Accounting Business Reporting for Decision Making

CHAPTER 4 Business transactions 147

Telephone expense 520

1/10 Balance b/d $280

Rent expense 530

1/10

7/10

Balance

Cash

$1 000

1 000

31/10

Electricity expense 540

1/10 Balance b/d $450

c. Trial balance

Advantage Tennis Coaching

Trial balance as at 31 October 2016

Name of account Dr Cr

Cash

Accounts receivable

Office furniture

Office equipment

Coaching equipment

Loan payable

Capital — N Cash

Drawings — N Cash

Coaching fees

Website development

Wages expense

Telephone expense

Rent expense

Electricity expense

$ 35 970

6 900

3 200

6 500

48 800

1 500

2 000

9 200

280

2 000

450

$ 50 000

20 000

46 800

Total $ 116 800 $ 116 800

Comprehension questions

4.4 Explain what a transposition error is and identify how you can detect that one has occurred. LO9

4.5 Distinguish between personal transactions and business transactions. Illustrate with

five examples of each. LO1, 2

4.6 Explain what is meant by an ‘arm’s length business transaction’ when a business buys

accounting software on credit. LO1, 2

4.7 What is the purpose of a statement of profit or loss for an entity? List typical items

that you would see in the statement of profit or loss for a florist. LO5

4.8 Describe how an accounting worksheet assists in the preparation of the statement of

profit or loss and the balance sheet. LO5

4.9 What is meant by the ‘concept of duality’? Provide an illustration involving a business

transaction where the business purchases office furniture on credit. LO1, 2

4.10 Both the journal and the ledger can be used to record a large number of transactions.

Differentiate between financial recordkeeping in the journal and the ledger. LO6

4.11 Discuss the purpose of a double-entry bookkeeping system. LO6