Accounting Business Reporting for Decision Making

CHAPTER 4 Business transactions 151

Transactions for July 2018 were as follows.

July 2

3

4

5

7

9

10

14

23

31

Received $2800 from accounts receivable.

Paid $1000 of accounts payable.

Paid rent for July $700.

Sent invoice to customer $5600.

Purchased office equipment for cash $2000.

Recorded cash sales $800.

Recorded credit sales $1500.

Purchased office supplies for cash $330.

Cash sales $2000.

Drawings by Jason Woodstock $800.

Required

a. Prepare worksheet entries for the business transactions for the month ended 31 July 2018.

b. At the end of July, Jason realised that the customer invoice sent on 5 July 2018 was

recorded incorrectly. The correct amount should be $6500. Explain what type of error

Jason made and explain the impact of this error on the balance sheet and the statement of

profit or loss.

4.28 Preparing statement of profit or losss and balance sheets   LO5

Using the information in problem 4.27, prepare:

a. a statement of profit or loss for the period ending 31 July 2018

b. a balance sheet as at 31 July 2018.

4.29 Allocating transactions and demonstrating duality   LO4

Choose appropriate account names and demonstrate the dual effect that occurs when the following

business transactions take place. For example, in (a) we would increase cash $14 000 and increase

capital $14 000.

a. Sam Major commenced business by contributing $14 000 cash.

b. Received $7000 income for services performed.

c. Paid telephone account $191.

d. Sam Major withdrew cash from business $800.

e. Purchased office stationery on credit $1900.

f. Cash sales $700.

g. Credit sales of $610.

h. Sam Major withdrew office equipment from business $2000.

i. Sam Major negotiated with possible business partner to contribute $50 000 as a silent partner to

the business.

j. Sam Major purchased a meal for his partner’s birthday on his personal credit card.

4.30 Preparing a worksheet and calculating profit   LO4, 5

The following transactions were taken from the records of Anthony Reader, an interior designer,

for the month ending 31 May 2017. You are required to design a suitable accounting worksheet

for the period.

May 1

2 3 5 7 8 9

10

11

Commenced business with cash at bank of $80 000.

Invoiced client for work completed $2100.

Purchased second-hand vehicle for business $20 000 cash.

Received cash payment for services rendered $1320.

Paid casual wages $900.

Paid rent for the past week $1000.

Sent an invoice to a client $960.

Paid electricity $180.

Received an invoice from newsagent for stationery $253.

(continued)