Accounting Assignment: Recording Transactions, Posting Journals, Preparing Financial Statements, and

Recording Transactions in Journals

1. Record the June transactions in the appropriate journal: sales, purchases, cash receipts, cash payments and general. Blank journals, ledgers and financial statements are on LMS under the assignment tab, for you to use to complete the assignment. The assignment is to be typed not hand written as are working papers.

 

2. Post the journals to the general and subsidiary ledgers. New accounts should be added as needed

 

3. Record the adjusting journal entries required for the year ended 30 June 2020 in general journal format. You should use brief narrations to explain your entries. Use the worksheet provided in the blank documents to record the adjusting entries and prepare financial statements for checking.

4. Prepare the following:

a. A fully classified Income Statement for the year ended 30 June 2020. This Statement must also show comparative figures for the previous year.

b. A fully classified Balance Sheet as at 30 June 2020.  This statement must also show the comparative figures for the previous year.

These financial statements should be typed and professionally presented.

5. Prepare a post-closing trial balance, and determine whether the subsidiary ledgers agree with the control accounts in the general ledger

6. A potential investor interested in purchasing shares in the company has approached you to undertake an analysis of the financial statements you have prepared in part 2 above.. As part of this analysis, you are required to:

 

a. Calculate the following ratios for both 2019 AND 2020. You are required to compare the results for the 2 years and also compare with the industry average.

b.

RATIO    INDUSTRY AVERAGE

i. Return on equity    8%

ii. Net profit margin    7%

iii. Current ratio    2:1

iv. Debt to total assets 35%

v. Average collection period 15 days    

 

c. Discuss the results of your ratio calculations performed in part (a) above and the trend in the profitability, liquidity and solvency of the company over the past 2 years compared with the industry average.

d. Provide a recommendation to your investor friend whether they should invest in the company or not. Provide reasons for your recommendation.

e. As part of your analysis, explain how industry average ratios can be obtained and the drawbacks to using industry averages as a standard for comparison.