warehousing department. Goods are kept in the warehousing
department and the accounting records are in the accounts payable department. This is
an important internal control to safeguard the inventory. Note that within this cycle there
is also a requirement for the warehousing clerk to sign the delivery docket confirming the
receipt of goods ordered an example of a documented procedure.
9. A subsidiary ledger is a group of accounts with a common characteristic. The

accounts are assembled to facilitate the accounting process by freeing the general
ledger from details concerning individual balances. The advantages of using
subsidiary ledgers are that they:
 Permit transactions affecting a single customer or single creditor to be shown in
a single account, thus providing necessary up-to-date information on specific
account balances.
 Free the general ledger of excessive details relating to inventory, accounts
receivable and accounts payable. As a result, a trial balance of the general
ledger does not contain potentially thousands of individual account balances.
 Assist in locating errors in individual accounts by reducing the number of
accounts combined in one ledger and by using control accounts.
 Permit a division of labour in posting by having one employee post to the
general ledger and a different employee(s) post to the subsidiary ledgers.
10. (a) (1) Individual transactions are generally posted daily to the subsidiary
ledger.
(2) In contrast, postings to the control accounts are usually made in
total at the end of the month.
(b) A control account is a general ledger account that summarises subsidiary
ledger data. Subsidiary ledger accounts keep track of specific account
activity (i.e. specific debtors or creditors). A subsidiary ledger is outside
the general ledger and is not used in the trial balance. The control account
provides the same information as the subsidiary ledger – only in summary.
11. At the end of the month, after all posting to both the general ledger and the subsidiary
ledger accounts have been made, a total of a subsidiary ledger account balances should
equal the balance of the control account in the general ledger. In this case, the control
account balance will be $450 larger than the total of the subsidiary accounts. The
difference would be investigated by checking the postings made to the control account
and subsidiary ledger accounts and the error would be discovered.
12. The general journal may be used to record such transactions as the granting of credit to
a customer for a sales return or allowance or the receipt of credit from a supplier for
purchases returned. In addition, all correcting, adjusting and closing entries should be
made in the general journal.

13. Sales journal: Records entries for all sales of inventory on account.
Cash receipts journal: Records entries for all cash received by the business.
Purchases journal: Records entries for all purchases of inventory on account.
Cash payments journal: Records entries for all cash paid.
Some advantages of each journal are given below:
Sales Journal
(1) Since the sales journal employs only one column to record an Accounts
Receivable debit and a Sales credit, its use reduces recording time;
(2) The credit to Sales is only posted once an accounting period; and
(3) The journal’s use allows for dividing responsibilities between employees.
Cash Receipts Journal

(1) Its use aids in the posting process since the totals for Cash, Discount Allowed,
Accounts Receivable, and Sales are all recorded in the general ledger only at the
end of the month; and
(2) It allows all accounts receivable credits to be posted to the appropriate subsidiary
ledger accounts daily.
Purchases Journal
The advantages are similar to those of the sales journal except that items involved are
Inventory debits and Accounts Payable credits.
Cash Payments Journal

Similar advantages to cash receipts journal except the columns involved are different.
In general, special journals:

(1) Allow greater division of labour because various individuals can record entries in
different journals at the same time; and
(2) Reduce posting time of journals because only column totals are posted to the
general ledger.
14. (a) No, the customers’ ledger (accounts receivable subsidiary ledger) will not agree
with the Accounts Receivable control account. The customers’ ledger will be
posted correctly, but the Accounts Receivable control account will be incorrect.
(b) The trial balance totals will be agreed and the trial balance will balance.
However, the balance in the Cash and Accounts Receivable control accounts will
be incorrect due to the addition error.
15. (a) General journal (d) Sales journal

(b) General journal (e) Cash receipts journal
(c) Cash receipts journal (f) General journal
16. One such example is a purchase return. Here the accounts payable control and
subsidiary ledger account must be debited for the same amount. The debit/credit
equality is unaffected since the trial balance is prepared using general ledger (control)
accounts only. The total of the subsidiary ledger accounts should be equal to the related
control account balance.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 6.1
(a) True
(b) False
(c) True
BRIEF EXERCISE 6.2
(a) Analysis
(b) Follow-up
(c) Design
(d) Implementation
BRIEF EXERCISE 6.3

Cumin Ltd
(a) Separation of duties
(b) Independent internal verification
(c) Documentation procedures
BRIEF EXERCISE 6.4
(a) General ledger

(b) Subsidiary ledger
(c) General ledger
(d) Subsidiary ledger
BRIEF EXERCISE 6.5
(a) Cash receipts journal

(b) Cash payments journal
(c) Cash payments journal
(d) Sales journal
(e) Purchases journal
(f) Cash receipts journal
BRIEF EXERCISE 6.6
(a) No
(b) Yes
(c) Yes
(d) No
BRIEF EXERCISE 6.7
(a) Both in total and daily

(b) In total
(c) In total
(d) Only daily (Note: They can also be individually posted at the end of the month.)

BRIEF EXERCISE 6.8
(a) Cash receipts journal

(b) Cash receipts journal
(c) Cash receipts journal
(d) Sales journal or cash receipts journal
(e) Purchases journal or cash payments journal.

SOLUTIONS TO EXERCISES
EXERCISE 6.1
Rotundo’s Pizza
1. Establishment of responsibility. The counter clerk is responsible for handling cash.

Other employees are responsible for making the pizzas.
2. Segregation of duties. Employees who make the pizza do not handle cash.
3. Documentation procedures. The counter clerk uses your order invoice (ticket) in
registering the sale on the cash register. The cash register produces a tape of all sales.
4. Physical, mechanical and electronic controls. A cash register is used to record the sale.
5. Independent internal verification. The counter clerk handling the pizza compares the
type of the pizza with the type indicated on the orders.
EXERCISE 6.2
The following are the internal control principles which are lacking for Caterpilla Tractors:
1. Segregation of duties. The same employee orders the goods and receives the wheels.
This may bring about a situation where wheels are ordered for their own personnel use
(e.g. for re-sale) and paid for by the company which may go undetected.
2. Independent internal verification. Sam processes the purchase order in the accounting
department as well as receiving the wheels.
3. Documentation procedures. It is unclear in the question as to whether there are any
documented procedures but since the business is starting out, we can assume that
perhaps there isn’t.
EXERCISE 6.3
Tessa Ltd
(a) $261,650. Beginning balance of $200,000 plus $125,150 debit from sales journal less
$63,500 credit from cash receipts journal.
(b) $48,430. Beginning balance of $45,000 plus $27,180 credit from purchases journal less
$23,750 debit from cash payments journal.
(c) The column total of $125,150 in the sales journal would be posted to the credit side of
the Sales account and the debit side of the Accounts Receivable account in the general
ledger.
(d) The accounts receivable column total of $63,500 in the cash receipts journal would be
posted to the credit side of the Accounts Receivable account in the general ledger.

EXERCISE 6.4
Teone Ltd
(a) & (b)
General Ledger
Accounts Receivable Control
Date Explanation Ref. Debit Credit Balance
Sept. 1 Balance 5,980

30 Credit sales S1 2,140 8,120
30 Cash CR1 3,530 4,590
30 Sales Allowance G1 110 4,480
Accounts Receivable Subsidiary Ledger
Edmonds

30 Credit sales S1 675 1,895
30 Cash CR1 620 1,275
Lee

30 Cash CR1 900 420
Roemer

30 Cash CR1 655 925
Schulz

30 Cash CR1 1,150 1,660
30 Sales Allowance G1 110 1,550
Henry
Sept. 30 Credit sales S1 515 515

30 Cash CR1 205 310
Note: Henry is a new customer so another subsidiary ledger account has been added.
(c)
Teone Ltd
Schedule of Accounts Receivable
as at 30 September 20163
Edmonds $1,275
Lee 420
Roemer 925
Schulz 1,550
Henry 310
Total $4,480
Accounts Receivable control account balance 30/9/16 $4,480
(d) The subsidiary ledger accounts contain the detail of the totals posted to the control
account; therefore the totals of subsidiary ledger and the control accounts must agree. If
the balance of the control account and the schedule do not agree, then this indicates that
an error has be made which must be corrected before proceeding any further with the
accounting process.

EXERCISE 6.5
Duckstein Ltd
(a) & (b)

Sales Journal
Invoice Accounts Receivable Cost of Sales Dr.

Date Account No. Ref. Dr. Inventory Cr.
Debited Sales Cr.
2017
Sept. 2 R Crow 101 √ 960 600
21 Buffy Ltd 102 √ 1,600 960
2,560 1,560
Duckstein Ltd
Purchases Journal
P1
Inventory Dr.
Date Account Terms Ref. Accounts Payable
Credited Cr.
2017
Sept. 10 L Dayne 2/7, n/30 √ 1,200
25 F Sage n/30 √ 1,800
3,000
(c) A multicolumn purchases journal enables purchases on credit other than inventory to be
recorded in the purchases journal rather than the general journal.

EXERCISE 6.6
Vanessa Bosnat
(a) & (b)

CR1
Discount Accounts Other Cost of Sales
Account Cash Dr Allowed Receivable Sales Accounts Dr
Date Credited Ref Dr Cr Cr Cr Inventory Cr
2016
May 1 V Bosant, 30,000 30,000
Cap.
2 12,000 12,000 8,400
22 R Dusto √ 18,000
18,000
60,000 18,000 12,000 30,000 8,400
Vanessa Bosnat
CP1
Account Other Accounts Discount Cash

Date Ch. No. Debited Ref. Accounts Payable Received Cr
Dr Dr Cr
2016
May 3 101 Inventory 18,000 18,000
14 102 Salary 1,400 1,400
Expense
19,400 19,400
EXERCISE 6.7
Jamies Hardware
(a) Journal (b) Columns in the journal

1. Cash Payments Other Accounts (Dr); Cash (Cr).
2. Cash Receipts Cash (Dr); Discount Allowed (Dr); and Accounts Receivable
(Cr).
3. Cash Payments Inventory (Dr); Cash (Cr).
4. Cash Payments Accounts Payable (Dr); Cash (Cr); and Discount Received
(Cr).
5. Cash Receipts Cash (Dr); Accounts Receivable (Cr)’
8. Cash Receipts Cash (Dr); Other Accounts (Cr).
10. Cash Receipts Cash (Dr); Sales (Cr); Cost of Sales (Dr); and Inventory (Cr)

EXERCISE 6.8
Opera House Ltd
(a)
Date Account Titles and Explanation Debit Credit

Mar. 2 Equipment 6,000
Accounts Payable – Harbour Ltd 6,000
(Purchased equipment on account)
5 Accounts Payable – Boat & Co. 300

Inventory 300
(Received a credit note for inventory damaged in shipment)
7 Sales Returns and Allowances 400

Accounts Receivable – Luna Ltd 400
Inventory 260
Cost of Sales 260
(Issued a credit note for inventory returned)
(b) Memorandum
To: Managing Director
From: Accountant
Subject: Posting to Control Accounts and Subsidiary Ledger Accounts
The posting to control and subsidiary ledger accounts varies with the journals used for recording
the transactions.
Single column sales and purchases journals – the total for the month is posted to the
accounts receivable and accounts payable control accounts respectively. The individual
entries are posted daily to the subsidiary accounts.
Multicolumn cash receipts and cash payments journals – the total of the control account
column for the month is posted to the control account. The individual amounts in the column
are posted daily to the subsidiary accounts.
General journal – the individual debit and credit entries are posted daily or at the end of the
month. Each entry that pertains to a control and a subsidiary account is dual-posted. That is,
it is posted to both the control account and the subsidiary ledger account.
I hope this memo answers your questions about posting.

EXERCISE 6.9
Rotunda Printworks
1. Cash Payments Journal 8. Cash Receipts Journal

2. General Journal 9. Cash Payments Journal
3. Cash Receipts Journal 10. General Journal
4. Cash Receipts Journal 11. General Journal
5. Sales Journal 12. Cash Payments Journal
6. Cash Receipts Journal 13. Purchases Journal
7. General Journal
EXERCISE 6.10
Frenchy Ltd
(a) The debit posting reference on 28 February should be from the cash payments journal
(CP) to record the payments made during the month. The missing general ledger debit
amount should be $29,500 to balance. Wang’s ending balance must be $3,240.
(Accounts Payable control balance of $9,840 less Sealy, $4,600, and Gates, $2,000.)
(b) All amounts posted in total to the control account are also posted in detail in the
accounts payable subsidiary ledger account. This system ensures that the total of the
subsidiary ledger accounts will equal the total in the corresponding control account.

EXERCISE 6.11
Peterson Ltd
(a)
Purchases Journal
P10
Inventory Dr
Date Account Credited Ref Accounts Payable Cr
July 3 Benton Ltd √ 1,000

12 Emerick Ltd √ 250
14 Dunlap Ltd √ 550
17 Comerica Materials √ 700
20 Benton Ltd √ 350
21 Emerick Ltd √ 300
29 Comerica Materials √ 1,050
4,200
120/201
(b)
General Journal
Date Account Titles and Explanations Ref. Debit Credit
July 1 Store Equipment 153 1,800

Accounts Payable – Alou Equipment Ltd 201/√ 1,800
(Purchase of store equipment on account)
15 Inventory 120 200

Accounts Payable – Galant Transit 201/√ 200
(Correction of an error in recording an inventory
purchase on credit)
18 Accounts Payable – Comerica Materials 201/√ 50

Inventory 120 50
(Received a credit note for inventory returned)
25 Accounts Payable – Dunlap Pty Ltd 201/√ 100

Inventory 120 100
(Received a credit note for inventory returned)
(c) An advantage of using specialised journals is that transactions of a similar nature are
grouped together, eliminating the necessity for narrations. Time is also saved because
much of the posting will be limited to posting column totals at the end of the month.
The circumstances under which it would not be better to use specialise journals would be
if there are very few transactions in each accounting period.

EXERCISE 6.12
Musac Hi Fi Ltd
$597 ($120 + $174 + $87 + $114 + $102). All of the debit postings to the subsidiary ledger
accounts should be from the sales journal. The total of all these debits should therefore be the
total credit sales for the month which would be the same amount as the end-of-month debit
posting from the sales journal to Accounts Receivable control account.

EXERCISE 6.13
Ruby Ltd
(a) $392,475. Beginning balance of $300,000 plus $187,725 debit from sales journal less
$95,250 credit from cash receipts journal.
(b) $72,645. Beginning balance of $67,500 plus $40,770 credit from purchases journal less
$35,625 debit from cash payments journal.
(c) The column total of $187,725 in the sales journal would be posted to the credit side of
the Sales account and the debit side of the Accounts Receivable account in the general
ledger.
(d) The accounts receivable column total of $95,250 in the cash receipts journal would be
posted to the credit side of the Accounts Receivable account in the general ledger.
(e) Preparing a schedule of Accounts Receivable allows the subsidiary ledger total to be
agreed to the total Accounts Receivable Control in the General Ledger.
EXERCISE 6.14
Bing Ltd
(a) The debit posting reference on 28 February should be from the sales journal (SJ) to
record some of the credit sales during the month. The missing general ledger debit
amount should be $5,000 to balance. Ring’s ending balance must be $5,762. (Accounts
Receivable control balance of $33,022 less Ding, $15,060, and King, $12,200.)
(b) All amounts posted in total to the control account are also posted in detail in the
accounts receivable subsidiary ledger account. This system ensures that the total of the
subsidiary ledger accounts will equal the total in the corresponding control account.
EXERCISE 6.15
Building Blocks Pty Ltd
(a) $1,194 ($240 + $348 + $174 + $228 + $204). All of the credit postings to the subsidiary
ledger accounts should be from the purchases journal. The total of all these credits
should therefore be the total credit purchases for the month which would be the same
amount as the end-of-month credit posting from the purchases journal to Accounts
Payable control account.
(b) No. Because details in the Accounts Payable subsidiary ledger would be exactly the
same as in the general ledger control account.

SOLUTIONS TO PROBLEM
SET A
PROBLEM SET A 6.1

Computer Supplies Ltd
(a)
CR4
Discount Accounts Other Cost of Sales Dr
Date Account Credited Ref Cash Dr Allowed Receivable Cr Sales Accounts Inventory Cr
Dr Cr Cr
Apr. 1 S Wiggle, Capital 301 18,000 18,000

4 Computer for U √ 4,998 102 5,100
5 PC West Ltd √ 1,860 1,860
8 Cash Sales 21,736 21,736 13,040
10 East PC Ltd √ 2,400 2,400
11 Inventory 120 1,650 1,650
23 PC West Ltd √ 4,500 4,500
29 Office Supplies √ 3,600 3,600
58,744 102 17,460 21,736 19,650 13,040
(101) (414) (112) (401) (x) (505)/(120)
Cross-footing Totals $71,886

Dr Total = $71,886 ($58,744 + $102 + $13,040)
Cr Total = $71,886 ($17,460 + $21,736 + $19,650 + $13,040)
(b)
General Ledger
Accounts Receivable No. 112
Apr. 1 Balance 22,050

30 CR4 17,460 4,590
East PC Ltd

10 CR4 2,400 2,250

Office Supplies Ltd


29 CR4 3,600 0
PC West Ltd

5 CR4 1,860 6,840
23 CR4 4,500 2,340
Computers for U Ltd


4 CR4 5,100 0
(c) Accounts receivable balance $4,590
Accounts Receivable subsidiary account balances:

East PC Ltd $2,550
PC West Ltd 2,340
Total $4,590

PROBLEM SET A 6.2

Antique Jewels Pty Ltd
(a)
CP10
Other Accounts Discount
Ch. Accounts Payable Inventory Received Cash
Date No. Account Ref Dr Dr Dr Cr Cr
Debited
Oct. 1 63 Inventory 1,540 1,540

3 64 Equipment 157 1,760 1,760
5 65 Diamond Factory √ 3,740 75 3,665
Ltd
10 66 Inventory 4,950 4,950
15 67 Ruby R Us Ltd √ 3,080 3,080
16 68 Amy Amethyst, 306 880 880
Drawing
19 69 Precious Stones √ 3,080 62 3,018
Ltd
29 70 Angus and √ 5,720 5,720
Bandicoot
2,640 15,620 6,490 137 24,613
(x) (201) (120) (405) (101)
Cross-footing Totals = $24,750

Total Debits = $24,750 ($2,640 + $15,620 + $6,490)
Total Credits = $24,750 ($137+ $24,613)

(b)
General Ledger
Accounts Payable No. 201
Oct. 1 Balance 23,420

31 CP10 15,620 7,800
Accounts Payable Subsidiary Ledger
Diamond Factory

5 CP10 3,740 -
Precious Stones Ltd


19 CP10 3,080 2,420
Ruby R Us Ltd

15 CP10 3,080 0
Angus and Bandicoot


29 CP10 5,720 5,380
(c)
Accounts payable balance $7,800
Accounts payable subsidiary account balances:

Precious Stones Ltd $2,420
Angus and Bandicoot 5,380
Total $7,800

(d) Social Implications:

 Corporate social responsibility (CSR) is ‘social responsibility’ applied in a business
environment and involves businesses acting with regard to social principles and
acting ethically. Basically, it is about business people’s obligation to act responsibly
for the benefit of society when carrying on business activities. Amy has an obligation
to be socially responsible so given she knows the goods are stolen it is not socially
responsible to sell them to her customers.
Financial implications:
 Choosing not to sell stolen goods may impact Antique Jewels Ltd’s profits for the
period if they cannot obtain sufficient supplies to meet the demand.

PROBLEM SET A 6.3

Racquets ‘R’ Us Ltd
(a)
Purchases Journal
P1
Other Accounts
Date Account Credited (Debited) Post Accounts Inventory Payable
Ref Dr Dr Cr
July 1 Tennis Australia Ltd √ 8,800 8,800

2 Johnson Shipping 510/√ 550 550
5 Grant and Sons √ 5,500 5,500
13 Racquet Supplies 126√ 990 990
15 Tennis Australia √ 3,960 3,960
15 Lepa Ltd √ 3,190 3,190
18 Dennisen Advertisements 610/√ 594 594
24 Grant and Sons √ 3, 960 3,960
26 Racquet Supplies (Equipment) 157/√ 330 330
28 Johnson Shipping 510/√ 462 462
2,926 25,410 28,336
(x) (120) (201)
Helpful Hint: This is a multicolumn purchases journal so purchases of items other than
inventory can be recorded. Note in the case of a multicolumn purchases journal, separate
columns are needed for Inventory and Accounts Payable. Furthermore, a Freight Inwards
account must be added to the Chart of Accounts. Freight Inwards is account number 510.
Sales Journal
S1
Accounts Receivable
Date Account Post Dr Cost of Sales Dr.
Debited Ref Sales Cr Inventory Cr
July 3 Squash Club Ltd √ 1,980 1,386

3 Teeny Tennis Ltd √ 2,200 1,540
16 Martin Ltd √ 3,795 2,657
16 Teeny Tennis Ltd √ 1,507 1,055
21 Squash Club Ltd √ 341 239
21 Randee Ltd √ 3,080 2,156
30 Martin Ltd √ 4,290 3,003
17,193 12,036
(112)/(401) (505)/(120)

General Journal
G1
Date Account Titles and Explanations Ref Debit Credit
July 8 Accounts Payable – Grant and Sons 201/√ 550

Inventory 120 550
(Received a credit note on inventory returned)
22 Sales Returns and Allowances 412 55

Accounts Receivable – Squash Club Ltd 112/√ 55
(Granted an allowance for inventory damaged in
shipment)
(b)
General Ledger
Date Explanation Ref Debit Credit Balance
July 31 S1 17,193 17,193

G1 55 17,138
Inventory No. 120

July 31 P1 25,410 25,410

G1 550 24,860
31 S1 12,036 12,824
Supplies No. 126

July 31 P1 990 990
Equipment No. 157

July 31 P1 330 330

July 31 P1 28,336 28,336

G1 550 27,786
Sales No. 401

July 31 S1 17,193 17,193
Sales Returns and Allowances No. 412

G1 55 55
Cost of Sales No. 505

July 31 S1 12,036 12,036
Freight In No. 510

July 31 P1 550 550

31 P1 462 1,012
Advertising Expense No. 610

July 31 P1 594 594
Helpful Hint: When posting the individual amounts from the ‘Other Accounts’ column in the
Purchases Journal (at the end of the month), the 31 July date can be used or the actual date of
the transaction. Both are acceptable.
Teeny Tennis Ltd

July 3 S1 2,200 2,200

16 S1 1,507 3,707

Squash Club Ltd

July 3 S1 1,980 1,980

21 S1 341 2,321
22 G1 55 2,266
Martin Ltd
July 16 S1 3,795 3,795

30 S1 4,290 4,290
Randee Ltd
July 21 S1 3,080 3,080
Racquet Supplies
July 13 P1 990 990

26 P1 330 1,320
Tennis Australia Ltd

July 1 P1 8,800 8,800
15 P1 3,960 12,760
Grant and Sons

July 5 P1 5,500 5,500
24 P1 3,960 9,460
8 G1 550 8,910
Johnson Shipping
July 2 P1 550 550

28 P1 462 1,012

Lepa Ltd
July 15 P1 3,190 3,190
Dennisen Advertisements
July 18 P1 594 594
(c)
Accounts Receivable Control Balance $17,138
Subsidiary account balances:

Teeny Tennis Ltd $3,707
Squash Club Ltd 2,266
Martin Ltd 8,085
Randee Ltd 3,080
Total $17,138
Accounts Payable Control Balance $27,786

Racquet Supplies $1,320
Tennis Australia Ltd 12,760
Grant and Sons 8,910
Johnson Shipping 1,012
Lepa Ltd 3,190
Dennison Advertisements 594
Total $27,786

PROBLEM SET A 6.4
Bouncing Balls Ltd

(a), (b) & (c)
Sales Journal
S17
Invoice Post Accounts Receivable Cost of Sales Dr
Date Account Debited No. Ref Dr Inventory Cr
Sales Cr
Jan. 4 Toys 4 U 371 √ 10,875 6,525

9 Mays Ltd 372 √ 8,700 5,220
17 Kid Time Ltd 373 √ 1,800 1,080
31 Toys 4 U 374 √ 13,995 8,397
35,370 21,222
(112)/(401) (505)/(120)
Purchases Journal
P13
Inventory Dr
Jan. 3 Ball Supplies Ltd √ 15,000

8 Balls Ltd √ 6,750
11 Hoble √ 5,550
23 Ball Supplies Ltd √ 11,700
24 Levine √ 7,035
46,035
(120)/(201)
General Journal
G14
Date Account Titles and Explanation Ref. Debit Credit
Jan. 5 Accounts Payable – Ball supplies. 201/√ 450

Inventory 120 450
(Returned damaged goods purchased
previously on credit)
19 Equipment 157 8,250

Sundry Accounts Payable – Johnson Ltd 202/√ 8,250

CR15
Discount Accounts Other Cost of

Account Cash Allowed Receivable Sales Accounts Sales Dr
Date Credited Ref Dr Dr Cr Cr Cr Inventory
Cr
Jan. 6 4,725 4,725 2,835

13 8,010 8,010 4,806
14 Mays Ltd √ 8,613 87 8,700
17 Toys 4 U √ 10,875 10,875
20 4,800 4,800 2,880
27 5,595 5,595 3,357
30 Kids √ 1,800 1,800
Time Ltd
44,418 87 21,375 23,130 0 13,878
(101) (716) (112) (401) (x) (505)/(120)

Dr Total = $58,383 ($44,418 + $87 + $13,878)
Cr Total = $58,383 ($21,375 + $23,130 + $13,878)

CP15
Accounts Payable Inventory Received Cash Cr
Date Account Debited Ref Dr Dr Dr Cr
Jan. 4 Supplies 126 120 120

13 Ball Supplies Ltd √ 14,550 291 *14,259
15 Salaries Expense 726 21,450 21,450
20 Balls Ltd √ 6,750 135 6,615
31 Salaries Expense 726 19,800 19,800
41,370 21,300 0 426 62,244
(x) (201) (x) (416) (101)

Dr Total = $62,670 ($41,370 + $21,300)
Cr Total = $62,670 ($426 + $62,244)
*Helpful Hint: Purchased $15,000 from Ball supplies on 3 Jan. 5 Jan returned $450 damaged
goods. Balance paid is $14,550 less 2% discount.
(d) Cross-footing the special journals prior to posting the totals to the ledger accounts
ensures that the total dollar debits equals the total dollar credits.

PROBLEM SET A 6.5

Mill Park Heights Bikes
(a), (d) & (g)
General Ledger
Cash No. 101
July 31 CR16 58,959 58,959
31 CP16 23,083 35,876

July 31 S15 10,740 10,740
31 CR16 8,340 2,400
Inventory No. 120

July 29 CR16 270 270CR
31 P14 25,392 25,122
31 S15 6,981 18,141
31 CR16 1,560 16,581
Store Supplies No. 127

July 4 CP16 360 360
31 Adjusting entry G5 276 84
Prepaid Rent No. 131

July 11 CP16 3,600 3,600
31 Adjusting entry G5 300 3,300

July 31 P14 25,392 25,392
31 CP16 17,760 7,632
Williams, Capital No. 301

July 1 CR16 48,000 48,000

Williams, Drawings No. 306

July 19 CP16 1,500 1,500
Sales No. 401

July 31 S15 10,740 10,740
31 CR16 2,400 13,140
Discount Received No. 405

July 31 CP16 137 137

July 31 S15 6,981 6,981
31 CR16 1,560 8,541
Discount Allowed No. 614

July 31 CR16 51 51
Supplies Expense No. 631

July 31 Adjusting entry G5 276 276
Rent Expense No. 729


(b) Sales Journal

S15
Account Post Accounts Receivable Cost of Sales Dr
Date Debited Ref Dr Inventory Cr
Sales Cr
July 6 Toy World √ 3,240 2,106

Co.
8 Biker Ltd √ 2,160 1,404
10 L Lemansky √ 2,940 1,911
21 S Kane √ 2,400 1,560
10,740 6,981
(112)/(401) (505)/(120)
CR16

Account Cash Dr Allowed Receivable Sales Accounts Dr
July
1 Williams, 301 48,000 48,000
Capital
7 2,400 2,400 1,560
13 Biker Limited √ 2,138 22 2,160
16 L Lemansky √ 2,911 29 2,940
20 Toy World √ 3,240 3,240
29 Inventory 120 270 270
58,959 51 8,340 2,400 48,270 1,560
(101) (614) (112) (401) (x) (505)/(120)

Dr Total = $60,570 ($58,959 + $51 + $1,560)
Cr Total = $60,570 ($8,340 + $2,400 + $48,270 + $1,560)

Dixon’s Bikes
July 4 P14 4,080 4,080
15 CP16 4,080 0
Bike Supplies
July 5 P14 4,500 4,500
10 CP16 4,500 0
R Gamble
July 11 P14 2,352 2,352
M Hill
July 13 P14 9,180 9,180
21 CP16 9,180 0
D Jacob
July 20 P14 5,280 5,280
Toy World Co.

July 6 S15 3,240 3,240
20 CR16 3,240 0
S Kane
July 21 S15 2,400 2,400
L Lemansky
July 10 S15 2,940 2,940
16 CR16 2,940 0

Biker Ltd
July 8 S15 2,160 2,160
13 CR16 2,160 0
(e)
Unadjusted Trial Balance
as at 31 July 2017
Debit Credit
101 Cash $35,876

112 Accounts Receivable 2,400
120 Inventory 16,581
127 Store Supplies 360
131 Prepaid Rent 3,600
201 Accounts Payable $7,632
301 Williams, Capital 48,000
306 Williams, Drawings 1,500
401 Sales 13,140
405 Discount Received 137
505 Cost of Sales 8,541
614 Discount Allowed 51
$68,909 $68,909
(f)
Schedule of Accounts Payable 31/7/17:

D Jacob $5,280
R Gamble 2,352
$7,632
Schedule of Accounts Receivable 31/7/17:

S Kane $2,400

(b) & (g)
General Journal
G5
Date Account Titles and Explanation Ref Debit Credit
July 31 Supplies Expense 631 276

Store Supplies 127 276
(Adjusting entry to record supplies used)
31 Rent Expense 729 300

Prepaid Rent 131 300
(Adjusting entry to recognise July rent expense)
(h)
Adjusted Trial Balance
as at 31 July 2017
Debit Credit
101 Cash $35,876

301 Williams, Capital 48,000
306 Williams, Drawings 1,500
401 Sales 13,140
631 Supplies Expense 276
729 Rent Expense 300
$68,909 $68,909
(i) If the trial balance doesn’t balance:

 Re-add the columns
 Check if all accounts have normal balances.
 Check that all balances have been accurately transferred from the general ledger
 If the difference between the total of the debit and credit columns is divisible by 2,
it may indicate an amount that was posted to the same side twice instead of once
as a debit and once as a credit.
 If the difference is divisible by 9, a transposition error may have been made i.e.,
the order of the digits in a number may have been reversed, or the error may be a
slide i.e., the decimal place may have been incorrectly placed in one of the
postings.

PROBLEM SET A 6.6
Party Shop Ltd

(b) & (c)
CR1

Account Cash Allowed Receivable Sales Accounts Dr
Date Credited Ref Dr Dr Cr Cr Cr Inventory Cr
Jan.
7 S Devine √ 1,750 1,750
12 W. Wong √ 2,695 55 2,750
23 5,000 5,000 3,250
29 Commission
Receivable 115 23,250 23,250
32,695 55 4,500 5,000 23,250 3,250
(101) (714) (112) (401) (x) (505)/(120)

Dr Total = $36,000 ($32,695 + $55 + $3,250)
Cr Total = $36,000 ($4,500 + $5,000 + $23,250 + $3,250)

CP1
Accounts Payable Inventory Received Cash
Date Account Debited Ref Dr Dr Cr Cr Cr
Jan. 11 Freight Inwards 506 250 250

12 Rent Expense 729 1,000 1,000
15 D Harms √ 7,750 250 7,500
18 Sales Salaries 726 1,250 1,250
Expense
18 Office Salaries 727 500 500
Expense
20 R Grilson √ 9,250 9,250
27 S Warren √ 475 475
3,000 17,475 0 250 20,225
(x) (201) (x) (415) (101)

Dr Total = $20,475 ($3,000 + $17,475)
Cr Total = $20,475 ($250 + $20,225)

Sales Journal
S1
Account Post Accounts Receivable Cost of Sales Dr
Date Debited Ref Dr Inventory Cr
Sales Cr
Jan 5 W Wong √ 2,750 1,787

24 Celebrations √ 3,850 2,502
Ltd
6,600 4,289
(112)/(401) (505)/(120)
Purchases Journal
Inventory Dr
Date Account Credited Terms Ref Accounts Payable Cr
Jan. 5 S Warren 2/7, n/30 √ 1,500

17 D Lapeska 2/7, n/30 √ 750
2,250
(120)/(201)
General Journal
G1
Jan. 14 Sales Returns and Allowances 412 350

Accounts Receivable – Party Time √/112 350
Inventory Write Down Expense ($350 x .65) 750 228

Cost of Sales 505 228
(Issued a credit for return of damaged inventory.
The inventory is considered unsaleable.)
30 Accounts Payable – D Lapeska √/201 250

Inventory 120 250
(Returned inventory to supplier)
(a) & (c)

General Ledger
Cash No. 101
Jan. 1 Balance 21,500
31 CR1 32,695 54,195
31 CP1 20,225 33,970


14 G1 350 7,900
31 CR1 4,500 3,400
31 S1 6,600 10,000
Commissions Receivable No. 115

29 CR1 23,250 0
Inventory No. 120

30 G1 250 12,000
31 P1 2,250 14,250
31 CR1 3,250 11,000
31 S1 4,289 6,711
Equipment No. 157

Accumulated Depreciation – Equipment No. 158


30 G1 250 22,000
31 P1 2,250 24,250
31 CP1 17,475 6,775
B Beatle, Capital No. 301


Sales No. 401

Jan. 31 CR1 5,000 5,000
31 S1 6,600 11,600
Commissions Revenue No. 405

Jan. 31 0

Jan. 14 G1 350 350

Jan. 31 CP1 250 250

Jan. 31 CR1 3,250 3,250
31 S1 4,289 7,539
14 G1 228 7,311
Freight In No. 506

Jan. 11 CP1 250 250

Jan. 31 CR1 55 55
Sales Salaries Expense No. 726

Jan. 18 CP1 1,250 1,250
Office Salaries Expense No. 727

Jan. 18 CP1 500 500


Jan. 12 CP1 1,000 1,000
Inventory Write Down Expense No. 750

Jan. 14 G1 228 228

Party Time Ltd
14 G1 350 1,150
Celebrations
24 S1 3,850 7,850
S Devine
7 CR1 1,750 1,000
W Wong
Jan. 5 S1 2,750 2,750
12 CR1 2,750 0
Toys 4 U
R Grilson
20 CP1 9,250 0

D Harms
15 CP1 7,750 0
D Lapeska
Jan. 17 P1 750 750
30 G1 250 500
S Warren
Jan. 5 P1 1,500 1,500
27 CP1 475 1,025
(d)
Party Shop Ltd
Trial Balance
as at 31 January 2017
Debit Credit
101 Cash $33,970

115 Commissions Receivable
120 Inventory 6,711
157 Equipment 3,975
158 Accumulated Depreciation – Equipment $2,250
201 Accounts Payable 6,775
301 B Beatle, Capital 44,725
401 Sales 11,600
506 Freight In 250
726 Sales Salaries Expense 1,250
727 Office Salaries Expense 500
729 Rent Expense 1,000
750 Inventory Write Down Expense 228
$65,600 $65,600

(e)
Accounts Receivable Subsidiary Ledger:

Party Time $1,150
Celebrations 7,850
S Devine 1,000
$10,000
Accounts Receivable Control $10,000
Accounts Payable Subsidiary Ledger:

Toys 4 U $5,250
D Lapeska 500
S Warren 1,025
$6,775
Accounts Payable Control $6,775

PROBLEM SET A 6.7

Wyatt Sports
(a)

CR1

June J Wyatt, 301 5,000 5,000

1 Capital
3 Mastin Pty √ 490 10 500
Ltd
6 Field Ltd √ 931 19 950
7 3,068 3,068 2,045
9 Block & √ 1,715 35 1,750
Son
11 Inventory 120 100 100
15 2,625 2,625 1,750
20 Green √ 800 800
Bros.
14,729 64 4,000 5,693 5,100 3,795
(101) (614) (112) (401) (x) (505)/(120)

Dr Total = $18,588 ($14,729 + $64 + $3,795)
Cr Total = $18,588 ($4,000 + $5,693 + $5,100 + $3,795

(b)
General Ledger
31 CR1 4,000 0
Block & Son

June 1 Balance 1,750
9 CR1 1,750 0
Field Ltd
June 1 Balance 950
6 CR1 950 0
Green Bros.
June 1 Balance 800
20 CR1 800 0
Mastin Pty Ltd

June 1 Balance 500
3 CR1 500 0
(c) Accounts receivable control balance =0

Sum of all subsidiary accounts =0

PROBLEM SET A 6.8
Clover Hill
(b)
Purchases Journal
P1
Inventory Dr
Date Account Credited Terms Ref. Accounts Payable Cr
Feb. S Healy 1/7, n/30 √ 6,000
6
9 L Held 1/10, √ 45,000
n/30
16 R Landly 2/7, n/30 √ 3,600
21 J Able 1/7, n/30 √ 9,750
64,350
(120)/(201)
CP1
Other
Account Accounts Inventor Discount Cash
Date Account Debited Ref. s Dr. Payable Dr. y Dr Received Cr.
Cr.
Feb. 9 Supplies 126 1,500 1,500

12 S Healy √ 6,000 60 5,940
15 Equipment 157 12,000 12,000
17 L Held √ 45,000 450 44,550
20 J Hill, Drawings 306 1,650 1,650
28 R Landly √ 3,600 3,600
15,150 54,600 0 510 69,240
(x) (201) (405) (101)
(a), (d) & (g)
Note: Corrected post references for Sales Journal and Cash Receipts Journal are S1 and
CR1 respectively as illustrated in the solution below.
General Ledger
Cash No. 101
Feb. 28 CR1 72,892 72,892
28 CP1 69,240 3,652


Feb 28 S1 39,000 39,000
28 CR1 18,000 21,000
Inventory No. 120

Feb. 28 P1 64,350 64,350
18 CR1 225 64,125
28 S1 25,740 38,385
28 CR1 6,435 31,950
Supplies No. 126

Feb. 9 CP1 1,500 1,500
28 Adjusting entry G1 1,050 450
Equipment No. 157

Feb. 15 CP1 12,000 12,000
Accumulated Depreciation - Equipment No. 158

Feb. 28 Adjusting entry G1 300 300

Feb. 28 P1 64,350 64,350
28 CP1 54,600 9,750
J Hill, Capital No. 301

Feb. 1 CR1 45,000 45,000
J Hill, Drawings No. 306

Feb. 20 CP1 1,650 1,650

Sales No. 401

Feb. 28 S1 39,000 39,000
28 CR1 9,750 48,750

Feb. 28 CP1 510 510

Feb. 28 S1 25,740 25,740
28 CR1 6,435 32,175

Feb. 28 CR1 83 83

Feb. 28 Adjusting entry G1 1,050 1,050
Depreciation Expense No. 711

Feb. 28 Adjusting entry G1 300 300
(c)
D Adams
Feb. 3 S1 8,250 8,250
13 CR1 8,250 0
P Babcock
Feb. 9 S1 9,750 9,750
26 CR1 9,750 0

D Chambers
Feb. 12 S1 12,000 12,000
K Dawson
Feb. 26 S1 9,000 9,000
J Able
Feb. 21 P1 9,750 9,750
S Healy
Feb. 6 P1 6,000 6,000
12 CP1 6,000 0
L Held
Feb. 9 P1 45,000 45,000
17 CP1 45,000 0
R Landly
Feb. 16 P1 3,600 3,600
28 CP1 3,600 0

(e)
Clover Hill
Trial Balance
as at 28 February 2016
Debit Credit
101 Cash $3,652

126 Supplies 1,500
157 Equipment 12,000
301 J Hill, Capital 45,000
306 J Hill, Drawings 1,650
401 Sales 48,750
$104,010 $104,010
(f)
Accounts Receivable Control Account $21,000
Accounts Receivable Subsidiary Accounts:

D Chambers $12,000
K Dawson 9,000 $21,000
Accounts Payable Control Account $9,750
Accounts Payable Subsidiary Account:

J Able $9,750
(g)
General Journal
G1
Date Account Titles and Explanation Ref. Debit Credit
Feb. 28 Supplies Expense 631 1,050

Supplies 126 1,050
(Record supplies used)
28 Depreciation Expense 711 300

Accumulated Depreciation – Equipment 158 300
(Record depreciation expense)

(h)
Clover Hill
as at 28 February 2016
Debit Credit
101 Cash $3,652

126 Supplies 450
158 Accumulated Depreciation – Equipment $300
301 J HIll, Capital 45,000
306 J Hill, Drawings 1,650
401 Sales 48,750
631 Supplies Expense 1,050
711 Depreciation Expense 300
$104,310 $104,310

PROBLEM SET A 6.9

Lacquer Nail Supplies
(a)
CP10
Ch. Accounts Payable Inventory Received Cash Cr
Date No. Account Debited Ref Dr Dr Dr Cr
Nov. 11 Inventory 900 900

1
3 12 Equipment 157 1,700 1,700
5 13 Creams & Oils R Us √ 1,900 19 1,881
11 14 Inventory 2,000 2,000
15 15 Plastic Nails Pty Ltd √ 1,000 30 970
16 16 V. Pinky, Drawing 306 500 500
19 17 Nail Polish √ 1,300 26 1,274
Professionals
25 18 Prepaid Insurance 130 3,000 3,000
30 19 Cotton Balls Ltd √ 2,500 2,500
5,200 6,700 2,900 75 14,725
(x) (201) (120) (405) (101)

Total Debits = $14,800 ($5,200 + $6,700 + 2,900)
Total Credits = $14,800 ($75 + $14,725)
(b)
General Ledger
Nov. 1 Balance 9,750

31 CP10 6,700 3,050

Cotton Balls Ltd

30 CP10 2,500 2,000

Nail Polish Professionals


19 CP10 1,300 1,050
Plastic Nails Pty Ltd


15 CP10 1,000 0
Creams & Oils R Us


5 CP10 1,900 0
(c) Accounts payable balance $3,050
Accounts payable subsidiary account balances:

Cotton Balls Ltd $2,000
Nail Polish Professionals 1,050
Total $3,050

PROBLEM SET A 6.10

Fancy Footwear Ltd
(a)
Purchases Journal
P1
Other Accounts
Ref Dr Dr Cr
July 1 Little Feet Ltd √ 9,600 9,600

2 Quick Shipping 510/√ 600 600
5 Grant and Sons √ 6,000 6,000
13 Shoe Supplies 126√ 1,080 1,080
15 Little Feet √ 4,320 4,320
15 Lepa Ltd √ 3,480 3,480
18 Shoe Advertisements Pty Ltd 610/√ 372 372
24 Grant and Sons √ 4,320 4,320
26 Shoe Supplies 157/√ 360 360
28 Quick Shipping 510/√ 504 504
2,916 27,720 30,636
(x) (120) (201)
columns are needed for Inventory and Accounts Payable. Furthermore, a Freight In account
must be added to the Chart of Accounts. Freight In is account number 510.
Sales Journal
S1
Accounts Receivable
Date Account Debited Post Dr Cost of Sales Dr.
Ref Sales Cr Inventory Cr
July 3 Pete’s Shoes Ltd √ 2,160 1,512

3 Teeny Feet Ltd √ 2,400 1,680
16 Martin’s Spartans Ltd √ 4,140 2,898
16 Teeny Feet Ltd √ 648 454
21 Pete’s Shoes Ltd √ 310 217
21 Sandles Ltd √ 3,360 2,352
30 Martin’s Spartans Ltd √ 4,680 3,276
17,698 12,389
(112)/(401) (505)/(120)

General Journal
G1
July 8 Accounts Payable – Grant and Sons 201/√ 600

Inventory 120 600

Accounts Receivable – Pete’s Shoes Ltd 112/√ 60
(Granted an allowance for inventory damaged in
shipment)
(b)
General Ledger
July 22 G1 60 60CR
31 S1 17,698 17,638
Inventory No. 120

July 8 G1 600 600CR

31 P1 27,720 27,120DR
31 S1 12,389 14,731DR
Supplies No. 126

July 15 P1 1,080 1,080
Equipment No. 157

July 26 P1 360 360


July 8 G1 600 600DR

31 P1 30,636 30,036CR
Sales No. 401

July 31 S1 17,698 17,698

July 22 G1 60 60

July 31 S1 12,389 12,389
Freight In No. 510

July 2 P1 600 600

28 P1 504 1,104

July 18 P1 372 372
Purchases Journal (at the end of the month), the 31 July date can be used or the actual date of
the transaction. Both are acceptable.
Pete’s Shoes Ltd

July 3 S1 2,160 2,160

21 S1 310 2,470
22 G1 60 2,410

Teeny Feet Ltd

July 3 S1 2,400 2,400

16 S1 648 3,048
Martin’s Spartans Ltd

July 16 S1 4,140 4,140

30 S1 4,680 8,820
Sandles Ltd
July 21 S1 3,360 3,360
Little Fleet Ltd

July 1 P1 9,600 9,600

15 P1 4,320 13,920
Grant and Sons

July 5 P1 6,000 6,000
8 G1 600 5,400
24 P1 4,320 9,720
Shoe Supplies
July 13 P1 1,080 1,080
26 P1 360 1,440
Quick Shipping
July 2 P1 600 600

24 P1 504 1,104
Lepa Ltd

July 15 P1 3,480 3,480
Shoe Advertisements Pty Ltd

July 18 P1 372 372
(c)
Accounts Receivable Control Balance 17,638

Pete’s Shoes Ltd $2,410
Teeny Feet Ltd 3,048
Martin’s Spartans Ltd 8,820
Sandles Ltd 3,360
Total $17,638

Little Feet Ltd $13,920
Shoe Supplies 1,440
Grant and Sons 9,720
Quick Shipping 1,104
Lepa Ltd 3,480
Shoe Advertisements 372
Total $30,036
(d) The advantages of using a computerised accounting system over a manual system is that
it is possible to process a much larger number of transactions in a much shorter period of
time. Data entry is minimal and posting of the transactions is done immediately by the
computer. Information can be obtained on a more timely basis and with fewer errors.
The disadvantages include the need for hardware and software to be compatible, the
possibility that data is lost due to power failures or viruses, the need to have staff with
suitable training, and the possibility of computer hacking or fraud.

SOLUTIONS TO PROBLEM
SET B
PROBLEM SET B 6.1
South Morange’s Hardware

(a)
CP1
Chq Post Other Accounts Discount
Date No. Account Debited Ref Accounts Payable Received Cash
Dr Dr Dr Cr
Nov 1 11 Inventory 120 450 450

3 12 Equipment 157 850 850
5 13 Wald Bros. √ 950 9 941
11 14 Inventory 120 1,000 1,000
15 15 R. Snyder √ 500 15 485
16 16 V. Creek, Drawing 306 250 250
19 17 G. Paul √ 650 13 637
25 18 Prepaid Insurance 130 1,500 1,500
30 19 R. Huff √ 1,250 1,250
4,050 3,350 37 7,363
(X) (201) (120) (101)
Cross-footing Totals: Dr = 7,400 Cr = 7,400

(b)
General Ledger
Accounts Payable Control No. 201

Date Explanation Post Debit Credit Balance
Nov. 1 Balance √ 4,875
30 CP1 3,350 1,525
R. Huff
30 CP1 1,250 1,000
G. Paul
19 CP1 650 525
R. Snyder
Nov. 1 Balance √ 500
15 CP1 500 0
Wald Bros.
Nov. 1 Balance √ 950
5 CP1 950 0
(c) Accounts payable control balance: $1,525

R. Huff $1,000
G. Paul 525
$1,525
(d) The ethical response is for Mr.Dodgy to offer and make it known to R.Snyder that purchases
will only be made in the best interests, and as required by South Morange’s Hardware.

PROBLEM SET B 6.2
Victoria Ltd
(a)
Purchases Journal
P1
Other
Date Account Credited Post Accounts Inventory Accounts
(Debited) Ref Dr Dr Payable Cr
May 2 Vons Ltd √ 10,450 10,450

3 The Freight People 510 440 440
8 Golden Ltd √ 8,800 8,800
8 Dorn Ltd √ 9,570 9,570
15 Engle Supply (Supplies) 126/√ 990 990
16 Vons Ltd √ 4,950 4,950
16 Golden Ltd √ 6,600 6,600
18 The Freight People 510 550 550
25 Ball Advertising (Adv. Exp.) 610/√ 990 990
28 Engle Supply (Equipment) 157/√ 275 275
- - 43,615
3,245 40,370
(X) (120) (201)
Sales Journal
S1
Accounts Cost of Sales Dr
Date Account Debited Ref Receivable Dr Inventory Cr
Sales Cr
May 5 Penner Ltd √ 1,925 1,348

5 Hend Ltd √ 2,970 2,079
5 Nelles Ltd √ 1,650 1,155
23 Hend Ltd √ 2,640 1,848
23 Nelles Ltd √ 2,420 1,694
11,605 8,124
(112)(401) (505)(120)

General Journal
May 10 Accounts Payable - Dorn

Ltd 201/√ 550
Inventory 120 550
17 Accounts Payable –Engle

Supply 201/√ 110
Supplies 126 110
20 Accounts Payable –Vons

Ltd 201/√ 330
Inventory 120 330

Accounts Receivable-
Nelles Ltd 112/√ 220
(b)
General Ledger

May 31 S1 11,605 11,605
26 G1 220 11,385
Inventory No. 120

May 10 G1 550
39,820
20 G1 330
39,490
31 P1
40,370 40,370
31 S1 8,124
31,366
Supplies No. 126

May 15 P1 990 990
17 G1 110 880
Equipment No. 157


May 28 P1 275 275

May 10 G1 550 550 DR
17 G1 110 660 DR
20 G1 330 990 DR
31 P1 43,615 42,625
CR
Sales No. 401

May 31 S1 11,605 11,605

May 26 G1 220 220

May 31 S1 8,124 8,124
Freight In No. 510

May 3 P1 440 440
18 P1 550 990
Advertising Expenses No. 610

May 25 P1 990 990
Penner Ltd
May 5 S1 1,925 1,925
Hend Ltd
May 5 S1 2,970 2,970

23 S1 2,640 5,610
Nelles Ltd
May 5 S1 1,650 1,650
23 S1 2,420 4,070
26 G1 220 3,850
The Freight People

May 3 P1 440 440
18 P1 550 990
Vons Ltd
May 2 P1 10,450 10,450
16 P1 4,950 15,400
20 G1 330 15,070
Engle Supply
May 15 P1 990 990
17 G1 110 880
28 P1 275 1,155
Golden Ltd
May 8 P1 8,800 8,800
16 P1 6,600 15,400
Dorn Ltd
May 8 P1 9,570 9,570
10 G1 550 9,020
Ball Advertising
May 25 P1 990 990
Subsidiary account balances

Penner Ltd $1,925
Hendrix Ltd 5,610
Nelles Ltd 3,850
Total $11,385
Accounts payable balance $42,625
Subsidiary account balances

The Freight People $ 990
Vons Ltd 15,070
Engle Supply 1,155
Golden Ltd 15,400
Dorn Ltd 9,020
Ball Advertising 990
Total $42,625

PROBLEM SET B 6.3

Allegra Pty Ltd
(a), (b) & (c)

Sales Journal
S1
Invoice Accounts Cost of Sales Dr
Date Account Debited No. Ref. Receivable Dr Inventory Cr
Sales Cr
Oct. 4 Parker Ltd 204 √ 4,500 2,700

17 L. Boyton Ltd 205 √ 2,675 1,605
25 Green Ltd 206 √ 2,610 1,566
30 L. Boyton Ltd 207 √ 2,300 1,380
12,085 7,251
(112)(401) (505)(120)
Purchases Journal
P1
Inventory Dr
Oct. 2 Mason Ltd √ 9,250

10 Quinn Ltd √ 2,100
27 Schmid Ltd √ 4,250
30 Mason Ltd √ 7,000
22,600
(120)(201)
General Journal
G1
Date Accounts and Explanations Ref Debit Credit
Oct. 13 Accounts Payable – Quinn

Ltd 201/√ 125
Inventory 120 125
25 Supplies 126 130

Accounts Payable - Frey
Ltd 201/√ 130


CR1
Date Account Ref Cash Allowed Receivable Sales Accounts Dr
Credited Dr Dr Cr Cr Cr Inventory Cr
Oct. 7 4,580 4,580 2,748

10 Parker Ltd √ 4,410 90 4,500
14 4,090 4,090 2,454
16 Land 140 54,000 54,000
21 4,235 4,235 2,541
25 L. Boyton
Ltd √ 2,621 54 2,675
28 4,270 4,270 2,562
78,206 144 7,175 17,175 54,000 10,305
(101) (112)(401) (112) (401) (X) (505)(120)

Dr Total = $88,655 ($78,206 + $144 + $10,305)
Cr Total = $88,655 ($7,175 + $17,175 + $54,000 + $10,305)

CP1
Date Account Debited Ref Accounts Payable Received Cash
Dr Dr Cr Cr
Oct 5 Supplies 126 40 40

9 Mason Ltd √ 9,250 185 9,065
18 Inventory 120 1,065 1,065
23 Quinn Ltd √ 1,975 1,975
26 Land 140 42,000
Buildings 145 28,000 70,000
30 Advertising
Expense 610 200 200
71,305 11,225 185 82,345
(X) (201) (120) (101)
Balancing Totals $82,530

Dr Total = $82,530 ($71,305 + $11,225)
Cr Total = $82,530 ($185 +$82,345)
(d) It is helpful to place ledger account numbers and ticks in the journals to cross reference to
ledgers and to indicate that this part of the accounting cycle has been completed.

PROBLEM SET B 6.4

Illuminate Lighting
(a)
CR4

Account Cash Allowed Dr Receivable Sales Accounts Dr
Apr. 1 F Francis, 301 12,000 12,000

Capital
4 Smith √ 3,332 68 3,400
5 North Ltd √ 1,240 1,240
8 Cash 14,490 14,49 8,694
Sales 0
10 Horn √ 1,600 1,600
11 Inventory 120 1,100 1,100
23 North Ltd √ 3,000 3,000
29 Harris √ 2,400 2,400
39,162 68 11,640 14,49 13,100 8,694
0
(101) (414) (112) (401) (x) (505)/(120)

Dr Total = $47,924 ($39,162 + $68 + $8,694)
Cr Total = $47,924 ($11,640 + $14,490 + $13,100 + $8,694)
(b)
General Ledger

30 CR4 11,640 3,060
Horn

10 CR4 1,600 1,500

Harris

29 CR4 2,400 0
North Ltd

5 CR4 1,240 4,560
23 CR4 3,000 1,560
Smith

4 CR4 3,400 0

Horn $1,500
North Ltd 1,560 Total
$3,060
(d) The advantages to the seller of offering a settlement discount are that the seller is able to
shorten the operating cycle by converting the accounts receivable to cash earlier. The
disadvantages are that the seller receives less cash as well as the additional work to
keep track of whether customers had appropriately calculated the discount and paid
within the discount period. The advantage for the buyer is that the buyer saves money
and the disadvantage is that the buyer would have to pay for the goods earlier.

PROBLEM SET B 6.5

Findon Pty Ltd
(a)
CP10
Ch. Account Accounts Payable Inventory Received Cash
Date No. Debited Ref Dr Dr Dr Cr Cr
Oct. 1 63 Inventory 2,800 2,800

3 64 Equipment 157 3,200 3,200
5 65 Hester Ltd √ 6,800 136 6,664
10 66 Inventory 9,000 9,000
15 67 Tario Ltd √ 5,600 5,600
16 68 L Findon, 306 1,600 1,600
Drawing
19 69 Milos Ltd √ 5,600 112 5,488
29 70 Pagan and √ 10,400 10,400
Sons
4,800 28,400 11,800 248 44,752
(x) (201) (120) (405) (101)

Total Debits = $45,000 ($4,800 + $28,400 + $11,800)
Total Credits = $45,000 ($248 + $44,752)
(b)
General Ledger

31 CP10 28,400 8,800

Hester

5 CP10 6,800 0
Milos Ltd

19 CP10 5,600 4,400

Tario Ltd

15 CP10 5,600 0
Pagan and Sons


29 CP10 10,400 4,400
(c) Accounts Payable Control balance $8,800
Accounts Payable subsidiary account balances:

Milos Ltd $4,400
Pagan and Sons 4,400
Total $8,800

PROBLEM SET B 6.6
Ruby Ltd
(a), (b) & (c)
Sales Journal
S17
Invoice Post Accounts Receivable Cost of Sales Dr
Date Account No. Ref Dr Inventory Cr
Debited Sales Cr
Jan. 4 Gilbert 371 √ 7,975 4,785

9 Mays Ltd 372 √ 6,380 3,828
17 Amber Ltd 373 √ 1,320 792
31 Gilbert 374 √ 10,265 6,159
25,940 15,564
(112)/(401) (505)/(120)
Purchases Journal
P13
Inventory Dr
Jan. 3 Bell Bros. √ 11,000

8 Law Ltd √ 4,950
11 Hoble √ 4,070
23 Bell Bros. √ 8,580
24 Levine √ 5,160
33,760
(120)/(201)
General Journal
G14
Jan. 5 Accounts Payable – Bell Bros. 201/√ 330

Inventory 120 330
(Returned damaged goods purchased
previously on credit)
19 Equipment 157 6,050

Accounts Payable – Johnson Ltd 201/√ 6,050

CR15
Discount Accounts Other Cost of Sales Dr

Date Account Ref Cash Dr Allowed Dr Receivable Sales Accounts Inventory Cr
Credited Cr Cr Cr
Jan. 6 3,465 3,465 2,079

13 5,874 5,874 3,524
14 Mays Ltd √ 6,316 64 6,380
17 Gilbert √ 7,975 7,975
20 3,520 3,520 2,112
27 4,103 4,103 2,462
30 Amber Ltd √ 1,320 1,320
32,573 64 15,675 16,962 0 10,177
(101 (716) (112) (401) (x) (505)/(120)
Balancing Totals $42,814

Dr Total = $42,814 ($32,573 + $64 + $10,177)
Cr Total = $42,814 ($15,675 + $16,962 + $10,177)

CP15
Account Accounts Payable Inventory Received Cash
Date Debited Ref Dr Dr Dr Cr Cr
Jan. 4 Supplies 126 88 88

13 Bell Bros. √ 10,670 213 *10,45
7
15 Salaries 726 15,730 15,730
Expense
20 Law Ltd √ 4,950 99 4,851
31 Salaries 726 14,520 14,520
Expense
30,338 15,620 0 312 45,646
(x) (201) (x) (416) (101)

Total Debits = $45,958 ($30,338 + $15,620)
Total Credits = $45,958 ($312 + $45,646)
*Helpful Hint: Purchased $11,000 from Bell Bros on 3 Jan. 5 Jan returned $330
damaged goods. Balance paid is $10,670 less 2% discount.

PROBLEM SET B 6.7
Camperdown Carpets
(b) & (c)

CR1

Jan 7 S Devine √ 3,500 3,500

12 B Senton √ 3,920 80 4,000
23 8,600 8,600 5,590
29 Commission
Receivable 115 40,000 40,000
56,020 80 7,500 8,600 40,000 5,590
(101) (714) (112) (401) (x) (505)/(120)

Dr Total = $61,690 ($56,020 + $80 + $5,590)
Cr Total = $61,690 ($7,500 + $8,600 + $40,000 + $5,590)

CP1
Account Other Accounts Inventory Discount Cash

Date Debited Ref Accounts Dr Payable Cr Received Cr
Dr Cr
Jan. 11 Freight In 506 300 300

12 Rent Expense 729 1,000 1,000
15 D Harms √ 15,000 150 14,850
18 Sales Salaries 726 2,800 2,800
Expense
18 Office Salaries 727 1,500 1,500
Expense
20 R Grilson √ 18,000 18,000
27 S Warren √ 950 950
5,600 33,950 0 150 39,400
(x) (201) (x) (415) (101)

Dr Total = $39,550 ($5,600 + $33,950)
Cr Total = $39,550 ($150 + $39,400)

Sales Journal
S1
Account Post Accounts Receivable Dr Cost of Sales Dr
Date Debited Ref Sales Cr Inventory Cr
July 5 B Senton √ 4,000 2,600

24 B Cole √ 7,700 5,005
11,700 7,605
(112)/(401) (505)/(120)
Purchases Journal
Inventory Dr
Jan. 5 S Warren 2/7, n/30 √ 2,500

17 D Lapeska 2/7, n/30 √ 1,600
4,100
(120)/(201)
General Journal
G1

Accounts Receivable – R Barton √/112 700
Inventory Write Down Expense ($700 x .65) 750 455

(Issue a credit return for return of damaged
inventory from a customer)
30 Accounts Payable – D Lapeska √/201 500

Inventory 120 500
(Returned inventory to supplier)
(a) & (c)

General Ledger
Cash No. 101
31 CR1 56,020 97,520
31 CP1 39,400 58,120
Accounts Receivable Control No. 112


14 G1 700 14,300
31 CR1 7,500 6,800
31 S1 11,700 18,500

29 CR1 40,000 5,000
Inventory No. 120

30 G1 500 22,500
31 P1 4,100 26,600
31 CR1 5,590 21,010
31 S1 7,605 13,405
Equipment No. 157


Accounts Payable Control No. 201

30 G1 500 42,500
31 P1 4,100 46,600
31 CP1 33,950 12,650
S Alomar, Capital No. 301

Sales No. 401


Jan. 31 CR1 8,600 8,600
31 S1 11,700 20,300

Jan. 31 0

Jan. 14 G1 700 700

Jan. 31 CP1 150 150

Jan. 31 CR1 5,590 5,590
31 S1 7,605 13,195
14 G1 455 12,740
Freight In No. 506

Jan. 11 CP1 300 300

Jan. 31 CR1 80 80

Jan. 18 CP1 2,800 2,800

Jan. 18 CP1 1,500 1,500


Jan. 12 CP1 1,000 1,000
Inventory Write Down Expense No. 750

Jan. 14 G1 455 455
R Barton
14 G1 700 1,800
B Cole
24 S1 7,700 15,200
S Devine
7 CR1 3,500 1,500
B Senton
Jan. 5 S1 4,000 4,000
13 CR1 4,000 0

S Field
R Grilson
20 CP1 18,000 0
D Harms
15 CP1 15,000 0
D Lapeska
Jan. 17 P1 1,600 1,600
30 G1 500 1,100
S Warren
Jan. 5 P1 2,500 2,500
27 CP1 950 1,550

(d)
Camperdown Carpets
Trial Balance
Debit Credit
101 Cash $58,120

115 Commissions Receivable 5,000
157 Equipment 6,450
301 S Alomar, Capital 86,450
401 Sales 20,300
506 Freight In 300
726 Sales Salaries Expense 2,800
727 Office Salaries Expense 1,500
729 Rent Expense 1,000
750 Inventory Write Down Expense 455
$121,050 $121,050
(e)
Accounts Receivable Subsidiary Ledger:

R Barton $1,800
B Cole 15,200
S Devine 1,500
$18,500
Accounts Receivable Control $18,500
Accounts Payable Subsidiary Ledger:

S Field $10,000
D Lapeska 1,100
S Warren 1,550
$12,650
Accounts Payable Control $12,650

PROBLEM SET B 6.8

Collins Bikes
(a), (d) & (g)
General Ledger
Cash No. 101
July 31 CR1 98,265 98,265
31 CP1 38,472 59,793

July 31 S1 17,900 17,900
31 CR1 13,900 4,000
Inventory No. 120

July 31 P1 42,320 42,320
29 CR1 450 41,870
31 S1 11,635 30,235
31 CR1 2,600 27,635
Store Supplies No. 127

July 4 CP1 600 600
31 G1 460 140
Prepaid Rent No. 131

July 11 CP1 6,000 6,000
31 Adjusting entry G1 500 5,500

July 31 P1 42,320 42,320
31 CP1 29,600 12,720
Collins, Capital No. 301

July 1 CR1 80,000 80,000

Collins, Drawings No. 306

July 19 CP1 2,500 2,500
Sales No. 401

July 31 S1 17,900 17,900
31 CR1 4,000 21,900

July 31 CP1 228 228

July 31 S1 11,635 11,635
31 CR1 2,600 14,235

July 31 CR1 85 85


Helpful Hint: No page numbers are specified in the question for the sales, cash receipts and
general journals. In this solution the following numbers are used: CR1, S1, G1.

(b)
Sales Journal
S1
Account Post Accounts Receivable Dr Cost of Sales Dr
Date Debited Ref Sales Cr. Inventory Cr
July 6 Hardy Co. √ 5,400 3,510

8 D Wasburn √ 3,600 2,340
10 L Lemansky √ 4,900 3,185
21 S Kane √ 4,000 2,600
17,900 11,635
(112)/(401) (505)/(120)

CR1
Cost of Sales
Discount Accounts Other Dr
Account Cash Allowed Receivable Sales Accounts Inventory Cr
Date Credited Ref Dr Dr Cr Cr Cr
July
1 Collins, Capital 301 80,000 80,000
7 4,000 4,000 2,600
13 D Wasburn √ 3,564 36 3,600
16 L Lemansky √ 4,851 49 4,900
20 Hardy Co. √ 5,400 5,400
29 Inventory 120 450 450
98,265 85 13,900 4,000 80,450 2,600
(101) (614) (112) (401) (x) (505)/(120)

Dr Total = $100,950 ($98,265 + $85 + $2,600)
Cr Total = $100,950 ($13,900 + $4,000 + $80,450 + $2,600)
(c)
J Dixon
July 4 P1 6,800 6,800
15 CP1 6,800 0
W Engel
July 5 P1 7,500 7,500
10 CP1 7,500 0

R Gamble
July 11 P1 3,920 3,920
M Hill
July 13 P1 15,300 15,300
21 CP1 15,300 0
D Jacob
July 20 P1 8,800 8,800
Hardy Co.
July 6 S1 5,400 5,400
20 CR1 5,400 0
S Kane
July 21 S1 4,000 4,000
L Lemansky
July 10 S1 4,900 4,900
16 CR1 4,900 0
D Wasburn
July 8 S1 3,600 3,600
13 CR1 3,600 0

(e)
Collins Bikes
Trial Balance
as at 31 July 2016
Debit Credit
101 Cash $59,793

301 Collins, Capital 80,000
306 Collins, Drawings 2,500
401 Sales 21,900
$114,848 $114,848
(f)
Subsidiary accounts balance:

D Jacob $8,800
R Gamble 3,920
$12,720
Subsidiary accounts balance:

S Kane $4,000
(b) & (g)

General Journal
G1
July 31 Supplies Expense 631 460

Store Supplies 127 460
(Adjusting entry to record supplies used)
31 Rent Expense 729 500

Prepaid Rent 131 500
(Adjusting entry to recognise July rent expense)

(h)
Collins Bikes
as at 31 July 2016
Debit Credit
101 Cash $59,793

301 Collins, Capital 80,000
306 Collins, Drawings 2,500
401 Sales 21,900
631 Supplies Expense 460
729 Rent Expense 500
$114,848 $114,848
(i) Adjusting entries are needed to ensure that the recognition criteria are followed
for all assets, liabilities, revenues and expenses.
Without adjusting entries, some asset and liability accounts may be overstated,
while others will be understated. The corresponding revenues and expenses
thus will also show incorrect balances. The net effect will be that financial
position and performance will not faithfully represent the substance of the
underlying events.

PROBLEM SET B 6.9

Beachcombers’ Supplies Pty Ltd
(a)
CR4
Discount Accounts Other COS Dr
Date Account Credited Ref Cash Allowed Receivable Sales Accounts Inventory
Dr Dr Cr Cr Cr Cr
Apr. 1 Beach Boy, Capital 301 9,000 9,000

4 Wet Suits Galore √ 2,499 51 2,550
5 Sand Wedge Ltd √ 930 930
8 Cash Sales 10,868 10,868 6,520
10 Board Barn √ 1,200 1,200
11 Inventory 120 825 825
23 Sand Wedge Ltd √ 2,250 2,250
29 I’m Board Ltd √ 1,800 1,800
29,372 51 8,730 10,868 9,825 6,520
(101) (414) (112) (401) (x) (505)/(120)
Cross-footing $35,943
Dr Total = $35,943 ($29,372 + $51 + $6,520)
Cr Total = $35,943 ($8,730 + $10,868 + $9,825 + $6,520)
(b)
General Ledger

30 CR4 8,730 2,295
Board Barn Ltd


10 CR4 1,200 1,125
I’m Board Ltd


29 CR4 1,800 0

Sand Wedge Ltd


5 CR4 930 3,420
23 CR4 2,250 1,170
Wet Suits Galore Pty Ltd


4 CR4 2,550 0
(c)
Accounts receivable balance $2,295
Board Barn $1,125
Sand Wedge Ltd 1,170
Total $2,295

PROBLEM SET B 6.10

Richards Ltd
(a)
Purchases Journal
P1
Other Accounts
Ref Dr Dr Cr
Dec 2 Celtic Ltd √ 14,250 14,250

3 Fast Delivery 510/√ 600 600
8 Ripping Ltd √ 12,000 12,000
8 Lamb Ltd √ 13,050 13,050
15 Office Supply 126√ 1,350 1,350
16 Celtic Ltd √ 6,750 6,750
16 Ripping Ltd √ 9,000 9,000
18 Fast Delivery 510/√ 600 600
25 Striking Advertising 610/√ 1,350 1,350
28 Office Supply 157√ 375 375
4,275 55,050 59,325
(x) (120) (201)
columns are needed for Inventory and Accounts Payable. Furthermore, a Freight Inwards
account must be added to the Chart of Accounts. Freight Inwards is account number 510. In
some versions of the book no amount has been specified for the freight charge on the
invoice received on 18th December. This solution assumes the amount is the same as the
amount invoiced on 3 December (i.e. $600)
Sales Journal
S1
Accounts Receivable
Date Account Debited Post Dr Cost of Sales Dr.
Ref Sales Cr Inventory Cr
Dec 5 Wang Ltd √ 2,625 1,838

5 Singh Ltd √ 4,050 2,835
5 Smith Ltd √ 2,250 1,575
23 Singh Ltd √ 1,200 840
23 Smith Ltd √ 3,300 2,310
13,425 9,398
(112)/(401) (505)/(120)

General Journal
G1
Dec 10 Accounts Payable – Lamb Ltd 201/√ 750

Inventory 120 750
17 Accounts Payable – Office Supply 201 150

Supplies 126 150
(Received a credit note on supplies returned)
20 Accounts Payable – Celtic Ltd 201/√ 450

Inventory 120 450

Accounts Receivable – Smith Ltd 112/√ 300
(Granted an allowance for inventory damaged
in shipment)
(b)
General Ledger
Dec 26 G1 300 300CR

31 S1 13,425 13,125
Inventory No. 120

Dec 10 G1 750 750CR

20 G1 450 1,200CR
31 P1 55,050 53,850DR
31 S1 9,398 44,452DR
Supplies No. 126

Dec 15 P1 1,350 1,350

17 G1 150 1,200
Equipment No. 157


Dec 28 P1 375 375

Dec 10 G1 750 750DR

17 G1 150 900DR
20 G1 450 1,350DR
31 P1 59,325 57,975
Sales No. 401

Dec 31 S1 13,425 13,425

Dec 26 G1 300 300

Dec 31 S1 9,398 9,398
Freight In No. 510

Dec 3 P1 600 600

18 P1 600 1,200

Dec 25 P1 1,350 1,350
Purchases Journal (at the end of the month), the 31 December date can be used or the actual
date of the transaction. Both are acceptable.
Wang Ltd

Dec 5 S1 2,625 2,625
Singh Ltd
Dec 5 S1 4,050 4,050

23 S1 1,200 5,250
Smith Ltd
Dec 5 S1 2,250 2,250

23 S1 3,300 5,550
26 G1 300 5,250

Celtic Ltd
Dec 2 P1 14,250 14,250

16 P1 6,750 21,000
20 G1 450 20,550
Ripping Ltd
Dec 8 P1 12,000 12,000
16 P1 9,000 21,000
Lamb Ltd
Dec 8 P1 13,050 13,050
10 G1 750 12,300
Fast Delivery
Dec 3 P1 600 600

18 P1 600 1,200
Office Supply
Dec 15 P1 1,350 1,350
17 G1 150 1,200
28 P1 375 1,575
Striking Advertising
Dec 25 P1 1,350 1,350
(c)

Wang Ltd $2,625
Singh Ltd 5,250
Smith Ltd 5,250
Total $13,125

Celtic Ltd $20,550
Ripping Ltd 21,000
Lamb Ltd 12,300
Fast Delivery 1,200
Office Supply 1,575
Striking Advertising 1,350
Total $57,975
(d) The advantages of using a computerised accounting system over a manual system is
that it is possible to process a much larger number of transactions in a much shorter
period of time. Data entry is minimal and posting of the transactions is done immediately
by the computer. Information can be obtained on a more timely basis and with fewer
errors.
The disadvantages include the need for hardware and software to be compatible, the
possibility that data is lost due to power failures or viruses, the need to have staff with
suitable training, and the possibility of computer hacking or fraud.

COMPREHENSIVE PROBLEM
CHAPTERS 3 TO 6
Students are required to include additional account names and numbers to record the
transactions. Please note the following accounts are required, however, students may
have used different account names and numbers.
Greta’s Furniture Pty Ltd
The chart of accounts includes the following account names and numbers:
Account number Account name

306 P Greta Drawings
350 Profit or Loss Summary
401 Sales
412 Sales Returns and Allowances
415 Discount Received
417 Commissions Revenue
510 Purchases
512 Purchase returns and allowances
516 Freight in
627 Sales salaries expense
711 Depreciation expense
722 Insurance expense
725 Discount allowed
727 Office salaries expense
728 Office supplies expense
729 Rent expense
(a)
Sales Journal
S1
Invoice Post Accounts Receivable Dr
Date Account Debited No. Ref Sales Cr
Jan. 3 The Furniture 510 √ 5,580

Warehouse
3 Beautiful Homes Ltd 511 √ 3,240
11 Couch City 512 √ 2,340
11 Lowell Chairs 513 √ 1,620
22 The Furniture 514 √ 3,060
Warehouse
22 Couch City 515 √ 1,440
25 Table Top Ltd 516 √ 6,300
25 Beautiful Homes Ltd 517 √ 10,980
34,560
(112)/(401)

Purchases Journal
P1
Purchases Dr
Jan. 5 Walden & Co √ 5,400

5 D Landell √ 3,960
16 Nordin Office Furniture √ 27,000
16 Lee Importers √ 25,560
16 Walden & Co √ 2,700
27 Nordin Office Furniture √ 26,100
27 D Landell √ 2,160
27 Walden & Co √ 5,040
97,920
(510)/(201)

CR1
Discount Accounts Other

Cash Dr Allowed Receivable Sales Accounts
Date Account Ref Dr Cr Cr Cr
Credited
Jan. 7 Lowell Chairs √ 7,128 72 7,200

7 Table Tops Ltd √ 3,564 36 3,600
10 27,900 27,900
13 The Furniture √ 5,580 5,580
Warehouse
13 Beautiful Homes √ 2,700 2,700
Ltd
20 31,500 31,500
21 Lowell Chairs √ 1,458 162 1,620
31 38,340 38,340
31 Commissions 115 70,200 70,200
Rec’d
188,370 270 20,700 97,740 70,200
(101) (725) (112) (401) (x)

CP1
Office Other
Cash Discount Accounts Supplies Accounts
Date Account Debited Ref. Cr Received Cr Payable Dr Dr Dr
Jan. 8 Freight In 516 324 324

9 Lee Importers √ 16,038 162 16,200
9 Nordin Office Furniture √ 19,503 297 19,800
12 Rent Expense 729 1,800 1,800
15 P Crow, Drawings 306 1,440 1,440
17 720 720
21 I Keah √ 27,000 27,000
23 Nordin Office Furniture √ 27,000 27,000
23 Lee Importers √ 25,200 25,200
28 360 360
31 Sales Salaries 627 7,740 7,740
Expense
31 Office Salaries 727 4,680 4,680
Expense
131,80 459 115,200 1,080 15,984
5
(101) (415) (201) (125) (x)
(a) & (e)

General Journal
G1
Date Account name (narration) Ref Debit Credit

Accounts Receivable – Beautiful Homes Ltd √/112 540
(Issued credit for goods returned)
18 Accounts Payable –Lee Importers √/201 360

Purchase Returns and Allowances 512 360
(Received credit for returned goods)
Adjusting Entries:
31 Office Supplies Expense 728 1,980

Office Supplies 125 1,980
(Office supplies used)
31 Insurance Expense 722 360

Prepaid Insurance 130 360
(January insurance expense (1/10 x 3,600))

Date Account name (narration) Ref Debit Credit

(Depreciation expense (1/12 x 2,700))
31 Commissions Receivable 115 39,600

Commissions Revenue 417 39,600
(Accrued commissions revenue)
Closing Entries
31 Inventory (Jan. 31) 120 28,800

Sales 401 132,300
Discount Received 415 459
Commissions Revenue 417 39,600
Purchase Returns and Allowances 512 360
Profit or Loss Summary 350 201,519
31 Profit or Loss Summary 350 148,239

Inventory (Jan 1) 120 32,400
Sales Returns and Allowances 412 540
Purchases 510 97,920
Freight In 516 324
Rent Expense 729 1,800
Sales Salaries Expense 627 7,740
Office Salaries Expense 727 4,680
Office Supplies Expense 728 1,980
Insurance Expense 722 360
Depreciation Expense 711 225
Discount Allowed 725 270

P Greta, Capital 301 53,280
31 P. Greta, Capital 301 1,440

P GretaCrow, Drawings 306 1,440
(b) & (e)

General Ledger
Cash No. 101
31 Various Receipts CR1 188,370 252,720
31 Various Payments CP1 131,805 120,915


31 Credit Sales S1 34,560 57,960
31 Cash and discount CR1 20,700 37,260
9 Sales Returns G1 540 36,720

31 Cash receipt CR1 70,200 0
31 Commission revenue G1 39,600 39,600
Inventory No. 120

31 Profit or Loss Summary G1 28,800 61,200
31 Profit or Loss Summary G1 32,400 28.800
Office Supplies No. 125

31 Cash CP1 1,080 2,880
31 Office supplies expense G1 1,980 900
Prepaid Insurance No. 130

31 Insurance expense G1 360 3,240
Equipment No. 157


31 Depreciation expense G1 225 2,925


31 Purchases P1 97,920 160,920
31 Cash CP1 115,200 45,720
28 Purchases Returns and allowances G1 360 45,360
P Greta, Capital No. 301

31 Profit or Loss Summary G1 53,280 194,940
31 Drawings G1 1,440 103,500
P Greta, Drawings No. 306

Jan. 15 Balance CP1 1,440 1,440
31 Capital G1 1,440 0
Profit or Loss Summary No. 350

Jan. 31 Revenues G1 201,519 201,519
31 Expenses G1 148,239 53,280
31 P Greta Capital; G1 53,280 0
Sales No. 401

Jan. 31 Accounts receivable S1 34,560 34,560
31 Cash CR1 97,740 132,300
31 Profit or Loss Summary G1 132,300 0

Jan. 9 Accounts receivable G1 540 540
31 Profit or Loss Summary G1 540 0

Jan. 31 Cash CP1 459 459


Jan. 31 Commission Receivable G1 39,600 39,600
Purchases No. 510

Jan. 31 Accounts payable P1 97,920 97,920
Purchase Returns and Allowances No. 512

Jan. 18 Accounts Payable G1 360 360
Freight In No. 516

Jan. 8 Cash CP1 324 324

Jan. 31 Cash CP1 7,740 7,740

Jan.31 Accumulated depreciation G1 225 225
Insurance Expense No. 722

Jan. 31 Prepaid Insurance G1 360 360

Jan. 31 Cash CR1 270 270


Jan. 31 Cash CP1 4,680 4,680
Office Supplies Expense No. 728

Jan. 31 Office Supplies G1 1,980 1,980

Jan. 12 Cash CP1 1,800 1,800
Couch City
11 S1 2,340 5,040
22 S1 1,440 6,480
Beautiful Homes Ltd

Jan. 3 S1 3,240 3,240
9 G1 540 2,700
13 CR1 2,700 0
25 S1 10,980 10,980
Table Tops
7 CR1 3,600 9,900
25 S1 6,300 16,200
Lowell Chairs
7 CR1 7,200 0
11 S1 1,620 1,620
21 CR1 1,620 0

The Furniture Warehouse

Jan. 3 S1 5,580 5,580
13 CR1 5,580 0
22 S1 3,060 3,060
D Landell
Jan. 5 P1 3,960 3,960
27 P1 2,160 6,120
Lee Importers
9 CP1 16,200 0
16 P1 25,560 25,560
18 G1 360 25,200
23 CP1 25,200 0
I Keah
21 CP1 27,000 0
Nordin Office Furniture

9 CP1 19,800 0
16 P1 27,000 27,000
23 CP1 27,000 0
27 P1 26,100 26,100
Walden & Co
Jan. 5 P1 5,400 5,400
16 P1 2,700 8,100
27 P1 5,040 13,140

(c) Greta’s Furniture Pty Ltd Worksheet for the month ended 31 January 2018
Statement of Profit or Statement of financial
No. Account Name Trial Balance Adjustments Adjusted Trial Balance Loss position
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
101 Cash 120,915 120,915 120,915
112 Accounts Receivable 36,720 36,720 36,720
115 Commissions Receivable (4) 39,600 39,600 39,600
120 Inventory 28,800 32,400 32,400 28,800 28,800
125 Office Supplies 2,880 (1) 1,980 900 900
130 Prepaid Insurance 3,600 (2) 360 3,240 3,240
157 Equipment 11,610 11,610 11,610
158 Accum. Depreciation – Equipment 2,700 (3) 225 2,925 2,925
201 Accounts Payable 45,360 45,360 45,360
301 P Greta, Capital 141,660 141,660 141,660
306 P Greta, Drawings 1,440 1,440 1,440
401 Sales 132,300 132,300 132,300
412 Sales Returns and Allowances 540 540 540
415 Discount Received 459 459 459
510 Purchases 97,920 97,920 97,920
512 Purchase Returns and Allowances 360 360 360
516 Freight In 324 324 324
627 Sales Salaries Expense 7,740 7,740 7,740
725 Discount Allowed 270 270 270

727 Office Salaries Expense 4,680 4,680 4,680
729 Rent Expense 1,800 1,800 1,800
Totals $322,839 $322,839
728 Office Supplies Expense (1) 1,980 1,980 1,980
722 Insurance Expense (2) 360 360 360
711 Depreciation Expense (3) 225 225 225
417 Commissions Revenue (4) 39,600 39,600 39,600
Totals $42,165 $42,165 $362,664 $362,664 148,239 201,519 243,225 189,945
Profit 53,280 53,280
Totals $201,519 $201,519 $243,225 $243,225

(d)
Statement of Profit or Loss
for the month ended 31 January 2018
OPERATING REVENUE
Sales revenues:
Gross sales $132,300
Less: Sales returns and allowances (540)
Net sales revenue 131,760
Cost of sales:
Beginning inventory, 1/1/18 $32,400
Purchases $97,920
Less: Purchase returns and allowances (360)
Net purchases 97,560
Freight in 324 97,884
Cost of goods available for sale 130.284
Less: Ending inventory 31/1/18 (28,800)
Cost of sales 101,484
Gross profit 20,276
OTHER OPERATING REVENUE

Commissions Revenue 39,600
Discount Received 459 40,059
70,335
OPERATING EXPENSES
Selling expenses:
Sales salaries expense $7,740
Administrative expenses:
Office salaries expense $4,680
Rent expense 1,800
Office supplies expense 1,980
Insurance expense 360
Depreciation expense 225 9,045
Financial expenses:
Discount Allowed 270 17,055
Profit $53,280

Chapter 6: Accounting subsystems

Statement of financial position
ASSETS
Current assets:
Cash $120,915
Accounts receivable 36,720
Commissions receivable 39,600
Inventory 28,800
Office supplies 900
Prepaid insurance 3,240
Total current assets $230,175
Non-current assets:
Equipment $11,610
Less: Accumulated depreciation (2,925)
Total non-current assets 8,685
238,860
LIABILITIES
Current liabilities:
Accounts payable 45,360
Total liabilities 45,360
NET ASSETS $193,500
EQUITY
Owners Equity $193,500

Statement of Changes in Owner’s Equity
P Greta, Capital 1 January 2018 $141,660

Add: Profit 53,280
194,940
Less: Drawings
(1,440
P Greta, Capital, 31 January 2018 $193,500

(f)
Post-Closing Trial Balance
No Account Name Debit Credit
101 Cash $120,915

115 Commissions Receivable 39,600
125 Office Supplies 900
130 Prepaid Insurance 3,240
301 P Greta, Capital 193,500
$241,785 $241,785
Accounts Receivable subsidiary ledger account balances:

Couch City $6,480
Beautiful Homes Ltd 10,980
Table Tops 16,200
The Furniture Warehouse 3,060 $36,720
Accounts Payable subsidiary ledger account balances:

D Landell $6,120
Nordin Office Furniture 26,100
Walden & Co 13,140 $45,360

BUILDING BUSINESS SKILLS
FINANCIAL REPORTING AND ANALYSIS
BUILDING BUSINESS SKILLS 6.1 FINANCIAL REPORTING PROBLEM
Domino’s Pizza Enterprises Ltd
(a) Domino’s would use control accounts, subsidiary ledgers and special journals because it
is an efficient and effective way for a large business to process numerous transactions
(see pages xxx and xxx text).
Domino’s has many customers and creditors, a large amount of property, plant and
equipment and many shareholders – the company is likely to have subsidiary ledgers
and control accounts for these items.
The 2013 Consolidated Statement of Financial Position and the notes to the financial
statements revealed the following:
Receivables (customers) $23,597,000

Payables (creditors) $17,999,000
Property, plant and equipment $49,613,000
Issued capital $40,855,000
Control accounts and subsidiary ledgers are needed to continually record, monitor and
update these large accounts.
Domino’s pays out and receives large amounts of cash (see the statement of cash
flows), it also buys and sells a large number of goods (see the statement of financial
performance), so the company is likely to use special journals for sales, purchases, cash
receipts and payments.
(b) There are no obvious disadvantages to Domino’s in using control accounts, subsidiary
ledgers and special journals but there are many advantages.
Advantages of Subsidiary Ledgers
Subsidiary ledgers have several advantages.

1. They show transactions affecting one customer or one creditor in a single
account, thus providing up-to-date information on specific account balances.
2. They free the general ledger of excessive details. As a result, a trial balance of
the general ledger does not contain vast numbers of individual account balances.
3. They provide effective control through the periodic comparison of the total of the
schedule of the subsidiary ledger with the balance in the corresponding control
account.
4. They make possible a segregation of duties in posting. One employee can post
to the general ledger while someone else posts to the subsidiary ledgers.
Advantages of special journals.
The use of a special journal to record transactions has a number of advantages. First, all
like transactions are grouped at the initial stage of recording. Second, the one-line entry
for each transaction saves time. Third, only totals, rather than individual entries, are
posted to the general ledger. This saves posting time and reduces the possibilities of

errors in posting. Finally, a segregation of duties can be achieved because one person
can take responsibility for the sales journal, another for the cash receipts and so on.
(c) As per the 2013 annual report, the Corporate Governance Statement for Domino’s Pizza
Enterprises Ltd meets the requirements of the ASX Corporate Governance Principles
and Recommendations (Third Edition). Each of the eight principles (as noted below) is
listed and compliance is noted with Domino’s clearly referencing the relevant page
number where investors can find additional information relating to each principle.
The seven principles noted are as follows:

Principle 1 – Lay solid foundations for management and oversight
Principle 2 – Structure the Board and add value
Principle 3 – Promote ethical and responsible decision-making
Principle 4 – Safeguard integrity in financial reporting
Principle 5 – Make timely and balanced disclosure
Principle 6 – Respect the rights of shareholders
Principle 7 – Recognise and manage risk
Principle 8 – Remunerate fairly and responsibly

BUILDING BUSINESS SKILLS 6.2 FINANCIAL REPORTING PROBLEM - MANUAL

MINI PRACTICE SET
Baycity Music Shop

(a)
Sales Journal
S1
Accounts Cost of Sales Dr
Account Invoice Post Receivable Dr Inventory Cr
Date Debited No. Ref Sales Cr
Jan. 6 J Hendrix 510 √ 4,480 2,688

6 N Jones 511 √ 2,520 1,512
11 R Danforth 512 √ 1,820 1,092
11 S Levin 513 √ 1,260 756
22 J Hendrix 514 √ 3,780 2,268
22 R Danforth 515 √ 1,120 672
25 B Jiminez 516 √ 4,900 2,940
25 N Jones 517 √ 8,540 5,124
28,420 17,052
(112)/(402) (505)/(120)
Purchases Journal
P1
Inventory Dr
Date Account Credited Terms Ref. Accounts Payable Cr
Jan. 3 Guitar World n/30 √ 4,200

3 Drums R Us n/30 √ 3,080
17 Aging Violins 1/7, n/30 √ 22,400
17 Microphones ltd 2/7, n/30 √ 19,880
17 Guitar World n/30 √ 2,100
27 Aging Violins 1/7, n/30 √ 20,300
27 Drums R Us n/30 √ 1,680
27 Guitar World n/30 √ 6,720
80,360
(120)/(201)


CR1
Cost of Sales
Discount Accounts Other Dr
Account Cash Allowed Receivable Sales Accounts Inventory Cr
Date Credited Ref Dr Dr Cr Cr Cr
Jan
7 S Levin √ 5,600 5,600
7 B Jiminez √ 2,800 2,800
10 21,700 21,700 13,020
12 J Hendrix √ 4,390 90 4,480
13 N Jones √ 2,058 42 2,100
15 Bank Loan 200 14,000 14,000
16 S Levin √ 1,235 25 1,260
20 24,500 24,500 14,700
31 29,820 29,820 17,892
31 500 500
106,603 157 16,240 76,020 14,500 45,612
(101) (614) (112) (401) (x) (505)/(120)
Dr Total = $152,372 ($106,603 + $157 + $45,612)

Cr Total = $152,372 ($16,240 + $76,020 + $14,500 + $45,612)

CP1
Discount Accounts Office Other
Cash Received Payable Supplies Accounts
Date Account Debited Ref Cr Cr Dr Dr Dr
Jan
8 Freight In 417 252 252
9 Microphones Ltd √ 12,348 252 12,600
9 Aging Violins √ 15,246 154 15,400
12 Rent Expense 729 1,400 1,400
15 Peter Dawes, Drawings 306 1,120 1,120
17 560 560
21 R Manual √ 15,000 15,000
23 Aging Violins √ 22,176 224 22,400
23 Microphones Ltd √ 19,208 392 19,600
28 280 280
31 Sales Salaries Expense 627 6,020 6,020
31 Office Salaries Expense 727 3,640 3,640
97,250 1,022 85,000 840 12,432
(101) (417) (201) (125) (x)
Dr = 98242 Cr = 98242

(a) & (e)

General Journal
G1

Accounts Receivable – N Jones √/112 420
Inventory ($420 x .60) 120 252

(Issued credit for goods returned)
18 Accounts Payable – Microphones Ltd √/201 280

Inventory 120 280
(Received credit for returned goods)
Adjusting Entries
31 Office Supplies Expense 728 1,140

Office Supplies 125 1,140
(Office supplies used)
31 Insurance Expense 722 200

Prepaid Insurance 130 200
(One month’s insurance expense 2,000/10 = 200)

(One month’s depreciation expense: 1,500/12 = 125)
31 Interest Expense 718 840

Interest Payable 230 840
(Interest owing on bank loan)
Closing Entries
31 Sales 401 104,440

Discount Received 417 1,022
Profit or Loss Summary 350 105,462


Jan. 31 Profit or Loss Summary 350 76,606
Sales Returns and Allowances 412 420
Cost of Sales 505 62,412
Freight In 515 252
Discount Allowed 614 157
Rent Expense 729 1,400
Sales Salaries Expense 627 6,020
Depreciation Expense 711 125
Interest Expense 718 840
Insurance Expense 722 200
Office Salaries Expense 727 3,640
Office Supplies Expense 728 1,140

Peter Dawes, Capital 301 28,856
31 Peter Dawes, Capital 301 1,120

Peter Dawes, Drawings 306 1,120
(b) & (e)

General Ledger
Cash No. 101
31 CR1 106,603 142,353
31 CP1 97,250 45,103

31 S1 28,420 43,020
31 CR1 16,240 27,780
9 G1 420 26,360
Inventory No. 120

31 P1 80,360 98,360
31 S1 17,052 81,278
31 CR1 45,612 35,666
9 G1 252 35,918
18 G1 280 35,668

Office Supplies No. 125

31 CP1 840 1,840
31 G1 1,140 700
Prepaid Insurance No. 130

31 G1 200 1,800
Equipment No. 157


31 G1 125 1,625
Bank Loan No. 200

Jan. 15 CR1 14,000 14,000

31 P1 80,360 123,360
31 CP1 85,000 38,360
18 G1 280 38,080
Interest Payable No. 230

Jan. 31 G1 840 840
Revenue Received in Advance No. 235

Jan. 31 CR1 500 500

Peter Dawes, Capital No. 301

31 G1 28,856 101,155
31 G1 1,120 100,036
P Dawes, Drawings No. 306

Jan. 15 CP1 1,120 1,120
31 G1 1,120 0
Profit or Loss Summary No. 350

Jan. 31 G1 105,461 105,461
31 G1 76,606 28,855
31 G1 28,855 0
Sales No. 401

Jan. 31 S1 28,420 28,420
31 CR1 76,020 104,440
31 G1 104,440 0

Jan. 9 G1 420 420
31 G1 420 0

Jan. 31 CP1 1,022 1,022
31 G1 1,022 0

Jan. 31 S1 17,052 17,052
31 CR1 45,612 62,664
9 G1 252 62,412
31 G1 62,412 0

Freight In No. 515

Jan. 8 CP1 252 252
31 G1 252 0
Discount allowed No. 614

Jan. 31 CR1 157 157
31 G1 157 0

Jan. 31 CP1 6,020 6,020
31 G1 6,020 0

Jan.31 G1 125 125
31 G1 125 0
Interest Expense No. 718

Jan. 31 G1 840 840
31 G1 840 0
Insurance Expense No. 722

Jan. 31 G1 200 200
31 G1 200 0

Jan. 31 CP1 3,640 3,640
31 G1 3,640 0
Office Supplies Expense No. 728

Jan. 31 G1 1,140 1,140
31 G1 1,140 0


Jan. 12 CP1 1,400 1,400
31 G1 1,400 0
R Danforth
11 S1 1,820 3,320
22 S1 1,120 4,440
N Jones
Jan. 6 S1 2,520 2,520
9 G1 420 2,100
13 CR1 2,100 0
25 S1 8,540 8,540
B Jiminez
7 CR1 2,800 4,700
25 S1 4,900 9,600
S Levin
7 CR1 5,600 0
11 S1 1,260 900
16 CR1 1,260 0
J Hendrix
Jan. 6 S1 4,480 4,480
12 CR1 4,480 0
22 S1 3,780 3,780

Drums R Us
Jan. 3 P1 3,080 3,080
27 P1 1,680 4,760
Microphones Ltd
9 CP1 12,600 0
17 P1 19,880 19,880
18 G1 280 19,570
23 CP1 19,600 0
R Manual
21 CP1 15,000 0
Aging Violins
9 CP1 15,400 0
17 P1 22,400 22,400
23 CP1 22,400 0
27 P1 20,300 20,300
Guitar World
Jan. 3 P1 4,200 4,200
17 P1 2,100 6,300
27 P1 6,720 13,020

(c)
Baycity Music Shop
Worksheet for the month ended 31 January 2017
Account Titles Trial Balance Adjustments Adjusted Trial Statement of Profit or Statement of Financial
Balance Loss Position
Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr
Cash 45,103 45,103 45,103
Accounts Receivable 26,360 26,360 26,360
Inventory 35,668 35,668 35,668
Office Supplies 1,840 (1) 1,140 700 700
Prepaid Insurance 2,000 (2) 200 1,800 1,800
Equipment 45,450 45,450 45,450
Accum. Depreciation – Equipment 1,500 (3) 125 1,625 1,625
Bank Loan 14,000 14,000 14,000
Accounts Payable 38,080 38,080 38,080
Interest Payable (4) 840 840 840
Revenue Received in Advance 500 500 500
Peter Dawes, Capital 72,300 72,300 72,300
Peter Dawes, Drawings 1,120 1,120 1,120
Sales 104,440 104,440 104,440
Discount Received 1,022 1,022 1,022
Sales Returns and Allowances 420 420 420
Discount Allowed 157 157 157
Cost of Sales 62,412 62,412 62,412
Freight In 252 252 252
Sales Salaries Expense 6,020 6,020 6,020
Office Salaries Expense 3,640 3,640 3,640
Rent Expense 1,400 1,400 1,400
Totals 231,842 231,842
Office Supplies Expense (1) 1,140 1,140 1,140
Insurance Expense (2) 200 200 200
Depreciation Expense (3) 125 125 125
Interest Expense (4) 840 840 840
Totals 2,305 2,305 232,807 232,807 76,606 105,461 156,201 127,345
Profit 28,856 28,856
Totals 105,461 105,461 156,201 156,201

(d)
Baycity Music Shop
Statement of Profit or Loss
OPERATING REVENUE
Sales revenues:
Gross sales 104,440
Less: Sales returns and allowances (420)
Net sales revenue 104,020
Cost of Sales:
Cost of sales 62,412
Freight in 252 62,664
Gross profit 41,356
Other Operating Revenue:
Discount Received 1,022
42,377
OPERATING EXPENSES
Selling expenses:
Sales salaries expense 6,020
Administrative expenses:
Office salaries expense 3,640
Rent expense 1,400
Office supplies expense 1,140
Insurance expense 200
Depreciation expense 125 6,506
Financial expenses:
Interest Expense 840
Discount Allowed 157 997 13,522
Profit 28,856
Baycity Music Shop

Statement of Changes in Owner’s Equity
Peter Dawes, Capital, 1 January 2017 72,300

Add: Profit 28,856
101,155
Less: Drawings (1,120)
Peter Dawes, Capital, 31 January 2017 100,036

Baycity Music Shop

Statement of Financial Position
ASSETS
Current assets:
Cash 45,103
Accounts receivable 26,360
Inventory 35,668
Office supplies 700
Prepaid insurance 1,800
Total current assets 109,631
Non-current assets:
Property, Plant and Equipment:
Equipment 45,450
Less: Accumulated depreciation (1,625)
Total non-current assets 43,825
Total assets 153,456
LIABILITIES AND OWNER’S EQUITY

Current liabilities:
Accounts payable 38,080
Interest payable 840
Revenue Received in Advance 500
Total current liabilities 39,420
Non-current liabilities:
Bank loan 14,000
Total non-current liabilities 14,000
Total liabilities 53,420
Owner’s Equity:
Peter Dawes, Capital 100,036
Total liabilities and owner’s equity 153,456

(f)
Baycity Music Shop
Post-Closing Trial Balance
Debit Credit
Cash 45,103
Accounts Receivable 26,360
Inventory 35,668
Office Supplies 700
Prepaid Insurance 1,800
Equipment 45,450
Accumulated Depreciation – Equipment 1,625
Bank Loan 14,000
Accounts Payable 38,080
Revenue Received in Advance 840
Interest Payable 500
Peter Dawes, Capital _ _____ 100,036
155,081 155,081
Accounts Receivable subsidiary ledger account balances:

R Danforth $4,440
N Jones 8,540
B Jiminez 9,600
J Hendrix 3,780 $26,360
Accounts Payable subsidiary ledger account balances:

Drums R Us $4,760
Aging Violins 20,300
Guitar World 13,020 $38,080

BUILDING BUSINESS SKILLS 6.3 COMPUTERISED ACCOUNTING PROGRAMS – AN

INTRODUCTION
There are many companies that sell computerised accounting software packages such as MYOB
and QuickBooks. These companies provide detailed product information and many provide trial
versions on the web site. The aim of this question is to allow students to find out more about
computerised accounting software packages and experience using them.

CRITICAL THINKING
BUILDING BUSINESS SKILLS 6.4 GROUP DECISION CASE
Ling & Jessop
(a) The special journals for Lee & Jones should be:
(1) sales journal;
(2) purchases journal;
(3) cash receipts journal; and
(4) cash payments journal.
(1) Sales Journal columns:

 Date
 Account Debited
 Invoice Number
 Post Reference
 Accounts Receivable, Dr. and Sales – Appliances, Cr.
 Cost of Sales, Dr. and Inventory, Cr.
(2) Purchases Journal columns:

 Date
 Account Credited
 Terms
 Post Reference
 Accounts Payable, Cr.
 Inventory – Appliances, Dr.
 Inventory – Parts, Dr.
Note: Because two different types of inventory are purchased on credit, a three-column
purchases journal might be used.
(3) Cash Receipts columns:

 Date
 Account Credited
 Post Reference
 Cash, Dr.
 Accounts Receivable, Cr.
 Sales – Appliances, Cr.
 Sales – Parts, Cr.
 Revenue from Repairs, Cr.
 Other Accounts, Cr.
 Cost of Sales, Dr. and Inventory, Cr.
Note: A Discount Allowed, Dr. column is not needed because all credit terms are net/30
days.

(4) Cash Payments Journal columns:

 Date
 Cheque Number
 Accounted Debited
 Post Reference
 Other Accounts, Dr.
 Accounts Payable, Dr.
 Advertising Expense, Dr.
 Salaries Expense, Dr.
 Discount Received, Cr.
 Cash, Cr.
Note: A Discount Received column is needed as practically all suppliers offer cash
discounts and it is company policy to take all discounts.
(b) Ling & Jessop should have:
(1) An accounts receivable control account with individual customers accounts in a

customers’ subsidiary ledger.
(2) An accounts payable control account with individual creditors accounts in a creditors’
subsidiary ledger.
The use of control accounts and subsidiary ledgers will:
(1) provide necessary up-to-date information on specific customer and creditor balances
(2) free the general ledger of excessive detail
(3) help locate errors in individual accounts
(4) make possible a division of labour in posting.
(c) It appears that the accounting information system for the business is still inefficient despite
hiring two additional bookkeepers to assist with the accounting work. Reasons for this could
include more than one person requiring the ledger to post from the journal. In addition, the
daily posting of transactions continues to be very time consuming, manual processes are
more subject to errors and it is time consuming trying to locate and correct errors
.
(d) The recommended changes would be to introduce a computerised accounting system to
improve efficiency and accuracy of recording transactions. Advantages of computerised
systems include:
- less staff are required so in the long run lower salary costs
- computerised systems can process numerous transactions quickly
- built in automatic posting
- error reduction
- faster response time – e.g. for producing reports
- in built checks – e.g. not processing a transaction if there are not equal debits and
credits

BUILDING BUSINESS SKILLS 6.5 COMMUNICATION ACTIVITY
MEMORANDUM
To: Marlene Jones
From: What’s My Name
Subject: Customer relationship management
Dear Marlene
I have conducted research into customer relationship management (CRM). Please find attached
report detailing how your business could benefit from CRM to assist you in understanding and
satisfying customer needs and improve profitability.
Customer relationship management is a difficult term to define as it means many different things to
different people. Generally, it refers to the process by which companies manage interaction with
their customers, by collecting and analysing data related to customers, and delivering ‘tailor made’
value propositions to individual customers. The rationale behind this is that customers are all
different, and they require different levels of services (e.g. ‘premium’ customers that require
constant attention, versus ‘passive’ customers who are happy with the basic service at lower costs).
The goal of CRM is to increase customer loyalty by providing personalised attention to customers
but without “wasting” company resources on services that customers do not value.
CRM often requires the support of different technologies, such as using the company websites to
‘research’ your customers (e.g. which links did they click on?). Amazon.com, for example, often
provides personalised recommendations to users when they log on, based on their previous visits
and purchases. Other data analysis/data mining tools can also be used to better understand
customer behaviour and categorise them into different ‘customer segments’, and in doing so,
building customer behaviour models.
There are many benefits to CRM, the most obvious one is to allow organisations to more effectively
manage their resources by serving the customers the ‘right way’, and ensuring a lower level of
customer turnover. As it is generally more expensive to acquire new customers than to sell to
existing customers, CRM allows companies to stop the “customer leakage” and maximise profit
from their existing accounts.
If you have any further queries, please do not hesitate to contact me.
Regards
XXXXXX

BUILDING BUSINESS SKILLS 6.6 ETHICS CASE
Tyler Products Ltd
(a) The stakeholders in this case are:

 Don Henke, manager of Tyler Products’ centralised computer accounting operation.
 The employees of Tyler Products’ three divisions at Moorebank, Smithfield and
Tempe.
(b) Don’s instructions to assign the Tempe code to all uncoded and incorrectly coded sales
documents overstates the sales of Tempe and understates the sales of Moorebank and
Smithfield, thereby affecting the employee bonus plan. Don’s intent and actions are
unethical. He is increasing the sales of his wife’s, relatives’ and friends’ Tempe division
sales and unfairly aiding them in the bonus competition.
(c) Tyler Products Ltd should have a written policy covering uncoded and incorrectly coded
sales documents. This would prevent the manager from arbitrarily designating the
division to be credited for the uncoded sales. Tyler Products could design new sales
documents which identify clearly from which division the sales were made.
BUILDING BUSINESS SKILLS 6.7 RESEARCH CASE
Answers will vary depending on the resources chosen by the students. However, at a minimum they
should look at 2014 annual report and press releases provided on the company website.

BUILDING BUSINESS SKILLS 6.8 JEWELS, JEWELS AND MORE JEWELS LTD
(a) Corporate social responsibility (CSR) is ‘social responsibility’ applied in a business

environment and involves businesses acting with regard to social principles and acting
ethically. Basically, it is about business people’s obligation to act responsibly for the benefit
society when carrying on business activities. This responsibility can be by passive by not
engaging in activities that could be socially harmful (e.g. polluting the air), or active, by
engaging in activities that directly support people and enhance social goals (e.g. building
public playgrounds and parks). For each business what is considered to be ‘socially
responsible’ differs, however there are key guiding principles including ensuring quality of
life, economic function of the society and social investment.
(b) If the customers of Jewels, Jewels and more Jewels Ltd are aware that one of their main
suppliers acquires blood diamond, they may choose to buy their products from socially
responsible businesses and they will lose profits. Jewels, Jewels and more Jewels Ltd may
also get bad press and exacerbate the decrease in profits.
(c) Jewels, Jewels and more Jewels Ltd could do a number of things to avoid negative
consequences including:
1 Find another ethical diamond supplier ASAP and make this information
public
2 Obtain assurance and evidence from Big Diamond Factory that they are
ethical socially responsible suppliers and then make that information
publicly available.
3 Put policies into place to ensure all future suppliers are socially
responsible and make this information public

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Solutions Manual

John Wiley & Sons Australia, Ltd 2016

CHAPTER 6 – ACCOUNTING INFORMATION SYSTEMS

ASSIGNMENT CLASSIFICATION TABLE

2. Explain the major phases in the 2

3. Define internal control.

5. Identify the principles and limitations of 3 1,2

6. Understand the accounting processes

7. Describe the sales and receivables

8. Apply internal control principles to the 1,2

9. Describe the nature and purposes of 3,4,5,6,10, 1A,2A,3A,

10. Explain how special journals are used 3,4,5,6,7,8, 1A,2A,3A,4

12. Appreciate the role of and use of non-

© John Wiley and Sons Australia Ltd, 2016 6.2

13. Identify the advantages and

14. Record transactions for sales, 5,6,7,8,11 1A,2A,3A,4A,

15. Understand how multi-column special 3,4,8,12,13 1A, 2A, 3A,

© John Wiley and Sons Australia Ltd, 2016 6.3

CHAPTER 6 – ACCOUNTING SUBSYSTEMS

1. (a) An accounting information system involves collecting and processing data

2. There are four phases when developing an accounting information system:

© John Wiley and Sons Australia Ltd, 2016 6.4

5. An internal auditor is an employee of the business who evaluates on a continuous

7. Data is transformed into accounting reports through the following sequence:

9. A subsidiary ledger is a group of accounts with a common characteristic. The

© John Wiley and Sons Australia Ltd, 2016 6.6

Some advantages of each journal are given below:

Cash Receipts Journal

Cash Payments Journal

In general, special journals:

15. (a) General journal (d) Sales journal

BRIEF EXERCISE 6.1

BRIEF EXERCISE 6.2

BRIEF EXERCISE 6.3

BRIEF EXERCISE 6.4

(a) General ledger

BRIEF EXERCISE 6.5

(a) Cash receipts journal

BRIEF EXERCISE 6.6

BRIEF EXERCISE 6.7

(a) Both in total and daily

© John Wiley and Sons Australia Ltd, 2016 6.8

BRIEF EXERCISE 6.8

(a) Cash receipts journal

© John Wiley and Sons Australia Ltd, 2016 6.9

1. Establishment of responsibility. The counter clerk is responsible for handling cash.

© John Wiley and Sons Australia Ltd, 2016 6.10

Sept. 1 Balance 5,980

Accounts Receivable Subsidiary Ledger

Sept. 1 Balance 1,220

Sept. 1 Balance 1,320

Sept. 1 Balance 1,030

Sept. 1 Balance 2,410

Date Explanation Ref. Debit Credit Balance

Sept. 30 Credit sales S1 515 515

Accounts Receivable control account balance 30/9/16 $4,480

© John Wiley and Sons Australia Ltd, 2016 6.12

(a) & (b)

Invoice Accounts Receivable Cost of Sales Dr.

© John Wiley and Sons Australia Ltd, 2016 6.13

(a) & (b)

Account Other Accounts Discount Cash

(a) Journal (b) Columns in the journal