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ACC5202 Assignment Semester 1, 2018 Weighting 35% 1 ACC5202 Assignment Due Date: 14th May, XXXXXXXXXXTotal Marks: 120 NOTE: Please make sure you put your name and student number on each page submitted...

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ACC5202 Assignment Semester 1, 2018 Weighting 35%

1

ACC5202 Assignment
Due Date: 14th May, XXXXXXXXXXTotal Marks: 120
NOTE: Please make sure you put your name and student number on each page submitted for
marking. Show all calculations in a margin to ensure part marks.
Question XXXXXXXXXXMarks)
A. A student was overheard to say “The worksheet is a very important report. If the worksheet
‘balances’ the books are co
ect!” Comment on the statement (i) that the worksheet is a very
important report and why, and (ii) whether it is co
ect to assume that the books are co
ect. Give
2 examples to either support or disprove this statement XXXXXXXXXXmarks)
B. As a graduate accountant you are confronted with the following task in your first job. Your boss
informs you that the Trial Balance as at 31st December 2018 does not balance and asks why? You
discover a number of e
ors and in order to co
ect the Trial Balance complete the table below:
(11 marks)
Would the
e
or cause
the Trial
Balance not
to balance
Which
accounts
would be
affected
and how?
How would the
e
or be co
ected
Effect on Trial
Balance totals
Yes No Debit Credit
Example A payment for wages of $500
was credited to cash co
ectly but debited
to wages twice expense.
Yes
Wages
Expense
Debit side of
Wages Expense
educed by 500
-500

1. The Accrued Wages account with a
alance of $500 was omitted from the Trial
Balance.




2. A payment of $490 for Prepaid Rent
was only posted to the Cash at Bank
account and not to Prepaid Rent


3. A debit of $458 to Cash at Bank was
posted as $485. The credit entry was
co
ect.
4. A credit of $600 to Accounts Payable
should have been made to Fees Revenue
5. A Dr for a cash receipt of $500 from
customers in settlement of their accounts
was posted twice as a DR to the Cash at
Bank and a Dr to Accounts Receivable
accounts
6. The Prepaid Expense balance of $7280
was listed in the Trial Balance as $7820
7. A $5210 credit to Fees Revenue was
posted as a $521 credit. The debit entry
to Accounts Receivable was made
co
ectly.
8. A purchase of office equipment for
$3300 on credit was not recorded.
9. A purchase of Furniture for $7500 using
a loan was posted as a debit to the Loan
Payable account and a debit to the
Equipment account.
10. The drawings account balance was
listed as a credit for $1500.
ACC5202 Assignment Semester 1, 2018 Weighting 35%

2

Question XXXXXXXXXXmarks)
A. What impact does the matching principle have on the method of accounting i.e. cash vs
accrual. Describe each method and discuss. (2 marks)
B. J. Jackson has calculated profit on the 30th June 2018 to be $ XXXXXXXXXXwhen the following was
discovered (the firm uses accrual accounting).
(i) The weekly wages bill for the firm is $ XXXXXXXXXXThe last payment for wages was on Friday
26th June. The next payment will be on Friday 3rd July.
(ii) Income of $1520 for commission fees had been earned but not yet recorded.
(iii) A full year’s rent of $36000 was paid for the premises from which the firm operates on 1st
Fe
uary 2018.
(iv) The firm has $25000 invested. It earns interest of 6% per annum payable quarterly.
Interest was last received on 1st April for the quarter (January, Fe
uary, March).
(v) The firm had received funds of $12000 on 1st March 2018 for work to be completed by
end of October XXXXXXXXXX% of the work has been completed by June 30th 2018.
(vi) An amount of $6000 paid for new Office Furniture had been inco
ectly coded and entered
as Office Expenses.
(vii) Office Supplies had a balance at the beginning of the year (after adjustments) of $800.
Throughout the year $5200 in office supplies was purchased. At June 30th 2018 the value
of office supplies remaining was $1500.
(viii) The firm had recorded in the GST Control account GST Collected of $7960 and GST Paid
of $8540. Make the entry that would be necessary to account to the ATO.
Required:
(i) Make the journal entries to adjust the accounts affected where necessary (include
na
ations to explain the entry and any calculations XXXXXXXXXXmarks)
(ii) What would be the new profit figure after taking into account the above entries? (You
must show calculations to get full marks XXXXXXXXXXmarks)
ACC5202 Assignment Semester 1, 2018 Weighting 35%

3

Question XXXXXXXXXXmarks)
a. According to the IASB’s conceptual framework there are four qualitative characteristics that
enhance the usefulness of information that is relevant and represented in reports. Name and
describe each of those characteristics XXXXXXXXXXmarks)
. B. Bright presents you with the following partially completed worksheet. He asks you to:
(i) Complete the worksheet XXXXXXXXXXmarks)
(ii) Prepare closing entries in a journal (Na
ations not required) (6 marks)
HARDYARDS ACCOUNTING SERVICES
Worksheet (partial) for period ended 30th June, 2018
Account
Adjusted Trial
Balance
Income
Statement
Balance Sheet
Debit Credit Debit Credit Debit Credit
Cash at Bank 14900
Accounts Receivable 25825
Prepaid Expenses 2200
Office Supplies 6160
Accrued Revenue 2540
GST Paid 26000
Equipment 163000
Accumulated
Depreciation XXXXXXXXXX
Accounts Payable 6320
Loan Payable XXXXXXXXXX
Salaries Payable 1930
GST Collected XXXXXXXXXX
Unearned Revenue 2750
B. Bright Capital XXXXXXXXXX
B. Bright Drawings 5000
Painting Revenue XXXXXXXXXX
Wages Expenses 100020
Rent Expense 6550
Depreciation Expense 11000
Marketing Expense 5520
Office Supplies Expense 6180
Interest on Loan
Expense 5900
XXXXXXXXXX
ACC5202 Assignment Semester 1, 2018 Weighting 35%

4

Question XXXXXXXXXXMarks)
A.
You overhear an advisor discussing offering credit to clients “With the existence of credit cards and
factor businesses, it is now possible for businesses not to have to wo
y about offering credit and
monitoring accounts receivable. Bad debts will become a thing of the past and there will be no need
to an allowance for bad debts account”. Discuss:
a. Will the way credit is offered change and what additional costs and processes or controls
will/should occur?
. Will firms no longer have to monitor accounts receivable and what does factoring mean?
c. What could be the impact of not allowing for bad and doubtful debts on the profits recorded
y the firm? XXXXXXXXXXmarks)
B. The following balances appeared in the ledger of Homewares Company Ltd for the year to date
on 31st May, 2018.
The transactions for June were:
(i) A review of accounts receivable revealed that accounts for debtors amounting to $11510
are to be written off.
(ii) Sales $99550 (inclusive of GST) 80% on credit.
(iii) Cash collected from customers $121600
(iv) $1870 (not included in (iii)) was received from a debtor whose debt of $1870 had been
previously written off.
(v) Investigation of a credit balance in a debtor’s account showed that a credit sale of $2200
for goods had not been recorded.
(vi) At the end of June a decision was made to increase balance of allowance for Doubtful
Debts to $19000.
Required:
(i) Make journal entries for the transactions for June. Include entries for GST where
appropriate XXXXXXXXXXmarks)
(ii) Set up ledger accounts for Account Receivable, Allowance for Doubtful Debts, Cash at
Bank and Sales to record the balances at beginning. Create extra accounts as necessary
(either T or three column) and post the entries from (i) – (vi) above. (6 marks)
(iii) Illustrate in an extract from a classified Income Statement and Balance sheet how the
elevant accounts and their balances would appear at 30th June, XXXXXXXXXXmarks)
(iv) Discuss two
Answered Same Day May 09, 2020 ACC5202

Solution

Pulkit answered on May 13 2020
152 Votes
Q1:-
(A) (i) Yes. Worksheet is a very important report as Financial statements show how companies performed during a given accounting period and worksheets help businesses prepare those financial statements.
(ii) No. It is not co
ect to assume that the books are co
ect.
1. Entries made twice. If an entry is made twice, the trial balance will still be in balance, so that is not a good document for finding it. Instead, for an ongoing transaction, you may have to wait for the issue to resolve itself. For example, a duplicate invoice to a customer will be rejected by the customer, while a duplicate invoice from a supplier will (hopefully) be spotted during the invoice approval process.
2. Entries not made at all. Impossible to find on the trial balance, since it is not there (!). Your best bet is to maintain a checklist of standard entries, and verify that all of them have been made.
(B)
    
    Would the e
or cause the Trial
Balance not to balance
    Which accounts would be affected and how?
    How would the e
or be co
ected
    Effect on Trial Balance totals
    
    Yes
    No
    
    
    Debit
    Credit
    Example A payment for wages of $500
was credited to cash co
ectly but debited to wages twice expense.
    Yes
     
    Wages Expense
    Debit side of Wages Expense reduced by 500
    -500
     
    1. The Accrued Wages account with a balance of $500 was omitted from the Trial Balance.
    Yes
     
    Accrued Wages
    Post the account to Trial Balance
    500
     
    2. A payment of $490 for Prepaid Rent was only posted to the Cash at Bank
account and not to Prepaid Rent
    Yes
     
    Prepaid Rent
    Debit Prepaid Rent Account
    500
     
    3. A debit of $458 to Cash at Bank was posted as $485. The credit entry was co
ect.
    Yes
     
    Cash at Bank
    Debit side of cash at bank reduced by 27
    -27
     
    4. A credit of $600 to Accounts Payable should have been made to Fees Revenue
     
    No
    Accounts payable & Fees Revenue
    Accounts payable Debit
Fees Revenue Credit by 600
     
     
    5. A Dr for a cash receipt of $500 from customers in settlement of their accounts was posted twice as a DR to the Cash at Bank and a Dr to Accounts Receivable
accounts
    Yes
     
    Cash at Bank,
Cash &
Accounts receivable
    Cash debit by 500, Cash at bank credit by 1000 and Accounts receivables credit by 1000
    -1000
    500
    6. The Prepaid Expense balance of $7280 was listed in the Trial Balance as $7820
    Yes
     
    Prepaid expenses
    Credit Prepaid expenses by 540
    -540
     
    7. A $5210 credit to Fees Revenue was posted as a $521 credit. The debit entry to Accounts Receivable was made
co
ectly.
    Yes
     
    Fees Revenue
    Fees revenue increased by 4689
     
    4689
    8. A purchase of office equipment fo
$3300 on credit was not recorded.
     
    No
    Office equipment, Loans
    Office equipment debit 3300
Loans credit 3300
    3300
    3300
    9. A purchase of Furniture for $7500 using a loan was posted as a debit to the Loan Payable account and a debit to the
Equipment account.
    Yes
     
    Loans payable
    Loans payable account credit by 15000
    -7500
    7500
    10. The drawings account balance was listed as a credit for $1500.
    Yes
     
    Drawing
    Drawing account debit 1500
    1500
    -1500
Q2:-
(A) The matching principle is an accounting principle which states that expenses should be recognised in the same reporting period as the related revenues. In practice, the matching principle combines accrual accounting (wherein revenues and expenses are recorded as they are incu
ed, no matter when cash is received). The matching principle is not used in cash accounting, wherein revenues and expenses are only recorded when cash changes hands.
The primary accounting methods are the accrual basis of accounting and the cash basis of accounting. Under the accrual basis, revenue is recognized when earned, and expenses are recognized when consumed. Accrual basis accounting is required for publicly-held entities, and for any organization that wants to have its financial statements audited. This is considered the most theoretically co
ect accounting method, but also requires a greater knowledge of accounting, and so is less likely to be used by smaller organizations.
The other main accounting method is the cash basis of accounting. Under the cash basis, revenue is recognized when cash is received from customers, and expenses are recognized when cash is paid to suppliers. This method is more likely to result in lumpy profitability in any given period, since a large cash inflow or outflow can sharply alter profits.
(B) (i)
    S.No.
    Particulars
    Amount
    (i)
    Wages account Dr.
To Outstanding Wages account
    12,000
     
    (Being Outstanding Wages recorded)
    
     
    
    
    (ii)
    Accrued Commision Dr.
To Commission account
    1,520
     
    (Being Commission earned recorded)
    
     
    
    
    (iii)
    Prepaid Rent account Dr.
To Rent account
    21,000
     
    (Being Prepaid Rent recorded i.e. 36000/12*7)
    
     
    
    
    (iv)
    Accrued Income account Dr.
To Interest on Investment account
    375
     
    (Being Interest on Investment earned till 30th June i.e. 25000*6%*1/4)
    
     
    
    
    (v)
    Advance from customer account Dr.
To Income account
    3,600
     
    (Being advance from customer become due i.e. 12000*30%)
    
     
    
    
    (vi)
    Office Furniture account Dr.
To Office Expenses account
    6,000
     
    (Being entry co
ected)
    
     
    
    
    (vii)
    Consumables account Dr.
To Office Supplies account
    4,500
     
    (Being consumables expenses recorded i.e. 5200+800-1500)
    
     
    
    
    (viii)
    GST receivable account Dr.
To GST Control account
    580
     
    (Being GST receivables recorded i.e. 8540-7960)
    
(ii) New Profit Figure: - 3281001-12000+1520+21000+375+3600+6000-4500-580= 3296416
Q3:-
(a) Comparability, timeliness, verifiability and understandability are directed to enhance both relevant and faithfully represented financial information. Those characteristics should be maximised both individually and in combination.
Comparability enables users to identify similarities and differences among items, both between different periods within a set of...
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