Accounting Business Reporting for Decision Making

142 Accounting: Business Reporting for Decision Making

APPLY YOUR KNOWLEDGE 50 marks

PART A

a. Discuss the difference in the role of the journal and the ledger in capturing accounting

information efficiently and effectively. 4 marks

b. Outline the entity concept and how it impacts on the recording of personal and

business transactions. 3 marks

c. Identify the type of errors that could be discovered by preparing a trial balance

and provide examples of each. 4 marks

d. Provide examples of two transactions and examine the application of the debit and

credit rule. 4 marks

PART B

The following business transactions relate to Colin Clark (financial planner) for his first month of busi-

ness operations in August 2017.

2017

August 1

2

4

7

9

11

13

14

17

19

22

29

Commenced business operations with a $300 000 cash injection of personal funds.

Paid monthly rent $1500.

Purchased office stationery $2000 on credit from Stationery Plus.

Purchased office equipment on credit from Supplies Inc. $10 000.

Sent invoice to client M Birt for services $3000.

Purchased MYOB software for laptop computer $700 cash.

M Birt paid amount outstanding.

Met with prospective client and negotiated the provision of financial advice for client and family

quoting $5000.

Paid car parking permit $220.

Withdrew cash from business $2000 for personal use.

Paid WWW Ltd for monthly internet use $182.

Received interest from business bank account $15.

a. State the impact on the accounting equation for each transaction above. For example:

1 Aug ↑ Cash $300 000 ↑ Capital $300 000

b. Prepare a worksheet for the month of August 2017 from the above information. 15 marks

PART C

a. Using the business transactions in part B, record the transactions in the ledger of Colin Clark. 7 marks

b. Prepare a trial balance for Colin Clark at 31 August 2017. 5 marks

c. Prepare a statement of profit or loss for the month ending 31 August 2017. 4 marks

d. Prepare a balance sheet as at 31 August 2017. 4 marks

Self-evaluation activities

4.1 Prepare an accounting worksheet to demonstrate the duality of each business transaction shown

for Smith Financials. Using the profit or loss column, identify the profit or loss for the month of

October 2016.