VCE Accounting Unit 1

Cash based service businesses A multi-media approach

David Page

1. The accounting process.

VCE Accounting Unit 1

VCE Accounting Unit 1

Cash based service businesses A multi-media approach
Chapter Chapter Chapter Chapter Chapter 1 2 3 4 5 ... The accounting process. ... Adding GST to the accounting process. ... Classification of the accounting reports. ... Bank reconciliations. ... Budgeting.

1. The accounting process.

VCE Accounting Unit 1

Chapter 1
The accounting process

1. The accounting process.

VCE Accounting Unit 1

Annie is an architect providing professional advice to individuals and businesses. This advice is the revenue activity of her business. At 1/7/19, the business had the following Balance Sheet: Annie the Architect: Balance Sheet at 1/7/19 Assets $ Equities $ Bank 40000 Capital, Annie 95000 Office assets 25000 Vehicle 30000 Total assets 95000 Total equities 95000 Assets
Resources under the control of the business which will provide economic benefits.

Equities
Who has an ownership or interest or claim in the assets.

Assets and equities balance in a Balance Sheet. Annie has 100% ownership in the assets of the business at 1/7/19. Her equity in the business is often called Capital.

Transactions for Annie the Architect, July 2019:

Annie the Architect Receipt # 40
Date: 1/7/19 From: Customers Consulting fees For: $: $3000.00 Thank you

Record in the journals.

Botanical Bank Date: 5/7/19 To: Shelly For: Wages expense

Annie the Architect Receipt # 41

Date: 9/7/19 From: Customers Consulting fees For: $: $2000.00 Thank you

Botanical Bank Date: 12/7/19 To: HotWire For: Internet expenses This cheque $300.00 Cheque number 56 Annie the Architect

This cheque $900.00 Cheque number 55 Annie the Architect Annie the Architect Receipt # 42
Date: 17/7/19 From: Customers Consulting fees For: $: $4000.00 Thank you

Transactions are evidenced by documents. Documents verify the transaction and ensure the data is reliable. Documents are inputs into the accounting system.

Botanical Bank Date: 22/7/19 To: Andersons For: Rent expense This cheque $4500 Cheque number 57 Annie the Architect Annie the Architect Receipt # 43
Date: 31/7/19 From: Customers Consulting fees For: $: $1000.00 Thank you VCE Accounting Unit 1

Botanical Bank Date: 26/7/19 To: Flash in the Pan For: Cleaning expenses This cheque $200.00 Cheque number 58 Annie the Architect

Botanical Bank Date: 28/7/19 To: OfficeWorks For: Office assets (new computer) This cheque $3000 Cheque number 59 Annie the Architect

1. The accounting process.

Journals for July 2019:

revenue activity

Journals record the transactions of the business. Cash receipt transactions are recorded in the Cash Receipts Journal and cash payment transactions are recorded in the Cash Payments Journal.

Cash Receipts Journal (CRJ)

CFS IS BS X calc. rev. X X calc. X calc. X

Date

Details

Doc.

Bank

Consultation Cash Fees Capital

Loans

Interest Sundry Revenue

Add up the columns at the end of July.

Sundry is used for miscellaneous or infrequent type transactions!

Cash Payments Journal (CPJ)

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X exp. X exp. X ? ?

Date

Details

Doc.

Bank

Wages

Internet Drawings Exps.

Loan

Interest

Rent

Cleaning

Office Exps.

Sundry

The design or format of the journals varies from business to business and depends on the information needs of each business. If a particular type of transaction occurs frequently, it usually has its own column in the journals.

Accounting reports for July 2019: 1. Cash Flow Statement:

Annie has decided to prepare accounting reports for July. July is thus the reporting period.

The Cash Flow Statement reports on cash receipts for the reporting period less cash payments for the reporting period and calculates the cash balance at the end of the reporting period. Most of the data for the Cash Flow Statement comes from the cash journals.

Annie the Architect: Cash Flow Statement for July 2019 Cash Receipts $ $ Get the data from the Cash Receipts Journal. Cash Payments

Get the data from the Cash Payments Journal.

Change in cash + cash bal. at start = cash bal. at end

Get the cash at start from the Balance Sheet at the start of the reporting period.

This is the most important value the cash balance at the end. 1. The accounting process.

VCE Accounting Unit 1

2. Income Statement:
Annie the Architect: Income Statement for July 2019 Revenue $ $

The definition of profit is revenue less expenses for the reporting period. The Income Statement reports on revenue and expenses for the period to determine profit or loss. The revenue activity for Annie the Architect is Consultation Fees. Annie could call this revenue other names such as Fees or Takings etc. Each business can decide the name it uses for its revenue activity. Source Annie the Architects revenue data from the Cash Flow Statement or Cash Receipts Journal. Expenses work to reduce profit. Overtime, you will become skilled at identifying expenses. To assist you, see the top section of the Cash Payments Journal and look for items in the IS row with this symbol: ( exp.) (CPJ)
CFS IS BS exp. X

Less Expenses

Net Profit

Date

Wages

Calculations/schedules:
Sometimes at the end of the reporting period, calculations have to be done to help prepare the new Balance Sheet. Calculations are usually done in a schedule like this: Office Assets Schedule at 31/7/19 $ Balance at start (Balance Sheet) Add new office assets (CPJ) Balance at end

3. New Balance Sheet:

At the end of the reporting period, a business will prepare a new Balance Sheet to report on the assets and equities at that point in time. The data comes from the Balance Sheet at the start of the reporting period plus any relevant changes that have occurred to assets and equities over the reporting period.

Get the Bank or Cash value from the Cash Flow Statement.

Annie the Architect: Balance Sheet at 31/7/19 Assets $ Equities $ Bank Capital, Annie Office assets Add Net Profit Vehicle Total assets Total equities

Profit belongs to the owner so it is reported with Capital in the Balance Sheet. Get the value from the Income Statement.

Summary of the accounting process so far:

Business transactions are evidenced by documents. Transactions are recorded in journals: Cash Receipts Journal Cash Payments Journal Prepare Accounting Reports: Cash Flow Statement Income Statement Balance Sheet

Start of reporting period

End of reporting period

Input stage

Processing stage

Output stage

The accounting reports are prepared for stakeholders. Stakeholders are individuals or businesses that are interested in the performance of the business. Examples of stakeholders include the owner, manager, potential owner, people/ businesses who are owed money, employees, Australian Taxation Office etc.

1. The accounting process.

VCE Accounting Unit 1

Accounting for August:

Annie the Architect: Balance Sheet at 1/8/19 Assets $ Equities $ Bank 41100 Capital, Annie 99100 Office assets 28000 Vehicle 30000 Total assets 99100 Total equities 99100 This capital value comes from the last Balance Sheet and is the addition of the original capital plus profit. Annie still has 100% ownership in the assets of the business: will this change during August? Record in the journals.

Transactions for Annie the Architect, August 2019:

Annie the Architect Receipt # 44
Date: 1/8/19 From: Customers Consulting fees For: $: $1000.00 Thank you

Botanical Bank Date: 5/8/19 To: Shelley For: Wages expense

Annie the Architect Receipt # 45

Date: 9/8/19 From: Customers Consulting fees For: $: $3000.00 Thank you

Botanical Bank Date: 12/8/19 To: Andersons For: Rent expense

Annie the Architect Receipt # 46

Date: 17/8/19 From: Customers Consulting fees For: $: $600.00 Thank you

This cheque $900.00 Cheque number 60 Annie the Architect Botanical Bank Date: 22/8/19 To: OfficeWorks For: Office expenses

Botanical Bank Date: 26/8/19 To: Flash in the Pan For: Cleaning expenses This cheque $170.00 Cheque number 63 Annie the Architect

This cheque $4500 Cheque number 61 Annie the Architect Annie the Architect Receipt # 47
Date: 31/8/19 From: AMP Bank Loan For: $: $7000 Thank you

Botanical Bank Date: 31/8/19 To: Ace Importers For: Equipment (CAD drawing system) This is an asset. This cheque $6000 Cheque number 64 Annie the Architect

This cheque $850 Cheque number 62 Annie the Architect

Cheque #64 is the purchase of new equipment. This is an asset so do not forget to report this in the Balance Sheet at the end of the month.

Journals for August: Cash Receipts Journal (CRJ)

CFS IS BS X calc. rev. X X calc. X calc. X

Date

Details

Doc.

Bank

Consultation Cash Fees Capital

Loans

Interest Sundry Revenue

Add up the columns at the end of August.

Cash Payments Journal (CPJ)

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X exp. X exp. X

Date

Details

Doc.

Bank

Wages

Internet Drawings Exps.

Loan

Interest Rent

Cleaning

Office Exps.

Sundry

1. The accounting process.

VCE Accounting Unit 1

Accounting reports for August 2019: 1. Cash Flow Statement:

Annie the Architect: Cash Flow Statement for August 2019 Cash Receipts $ $

2. Income Statement:
See the top section of the cash journals to help you identify the revenue and expenses. Annie the Architect: Income Statement for August 2019 Revenue $ $

Cash Payments Less Expenses If expenses are more than revenue, it is a net loss.

Change in cash + cash bal. at start = cash bal. at end Cash at start will be cash at end of lat month.

Net Loss

The information in the accounting reports is said to be reliable if it is supported by documentary evidence. Stakeholders expect the information in the reports to be reliable.

3. Balance Sheet:
Annie the Architect: Balance Sheet at 31/8/19 Assets $ Equities $ Bank Liabilities Office assets AMP Loan Vehicle Owners Equity Equipment Capital, Annie Less net loss Total assets Total equities $ The Balance Sheet now reports liabilities as an equity. Liabilities are obligations to individuals or businesses, in this example, AMP. AMP has an ownership or claim or interest in the assets of the business until the loan is repaid by Annie the Architect.

Most businesses have liabilities, so for most businesses equities is made up of two components: liabilities and owners equity. Liabilities is the external ownership in the assets and owners equity is the internal ownership in the assets.

The Accounting Equation at 31/8/19:

ASSETS $

=
$

EQUITIES

ASSETS $

EQUITIES

LIABILITIES $

OWNERS EQUITY $

The equality between assets and equities or the relationship between the values of assets, liabilities and owners equity is often called the accounting equation. The accounting equation is really just the Balance Sheet, that is, assets equals liabilities plus owners equity. 1. The accounting process.

VCE Accounting Unit 1

Accounting for September:

Annie the Architect: Balance Sheet at 1/9/19 Assets $ Equities $ Bank 40280 Liabilities Office assets 28000 AMP Loan 7000 Vehicle 30000 Owners Equity Equipment 6000 Capital, Annie 97280 Total assets 104280 Total equities 104280

Transactions for Annie the Architect, September 2019:

Annie the Architect Receipt # 48
Date: 1/9/19 From: Customers Consulting fees For: $: $2000.00 Thank you

Record in the journals.

Botanical Bank Date: 4/9/19 To: Shelley For: Wages expense

Annie the Architect Receipt # 49

Date: 10/9/19 From: Customers Consulting fees For: $: $1500.00 Thank you

Botanical Bank Date: 13/9/19 To: Andersons For: Rent expense

Annie the Architect Receipt # 50

Date: 19/9/19 From: Customers Consulting fees For: $: $800.00 Thank you

This cheque $900.00 Cheque number 65 Annie the Architect Botanical Bank Date: 24/9/19 To: Optus For: iPhone charges (office expenses) This cheque $900 Cheque number 67 Annie the Architect

Botanical Bank Date: 27/9/19 To: Flash in the Pan For: Cleaning expenses This cheque $190.00 Cheque number 68 Annie the Architect

This cheque $4500 Cheque number 66 Annie the Architect Botanical Bank Date: 30/9/19 To: AMP For: Loan repayment This cheque $500 Cheque number 69 Annie the Architect

Botanical Bank Date: 30/9/19 To: Cash For: Drawings This cheque $2700 Cheque number 70 Annie the Architect

Drawings is when the owner takes assets for personal use. Drawings is usually cash but can be any business asset.

Journals for September: Cash Receipts Journal (CRJ)

CFS IS BS X calc. rev. X X calc. X calc. X

Date

Details

Doc.

Consultation Cash Bank Fees Capital

Loans

Interest Sundry Revenue

Add up the columns at the end of September.

Cash Payments Journal (CPJ)

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X exp. X exp. X

Date

Details

Doc.

Bank

Wages

Internet Drawings Exps.

Loan

Interest Rent

Cleaning

Office Exps.

Sundry

1. The accounting process.

VCE Accounting Unit 1

Accounting reports for September 2019: 1. Cash Flow Statement: 2. Income Statement:
See the top section of the cash journals to help you identify the revenue and expenses. Annie the Architect: Income Statement for September 2019 Revenue Cash Payments Less Expenses $ $

Annie the Architect: Cash Flow Statement for September 2019 Cash Receipts $ $

Net Loss Change in cash + cash bal. at start = cash bal. at end Cash at start will be cash at end of last month. The owner, who is usually the manager, is the major stakeholder!

Calculations/schedules:
Loan schedule at 30/9/19 $ Use this loan schedule to work out how much is owing to AMP at the end of September. Balance at start (Balance Sheet) Add new loans (CRJ) Sub-total Less loan payments (CPJ) Balance at end

3. Balance Sheet:
Annie the Architect: Balance Sheet at 30/9/19 Assets $ Equities $ BANK Liabilities OFFICE ASSETS AMP loan VEHICLE Owners Equity EQUIPMENT Capital, Annie LESS LOSS LESS DRAWINGS Total assets Total equities $

Drawings reduces the owners ownership in the businesses assets thus it is deducted in the owners equity section of the Balance Sheet.

Accounting equation at 30/9/19:

ASSETS $

EQUITIES $ EQUITIES

ASSETS $
1. The accounting process.

=
10

LIABILITIES $

OWNERS EQUITY $
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Assets Truck Trailer Office assets Stock of paint Equipment Total assets

Pete the Painter: Balance Sheet at 1/1/21 $ Equities $ 30000 Liabilities 2000 ANZ Loan 10000 9000 Bank overdraft 3000 6700 Owners Equity 12000 Capital, Pete 59700 Total equities

13000 46700 59700

Pete the Painters revenue activity is painting!

Transactions for Pete the Painter, January, 2021:

Record in the journals.

Note that Pete the Painter has a bank overdraft, a liability. This means the business has no money in its bank account and owes the bank money!

Pete the Painter Receipt # 119

Date: 1/1/21 From: Customers Takings For: $: $2000.00 Thank you

Bank of Dandenong Date: 4/1/21 To: Bazza For: Wages expense

Bank of Dandenong Date: 8/1/21 To: Dulux For: Paint (asset)

Pete the Painter Receipt # 120

Date: 11/1/21 From: Customers Takings For: $: $800.00 Thank you

Bank of Dandenong Date: 14/1/21 To: Garretts For: vehicle expenses

This cheque $670 Cheque number 346 Pete the Painter Bank of Dandenong Date: 17/1/21 To: Telstra For: Telephone expenses This cheque $170 Cheque number 349 Pete the Painter

This cheque $370 Cheque number 347 Pete the Painter Pete the Painter Receipt # 121
Date: 21/1/21 From: Customers Takings For: $: $1600.00 Thank you

Bank of Dandenong Date: 24/1/21 To: Dulux For: Paint (asset) This cheque $490 Cheque number 350 Pete the Painter

This cheque $290 Cheque number 348 Pete the Painter

INTERNET TRANSFER: PAYMENT. 009 DATE: 25/1/21 FROM: PETE THE PAINTER A/C: P98332 TO: PETE A/C: 55743 FOR: DRAWINGS TOTAL: $4500

Pete has used an internet transfer to pay himself drawings. This is an easy and quick way to transfer money from the business account to the owners personal account. It is still recorded in the cash payments journal.

MEMO #26: 31/1/21 Stocktake of paint. $2100.

Memo #26 is an example of a non-cash transaction so it is not recorded in the cash journals. It will be recorded in a new journal called the General Journal. See below:

General Journal (GJ) Date Details $

We have seen 3 journals. Cash receipts, cash payments and now the general journal for non-cash transactions. 1. The accounting process.

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VCE Accounting Unit 1

Cash Journals for January: Cash Receipts Journal (CRJ)

CFS IS BS X calc. rev. X X calc. X calc. X

Date

Details

Doc.

Bank

Takings

Cash Capital

Loans

Interest Sundry Revenue

Pete the Painter calls his revenue activity Takings.

Cash Payments Journal (CPJ)

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X calc. Stock at end exp. X

Date

Details

Doc.

Bank

Wages

Teleph. Drawings Exps.

Loan

Interest

Veh. Exps.

Paint

Office Exps.

Sundry

Calculations/schedules for January:

Paint expense schedule at 31/1/21 When Pete buys paint, it is an asset. The paint that is used-up during the reporting period is an expense. At the end of each reporting period, Pete needs to calculate the paint used-up to calculate paint expense. $ Stock of paint at start (Bal. Sheet) Add purchases of new paint (CPJ) Sub-total Less stocktake of paint (GJ) Paint expense for period

Accounting reports for January 2021: 1. Cash Flow Statement:

Pete the Painter: Cash Flow Statement for January 2021
Cash Receipts $ $

2. Income Statement:
See the top section of the cash journals to help you identify the revenue and expenses.

Pete the Painter: Income Statement for January 2021

Revenue TAKINGS Less Expenses Paint Dont forget the paint expense from the schedule! $ $

Cash Payments Paint purchases

860

Change in cash + cash bal. at start = cash bal. at end

Net Loss The cash balance at the end is a (negative) which means there is an overdraft.

Note: there is a difference between paint purchases as reported in the Cash Flow Statement and paint expense as reported in the Income Statement. 1. The accounting process.

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3. Balance Sheet:
Assets are recorded at their historical cost (original cost) which can always be verified by documentary evidence.

All of the reports are expressed in Australian dollars, $A, as per the monetary unit principle. Pete the Painter: Balance Sheet at 31/1/21 $ Equities $ Liabilities ANZ loan BANK OVERDRAFT Owners Equity Capital, Pete

Assets

$ Bank overdraft is a liability.

Total assets

Total equities

Transactions for Pete the Painter, February, 2021:

Record in the journals.

Pete the Painter Receipt # 122

Date: 1/2/21 From: Customers Takings For: $: $2000.00 Thank you

INTERNET TRANSFER: PAYMENT. 010 DATE: 5/2/21 FROM: PETE THE PAINTER A/C: P98332 TO: BAZZA A/C: 776589 FOR: WAGES EXPENSE TOTAL: $690 Bank of Dandenong Date: 18/2/21 To: Dulux For: Paint (asset)

Pete the Painter Receipt # 123

Date: 11/2/21 From: Customers Takings For: $: $1700.00 Thank you

INTERNET TRANSFER: PAYMENT. 011 DATE: 15/2/21 FROM: PETE THE PAINTER A/C: P98332 TO: PETE A/C: 55743 FOR: DRAWINGS TOTAL: $1000 Bank of Dandenong Date: 22/2/21 To: Telstra For: Telephone expenses This cheque $150 Cheque number 353 Pete the Painter Bank of Dandenong Date: 24/2/21 To: AMP For: Insurance expense This cheque $570 Cheque number 354 Pete the Painter

This cheque $750 Cheque number 351 Pete the Painter

Bank of Dandenong Date: 19/2/21 To: Shell Doveton For: Petrol (vehicle expenses) This cheque $89 Cheque number 352 Pete the Painter

Pete the Painter Receipt # 124

Date: 23/2/21 From: Customers Takings For: $: $3100.00 Thank you MEMO #27: 24/2/21 Owner contributed a personal computer to the business, $2000. Record as office assets.

Bank of Dandenong Date: 28/2/21 To: Dulux For: Paint (asset)

This cheque $210 Cheque number 355 Pete the Painter

INTERNET TRANSFER: RECEIPT. R776 DATE: 29/2/21 FROM: PETE A/C: 55743 TO: PETE THE PAINTER A/C: P98332 FOR: CAPITAL INJECTION OF CASH TOTAL: $2700

MEMO #28: 29/2/21 Stocktake of paint. $830.00

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Journals for February:

Cash Receipts Journal (CRJ)
CFS IS BS X calc. rev. X X calc. X calc. X

Date

Details

Doc.

Bank

Takings

Cash Capital

Loans

Interest Sundry Revenue

Total the cash journals at the end of February.

Cash Payments Journal (CPJ)

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X calc. Stock at end exp. X

Date

Details

Doc.

Bank

Wages

Teleph. Drawings Exps.

Loan

Veh. Interest Exps.

Paint

Office Exps.

Sundry

General Journal (GJ) Date Details

Calculations/schedules for February:

Paint expense schedule at 29/2/21 $ Stock of paint at start (Bal. Sheet) Add purchases of new paint (CPJ) Sub-total Less stocktake of paint (GJ) Paint expense for period

Office Assets schedule at 29/2/21 $ Balance at start (Bal. Sheet) Add new office assets Balance at end Capital schedule at 29/2/21 $ Balance at start (Bal. Sheet) Add new capital Balance at end

Accounting reports for February 2021: 1. Cash Flow Statement:

Pete the Painter: Cash Flow Statement for February 2021
Cash Receipts $ $

2. Income Statement:
See the top section of the cash journals to help you identify the revenue and expenses.

Pete the Painter: Income Statement for February 2021

Cash Payments Paint purchases Revenue $ $

Less Expenses Paint

Change in cash + cash bal. at start = cash bal. at end 1. The accounting process.

Dont forget the paint expense from the schedule!

Net Profit

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3. Balance Sheet:
Assets are recorded at their historical cost (original cost) which can always be verified by documentary evidence.

Assets

Pete the Painter: Balance Sheet at 29/2/21 $ Equities $ Liabilities ANZ loan Owners Equity Capital, Pete

Total assets

Total equities

Accounting Equation:

Consider the following transaction of Pete the Painter and the impact on the accounting equation.

1. Cash takings $3000. ASSETS Increase in bank $3000 2. Cash drawings $6000. ASSETS

LIABILITIES No impact

OWNERS EQUITY

Increase $3000 due to takings revenue.

LIABILITIES

OWNERS EQUITY

3. Bought office assets $5000 cash. ASSETS

LIABILITIES

OWNERS EQUITY

4. Paid cash for wages, $600. ASSETS

LIABILITIES

OWNERS EQUITY

5. Borrowed $3000 from ANZ bank. ASSETS

LIABILITIES

OWNERS EQUITY

6. Owner injected $1000 into the business. ASSETS

LIABILITIES

OWNERS EQUITY

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Pete the Painter: Balance Sheet at 1/3/21 Assets $ Equities Stock of paint 830 Liabilities Bank 951 ANZ loan Truck 30000 Trailer 2000 Owners Equity Office assets 11000 Capital, Pete Equipment 12000 Total assets 56781 Total equities

$ 10000

46781

56781

Transactions for Pete the Painter, March, 2021:

Record in the journals.

INTERNET TRANSFER: RECEIPT. 01 DATE: 1/3/21 FROM: ANZ BANK: A/C: ANZ99811278 TO: PETE THE PAINTER A/C: P98332 FOR: INCREASE IN LOAN TOTAL: $2900 Pete the Painter Receipt # 126
Date: 11/3/21 From: Customers Takings For: $: $550.00 Thank you

Pete the Painter Receipt # 125

Date: 3/3/21 From: Customers Takings For: $: $1400.00 Thank you

Bank of Dandenong Date: 7/3/21 To: Dulux For: Paint (asset)

This cheque $390 Cheque number 356 Pete the Painter Bank of Dandenong Date: 17/3/21 To: Shell Doveton For: Petrol (vehicle expenses) This cheque $117 Cheque number 357 Pete the Painter

INTERNET TRANSFER: PAYMENT. 012 DATE: 13/3/21 FROM: PETE THE PAINTER A/C: P98332 TO: BAZZA A/C: 776589 FOR: WAGES EXPENSES TOTAL: $810 Bank of Dandenong Date: 22/3/21 To: City Sotware For: Accounting packageoffice expenses This cheque $350 Cheque number 358 Pete the Painter

INTERNET TRANSFER: PAYMENT. 013 DATE: 19/3/21 FROM: PETE THE PAINTER A/C: P98332 TO: PETE A/C: 55743 FOR: DRAWINGS TOTAL: $3000

Pete the Painter Receipt # 127

Date: 23/3/21 From: Customers Takings For: $: $700.00 Thank you

INTERNET TRANSFER: PAYMENT. 014 DATE: 27/3/21 FROM: PETE THE PAINTER A/C: P98332 TO: ANZ BANK: A/C: ANZ99811278 FOR: LOAN REPAYMENT $500, INTEREST $70 TOTAL: $570

Bank of Dandenong Date: 28/3/21 To: Paint Spot For: Spray painting machine (equipment) Asset. This cheque $3000 Cheque number 359 Pete the Painter

Bank of Dandenong Date: 29/3/21 To: Dulux For: Paint (asset)

MEMO #29: 31/3/21 Stocktake of paint. $600.00

This cheque $160 Cheque number 360 Pete the Painter

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VCE Accounting Unit 1

Journals for March:

Cash Receipts Journal (CRJ)
CFS IS BS X calc. rev. X X calc. X calc. X

Date

Details

Doc.

Bank

Takings

Cash Capital

Loans

Interest Sundry Revenue

Total the cash journals at the end of March.

Cash Payments Journal (CPJ)

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X calc. Stock at end exp. X

Date

Details

Doc.

Bank

Wages

Teleph. Drawings Exps.

Loan

Veh. Interest Exps.

Paint

Office Exps.

Sundry

General Journal (GJ) Date Details

Calculations/schedules for March:

Paint expense schedule at 31/3/21 $ Stock of paint at start (Bal. Sheet) Add purchases of new paint (CPJ) Sub-total Less stocktake of paint (GJ) Paint expense for period

Loan schedule at 31/3/21 $ Balance at start (Bal. Sheet) Add new loans (CRJ) Sub-total Less loan payments (CPJ) Balance at end Equipment schedule at 31/3/21 $ Balance at start (Bal. Sheet) Add new equipment (CPJ) Balance at end

Accounting reports for March 2021: 1. Cash Flow Statement:

Pete the Painter: Cash Flow Statement for March 2021 Cash Receipts $ $

2. Income Statement:

See the top section of the cash journals to help you identify the revenue and expenses. Pete the Painter: Income Statement for March 2021 Revenue Less Expenses Paint $ $

Cash Payments Purchases of paint

Change in cash + cash bal. at start = cash bal. at end 1. The accounting process.

Dont forget the paint expense from the schedule!

Net Profit/loss

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3. Balance Sheet:

Assets

Pete the Painter: Balance Sheet at 31/3/21 $ Equities $ Liabilities ANZ loan BANK OVERDRAFT Owners Equity Capital, Pete

Total assets

Total equities

Accounting Equation:
Consider the following transactions of Pete the Painter and the impact on the accounting equation.

1. Owner contributed vehicle to business, $20000. ASSETS

LIABILITIES

OWNERS EQUITY

2. Paid rent $4000. ASSETS

LIABILITIES

OWNERS EQUITY

3. Bought computer $4000 cash. ASSETS

LIABILITIES

OWNERS EQUITY

4. Cash takings, $3500. ASSETS

LIABILITIES

OWNERS EQUITY

5. Borrowed $2000 from Commonwealth Bank. ASSETS

LIABILITIES

OWNERS EQUITY

6. Owner injected $7000 cash into the business. ASSETS

LIABILITIES

OWNERS EQUITY

7. Repaid $2000 to the Commonwealth Bank. ASSETS

LIABILITIES

OWNERS EQUITY

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Supplies include fertilizers, chemicals, petrol for mower etc.

Haleys Gardening: Balance Sheet at 30/6/19 Assets $ Equities $ Stock of supplies 4900 Liabilities Truck 26000 Vic Finance Co. 11000 Office assets 15000 Bank overdraft 3000 Mower 3800 Owners Equity Capital, Haley 35700 Total assets 49700 Total equities 49700

Cash Receipts Journal (CRJ)

CFS IS BS X calc. rev. X X calc. X calc. X

Date Details 31/7 TOTALS

Doc.

Bank 16900

Takings 6900

Cash Capital 7000

Vic Loan 3000

Interest Sundry Revenue

Gardening is Haleys revenue activity which she calls Takings.

Cash Payments Journal (CPJ)

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X calc. Stock at end exp. X

Date Details 31/7 TOTALS

Doc.

Bank 6765

Advertising Expenses 450

Phone Loan Veh. Drawings Interest Supplies costs Repay. Exps. 140 1600 390 75 370 790

Office Exps. 250

Sundry 2700

Sundry, $2700, is for a new trailer, asset. General Journal (GJ) Date 31/7 Details Owner took some office assets for private use, memo #55. Stocktake of supplies, memo#56 $ 600 3800
Capital schedule at 31/7/19 $ Balance at start (Bal.Sheet) Add new capital (CRJ) Balance at end Drawings schedule at 31/7/19 $ Cash drawings + other drawings = total drawings Office assets schedule at 31/7/19 $ Balance at start + change office assets Balance at end

Transactions for July have been recorded and totalled above. Complete the following schedules and the accounting reports for July 2019. Supplies expense schedule at 31/7/19 $ Stock at start Add purchases Sub-total Less stocktake Supplies expense Loan schedule at 31/7/19 $ Balance at start Add new loans Sub-total Less loan payments Balance at end

Haleys Gardening: Cash Flow Statement for July 2019 Cash Receipts $ $

Haleys Gardening: Income Statement for July 2019 Revenue Less expenses $ $

Haleys Gardening: Balance Sheet at 31/7/19 Assets $ $

Cash Payments Total Assets Equities Liabilities Net Profit/loss Owners Equity Change in cash Cash bal. at start Cash bal. at end 1. The accounting process. Note the different presentation of the Balance Sheet.

Total Equities VCE Accounting Unit 1

21

Review of the elements

1. A simple definition of an asset would be RESOURCES UNDER THE CONTROL OF THE BUSINESS WHICH WILL PROVIDE FUTURE ECONOMIC BENEFITS. 2. List 5 examples of assets. ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ 3. A simple definition of a liability would be ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ 4. Three examples of liabilities are ... ____________________________________________ ____________________________________________ ____________________________________________ 5. An asset which can sometimes become a liability is ____________________________________________ 6. A simple definition of owners equity would be ASSETS LESS LIABILITIES. THE OWNERS INTEREST, CLAIM OR OWNERSHIP IN THE ASSETS OF THE BUSINESS. 7. A simple explanation of equities would be ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ 8. When does the value of assets = owners equity? ____________________________________________ ____________________________________________ ____________________________________________ 9. List four factors that can change the value of owners equity. (i) ____________________________________ (ii) ____________________________________ (iii) ___________________________________ (iv) ___________________________________ 10. The owner of a business took $5000 for private use. How would this impact on the accounting equation? ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________

A L

OE

R E

11. A simple definition of revenue would be ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ 12. A simple definition of expenses would be ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ 13. A business had cash revenue of $2000. Explain how this would impact on the accounting equation. ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ 14. At 1/1/17 owners equity was $30000. During January revenue was $19000, drawings $3000, and expenses $12000. The value of owners equity at 31/1/17 would be ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ 15. At 1/7/20 owners equity was $60000. During July revenue was $20000, capital contribution $4000, expenses $15000 and drawings $9000. The value of owners equity at 31/7/20 would be ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ 16. A business borrowed $5000 from the ANZ Bank. How would this impact on the accounting equation? ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ 17. Explain the term reporting period. ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ 18. This type of transaction works to decrease owners equity but excludes drawings. ____________________________________________ 19. This type of transaction works to increase owners equity but excludes capital contribution. ____________________________________________ 20. Three journals are (i) ____________________________ (ii) ____________________________ (iii) ____________________________

1. The accounting process.

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VCE Accounting Unit 1

This type of exercise requires you to prepare the 3 accounting reports without the journals! Kim is a hairdresser and her Balance Sheet is provided at 1/6/15: Kims Hairdressing Services: Balance Sheet at 1/6/15 Assets $ Equities $ Bank 10000 AMP Loan 8000 Stock of supplies 3000 Capital, Kim 65000 Other assets 60000 Total assets 73000 Total equities 73000 The following transactions occurred during June 2015: Takings, $44000. Capital contribution of cash $5000. Purchases of more supplies $700. Other expenses $22000. Paid $2000 off the AMP loan principal. Stocktake of supplies at 30/6 = $400. Prepare the following 3 reports. Change in cash Add balance at start Equals balance at end Hairdressing is Kims revenue activity which she calls Takings.

Kims Hairdressing Services Cash Flow Statement for June 2015 Receipts $ $

Payments

Kims Hairdressing Services Income Statement for June 2015 Revenue $

Total revenue Less Expenses

Kims Hairdressing Services: Balance Sheet at 30/6/15 Assets $ Equities $

Total expenses Profit

Working space if required:

1. The accounting process.

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VCE Accounting Unit 1

From the following list of elements, prepare the Accounting Reports for the 3 months ending 31/3/16.

Complete the classification column using A, L, OE, OE, R or E. Pennys Podiatry: List of elements for the 3 months ending 31/3/16 Item Bank Stock of materials at 1/1/16 Vehicle Office assets Premises AMP Loan Capital, Penny Takings Wages Office expenses Purchases of materials Advertising Drawings $ 31400 1000 25000 40000 90000 25000 136000 60000 12000 4800 6000 1800 9000 Change in cash + cash bal. at start = cash bal. at end Pennys Podiatry: Income Statement for March quarter 2016 Revenue $ $ Do schedule Cash Payments Pennys Podiatry: Cash Flow Statement for March quarter 2016 Cash Receipts $ $ Classification

Calculations:

A stocktake of materials at 31/3/16 = $2000.

Cash data for March quarter 2016: Cash balance at 1/1/16 = $5000 Cash receipts: Takings $60000. Cash payments: Wages $12000, office expenses $4800, materials $6000, advertising $1800 and drawings $9000.

Less expenses

NET PROFIT Pennys Podiatry: Balance Sheet at 31/3/16 $ Equities $ Liabilities

Assets

Owners Equity Capital, Penny

Total assets

Total equities

Profit increases owners equity and a loss decreases owners equity. Alternatively, revenue increases owners equity and expenses decrease owners equity.

1. The accounting process.

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VCE Accounting Unit 1

From the following list of elements, prepare the Accounting Reports for the 6 months ending 30/6/19.

Complete the classification column using A, L, OE, OE, R or E. Hotwire Electrics: List of elements for the 6 months ending 30/6/19 Item Tools and equipment Stock of supplies at 1/1/19 Truck Furniture Computer Bank overdraft ANZ Loan Capital Takings Office expenses Purchases of supplies Rent Advertising Drawings $ 9000 2800 34000 6400 3200 (38600) 18800 20700 44000 7200 14100 12000 3400 30000 Change in cash + cash bal. at start = cash bal. at end Hotwire Electrics: Income Statement for 6 months ending 30/6/19. Revenue $ $ Do schedule Cash Payments Hotwire Electrics: Cash Flow Statement for 6 months ending 30/6/19 Cash Receipts $ $ Classification Calculations:

A stocktake of supplies at 30/6/19 = $6200 Cash data for 6 months ending 30/6/19: Cash balance at 1/1/19 = ($11700) overdraft Cash receipts: Takings $44000 Cash payments: Supplies $14100, office expenses $7200, rent $12000, advertising $3400, drawings $30000 and ANZ loan $4200.

Less expenses

NET PROFIT Hotwire Electrics: Balance Sheet at 30/6/19 $ Equities $ Liabilities

Assets

Owners Equity Capital

Total assets

Total equities

Repeating that profit increases owners equity and a loss decreases owners equity. Alternatively, revenue increases owners equity and expenses decrease owners equity.

1. The accounting process.

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VCE Accounting Unit 1

Indicate the impact on the accounting equation for the following transactions:

1. Owner contributed $30000 cash to business.

ASSETS

LIABILITIES

OWNERS EQUITY

2. Business bought a computer for $4000 cash.

ASSETS

LIABILITIES

OWNERS EQUITY

3. Business borrowed $10000 from NAB Bank.

ASSETS

LIABILITIES

OWNERS EQUITY

4. Owner took $5000 cash for private use.

ASSETS

LIABILITIES

OWNERS EQUITY

5.

Cash takings $17000 for services provided.

ASSETS

LIABILITIES

OWNERS EQUITY

6.

Paid $2000 for wages.

ASSETS

LIABILITIES

OWNERS EQUITY

7.

Paid $4000 to the NAB Bank to reduce loan.

ASSETS

LIABILITIES

OWNERS EQUITY

8.

Paid $7000 for new furniture.

ASSETS

LIABILITIES

OWNERS EQUITY

1. The accounting process.

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VCE Accounting Unit 1

Questions ...
1. Which one of the following is the best description of an asset? A. Future obligations of the business. B. Resources under the control of the business which will provide future economic benefits. C. Causes an increase in owners equity. D. Causes a decrease in owners equity. 2. Which one of the following is the best description of a liability? A. Future obligations of the business. B. Resources under the control of the business which will provide future economic benefits. C. Causes an increase in owners equity. D. Causes a decrease in owners equity. 3. Which one of the following is the best description of owners equity? A. Future obligations of the business. B. Resources under the control of the business which will provide future economic benefits. C. Liabilities less assets. D. Assets less liabilities. 4. Revenue could be defined as .. A. Future obligations of the business. B. Resources under the control of the business which will provide future economic benefits. C. Transactions that cause an increase in owners equity excluding capital contributions. D. Transactions that cause a decrease in owners equity excluding drawings. 5. Expenses could be defined as A. Future obligations of the business. B. Resources under the control of the business which will provide future economic benefits. C. Transactions that cause an increase in owners equity excluding capital contributions. D. Transactions that cause a decrease in owners equity excluding drawings. 6. The reporting period is best described as A. B. C. D. Period of time over which assets are determined. Period of time over which profit is determined. Period of time over which liabilities are determined. 1/7/XX to 30/6/XX 14. The owners equity section of the Balance Sheet can report A. B. C. D. Capital plus revenue less drawings. Assets plus profit less drawings. Capital plus profit less drawings. Assets less loss less drawings. 9. Transactions are evidenced by A. B. C. D. Cash Flow Statement. Income Statement. Documents. Journals.

10. An item will usually get its own column in the journals if A. B. C. D. It has a high dollar value. It is a frequent transaction. It is an infrequent transaction. There is enough room.

11. The report that provides stakeholders with detailed information about the businesses cash resources A. B. C. D. Balance sheet Cash receipts journal. Cash flow statement. Income statement.

12. Owners equity can change due to A. B. C. D. Revenue. Expenses. Drawings. All of the above.

13. If drawings exceeds profit for a reporting period, owners equity will A. B. C. D. Increase. Decrease. No impact. Impact cannot be determined from this data.

15. The most likely sequence for a simple accounting process is A. B. C. D. Documents, journals, reports. Journals, documents, reports. Reports, documents, journals. Documents, reports, journals.

7. Equities are best described as A. B. C. D. Assets and liabilities. Assets less liabilities. Liabilities and owners equity. Assets less owners equity.

16. Information in the accounting reports is said to be more reliable if A. B. C. D. The The The The Income Statement reports a profit. reports are supported by documentary evidence. reports are prepared frequently. Balance Sheet balances.

8. In a Balance Sheet, the following balance 17. The accounting equation shows A. B. C. D. Assets and liabilities. Assets and equities. Assets and revenues. Equities and liabilities. A. B. C. D. Liabilities equals assets plus owners equity. Assets equal liabilities plus owners equity. Owners equity less liabilities equals assets. Assets plus liabilities equals owners equity. VCE Accounting Unit 1

1. The accounting process.

27

Find the errors!

Cash Receipts Takings Capital LoanWestpac Cash Payments Wages Office expenses Advertising Drawings Computer Change in cash + cash bal. at start = cash bal. at end

40000 5000 3000 12000 7000 3000 5000 3600

48000

1. Consider this report or statement for Choice Tree-Loppers for the month of June 2017. Identify two errors. (i) ____________________________________________________ _______________________________________________________ _______________________________________________________

30600 17400 (2000) 15400

(ii) ___________________________________________________ _______________________________________________________ _______________________________________________________

Income Statement at 30/6/17. Revenue Takings Capital Less payments Wages Office expenses Advertising Drawings Computer Net Profit 40000 5000 12000 7000 3000 5000 3600

2. Consider this Income Statement for Choice Tree-Loppers for the month of June 2017. Identify five errors. 45000 (i) ___________________________________________________ _______________________________________________________ _______________________________________________________ (ii) ___________________________________________________ _______________________________________________________ _______________________________________________________ (iii) ___________________________________________________ _______________________________________________________ _______________________________________________________ (iv) ___________________________________________________ _______________________________________________________ _______________________________________________________ (v) ___________________________________________________ _______________________________________________________ _______________________________________________________

30600 14400

3. Consider this Balance Sheet and then identify 5 errors.

Choice Tree-Loppers: Balance Sheet for June 2017 Assets $ Equities $ $ LoanWestpac 3000 Liabilities Computer 3600 Bank 15400 Vehicle 50000 Owners Equity Tools and equipt. 20000 Capital 70000 net profit 14400 + drawings 5000 60600 Total assets 76600 Total equities 76000

(i) _________________________________________________________________________________________ _____________________________________________________________________________________________ (ii) _________________________________________________________________________________________ _____________________________________________________________________________________________ (iii) _________________________________________________________________________________________ _____________________________________________________________________________________________ (iv) ________________________________________________________________________________________ _____________________________________________________________________________________________ (v) _________________________________________________________________________________________ _____________________________________________________________________________________________ 1. The accounting process.

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VCE Accounting Unit 1

1. The accounting process.

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VCE Accounting Unit 1

Summary exercise

Complete the records and reports for JetFast Couriers for September 2019.

JetFast Couriers: Balance Sheet at 31/8/19 Assets $ Equities $ Bank 18000 Liabilities Vehicles 94000 Loan: ANZ 9000 Office assets 37000 Owners Equity Stock of supplies 1000 Capital, Harry 141000 Total assets 150000 Total equities 150000

JetFast Couriers Receipt # 88

Date: 1/9/19 From: Customers Takings For: $: $1500.00 Thank you

Bank of Geelong Date: 2/9/19 To: For: Rent expense

INTERNET TRANSFER: PAYMENT. 345 DATE: 3/9/19 FROM: JETFAST COURIERS A/C: J8876 TO: HARRY A/C: H665 FOR: DRAWINGS TOTAL: $2500

This cheque $4500 Cheque number 556 JetFast Couriers

JetFast Couriers Receipt # 89

Date: 5/9/19 From: Customers Takings For: $: $4200.00 Thank you Bank of Geelong Date: 9/9/19 To: BusinessWorks For: Supplies

MEMO #49: 4/9/19 Owner contributed a personal computer to the business, $2000. Record as office assets.

JetFast Couriers Receipt # 90

Date: 7/9/19 From: Customers Takings For: $: $2700.00 Thank you INTERNET TRANSFER: PAYMENT. 346 DATE: 8/9/19 FROM: JETFAST COURIERS A/C: J8876 TO: ANZ BANK A/C: A9987 FOR: REPAYMENT INC. $400 INTEREST TOTAL: $2400

This cheque $670 Cheque number 557 JetFast Couriers Bank of Geelong Date: 12/9/19 To: Netspace For: Internet fees

INTERNET TRANSFER: PAYMENT. 347 DATE: 10/9/19 FROM: JETFAST COURIERS A/C: J8876 TO: JEN HOANG A/C: H8811 FOR: WAGES TOTAL: $1200

JetFast Couriers Receipt # 91

Date: 11/9/19 From: Customers Takings For: $: $3800.00 Thank you Bank of Geelong Date: 16/9/19 To: HiDesign For: Advertising

JetFast Couriers Receipt # 92

Date: 13/9/19 From: Customers Takings For: $: $900.00 Thank you

Bank of Geelong Date: 14/9/19 To: Geelong Auto For: Vehicle expenses

This cheque $480 Cheque number 558 JetFast Couriers

This cheque $730 Cheque number 559 JetFast Couriers

This cheque $590 Cheque number 560 JetFast Couriers VCE Accounting Unit 1

1. The accounting process.

30

JetFast Couriers Receipt # 93

Date: 18/9/19 From: Customers Takings For: $: $1400.00 Thank you Bank of Geelong Date: 22/9/19 To: BusinessWorks For: Supplies

INTERNET TRANSFER: PAYMENT. 348 DATE: 19/9/19 FROM: JETFAST COURIERS A/C: J8876 TO: HARRY A/C: H665 FOR: DRAWINGS TOTAL: $2000

JetFast Couriers Receipt # 94

Date: 20/9/19 From: Customers Takings For: $: $2300.00 Thank you

JetFast Couriers Receipt # 95

Date: 24/9/19 From: Customers Takings For: $: $800.00 Thank you

This cheque $290 Cheque number 561 JetFast Couriers Bank of Geelong Date: 29/9/19 To: Trade Vans For: New Vehicle

INTERNET TRANSFER: RECEIPT. R443 DATE: 27/9/19 FROM: ANZ A/C: A9987 TO: JETFAST COURIERS A/C: J8876 FOR: INCREASE IN LOAN TOTAL: $6000

JetFast Couriers Receipt # 96

Date: 30/9/19 From: Customers Takings For: $: $3600.00 Thank you

MEMO #50: 30/9/19 Stocktake of supplies. $1200.

This cheque $22000 Cheque number 562 JetFast Couriers Cash Receipts Journal (CRJ)
CFS IS BS X calc. rev. X

X calc.

X calc.

Date

Details

Doc.

Bank

Takings

Cash Capital

Loans

Sundry

Add up the columns at the end of September.

Cash Payments Journal (CPJ)

CFS IS BS X calc. exp. X exp. X X X calc. exp. X exp. X exp. at end exp. X

Date

Details

Doc.

Bank

Wages

Internet Drawings Exps.

Loan

Interest Rent

Supplies

Office Exps.

Sundry

General Journal (GJ) Date Details

1. The accounting process.

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VCE Accounting Unit 1

Calculations:

JetFast Couriers: Cash Flow Statement for September 2019. Cash Receipts $ $

JetFast Couriers: Income Statement for September 2019. Revenue $ $

Less expenses Cash Payments

Change in cash + cash bal. at start = cash bal. at end

Assets

JetFast Couriers: Balance Sheet at 30/9/19 $ Equities $ Liabilities

Owners Equity Capital

Total assets

Total equities

1. The accounting process.

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VCE Accounting Unit 1