Workshop 2 (Questions) PDF

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1102AFE ACCOUNTING FOR DECISION MAKING Trimester 1 2020

WORKSHOP 2 – ACCOUNTING INFORMATION

Question 1 - Complete the table below. Item Cash at bank Office building Suppliers Accounts receivable Loan Drawings Capital Stationery Interest revenue Wages expense Inventory Fees revenue Office furniture Stationery expense Motor vehicles

Classification of item (A, L, OE, R, E)

Income Statement (IS) or Balance Sheet (BS)

Question 2 – Calculate the missing figures: Assets 100,000 (b) 95,000 8,300

=

Liabilities 20,000 30,000 (c) 5,500

+

Owner’s Equity (a) 67,000 20,000 (d)

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1102AFE ACCOUNTING FOR DECISION MAKING Trimester 1 2020

Question 3 – Identify whether these transactions are/are not business transactions. Explain (they are all independent transactions and from various businesses). Item a) Jack, a sole trader, meets with his bank and negotiates a loan to provide additional finance to his business. b) Jack, a sole trader, purchases inventory for his store using EFTPOS. c) Challis Ltd signs an employment contract for a new director two months before they actually start. d) Butler & Co receives an invoice for internet expenses. e) Butler & Co pays the internet expenses outstanding. f) A partner from Dickson Associates permanently withdraws a laptop from the business for home use. g) Jack, a sole trader, has lunch with a potential client and discusses a discount incentive scheme for future business between the two parties. h) The partner from Dickson Associates uses personal funds for a new home theatre system.

Y/N

Explanation

Question 4 – Effect of business transactions in the accounting equation June transactions: Identify which accounts are affected, how they are affected (increase or decrease), and the element(s) of the financial statement of these accounts (A, L, OE, R, E). A = L + OE + R - E

Transaction Paid office rent $1,500 for June (the current month). Withdrew $1000 for personal use.

Account

Account

Sent an invoice to a client $3,500 for work performed in the current month. Advertised the business in the local newspaper in June for $500 payable on July. Received cash $800 in June (the current month) from sales to customers in May. Paid $1,200 insurance for the next 12 months

Question 5 - Multiple choice questions 1. The duality concept requires that each transaction must be recorded:

a) b) c) d) e)

on both sides of the accounting equation. in both the income statement and balance sheet. in at least two different accounts. first as an expense then as equity. in both revenue and cost of sales accounts. Page 2 of 4

1102AFE ACCOUNTING FOR DECISION MAKING Trimester 1 2020

2. A characteristic essential to all assets is:

a) b) c) d) e)

a result of a past event. a resource controlled by the entity. a present economic resource. all of the above. none of the above.

3. An owner contributes $50,000 cash to expand the business. This transaction would:

a) increase income and cash accounts by $50,000. b) increase income and retained earnings accounts by $50,000. c) increase capital and cash accounts by $50,000. d) Increase capital and property, plant and equipment accounts by $50,000. e) none of the above.

4. What is the effect on the accounting equation of the following transaction in October 2019: “Received $1,200 from a customer for services to be provided in November 2019”? a) Increase assets and increase owners’ equity. b) Increase assets and decrease liabilities. c) Increase one asset account and decrease another asset account. d) Decrease assets and increase owners’ equity. e) Increase assets and increase liabilities.

5. Trevor Supplies paid 12-month insurance policy $2,400 in August. The insurance policy started on 1 August. By the end of the financial year (31 December), How much would be recorded as insurance expense?

a) $2,400. b) $200. c) $0. d) $1,400. e) $1,000.

6. On 13th March a customer paid $2,000 to Engineering Consultants for services to be provided in May. Engineering Consultants started the job at the beginning of May and finished on 31 st May. In which month should the service revenue be recorded?

a) March b) April c) May Page 3 of 4

1102AFE ACCOUNTING FOR DECISION MAKING Trimester 1 2020

d) Any 7. What account increases and what account decreases as a result of the following transaction in October 2019: “Paid $1,200 rent for the following 6 months”? a) Rent expense account increases and cash account decreases by $1,200. b) Rent expense and retained earnings accounts decrease by $1,200. c) Rent expense and rent payable accounts increase by $1,200. d) Rent payable and cash accounts decrease by $1,200. e) Prepaid rent account increases and cash account decreases by $1,200.

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