Unit: CAFF001 Accounting Systems and Processes

Topic: 03 The Accounting Process

Document: Practice Questions & Activities

Topic 3: The Accounting Process

David has been running his business for a month now and he is struggling to keep track of things.
While David has some rudimentary business skills he picked up, he is no accountant.

David recalls that you are currently studying Accounting at University and he has decided to
approach you for help. Being the good friend that you are you decided to said ‘for sure’ as you’re
the type of person that loves to help out a mate in need.

David provides you with details regarding the Shirt Shop in January 20X8. He would like to know -
how much cash was in the business bank account at the end of January 20X8? And how much did
the business owe suppliers (accounts payable) at the end of Jan 20X8?

1. David, (sole owner of The Shirt Shop) deposited $20,000 in the bank to provide the business with
additional cash flow.
2. Paid rent for January $3,500.
3. During the month, cash sales were made totalling $18,900. The cost price of the goods sold was
$8,820.
4. Purchased office supplies $300 and paid cash.
5. David withdrew $8,000 from the business bank account as monthly drawings.
6. Received $33,360 from credit sales made in previous periods.
7. Paid advertising bill for the month of January 20x8 $2,100.
8. Purchased inventory on credit $43,000.
9. During the month, credit sales were made totalling $75,600. The cost price of the goods sold was
$35,280.
10. Paid sales commission to employees for the month $2,360 cash.
11. Paid Delivery Expenses for month $3,780.
12. Received $49,900 from credit sales made during the month.
13. Paid $47,648 to suppliers for purchases of inventory on credit.
14. Paid interest on the loan for the month $200.
15. Paid salaries – Sales staff for the month $14,000.
16. Paid salaries – Office staff for the month $6,500.
31st. Purchased shop fittings for $20,400 cash.

REQUIRED:

In order to help calculate the overall “cash at bank” and “accounts payable” closing balances you will need
to complete a BASIC Transaction Analysis Table as below. Please note that the opening balances have
already been pre-filled to get you started.

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 Unit: CAFF001 Accounting Systems and Processes
Topic: 03 The Accounting Process
Document: Practice Questions & Activities

BASIC TRANSACTION ANALYSIS TABLE

Dat
e Assets Liabilities Owner's Equity
Amount
Accounts Amounts Accounts s Accounts Amounts
1-
Jan Cash +12,000 Accounts payable +24,624 Capital +71,226
Accounts receivable +42,000 Bank Loan +30,000
Inventory +10,800
Office Supplies +250
Computer Equipment +16,800
Acc. Dep. (Computers) -4,000
Shop Fittings +12,000
Vehicle +36,000

1 Cash +20,000 Capital +20,000

2 Cash -3,500 Rent expense -3,500

3 Cash +18,900 Sales revenue +18,900

3 Inventory -8,820 Cost of goods sold (COGS) -8,820

4 Office Supplies +300

Cash -300

5 Cash -8,000 Drawings -8,000

6 Cash +33,360
Accounts receivable -33,360

7 Cash -2,100 Advertising expense -2,100

8 Inventory +43,000 Accounts payable +43,000

9 Accounts receivable +75,600 Sales revenue +75,600

9 Inventory -35,280 COGS -35,280

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 Unit: CAFF001 Accounting Systems and Processes
Topic: 03 The Accounting Process
Document: Practice Questions & Activities

10 Cash -2,360 Sales commission expense -2,360

11 Cash -3,780 Delivery expense -3,780

12 Cash +49,900
Accounts receivable -49,900

13 Cash -47,648 Accounts payable -47,648

14 Cash -200 Interest expense -200

15 Cash -14,000 Salaries expense (Sales staff) -14,000

Salaries expense (Office

16 Cash -6,500 staff) -6,500

31 Cash -20,400
Shop fittings +20,400

TOTAL 151,162 49,976 101,186

The closing balance for cash account and accounts payable are as follows:

Cash at Bank (Closing Balance)

= +$12,000 + $20,000 - $3,500 + $18,900 - $300 - $8,000 + $33,360 - $2,100 - $2,360 - $3,780 +
$49,900 - $47,648 - $200 - $14,000 - $6,500 - $20,400

= $25,372

Accounts Payable (Closing Balance)

= +$24,624 + $43,000 - $47,648

= $19,976