Answer To: ACC5202 Assignment Semester 1, 2018 Weighting 35% 1 ACC5202 Assignment Due Date: 14th May,...
Pulkit answered on May 13 2020
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 correct to assume that the books are correct.
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 error cause the Trial
Balance not to balance
Which accounts would be affected and how?
How would the error be corrected
Effect on Trial Balance totals
Yes
No
Debit
Credit
Example A payment for wages of $500
was credited to cash correctly 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 correct.
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
correctly.
Yes
Fees Revenue
Fees revenue increased by 4689
4689
8. A purchase of office equipment for
$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 incurred, 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 correct 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 corrected)
(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...