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Question:

Every student for this assignment is required to find the assignment question, analyse the given information, make calculations where relevant and draw relevant, supported conclusions and make justified recommendations. Responses are to be formatted into a professional report for each part of each question, as would be expected of someone working in a modern accountant’s office.

Business reports are practical learning tasks where students apply the theories they have been studying to real world situations. The students are required to select a topic or work on a topic provided by the lecturer, collect information (Primary and/or secondary) or work on the information provided by the lecturer, and prepare a report describing a business problem or incident.

You can search for peer-reviewed journal articles, which you can find in the online journal databases and which can be accessed from the library homepage.

Best Practices for Validation for an Upgrade or New ERP System.

Which Achieves Learning Objectives the Best?

The Analysis of the Final “Debtors” Section Page Preparation in the Trial Balance of Giovanni Farolfi’s Company Branch Office.

The Virtual Reconstruction of the Earliest Double-Entry Accounting Ledger.

Extending the Use and Effectiveness of the Monopoly® Board Game as an In-Class Economic Simulation in the Introductory Financial Accounting Course. 

Answer:
Question-1

Particulars

Debit

Credit

Interest Expense A/c

 

 

Dr.

12800

 

To Interest Payable A/c

 

 

 

12800

(for interest accrued on the mortgage but not paid)

 

 

 

 

 

 

 

 

 

Supplies Expense A/c

 

 

Dr.

320

 

To Supplies A/c

 

 

 

 

320

(for ending supplies in hand recorded)

 

 

 

 

 

 

 

 

 

 

Insurance expense A/c

 

Dr.

512

 

To Prepaid

 

 

 

 

512

(for reversal of prepaid insurance)

 

 

 

 

 

 

 

 

 

 

Prepaid Insurance

 

 

 

2560

 

To Insurance Expense

 

 

 

 

2560

(for adjustment entry passed)

 

 

 

 

 

 

 

 

 

 

Insurance

 

 

Dr.

460

 

To Cash

 

 

 

 

460

(for amount paid )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation Expense- Furniture

 

 

6000

 

Depreciation Expense- office Equipment

 

 

12000

 

Depreciation Expense- Store Equipment

 

 

8700

 

Depreciation Expense- Automobile

 

 

12000

 

To Accumulated Depreciation

 

 

 

38700

(for depreciation adjusted )

 

 

 

 

 

 

 

 

 

 

Cash A/c

 

 

Dr.

8000

 

To unearned Revenue

 

 

 

8000

 

 

 

 

 

 

Unearned Revenue

 

 

Dr.

8000

 

To Revenue

 

 

 

 

8000

 

 

 

 

 

 

Question-2

Paul services Trial Balance As At 30 June 2016

 

 

 

 

Account No

Account Name

Debit

Credit

Adjustments

Final Trial

 

 

 

 

 

Debit

Credit

Debit

Credit

101

Cash at Bank

27560.00

 

8000

460

35100.00

 

105

Accounts Receivable

9190.00

 

 

 

9190.00

0.00

115

Supplies

1280.00

 

 

320

960.00

 

120

Prepaid Insurance

2560.00

 

 

512

2048.00

 

135

Office Furniture

32000.00

 

 

 

32000.00

0.00

137

Acc. Depreciation. - Furniture

0.00

 

6000

0.00

6000.00

140

Office Equipment

64000.00

 

 

 

64000.00

0.00

141

Acc. Depreciation - Equipment

0.00

 

12000

0.00

12000.00

145

Store Equipment

96000.00

 

 

 

96000.00

0.00

146

Acc. Depreciation - Equipment

0.00

 

8700

0.00

8700.00

170

Automobile

128000.00

 

 

 

128000.00

0.00

171

Acc. Depreciation - Automobile

0.00

 

12000

 

12000.00

201

Accounts Payable

 

18380.00

 

 

 

18380.00

201

Interest Payable

 

27570.00

 

12800

 

40370.00

201

Unearned revenue

 

16000.00

8000

8000

 

16000.00

201

Loan Payable

 

6400.00

 

 

 

6400.00

201

Mortgage Payable

 

128000.00

 

 

 

128000.00

201

Paul's Capital

 

46498.00

 

 

 

46498.00

201

Paul's Drawings

128.00

 

 

 

128.00

 

201

 Revenue

 

128000.00

 

8000

 

136000.00

201

Advertising Expense

600.00

 

 

 

600.00

 

201

Automobile Expense

5775.00

 

 

 

5775.00

 

201

Depreciation Expense - Furniture

0.00

 

6000

 

6000.00

 

201

Depreciation Expense - Equipment

0.00

 

12000

 

12000.00

 

201

Depreciation Expense - Store Equipment

0.00

 

8700

 

8700.00

 

201

Depreciation Expense - Automobile

0.00

 

12000

 

12000.00

 

201

Insurance Expense

500.00

 

972

 

1472.00

 

201

Maintenance Expense

2100.00

 

 

 

2100.00

 

201

Miscellaneous Expense

1155.00

 

 

 

1155.00

 

201

Rent Expense

0.00

 

 

 

0.00

 

201

Supplies Expense

0.00

 

320

 

320.00

 

201

Utilities Expense

0.00

 

 

 

0.00

 

201

Interest Expense

0.00

 

12800

 

12800.00

 

 

 

370848.00

370848.00

68792.00

68792.00

430348.00

430348.00

 

Office Furniture after Depreciation

 

Office Equipment after Depreciation

Office Furniture

32000

 

Office Equipment

 

64000

Residual value

2000

 

Residual value

 

4000

Estimated useful life

5

 

Estimated useful life

 

5

Depreciation

6000

 

Depreciation

 

12000

Closing Value

26000

 

Closing Value

 

52000

 

 

 

 

 

 

Store Equipment after Depreciation

 

Automobile after Depreciation

Store Equipment

93000

 

Office Furniture

 

128000

Residual value

6000

 

Residual value

 

8000

Estimated useful life

10

 

Estimated useful life

 

10

Depreciation

8700

 

Depreciation

 

12000

Closing Value

84300

 

Closing Value

 

116000

Question-3

Particulars

Amount

 Revenue

136000.00

 

 

Expenses

 

Advertising Expense

600.00

Automobile Expense

5775.00

Depreciation Expense - Furniture

6000.00

Depreciation Expense - Equipment

12000.00

Depreciation Expense - Store Equipment

8700.00

 

 

Depreciation Expense - Automobile

12000.00

Insurance Expense

1472.00

Maintenance Expense

2100.00

Miscellaneous Expense

1155.00

Rent Expense

0.00

Supplies Expense

320.00

Utilities Expense

0.00

Interest Expense

12800.00

 

 

Profit/ loss

73078.00

Question-4

 

Journalise the Closing Entries

 

 

 

 

 

 

 

 

 

 

Date

Particulars

Debit

Credit

 

Profit and Loss A/c

 

Dr.

73078.00

 

 

To  General expenses

 

 

73078.00

 

(for all the expenses transferred)

 

 

Question-5

Balance Sheet

 

 

Particulars

 

Amount

Paul's Capital

 

46498.00

Paul's Drawings

 

128.00

Add: Net Profits

 

73078.00

Total Capital

 

119448.00

 

 

 

Interest Payable

 

40370.00

Unearned revenue

 

16000.00

Loan Payable

 

6400.00

Accounts Payable

 

18380.00

Mortgage Payable

 

128000.00

 

 

 

 

 

 

Total

 

328598.00

 

 

 

Cash at Bank

 

35100.00

Accounts Receivable

 

9190.00

Supplies

 

960.00

Prepaid Insurance

 

2048.00

Office Furniture

32000.00

 

Office Equipment

64000.00

 

Store Equipment

96000.00

 

Automobile

128000.00

 

Less: accumulated Depreciation

38700.00

281300.00

 

 

 

 

 

 

Total

 

328598.00

Question-6
Trial balance overview

A trial balance is an accounting book which helps in maintaining the organisations general and ledger accounts. In this book of accounts all the debit balances are maintained in the debit column of the book and the credit balances are maintained in the credit column of the book. The balance of both the columns should be identical in nature. Such book of accounting helps in finding errors in the financial statements of the organisation. Such a statement is useful for the auditors in order to identify the errors of the company to audit the accounts. Such errors are resolved by the auditors and an audit report is made on the basis of such financial statements (Baxter and Davidson, 2014).

Under the traditional system the preparation of the trial balance was initially started by the accountant. However under the current system of the accounting the accounting software has been installed in the organisation in order to create more accuracy and the transparency among the organisation. The manual system is a conventional system and it is time consuming on the other hand the computerised system is the key component which follows the double entry system and the system of accounting as well (Carey, Knowles and Towers-Clark, 2017).

Purpose for Creation

The purpose for which the trial balance is created is similar for any kind of the organisation and therefore the reasons are specifically presented below. The reason for creation of trail balance is to identify all the errors that have been made while recording the transactions of the organisation. The purpose for the creation of trail balance is proved when all the credit balances of the statement matches with all the debit balances of the statement. Such error helps in rectification of entries and helps in preparing the profit and loss statement of the organisation. Such a statement is prepared by the book keeper of the accounts who maintains the daily record of transactions in the books of accounts (Kuter, Gurskaya, Andreenkova and Musaelyan, 2017).

The Trial Balance helps in identifying all the errors which are in the form of omission, error of commission, error in original journal entry, error of principle, compensating errors and the error of reversal. Such errors help in preparation of financial statements. The purpose of creation of trial balance is to help the organisation in reconciliation of the balances. The trail balance also ensures that every entry is recorded in the financial statements. In case of any error the trail balance helps in rectifying those entries (Ellerman, 2014).

Adjusting entries

When a transaction starts in one accounting period and ends in the different accounting period than the adjusting entry is required definitely. In simpler terms the adjusting entry can also be known as the reporting entries that are used to rectify and reconcile the mistakes attempted in the past years. The adjusting entry is also termed as the balance day adjustment. The accounts that are involved with the adjusting entries are the income statement and the balance sheet and this type of entry is typically relatable to the accrued expense, accrued revenue, prepaid expenses and unearned revenue (Fanning and Grant, 2017). The entries are also passed keeping in mind the matching principle concept in order to match the revenue and the expenses and these kind of the adjustments are also carried forward to the account ledgers and the worksheet of the accounting in the next accounting cycle step. The common characteristics of an adjusting entry are that it will involve the incomes and expenses and the assets and the liabilities. In summary the adjusting journal entries are basically of the three categories namely the accruals, deferrals and estimates (Shanklin and Ehlen, 2017).

Purpose of writing an adjusted trial balance

Normally the trial balance reflects all the accounts that are recorded in the ledgers and from the ledgers the trial balance is prepared subject to certain changes. Once the financial statements are prepared they are prepared using the help from the trial balance. That’s when the adjusted trial balance came into existence. The adjusted trial balance is made with the adjustments given apart from the trial balance. The process if the adjusted trial balance is identical just likes the normal one. The simple reason is to match the revenues with the expenses and the monitor the performances of the company which will be beneficial from the point of view of the shareholders (Kramer, 2017).

The cycle of the financial statements is totally dependent on the books of accounts and the financial statements so that the shareholders can take the decisions of the company wisely (Harris and Dilling, 2017). The trial balance is never a part of the financial statement rather it is a document to be used internally which has basically two purposes.

To verify that the balance of the debit side and the credit side is equal to each other and to for the purpose of the construction of the ultimate report that is circulated among the shareholders and the investors (Gurskaya, Kuter and Andreenkova, 2017). The second implication of the adjusted trial balance has fallen into the vain since the computerised accounting system has been in motion for the production of the financial statements. The trial balance is set up before the adjusting entries and after the adjusting entries the trial balance is the adjusted and the complete trial balance. The balances of the trial changes immediately once the entries are adjusted. In order to be sure of the data relevancy the Trial balance is to be 100% correct (Fang and Slavin, 2018).

Not only trial balance at times helps to save the business of the organisation but it builds a greater image on part of the management. The business is kept away from the issues of legal as well as the audit matters and it has so many uses. All the major financial statements are prepared from the use of the adjusted trial balance only. Further if there is any difference in the financial statements than the same are considered as unacceptable (Weil, Schipper and Francis, 2013).

Difference between the adjustment entries and closing journal entries

The difference in the closing entries and the adjusting entry is for a particular thing and that is timing. Under the process of recording the adjusting journal entries the entries are generally recorded post recording all the transactions and in the process of recording the closing entries these entries are generally recorded after the financial statements are prepared. One of the good reasons of maintaining the books of accounts is to keep a proof with the organisation of the past years and also gives the comparative benefit. The up to date financial data is also reliable and very useful in the eyes of the investors and the shareholders. The example of outstanding expenses is a sound example to depict the adjustment entries treatment (Baydoun, Sulaiman,Willett and Ibrahim, 2018). The incomes that is outstanding for the current year such as salary outstanding and not paid till the end of the year. For this purpose the salary needs to be adjusted with the assistance of the adjusting entry. For example salary outstanding for one employee is 5000.

Salary A/c

5000

 

 

 

To Salary Outstanding A/C

 

260

The rest of the expenses are directly transferred to their respective account. The closing entries on the other hand are deliberately recorded once the financial statements are perfectly related.  The journal entries are involved while closing the accounts. The fundamental of the closing entry is that the revenue and the expenses are recorded and the difference between them is zero. This purely means that the new entries will came into existence once the year has been finished from the scratch (Thornton, 2018).

References

Baxter, W.T. and Davidson, S. eds. (2014) Studies in accounting (Vol. 4). California: Routledge.

Baydoun, N., Sulaiman, M., Willett, R.J. and Ibrahim, S., (2018). Principles of Islamic Accounting. United States: John Wiley & Sons.

Best Practices for Validation for an Upgrade or New ERP System. Boston: Cengage Learning

Carey, M., Knowles, C. and Towers-Clark, J. (2017) Accounting: a smart approach. London: Oxford University Press.

Ellerman, D., (2014) On double-entry bookkeeping: The mathematical treatment. Accounting Education, 23(5), pp.483-501.

Fang, J. and Slavin, N.S., (2018) Cash is King: An Easy Way to Understand Debits and Credits. GSTF Journal on Business Review (GBR), 4(1).

Fanning, K. and Grant, R., (2017) Manual vs. Computerized Practice Set: Which Achieves Learning Objectives the Best?. AIS Educator Journal, 12(1), pp.25-33.

Gurskaya, M., Kuter, M. and Andreenkova, A., (2017) December. The Analysis of the Final “Debtors” Section Page Preparation in the Trial Balance of Giovanni Farolfi’s Company Branch Office. In International Conference on Information Technology Science (pp. 185-194). New York: Springer

Harris, P. and Dilling, P., (2017) Case Study: Consolidated Balance Sheet At Date Of Purchase. Journal of Business Case Studies (Online), 13(1), p.1.

Kuter, M., Gurskaya, M., Andreenkova, A. and Musaelyan, A., (2017) December. The Virtual Reconstruction of the Earliest Double-Entry Accounting Ledger. In International Conference on Information Technology Science (pp. 169-184). New York: Springer

Shanklin, S.B. and Ehlen, C.R., (2017) Extending the Use and Effectiveness of the Monopoly® Board Game as an In-Class Economic Simulation in the Introductory Financial Accounting Course. American Journal of Business Education, 10(2), pp.75-80.

Thornton, S.C., (2018) A Collection of Case Studies on Financial Accounting Concepts (Doctoral dissertation, University of Mississippi). United States: John Wiley & Sons.

Weil, R.L., Schipper, K. and Francis, J., (2013) Financial accounting: an introduction to concepts, methods and uses. Boston: Cengage Learning.

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