Course: Financial Accounting (5418)

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Semester: Autumn, 2022

 ASSIGNMENT-01

Q. 1

Which of the following errors would cause a trial

balance to have unequal totals? Explain your answers.

1. A payment to a creditor was recorded as a debit to

Accounts payable for Rs. 129 and as a credit to Cash for
Rs. 102.
The trial balances will not be equal. Credit column is Rs. 600 more than the debit
column.
2. A payment of Rs. 150 to a creditor for an account payable was debited to
Accounts receivable and credited to Cash.
The trial balances will not be equal. Credit column is Rs. 150 while debit column is
empty.
3. A purchase of office supplies of Rs. 420 was recorded as a debit to office
supplies for Rs.42 and as a credit to Cash for Rs. 42.
The trial balances will not be equal because supplies will be Rs. 420 while Credit
and debit column have Rs. 42.
4. A purchase of equipment for Rs.450 was recorded as a debit to Supplies for
Rs.450 and as a credit to Cash for Rs.450.
The trial balances will not be equal because purchases Rs. 450 while debit and
Credit column have Rs. 450.
Q. 2

Open the following T accounts: Cash; Repair Supplies;

Repair Equipment;Accounts Payable; T. Ornega, Capital;
Withdrawals; Repair Fees Earned; Salaries Expense; and
Rent Expense. Record the following transactions for the
month of June directly in the T accounts; use the letters
to identify the transactions in your T accounts.
Determine the balance in each account.
a. Tony Ornega opened Ornega Repair Service by investing Rs. 4,300 in
cash and Rs.1600, in repair equipment.

b. Paid Rs. 800 for the current month’ rent.

c. Purchase repair supplies on credit, Rs. 1,100.

d. Purchase additional repair equipment for cash, Rs. 600.

e. Paid salary to helper, Rs. 900.

f. Paid Rs. 400 of amount purchased on credit in c.

g. Accepted cash for repairs complete, Rs. 3,720

h. Withdrew Rs. 1,000 in cash.

JOURNAL ENTRIES
a) cash account debit 4300
 repair equipment account debit. 1600
to capital account. 5900
b) rent account debit. 800
to cash account. 800
c) repair supplies account debit. 1100
to account payable. 1100
d) repair equipment account debit 600 to cash account. 600
e) salary account debit 900
to cash account. 900
f) account payable account debit 400
to cash account. 400
g) cash account debit. 3720
to repair fees earned 3720
h) withdraw account debit 1000
to cash account. 1000
Q.3

For each type of adjustment listed, indicate whether it

is an unrecorded receivable, an unrecorded liability, an
unearned revenue, or a prepaid expense at
December31, 2012.
1. Property taxes that that are for the year 2012 but are not to be paid until
2013.

Unearned Revenue
2. Rent revenue earned during 2012, but not collected until 2013.

Prepaid Expenses

3 Salaries earned by employees in December 2012, but not to be paid until

January 5, 2013.

Unrecorded receivable

4. A payment received from a customer in December 2012 for services that

will not be performed until February 2013.

Unrecorded liability

5. An insurance premium paid on December 29,2012, for the period January

1,2013 to December 31, 2013.

Unrecorded receivable

6. Gasoline charged on a credit card during December 2012. The bill will not
be received until January 15, 2013.

Unearned Revenue

7. Interest on a certificate of deposit held during 2012. The interest will not be
received until January 7, 2013.

Unrecorded receivable

8. A deposit received on December 15, 2012, for rental of storage space. The
rental Period if from January 1, 2013, to December 31,2013.

Unrecorded liability
Q. 4 What do you know about Accounting Information
System? Describe. Also explain the principles and
components of Accounting Information System.
An accounting information device (AIS) is a structure that a enterprise makes
use of to collect, store, control, manner, retrieve, and report its monetary data
so it may be utilized by accountants, experts, business analysts, managers,
chief monetary officers (CFOs), auditors, regulators, and tax companies.

Specially educated accountants work in-depth with AIS to ensure the very best
level of accuracy in a organisation's monetary transactions and file-
maintaining, in addition to make financial records effortlessly available to
people who legitimately want get right of entry to to it—all at the same time
as preserving data intact and cozy.

An accounting information gadget is a manner of monitoring all accounting

and enterprise hobby for a organization. Accounting records structures
normally consist of six number one additives: people, methods and
commands, statistics, software, records generation infrastructure, and inner
controls. Below is a breakdown of each thing in element.

1. AIS People

The humans in an AIS are the system users. An AIS enables the extraordinary
departments within a business enterprise work together. Professionals who
may also need to use an enterprise's AIS include:

Accountants
Consultants

Business analysts

Managers

Chief financial officials

Auditors

For example, control can establish income goals for which team of workers
can then order the ideal amount of inventory. The stock order notifies the
accounting department of a new payable. When sales are made in a
enterprise, the human beings and departments involved inside the sales
process could encompass the following:

Salespeople input the consumer orders into the AIS.

Accounting payments or sends an invoice to the client.

The warehouse assembles the order.

The shipping department sends the order out to the purchaser.

The accounting branch receives notified of a brand new debts receivable,

that's an IOU from the client this is generally paid inside 30, 60, or ninety days. 

The customer support branch tracks the order and consumer shipments.

Management uses AIS to create income reviews and perform cost analysis,
that can consist of stock, delivery, and production charges.
With a well-designed AIS, all of us within an organization can access the equal
system and retrieve the same facts. An AIS also simplifies the manner of
reporting records to humans out of doors of the agency, when important.

For instance, specialists would possibly use the information in an AIS to

analyze the effectiveness of the agency's pricing structure by searching at price
information, sales facts, and sales. Also, auditors can use the information to
evaluate a organisation's internal controls, financial circumstance, and
compliance with rules together with the Sarbanes-Oxley Act (SOX).

The AIS ought to be designed to satisfy the desires of the individuals who will
be the usage of it. The device must additionally be smooth to apply and should
enhance, no longer restrict efficiency.

2. Procedures and Instructions

The system and commands of an AIS are the strategies it makes use of for
gathering, storing, retrieving, and processing information. These techniques
are each guide and automatic. The records can come from both internal assets
and external resources. Procedures and commands will be coded into the AIS
software program. However, the strategies and instructions must additionally
be "coded" into employees via documentation and training. The methods and
instructions must be accompanied continually so one can be powerful.

3. AIS Data

An AIS need to have a database structure to keep statistics, inclusive of

dependent query language (SQL), that's a pc language typically used for
databases. SQL lets in the information it is in the AIS to be manipulated and
 retrieved for reporting purposes. The AIS will even need various enter
monitors for the special kinds of machine users and data entry, in addition to
exceptional output formats to meet the needs of different users and numerous
forms of information.

The statistics contained in an AIS is all the monetary statistics pertinent to the
organization's enterprise practices. Any enterprise statistics that influences the
agency's budget need to move into an AIS.

The sort of records protected in an AIS depends on the nature of the business,
but it can include the subsequent:

 Sales orders

 Customer billing statements

 Sales evaluation reports

 Purchase requisitions

 Vendor invoices

 Check registers

 General ledger

 Inventory facts

 Payroll statistics

 Timekeeping

 Tax records
The information can be used to put together accounting statements and
economic reviews, which includes bills receivable growing
older, depreciation or amortization schedules, a trial stability, and a earnings
and loss declaration. Having all of this facts in one place—in the AIS—helps a
business's document-maintaining, reporting, evaluation, auditing, and
selection-making sports. For the information to be beneficial, it should be
complete, accurate, and relevant.

On the opposite hand, examples of information that might now not go into an
AIS include memos, correspondence, presentations, and manuals. These files
might have a tangential courting to the organisation's price range, but, aside
from the usual footnotes, they may be no longer really part of the
organization's monetary file-preserving.

4. AIS Software

The software element of an AIS is the pc packages used to shop, retrieve,

system, and analyze the agency's economic statistics. Before there had been
computer systems, an AIS become a guide, paper-primarily based device, but
nowadays, most groups are using pc software as the idea of the AIS. Small
groups may use Intuit's QuickBooks or Sage's Sage 50 Accounting, however
there are others. Small to mid-sized agencies may use SAP's Business
One. Mid-sized and huge groups would possibly use Microsoft's Dynamics
GP, Sage Group's MAS 90, or MAS 200, Oracle's PeopleSoft, or Epicor Financial
Management.
 Quality, reliability, and protection are key additives of effective AIS software.
Managers depend upon the statistics it outputs to make choices for the
enterprise, and that they need splendid facts to make sound choices.

AIS software program packages may be custom designed to meet the unique
needs of different kinds of groups. If an current program does not meet a
organization's wishes, the software program can also be evolved in-house with
enormous enter from quit-users or can be advanced by using a third-party
enterprise particularly for the corporation. The device could also be
outsourced to a specialised employer.

For publicly-traded businesses, regardless of what software program program

and customization alternatives the commercial enterprise chooses, Sarbanes-
Oxley rules will dictate the shape of the AIS to a point. This is because SOX
guidelines set up inner controls and auditing procedures with which public
groups should comply.12

five. IT Infrastructure

Information generation infrastructure is just a flowery name for the hardware

used to operate the accounting statistics system. Most of these hardware
gadgets a enterprise would need to have besides and may consist of the
subsequent:

 Computers

 Mobile gadgets

 Servers

 Printers
 Surge protectors

 Routers

 Storage media

A lower back-up electricity deliver

In addition to price, elements to keep in mind in choosing hardware

encompass speed, storage capability, and whether or not it is able to be
multiplied and upgraded.

Perhaps most importantly, the hardware selected for an AIS need to be well
suited with the meant software program. Ideally, it might be no longer simply
compatible, however most suitable—a clunky machine can be lots much less
helpful than a fast one. One way companies can without difficulty meet
hardware and software compatibility requirements is via purchasing a turnkey
gadget that includes both the hardware and the software that the commercial
enterprise wishes. Purchasing a turnkey machine means, theoretically, that the
enterprise gets an most reliable aggregate of hardware and software for its
AIS.

A right AIS ought to additionally encompass a plan for keeping, servicing,

changing, and upgrading components of the hardware machine, in addition to
a plan for the disposal of damaged and previous hardware, in order that
touchy facts is completely destroyed

6. Internal Controls

The inner controls of an AIS are the safety measures it incorporates to defend
sensitive facts. These may be as simple as passwords or as complex as
 biometric identification. Biometric safety protocols may consist of storing
human characteristics that do not change over the years, consisting of
fingerprints, voice, and facial popularity.

An AIS should have internal controls to defend towards unauthorized pc get

entry to and to restrict get admission to to authorized users, which includes
some users inside the employer. It have to also prevent unauthorized record
get admission to via folks who are allowed to get admission to most effective
choose components of the device.

An AIS carries exclusive statistics belonging no longer simply to the employer

however additionally to its employees and clients. This records may
additionally include:

 Social Security numbers

 Salary and personnel information

 Credit card numbers

 Customer statistics

 Company financial statistics

Financial records of providers and providers

All of the statistics in an AIS have to be encrypted, and get admission to to the
device have to be logged and surveilled. System pastime have to be traceable
as well.

An AIS additionally wishes internal controls that protect it from computer

viruses, hackers, and different inner and external threats to community safety.
 It must additionally be protected from natural screw ups and energy surges
which can purpose statistics loss.

Q. 5

a. Define cash equivalents, and explain methods of controlling

cash, including bank reconciliations.
Cash and coins equivalents refers to the road object on the balance sheet that reviews the fee
of a enterprise's assets which might be coins or can be transformed into coins straight away.
Cash equivalents consist of bank money owed and marketable securities, which are debt
securities with maturities of less than 90 days. However, regularly coins equivalents do not
include equity or inventory holdings because they are able to vary in value.

Cash and coins equivalents refers to the road item at the stability sheet that reports the price
of a corporation's belongings which can be cash or may be converted into coins at once.

Cash equivalents include bank debts and marketable securities inclusive of business paper and
brief-time period authorities bonds.

Cash equivalents should have maturities of 3 months or less.

Cash equivalents must also be capable of be liquidated to cash; for that reason, cash
equivalents regularly have lively markets.

A company includes cash and coins equivalents to pay its quick-term bills but to additionally
maintain capital for long-term capital deployment.

Cash

Cash is money within the shape of currency, which incorporates all payments, cash, and forex
notes. A demand deposit is a sort of account from which price range can be withdrawn at any
time without having to inform the institution. Examples of demand deposit bills consist of
checking bills and savings accounts. All call for account balances as of the date of the economic
statements are included in cash totals.

Foreign Currency

Companies protecting a couple of currency can revel in forex chance. Currency from foreign
international locations must be translated to the reporting foreign money for economic
reporting functions. The conversion have to provide outcomes corresponding to those that
might have befell if the enterprise had finished operations using simplest one foreign money.
Translation losses from the devaluation of overseas foreign money are not suggested with coins
and cash equivalents. These losses are mentioned inside the monetary reporting account
known as "accrued different comprehensive income."1

Cash Equivalent

Cash equivalents are investments that may with no trouble be converted into coins. The
investment have to be brief time period, commonly with a most funding period of 3 months or
much less. If an investment matures in more than 3 months, it should be categorized within the
account named "different investments." Cash equivalents ought to be exceptionally liquid and
easily bought in the marketplace. The shoppers of those investments ought to be without
problems available.

The dollar amounts of coins equivalents should be recognised. Therefore, all cash equivalents
ought to have a regarded marketplace rate and have to no longer be situation to charge
fluctuations. The price of the coins equivalents ought to no longer be predicted to exchange
extensively before redemption or adulthood. Examples of coins equivalents encompass:

Marketable Securities. This broad term covers any investment protection that may speedy be
transformed to coins in a short quantity of time. Many of the examples under can also be called
a marketable security, and agencies frequently lump these investments together on their
balance sheet.

Treasury Bills. These debt gadgets are issued through the US authorities and regularly have a
maturity date of 365 days or much less.
Other Short-Term Government Bonds. These debt contraptions may be issued by any
authorities entity (town, state, or Federal). The creditworthiness of the government enterprise
should be considered while comparing the threat of the bond.

Banker's Acceptance. This is an settlement in which the bank has agreed to guarantee a

destiny agreement between two parties. This tool is a certain amount to be paid to the holder
on a selected date.

Commercial Paper. This is short-term bonds or debt issued by businesses. Commercial paper

has adulthood as much as 9 months (270 days). The interest rate on commercial paper will
range primarily based on the creditworthiness of the issuing corporation.

Money Market Account. This interest-bearing account is much like a financial savings account;
however, they often require larger minimum deposits and have a few minor regulations to the
account.

Certificates of Deposits. CD's can be taken into consideration a cash equivalent depending at

the adulthood date.Preferred Shares of Equity. This may be considered a cash equal if they're
purchased quickly earlier than the redemption date and not anticipated to experience material
fluctuation in price.

b. During 2010, Omega Company had net sales of Rs. 11,400,000. Most of the
sales were on credit. At the end of 2010, the balance of Accounts Receivable
was Rs. 1,400,000 and Allowance for Uncollectible Accounts had a debit balance
of Rs. 48,000. Omega Company’s management uses two methods of
estimating uncollectible sales is 1.5 percent of net sales, and based on an aging
of accounts receivable, the end-of-year uncollectible accounts total Rs.
140,000. Prepare the end-of-year adjusting entry to record the uncollectible
accounts expense under each method. What will the balance of Allowance for
Uncollectible Accounts be after each adjustment? Why are the results different?
Which method is likely to be more reliable? Why?