SCHOOL OF BUSINESS

Subject : Principles of Financial Accounting

Code : ACC1014
Workshop 2 : Analyzing & Recording Business

Question 1 (Discussion Questions no. 2 Hoggett 10ed.; Chapter 3)

The owner of a very small, part-time business is very disorganised and doesn’t like
filing invoices, accounts and receipts. ‘What is the point of keeping all that paper
work?’, he asks. ‘Once the details have been recorded in the accounting system why
waste time and space filing everything?’ Explain to the small business owner why it
is important to keep supporting documentation and how such records are likely to be
useful for future decision making and provide an example. (10 marks)

Question 2 (Problem 3.2, Hoggett 9ed.; Chapter 3)

On 1 July 20X5 Nicole Andreou opened a beauty parlour. The following transactions
occurred during the first month of operations (ignore GST):

July 2 Andreou invested $120 000 in the business by depositing

cash into a business cheque account with the Eastpac Bank.
2 Paid $1800 for the first month’s rent.
3 Purchased equipment by an online bank transfer for $32 000
and signing a commercial loan agreement for $38 000.
4 Purchased supplies for $8400.
6 Paid advertising expense of $890.
16 Recorded beauty services revenue for the first half of the
month of $3250 in cash and $620 on credit.
20 Paid insurance expense for July of $480 using an online bank
transfer.
23 Received a $140 payment from customers who paid on credit
in the first half of the month.
28 Andreou withdrew $560 cash for personal living expenses.
31 Recorded revenue for the second half of the month of $3680
in cash and $580 on credit.
31 Paid telephone account of $330 by electronic transfer.

Use the following account titles and numbers: Cash at Bank, 100; Accounts
Receivable, 101; Supplies, 102; Equipment, 103; Loan Payable, 200; Nicole
Andreou, Capital, 300; Nicole Andreou, Drawings, 301; Revenue, 400; Rent
Expense, 500; Advertising Expense, 501; Insurance Expense, 502; Telephone
Expense, 503.

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Required
A. Prepare the general journal entries to record the transactions.
B. Post the entries from the general journal to the general ledger accounts (running
balance format) and enter the posting references in the general journal.
C. Prepare a trial balance as at 31 July 20X5. (Answer: $166,130)

Question 3
Zhang Ltd uses sales, purchases, cash receipts, cash payments and a general
journal along with subsidiary ledgers for accounts receivable and accounts payable.
Zhang Ltd’s financial year ends on 31 December 20X6. The post-closing trial
balance as at 30 June 20X6 and schedules of balances of the subsidiary ledgers are
presented below.

ZHANG LTD
Post-closing Trial Balance
as at 30 June 20X6
1-100 Cash at bank $  26 68
1-110 Accounts receivable control 0
1-150 Inventory 15 440
1-170 Office equipment 25 280
1-175 Accumulated depreciation – office equipment 53 000 $  7 800
2-200 Accounts payable control 20 590
3-300 Share capital 60 000
3-350 Retained earnings 32 010
4-400 Sales —
4-405 Sales returns
4-410 Discount received — —
5-500 Purchases
5-505 Purchases returns — —
5-512 Discount allowed
5-530 Rent expense —
5-540 Sundry expenses —
5-550 Commissions expense —               
         —
$120 40 $120 40
0 0

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Schedule of Accounts Receivable

as at 30 June 20X6
Moorman Ltd $3 600
Lo Ltd 7 210
North Ltd   4 630
$15 440

Schedule of Accounts Payable

as at 30 June 20X6
Higgins Ltd $7 200
G. McClure 5 150
Ventura Ltd   8 240
$20 590

The following transactions occurred in July 2016:

July 1 Received a cheque from Moorman Ltd for payment on account, $3600.
2 Paid rent for July, $3700, by interbank transaction to Buildings Ltd.
3 Sold inventory to Kemp Ltd on credit, invoice 342, $4200, terms 2/10, n/30.
5 Purchased inventory on credit from F. Falla, $4900, invoice 243,
terms 2/10, n/30.
7 Paid G. McClure for inventory purchased previously (no discount), $5150,
by interbank transfer.
7 Received payment from Kemp Ltd for full settlement of invoice 342.
10 Received an adjustment note from F. Falla for inventory returned, $200.
11 Paid F. Falla in full for invoice 243 by interbank transfer.
12 Paid sales commissions, $9580, by interbank transfer.

15 Received a cheque from Lo Ltd in part payment of the account, $3600,

no discount applicable.
16 Paid $14 000 for new office equipment, cheque no. 304.
18 Cash sales, $2620.
19 Sold inventory on credit to Moorman Ltd, $4430, invoice 343, terms 2/10,
n/30.
22 Sold inventory on credit to C. Gable, $2200, invoice 344, terms 2/10, n/30.
24 Paid Ventura Ltd for inventory purchased in May, $8240, cheque no. 305.
26 Cash sales, $2800.
30 Issued cheque no. 306 to pay sundry expenses, $1280.
30 North Ltd directly credited Zhang’s bank account for $4630, for payment of
account.
30 Received a cheque from C. Gable in payment of invoice 344.

Required:
A. Journalise the transactions in the appropriate journals.
B. Make all necessary postings for the month.

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C. Prepare a trial balance of the general ledger as at 31 July 20X6, and reconcile
subsidiary ledgers with their control accounts. ($123,554)

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