A comprehensive accounting exercise designed to integrate your knowledge of accounting systems and the accounting cycle. The exercise is designed to test the following criteria: your technical competence and understanding of the accounting cycle and operation of an accounting information system; your ability to identify and accurately record events and post them correctly to the appropriate accounts; and your ability prepare bank reconciliation and month end accounts with comments on financial performance. At the end of the month the following events occurred:
- Some of the stock of Psyche Books’ was recorded at $5000 but was established to have a net realisable value of $200.
- Interest on bank loan accrued at the end of the month is $46000.
- Depreciation was charged to the buildings and motor vehicle at the end of the month.
- Monthly rent for Psyche Books’ head office was $5000 and is payable on the first of every month in advance.
- Prepaid insurance was originally for two years, purchased on 1 January 2012.
- The company policy is to keep allowance for doubtful debts at the end of the month equal 3 per cent of total credit sales for the month.
- Owed salaries at the end of the month: $22500.
- Electricity charges for the month are estimated to be $2760; phone charges for the month are estimated to be $890
- Prepare journal entries for the above transactions.
- Create ledgers ( T accounts ) for all accounts as per chart of accounts
- Enter the opening balances in the ledger accounts and post the journal entries to the ledger.
- Prepare and post the adjusting entries.
- Prepare pre-closing trial balance at 31 October 2012.
- Prepare closing entries.
- Prepare post-closing trial balance.
- Prepare an income statement for the month of October 2012 and a balance sheet as at 31 October 2012.
- Prepare reversing entries
Please complete the Excel worksheet (uploaded onto SIS) to answer above 1- 9. However, you also need prepare Balance sheet & income statement on MS Word.