Lect 3 - fgjfgj PDF

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Lecture 3 Accounting Liabilities of 1/7/15 220 Retained profits of 30/6/16300 Assets of 30/6/16790

Transactions   

Events that affect the operations or finances of an organisation at the time Accounting systems record transactions Recorded from perspective of accounting entity

Transaction analysis   

Transaction analysis involves an examination of each business transaction with the aim of understanding its effect on the accounting equation (i.e. A=L+SE) Eg Borrow $10 from bank this month, liability increase assets increase After a transaction, equation is in balance.

Double Entry Accounting Golden Rule: Accounting equation must always balance  Debits=credits these describe changes in accounts

Type Normal Assets Debit Liabilities Credit Shareholders equity Credit Revenue Credit Expenses Debit REMEMBER DC AE LER

Increase Debit Credit Credit Credit Debit

Decrease Credit Debit Debit Debit Credit

https://www.youtube.com/watch?v=0--jJn6zqfg Journal Entry  

Shorthand version of transaction analysis Rely on rules of debit and credit debit=credits

Eg Machinery Purchased for $10000 Dr Machinery

10 000 (+A)

Cr Cash

10 000 (-A)

Dividents as Journal Entries 



Dividends are declared o Dr retained profits 20 000 (-SE) o Cr Dividends payable 20 000 (+L) Dividends are paid o Dr Divdends payable 20 000 (-L) o Cr Cash 20 000 (-A)

Depreciation as Journal Entries  

Motor vehicle purchased with $10 000 cash is useful over 4 years Yr 1  Dr Motor Vehicle 10 000 (+A), Cr Cash 10 000 (-A) Dr Depreciation Expense 2500 (+E), Cr Accumulated depreciation 2500 (-A)

Balance Sheet

Income statement

ASSET Motor Vehicle

10 000

Accumulated Depreciation -2500 =7500

Depreciation expense

2500

Write these transactions as Journal Entries 1. Issued shares for $300 000 cash Dr Cash 300 000 (+A), Cr share capital 300 000 (+SE) 2. Catering services provided for an office function; billed customer $2500 Dr Accounts receivable 2500 (+A), Cr Revenue 2500 (+R) 3. Customer paid $2500 they owed on their account Dr Cash 2500 (+A), Cr Accounts receivable 2500 (-A) 4. Cash sales of $30 000; Cost of goods sold =$12 000 Dr Cash 30 000 (+A), Cr Revenue 30 000 (+R) Dr COGS 12 000 (+E) Cr Inventory 12 000 (-A) 5. Credit sales of $40 000; Cost of goods sold = $16 000 Dr Accounts receivable 40 000 (+A), Cr Expense 6. $20 000 wages paid for first 2 weeks of April 7. At end of month: $18 000 wages is owing for last 2 weeks of the month to be paid on May 1.

Tutorial Q DQ 3) Why does an increase in revenue result in increase in shareholders’ equity? What other part of A=L+OE is likely to be affected? Shareholders equity contains shareholders capital and retained profits. Retained profits is opening balance of retained profits+ revenue- expenses- dividends declared, therefore an increase in revenue increases retained profits and ultimately SE. It is likely also to increase assets accounts receivable, cash increase 6) Which accounts normally have a debit balance and which credit balance. Assets, Expenses are normally debits while Liabilities, owners equity and revenue are normally credits 9) List some large expenses you would expect to see on I/S for A) Woolworths  Cost of goods sold, Inventory holding costs, Transportation B) Commonwealth Bank Interest payable, C) Red Cross  Advertisement expenses D) Australian Navy  Training expenses Problems 3.12) Transaction analysis- revenue and expenses Done in Book

3.15) Normal Balances of Accounts Accounts receivable Debit Accounts payablecredit Inventorydebit Provision for employee entitlementsDebit CREDIT Taxes Payable credit

Retained profitsCredit Share Capitalcredit Investmentsincrease in assetsdebit Plant and equipmentdebit Accrued expensesaccounts payable increasecredit Prepaymentsdecrease in liabilitiesdebit 3.2) Prepare Journal Entries Done in book.

Journal Entries 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Dr account receivable 200 000 (+A) Cr Revenue 200 000 (+R) Dr Cash 6000 (+A) Cr Revenue 6000 (+R) Dr Cash 150 000 (+A) Cr Accounts receivable 150 000 (-A) Dr Inventory 70 000 (+A) Cr Accounts payable 70 000 (+L) Dr Accounts payable 50 000 (-L) Cr Cash 50 000 (-A) Dr COGS 80 000 (+E) Cr Inventory 80 000 (-A) Dr Wages expense 90 000 (+E), Cr Wages payable 90 000 (+L) Dr Wages 22 000 (+E), Cr Cash 22 000 (-A) Dr Tax payable 6000 (-L), Cr Cash 6000 (-A) Dr Retained Profits 20 000 (-SE), Cr Cash 20 000 (-A)

3.22)Retained Profits

Net Profit= 23570+ 2111480-1703470-145 210=$286370 Note for Retained profit: Opening retained profit balance (354290)+ net profit (286370)-Dividends declared (87 000)=$553660...