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VCE Accounting Unit 31. Pre double-entry
Clean Cut Mowers. Balance Sheet at 30/6/18
Assets $ Equities $
Bank 40000 Owners equity
Stock control 20000 Capital, Bob 175000
Office assets 25000
Premises 90000
Total assets 175000 Total equities 175000
The accounting reports, like the Balance Sheet, are prepared for stakeholders. Stakeholdersare individuals or businesses that are interested in the performance of the business. Examplesof stakeholders include the owner, manager, potential owner, people/businesses who are owedmoney by the business, employees, Australian Taxation Office (ATO) etc.
Clean Cut Mowers buy and sell ride-on mowers. Clean Cut Mowers is a tradingbusiness which buys and sells mowers on a cash basis. Selling the mowers is thebusinesss revenue activity. The business is owned by one person, Bob, thusClean Cut Mowers is a sole-trader or sole-proprietorship. On 30/6/18. CleanCut Mowers had the following Balance Sheet.
STOCK CARD: Ride on mower
2018 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
30/6 Balance 10 2000 20000
7/7 CHQ 56 3 2000 6000 13 2000 26000
8/7 REC 43 2 2000 4000 11 2000 22000
28/7 REC 44 3 2000 6000 8 2000 16000
Stock card
Equities refers to who has an interest or ownership in the assets.At 30/6/18, Bob, the owner, has 100% interest or ownership in theassets. Bobs ownership is called owners equity or capital.
Assets and equitiesbalance in a Balance Sheet.
Ride on mowers is the stock that is traded by Clean Cut Mowers. Detailed information about stock isrecorded in the stock card: see below. Note that the stock balance at 30/6/18 is $20000 as per the Balance
Sheet of the same date: see above.
On 30/6/18 the business has 10 ride-on mowers with a unit cost of $2000.The IN column of the stock
card records all movements
of stock into the business.The most common exampleof an IN transaction would bethe purchase of stock.
The OUT column of thestock card records all
movements of stock out ofthe business. The mostcommon example of anOUT transaction would bethe sale of stock.
The BALANCE column changesafter each stock transaction andrepresents the value of stock onhand at any point in time.
Balance Sheet
Assets are resources under the control ofthe business, as a result of past events,which will provide future economic benefits.
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VCE Accounting Unit 31. Pre double-entry
Clean Cut Mowers. UnclassifiedCash Flow Statement for July 2018.
Cash Receipts $ $
Sales 20000
Cash Payments
Stock purchases 6000
Office expenses 900 6900
Change in cash 13100+ Cash at start 40000
= Cash at end 53100
Cash Receipts Journal (CRJ)CFS X
IS exp. rev. X XBS calc. X X calc. calc.
Date Details Doc. BankCost ofSales
Sales SundryLoan Capital
8/7 SALES 43 8000 4000 8000
28/7 SALES 44 12000 6000 12000
31/7 Totals 20000 10000 20000
Cash Payments Journal (CPJ)CFS
IS exp. X X exp. X exp. exp. ?
BS calc. X calc. X calc. X X ?
Date Details Doc. BankInternet
Exps.Drawings Loan Interest Stock Cleaning
OfficeExps.
Sundry
7/7 STOCK 56 6000 600017/7 OFFICE EXPS. 57 900 900
31/7 Totals 6900 6000 900
July transactions The following transactions, evidenced bydocuments, occurred during July 2018.
Bank of Melton
Date: 7/7/18
To: Just Mowers
For: 3 Mowers at $2000
each.
This cheque $6000Cheque number 56
Clean Cut Mowers
Clean Cut MowersReceipt # 43
Date: 8/7/18
From:Cash Customers
For:Sale of 2 mowers
at $4000 each.
$: $8000.00
Thank you
Bank of MeltonDate: 17/7/18
To: OfficeWorks
For: Office expenses.
(Stationery etc.)
This cheque $900Cheque number 57
Clean Cut Mowers
Clean Cut MowersReceipt # 44
Date: 28/7/18
From:Cash Customers
For: Sale of 3 mowersat $4000 each.
$: $12000.00
Thank you
Cheque #56 is for thecash purchase of moretrading stock.
Receipt #43 is for thecash sale of trading stock.Cost of sales = $4000.
Cheque #57 is for thecash payment of officeexpenses.
Receipt #44 is for thecash sale of trading stock.Cost of sales = $6000.
Cash Journals
ReportsClean Cut Mowers.
Income Statement for July 2018.
Revenue $
Sales 20000
Less Cost of Goods Sold
Cost of sales 10000
Gross profit 10000
Less other expenses
Office expenses 900
Net profit 9100
Clean Cut Mowers. Balance Sheet at 31/7/18Assets $ Equities $
Bank 53100 Owners equity
Stock control 16000 Capital, Bob 175000Office assets 25000 Add net profit 9100
Premises 90000
Total assets 184100 Total equities 184100
Profit is revenue earned less expenses incurred overthe reporting period (July) and this data is reported inthe Income Statement. The revenue activity for this
business is sales. Expenses are incurred to earn revenue.In July, the expenses are cost of sales and officeexpenses. Revenue and expense data is sourced fromthe cash journals and/or the Cash Flow Statement.
The Cash Flow Statement reports cash receipts andcash payments over the reporting period and showsthe cash balance at the end of the reporting period.The cash flow data is sourced from the cash journals.
Net profit belongs to the owner so itis added to Capital in the new Balanceat the end of the reporting period.
The data for the Balance Sheet at the end of thereporting period comes from the originalBalance but takes into account any changes toassets, (such as Bank and Stock) and equities.
Total the cashjournals at the
end of July.
Receipts are recorded inthe Cash Receipts Journaland cheques in the Cash
Payments Journal.
FromBalanceSheet.
Fromstockcards
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VCE Accounting Unit 31. Pre double-entry
Clean Cut Mowers. Balance Sheet at 1/8/18
Assets $ Equities $
Bank 53100 Owners equity
Stock control 16000 Capital, Bob 184100
Office assets 25000
Premises 90000
Total assets 184100 Total equities 184100
Balance Sheet
STOCK CARD: Ride on mower
2018 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/8 Balance 8 2000 16000
5/8 CHQ 58 4 2000 8000 12 2000 24000
11/8 REC 45 3 2000 6000 9 2000 18000
28/8 REC 46 5 2000 10000 4 2000 8000
Stock card
August transactions The following transactions, evidenced bydocuments, occurred during August 2018.
Bank of MeltonDate: 5/8/18
To: Just Mowers
For: 4 Mowers at $2000
each.This cheque $8000
Cheque number 58
Clean Cut Mowers
Clean Cut MowersReceipt # 45
Date: 11/8/18
From:Cash Customers
For: Sale of 3 mowersat $4000 each.
$: $12000.00
Thank you
Bank of Melton
Date: 18/8/18
To: Netspace
For: Internet expensesThis cheque $500
Cheque number 59
Clean Cut Mowers
Clean Cut MowersReceipt # 46
Date: 28/8/18
From:Cash Customers
For:Sale of 5 mowers
at $4000 each.
$: $20000.00
Thank you
Cheque #58 is for thecash purchase of moretrading stock.
Receipt #45 is for the
cash sale of trading stock.Cost of sales = $6000.
Cheque #59 is for thecash payment of internetexpenses.
Receipt #46 is for thecash sale of trading stock.Cost of sales = $10000.
Cash Receipts Journal (CRJ)CFS X
IS exp. rev. X X
BS calc. X X calc. calc.
Date Details Doc. BankCost ofSales
Sales SundryLoan Capital
11/8 SALES 45 12000 6000 12000
28/8 SALES 46 20000 10000 20000
31/8 Totals 32000 16000 32000
Cash Payments Journal (CPJ)CFS
IS exp. X X exp. X exp. exp. ?
BS calc. X calc. X calc. X X ?
Date Details Doc. Bank InternetExps.
Drawings Loan Interest Stock Cleaning OfficeExps.
Sundry
5/8 STOCK 58 8000 8000
18/8 INTERN.EXPS. 59 500 500
31/8 Totals 8500 500 8000
Journals for August
Total the cashjournals at theend of August.
Stock cardsonly record
the cost priceof stock.
Capital at the start of August isthe capital at the end of July.This capital figure includes theimpact of the profit from July.This data comes from the last
Balance Sheet.
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VCE Accounting Unit 31. Pre double-entry
Summary of the accounting process so far:
Start ofreporting
period
Businesstransactions
are evidencedby documents.
Transactions arerecorded in the stockcards and journals:
Cash Receipts JournalCash Payments Journal
End ofreporting
period
Prepare AccountingReports:
Cash Flow StatementProfit/Loss Statement
Balance Sheet
Input stage Processing stageRecording
Output stageReporting
Reports for August
Clean Cut Mowers. Unclassified CashFlow Statement for August 2018.
Cash Receipts $ $
Sales 32000
Cash Payments
Stock purchases 8000Internet expenses 500 8500
Change in cash 23500
+ Cash at start 53100
= Cash at end 76600
Clean Cut Mowers. IncomeStatement for August 2018.
Revenue $
Sales 32000
Less Cost of Goods Sold
Cost of sales 16000
Gross profit 16000Less other expenses
Internet expenses 500
Net profit 15500
The reports must contain relevant information forstakeholders such as the name of the business,the name of the report and the relevant date ordates. The Cash Flow Statement and IncomeStatement must clearly indicate the reporting
period, in this case, August 2018.
Revenue can be defined as any transactionthat leads to an increase in owners equity(excluding capital contribution). The mostcommon example of revenue is sales.
Expenses can be defined as any transactionthat leads to a decrease in owners equity
(excluding drawings). Common examples ofexpenses are cost of sales, office expenses,internet expenses, wages, rent, cleaning,advertising, interest on loans, etc. You willbecome skilled at identifying expenses.
If revenue is greater than expenses for thereporting period, a profit has been generated.If revenue is less than expenses for the
reporting period, a loss has been incurred.
Clean Cut Mowers. Balance Sheet at 31/8/18Assets $ Equities $
Bank 76600 Owners equity
Stock control 8000 Capital, Bob 184100
Office assets 25000 Add net profit 15500
Premises 90000
Total assets 199600 Total equities 199600
The stock valuemust match thefinal balance ofthe stock card.
Get the Bank
value from theCash FlowStatement.
Get the
profit valuefrom theIncomeStatement.
from?
Gross profit is the difference between sales and the costof goods soldthe profit made on the purchase and saleof stock only. Net profit is the difference between gross
profit and other expensesthe final profit after allexpenses have been deducted from sales.
Unit 3, Outcome 1, focuses on recording not reporting!
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VCE Accounting Unit 31. Pre double-entry
Clean Cut Mowers. Balance Sheet at 1/9/18
Assets $ Equities $
Bank 76600 Owners equity
Stock control 8000 Capital, Bob 199600
Office assets 25000
Premises 90000
Total assets 199600 Total equities 199600
Balance Sheet
STOCK CARD: Ride-on mower
2018 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/9 Balance 4 2000 8000
3/9 CHQ 60 7 2000 14000 11 2000 22000
12/9 REC 47 4 2000 8000 7 2000 14000
23/9 REC 49 3 2000 6000 4 2000 8000
30/9 REC 50 2 2000 4000 2 2000 4000
Stock card
September transactions The following transactions, evidenced bydocuments, occurred during September 2018.Bank of Melton
Date: 3/9/18
To: Just Mowers
For: 7 Mowers at $2000
each.
This cheque $14000
Cheque number 60
Clean Cut Mowers
Clean Cut MowersReceipt # 47
Date: 12/9/18
From:Cash Customers
For:Sale of 4 mowersat $4000 each.
$: $16000.00
Thank you
Bank of MeltonDate: 19/9/18
To: OfficeWorks
For: Office expenses
This cheque $700
Cheque number 61
Clean Cut MowersClean Cut Mowers
Receipt # 49Date: 23/9/18
From:Cash Customers
For:Sale of 3 mowersat $4000 each.
$: $12000.00
Thank you
Cash Receipts Journal (CRJ)CFS X
IS exp. rev. X X
BS calc. X X calc. calc.
Date Details Doc. BankCost ofSales
Sales SundryABCLoan
Capital
12/9 SALES 47 16000 8000 16000
15/9 LOAN-ABC 48 10000 10000
23/9 SALES 49 12000 6000 12000
30/9 SALES 50 8000 4000 8000
30/9 Totals 46000 18000 36000 10000
Cash Payments Journal (CPJ)CFS
IS exp. X X exp. X exp. exp. ?
BS calc. X calc. X calc. X X ?
Date Details Doc. BankInternet
Exps.Drawings Loan Interest Stock Cleaning
OfficeExps.
Sundry
3/9 STOCK 60 14000 1400019/9 OFF.EXPS. 61 700 700
21/9 ADVERT. 62 1400 1400
25/9 DRAWINGS 63 2000 2000
30/9 Totals 18100 2000 14000 700 1400
Journals for September
Total the cashjournals at the
end of Sept.
Clean Cut MowersReceipt # 48
Date: 15/9/18
From:ABC Finance Co.
For: Loan.
$: $10000.00
Thank youBank of Melton
Date: 21/9/18To: Rez Design
For: Advertising
This cheque $1400
Cheque number 62
Clean Cut Mowers
Bank of MeltonDate: 25/9/18
To: Cash
For: Drawings
This cheque $2000
Cheque number 63
Clean Cut Mowers
Clean Cut MowersReceipt # 50
Date: 30/9/18
From:Cash Customers
For:Sale of 2 mowersat $4000 each.
$: $8000.00
Thank you
The design of thejournals depends on theinformation needs of the
businessthis can varyfrom business to business.
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VCE Accounting Unit 31. Pre double-entry
Accounting equation at 30/9/18:
ASSETS EQUITIES
$223500 $223500
=
ASSETS
$223500 =EQUITIES
LIABILITIES$10000
OWNERS EQUITY$213500
Reports for SeptemberClean Cut Mowers. Unclassified CashFlow Statement for September 2018.
Cash Receipts $ $
SALES 36000
LOANABC 10000 46000
Cash Payments
DRAWINGS 2000STOCK PURCHASES 14000
OFFICE EXPENSES 700
ADVERTISING 1400 18100
Change in cash 27900
+ Cash at start 76600
= Cash at end 104500
Clean Cut Mowers. IncomeStatement for September 2018.
Revenue $ $
SALES 36000
Less Cost of Goods Sold
COST OF SALES 18000
Gross profit 18000Less other expenses
OFFICE EXPENSES 700
ADVERTISING 1400 2100
Net profit 15900
Clean Cut Mowers. Balance Sheet at 30/9/18
Assets $ Equities $
Bank 104500 LiabilitiesStock control 4000 ABC Finance Co. 10000
Office assets 25000 Owners equity
Premises 90000 Capital, Bob 199600
Add net profit 15900
Less drawings (2000)
Total assets 223500 Total equities 223500
The stock valuemust match thefinal balance ofthe stock card.
Get the Bankvalue from theCash FlowStatement.
Cheque #63 was for drawings. Drawings is when the owner takes assets out of thebusiness for private use. Drawings is usually cash but it can be any asset. Drawings willbe reported in the Balance sheet as a negative owners equity item as it works toreduce the owners interest or ownership in the businesss assets.
Accounting equation
The Balance Sheet is an expression of the accounting equation, that is:
Assets = Equities orAssets = Liabilities + Owners Equity orOwners Equity = Assets Liabilities.
During September, the business borrowed $10000 cash from
ACE Finance Co. The $10000 has to be repaid and so it is aliability for the business. Liabilities are present obligationsof the business that will lead to a future outflow of economicbenefits to external entities (businesses or individuals). TheABC Finance Co. has an interest or ownership in assets of thebusiness, hence liabilities are also equities.
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VCE Accounting Unit 31. Pre double-entry
ASSETS LIABILITIES OWNERS EQUITY
INCREASE STOCK $14000DECREASE CASH $14000
= +
Identify how the following transactions will impact on the accountingequation. Treat each transaction separately. Non cumulative.
Bank of MeltonDate: 3/9/18
To: Just Mowers
For: 7 Mowers at $2000each.
This cheque $14000Cheque number 60
Clean Cut Mowers
Clean Cut MowersReceipt # 47
Date: 12/9/19
From:Cash Customers
For:Sale of 4 mowersat $4000 each.
$: $16000.00
Thank you
Bank of Melton
Date: 19/9/18
To: OfficeWorks
For: Office expenses
This cheque $700
Cheque number 61
Clean Cut Mowers
Clean Cut MowersReceipt # 48
Date: 15/9/19
From:ABC Finance Co.
For: Loan.
$: $10000.00
Thank you
ASSETS LIABILITIES OWNERS EQUITY
INCREASE CASH $16000DECREASE STOCK $8000
NET INCREASE $8000
INCREASE $16000 SALESDECREASE $8000 COST OF SALES
NET INCREASE $8000
= +
Difficult transaction. Cash sale of stock.The total cost of sales = $8000 (4 x $2000).
ASSETS LIABILITIES OWNERS EQUITY
INCREASE CASH $10000 INCREASE ABC LOAN $10000
= +
ASSETS LIABILITIES OWNERS EQUITY
DECREASE CASH $700 DECREASE $700 DUE TOOFFICE EXPENSES
= +
Cash purchase of stock.
Loan of $10000 cash.
Cash expenses of $700.Important
On the two exams, avoid allabbreviations such as arrows : the
examiners do not like them!Also, avoid abbreviations such as C.O.S.
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VCE Accounting Unit 31. Pre double-entry
Clean Cut MowersReceipt # 49
Date: 23/9/19
From:Cash Customers
For:Sale of 3 mowersat $4000 each.
$: $12000.00
Thank you
Bank of Melton
Date: 21/9/18
To: Rez Design
For: Advertising
This cheque $1400
Cheque number 62
Clean Cut Mowers
Bank of Melton
Date: 25/9/18
To: Cash
For: Drawings
This cheque $2000
Cheque number 63
Clean Cut Mowers
Clean Cut MowersReceipt # 50
Date: 30/9/19
From: Cash Customers
For:Sale of 2 mowersat $4000 each.
$: $8000.00
Thank you
ASSETS LIABILITIES OWNERS EQUITY
DECREASE CASH $1400DECREASE $1400 DUE TOADVERTISING EXPENSES
= +
ASSETS LIABILITIES OWNERS EQUITY
INCREASE CASH $12000DECREASE STOCK $6000
NET INCREASE $6000
INCREASE $12000 SALESDECREASE $6000 COST OF SALES
NET INCREASE $6000
= +
ASSETS LIABILITIES OWNERS EQUITY
DECREASE CASH $2000DECREASE $2000 DUE TO
DRAWINGS.
= +
ASSETS LIABILITIES OWNERS EQUITY
INCREASE CASH $8000
DECREASE STOCK $4000NET INCREASE $4000
INCREASE $8000 SALES
DECREASE $4000 COST OF SALESNET INCREASE $4000
= +
Cash expenses of $1400.
Difficult transaction. Cash sale of stock.The total cost of sales = $6000 (3 x $2000).
Cash drawings $2000.
Difficult transaction. Cash sale of stock.The total cost of sales = $4000 (2 x $2000).
ImportantYou can use pencil in class and
on all assessment tasksincluding the two exams!
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VCE Accounting Unit 31. Pre double-entry
General Journal (GJ)
Date Details $
29/10/18 CAPITAL CONTRIBUTION OF OFFICE ASSETS (COMPUTER), MEMO #1 1000
31/10 DRAWINGS OF STOCK X 1 UNIT, MEMO #2 2000
MEMO #1:29/10/18The owner, Bob, contributed his personal
computer to the business (office assets). $1000.
Clean Cut Mowers. Balance Sheet at 1/10/18
Assets $ Equities $
Bank 104500 Liabilities
Stock control 4000 ABC Finance Co. 10000
Office assets 25000 Owners equity
Premises 90000 Capital, Bob 213500
Total assets 223500 Total equities 223500
Balance Sheet
STOCK CARD: Ride-on mower
2018 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/10 Balance 2 2000 4000
4/10 CHQ 64 9 2000 18000 11 2000 22000
15/10 REC 51 5 2000 10000 6 2000 12000
31/10 MEM 2 1 2000 2000 5 2000 10000
Stock card
October transactions The following transactions, evidenced bydocuments, occurred during October 2018.Bank of MeltonDate: 4/10/18
To: Just Mowers
For: 9 Mowers at $2000
each.
This cheque $18000
Cheque number 64
Clean Cut Mowers
Clean Cut MowersReceipt # 51
Date: 15/10/18
From:Cash Customers
For:Sale of 5 mowers
at $4000 each.
$: $20000.00
Thank you
Bank of Melton
Date: 25/10/18
To: OfficeWorks
For: Power expenses.
This cheque $500
Cheque number 65
Clean Cut Mowers
Cash Receipts Journal (CRJ)CFS X
IS exp. rev. X X
BS calc. X X calc. calc.
Date Details Doc. BankCost ofSales
Sales Loan Capital Sundry
15/10 SALES 51 20000 10000 20000
31/10 Totals 20000 10000 20000
Cash Payments Journal (CPJ)CFS
IS exp. X X exp. X exp. exp. ?
BS calc. X calc. X calc. X X ?
Date Details Doc. BankInternet
Exps.Drawings
ABCLoan
Intereston loan
Stock CleaningOfficeExps.
Sundry
9/10 STOCK 64 18000 18000
25/10 POWER EXPS. 65 500 500
27/10 LOAN-ABC 66 770 700 70
31/10 Totals 19270 700 70 18000 500
Journals for October
Total the cashjournals at the
end of Oct.
MEMO #2:
31/10/18The owner, Bob, took 1 unit of stock home forhis private use. $2000. Drawings of stock.
Bank of MeltonDate: 27/10/18
To: ABC Finance Co.
For: Repayment of
loan including $70interest.
This cheque $770
Cheque number 66
Clean Cut Mowers
Of course most businessesuse electronic systems notthese ol fashioned manual
systems!
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VCE Accounting Unit 31. Pre double-entry
ASSETS EQUITIES
$231230 $231230
=
ASSETS$231230 =
EQUITIESLIABILITIES
$9300OWNERS EQUITY
$221930
Reports for OctoberClean Cut Mowers. Unclassified Cash
Flow Statement for October 2018.
Cash Receipts $ $
SALES 20000
Cash Payments
LOANABC 700
INTEREST ON LOAN 70
STOCK PURCHASES 18000
POWER EXPS. 500 19270
Change in cash 730
+ Cash at start 104500
= Cash at end 105230
Clean Cut Mowers. IncomeStatement for October 2018.
Revenue $ $
SALES 20000
Less Cost of Goods Sold
COST OF SALES 10000
Gross profit 10000
Less other expenses
INTEREST ON LOAN 70
POWER EXPENSES 500 570
Net profit 9430
Clean Cut Mowers. Balance Sheet at 31/10/18
Assets $ Equities $
Bank 105230 Liabilities
Stock control 10000 ABC Finance Co. 9300
Office assets 26000 Owners equity
Premises 90000 Capital, Bob 214500Add net profit 9430
Less drawings (2000)
Total assets 231230 Total equities 231230
Calculation space (if required)
ABC LOAN $10000 $700 = $9300OFFICE ASSETS: $25000 + $1000(CAPITAL CONTRIBUTION) = $26000.
CAPITAL: $213500 + $1000 CAPITALCONTRIBUTION (OFFICE ASSETS) =$214500.
Accounting equation @ 31/10/18
Identify how the following 2 transactions will impact on the accountingequation. Treat each transaction separately. Non cumulative.
ASSETS LIABILITIES OWNERS EQUITY
INCREASE OFFICE ASSETS$1000
INCREASE $1000 DUE TOCAPITAL CONTRIBUTION.
= +
MEMO #1:29/10/18The owner, Bob, contributed his personal
computer to the business (office assets). $1000.
MEMO #2:31/10/18
The owner, Bob, took 1 unit of stock home forhis private use. $2000. Drawings of stock.
ASSETS LIABILITIES OWNERS EQUITY
DECREASE STOCK $2000 DECREASE $2000 DUE TODRAWINGS.
= +
Can you think
of two separateplaces to find
the cost of sales
data?
Eventually you will be able to identifythe impact of any transaction on the
accounting equation.
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VCE Accounting Unit 31. Pre double-entry
A L OE R EQuick Review9. Transactions are evidenced by
A. Cash Flow Statement.B. Income Statement.C. Documents.D. Journals.
10. An item will usually get its own column in thejournals if
A. It has a high dollar value.B. It is a frequent transaction.C. It is an infrequent transaction.D. There is enough room.
11. The report that provides stakeholders with detailedinformation about the businesses cash resources
A. Balance sheetB. Cash receipts journal.C. Cash flow statement.D. Income statement.
12. Owners equity can change due to
A. Revenue.B. Expenses.C. Drawings.D. All of the above.
13. If drawings exceeds profit for a reporting period,owners equity will
A. Increase.B. Decrease.
C. No impact.D. Impact cannot be determined from this data.
14. The owners equity section of the Balance Sheetcan report
A. Capital plus revenue less drawings.B. Assets plus profit less drawings.C. Capital plus profit less drawings.D. Assets less loss less drawings.
15. The most likely sequence for a simple accountingprocess is
A. Documents, journals & stock-cards, reports.B. Journals & stock-cards, documents, reports.C. Reports, documents, journals & stock-cards.D. Documents, reports, journals & stock-cards.
16. Information in the accounting reports is said to bemore reliable if
A. The Income Statement reports a profit.B. The reports are supported by documentary
evidence.C. The reports are prepared frequently.D. The Balance Sheet balances.
17. The accounting equation shows
A. Liabilities equals assets plus owners equity.B. Assets equal liabilities plus owners equity.C. Owners equity less liabilities equals assets.D. Assets plus liabilities equals owners equity.
1. Which one of the following is the best description ofan asset?
A. Present obligations of the business that will lead to afuture outflow of economic benefits.
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 ofa liability?
A. Present obligations of the business that willlead to a future outflow of economic benefits.
B. Resources under the control of the business whichwill 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. Period of time over which assets are determined.B. Period of time over which profit is determined.C. Period of time over which liabilities are determined.D. 1/7/XX to 30/6/XX
7. Equities are best described as
A. Assets and liabilities.B. Assets less liabilities.C. Liabilities and owners equity.D. Assets less owners equity.
8. In a Balance Sheet, the following balance
A. Assets and liabilities.B. Assets and equities.C. Assets and revenues.D. Equities and liabilities.
PS: the currentVCE exams do
not includemultiple-choice
questions.
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The accounting equation is Assets (A)= Liabilities (L) + Owners Equity (OE) which represents therelationships in the Balance Sheet. Alternative ways to express the accounting equation are:OE = A L and A L = OE.
Example 1: Excludes revenue, expenses and GST.
ASSETS LIABILITIES OWNERS EQUITY= +
Transaction 1: owner contributed $100000 cash to start business.
$100000 $100000= +2: owner contributed personal stock to business worth $6000.
$6000 $6000= +3: owner contributed personal vehicle to business worth $20000.
$20000 $20000= +4: bought computer for $4000 cash.
$4000 $4000 = +
5: bought office desk for $2000 cash.
$2000 $2000 = +
6: borrowed $8000 from ANZ Bank.
$8000 $8000= +7: paid ANZ Bank $500 to reduce loan.
$500 $500= +8: paid $5000 cash for stock.
$5000 $5000 = +
9: owner took $1000 cash for private use (Drawings).
$1000 $1000= +10: borrowed additional $3000 from ANZ.
$3000 $3000= +
Accounting Equation again
Treat each transaction separately.
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Example 2: Includes revenue and expenses but excludes GST. Cumulative exercise.
ASSETS$100000
LIABILITIES$20000
OWNERS EQUITY
$80000= +
Transaction 1: owner contributed $6000 cash to business.
$106000 $20000 $86000= +
Transaction 2: Sold stock for $3000 cash (cost of stock $1500).
$107500 $20000 $87500= +
Transaction 3: Sold stock for $2000 cash (cost of stock $1000).
$108500 $20000 $88500= +
Transaction 4: Paid wages expense $1000.
$107500 $20000 $87500= +
Transaction 5: Paid advertising expense $800.
$106700 $20000 $86700= +
Transaction 6: Bought stock for cash $6000.
$106700 $20000 $86700= +
Transaction 7: Paid rent expense $2000.
$104700 $20000 $84700= +
Transaction 8: Cash sales of stock $7000. Cost of sales $3500.
$108200 $20000 $88200= +
Transaction 9: Cash drawings by owner for private use, $800.
$107400 $20000 $87400= +
Transaction 10: Paid wages $1000.
$106400 $20000 $86400= +
Transaction 11: Cash sales of stock $8000, cost of sales $4000.
$110400 $20000 $90400= +
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The elements are: assets (A), liabilities (L), owners equity (OE), revenue (R) and expenses (E).You need to understand these terms eventually!You could use this sheet to assist you! Why not do this in pairs?Resources?Find the AASB Glossary to help you complete this page.
Just Computers. Balance Sheet at 31/7/21
ASSETS $ EQUITIES $
Bank 24700 LIABILIITIES
Fixtures & Fittings 2000 Loan, ANZ 10000
Stock of Computer Systems 9600 OWNERS EQUITY
Office Equipment 3700 Capital, Jennifer 30000
Total Assets 40000 Total Equities 40000
Assets Liabilities Owners Equity
A resource:
(a) controlled by an entity as a
result of past events; and
(b) from which future economic
benefits are expected to flow to the
entity.
A present obligation of the entity
arising from past events, the
settlement of which is expected to
result in an outflow from the entity
of resources embodying economic
benefits.
The residual interest in the assets of
the entity after deducting all its
liabilities.
Find the AASB definitions of the following:
The Elements again
Just Computers,Income Statement for August 2022
Revenue $ $
Sales 29000Less Cost of Goods SoldCost of sales 8700
Gross Profit 20300Less other ExpensesAdvertising 3700Wages 12400 16100Net Profit 4200
Revenue Expenses
The gross inflow of economic benefits during the period
arising in the course of the ordinary activities of an entity
when those inflows result in increases in equity, other than
increases relating to contributions from equity
participants (yuk!)
Decreases in economic benefits during the accounting
period in the form of outflows or depletions of assets or
incurrences of liabilities that result in decreases in equity,
other than those relating to distributions to equity
participants (yuk!)
Find the AASB definitions of the following:
A L OE R E
www.aasb.gov.au
A L OE R E
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Agreed valueWhich value should the business use to value the vehicle?$40000 or $30000? The original cost of $40000 is notrelevant to the business since it was paid by the owner as aprivate individual: the business entity did not pay $40000.Even though the $30000 is an estimate, and thus lacksreliability, it is a more relevant valuation for the
stakeholders. (Note that the use of experts does,however, help to improve the reliability of the estimate).
MEMO #66:3/6/22Owner contributed a personal vehicle to
the business which had originally costher $40000 on 1/6/19. After consulting
some valuation experts, the agreedvalue is $30000.
Ace Traders. Balance Sheet extract at 3/6/22
ASSETS $ EQUITIES $
Vehicle 30000
General Journal (GJ)
Date Details $
3/6/22 Contribution of vehicle at agreed value, memo #66 30000
Explain how memo #66 impacts on the accounting equation of Ace Traders.
Assets: increase $30000
Liabilities: no impact
Owners equity: increase $30000 due to capital contribution
Stock for advertising purposesSometimes a business will take some of its stock to use for
promotional or advertising purposes. It might be that thebusiness is attending a Trade Expo or other function and wantsto display its stock. Perhaps the business has a travelling salesperson who takes stock to show to potential customers.
MEMO #22:1/11/32Took 5 iPads for advertisingpurposes.
STOCK CARD: iPads
2032 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/11 Balance 20 300 6000Memo 22 5 300 1500 15 300 4500
General Journal (GJ)
Date Details $
1/11/32 Stock for advertising purposes, 5 iPads, memo #22 1500
Hi Tech Traders. IncomeStatement extract for November 2032.
$ $Less other expenses
Advertising 1500
Net profit
The stock used for advertising will be
reported as an expense in the IncomeStatement. This is an example of a noncash expense. Another example of annon cash expense is cost of sales.
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Just TVs. Balance Sheet at 1/7/28
Assets $ Equities $
Stock control 50000 Liabilities
Bank 12000 Bank of Kew loan 7000
Office assets 20000 Owners equity
Capital, Emmy 75000
Total assets 82000 Total equities 82000
The following transactions occurred during July 2028:
5/7, purchased 10 TVs at $1000 each, total $10000, cheque #124.9/7, sold 15 TVs at $3000 each, total $45000, (cost of sales $15000), receipt #432.10/7, took 2 TVs for business expo, memo #55, total of $2000.13/7, owner contributed her vehicle (asset) which had an original cost of $60000 when bought in 2025 andnow has an agreed value of $28000, memo #56.
14/7, paid office expenses, $3200, cheque #125.16/7, drawings of cash $6000, cheque #126.20/7 paid $1200, including $200 interest, to Bank of Kew, internet transfer #IT89.22/7, sold 5 TVs at $3000 each, total $15000, (cost of sales $5000), receipt 433.28/7, purchased 6 TVs at $1000 each, total $6000, cheque #126.
General Journal (GJ)
Date Details $10/7/28 Took 2 TVs from stock for advertising use at expo, memo #55 2000
13/7 Owner contributed vehicle to business at agreed value, memo #56 28000
Cash Receipts Journal (CRJ)CFS X
IS exp. rev. X X
BS calc. X X calc. calc.
Date Details Doc. BankCost ofSales
SalesKewLoan
Capital Sundry
9/7 Sales 432 45000 15000 45000
22/7 Sales 433 15000 5000 15000
31/7 Totals 60000 20000 60000
Cash Payments Journal (CPJ)
CFS IS exp. X X exp. X exp. exp. ?
BS calc. X calc. X calc. X X ?
Date Details Doc. BankInternet
Exps.Drawings
KewLoan
Intereston loan
Stock CleaningOfficeExps.
Sundry
5/7 Stock 124 10000 10000
14/7 Office exps. 125 3200 3200
16/7 Drawings 126 6000 6000
20/7 Loan/interest IT89 1200 1000 200
28/7 Stock 126 6000 6000
31/7 Totals 26400 6000 1000 200 16000 3200
Records for July
STOCK CARD: TVs
2028 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/7 Balance 50 1000 50000
5/7 Chq 124 10 1000 10000 60 1000 60000
9/7 Rec 432 15 1000 15000 45 1000 45000
10/7 Mem 55 2 1000 2000 43 1000 4300022/7 Rec 433 5 1000 5000 38 1000 38000
28/7 Chq 126 6 1000 6000 44 1000 44000
Total cashjournals at the
end of the month.
System review
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Reports for JulyJust TVs. Unclassified Cash Flow
Statement for July 2028.
Cash Receipts $ $
Sales 60000
Cash Payments
Drawings 6000
Kew loan 1000
Interest on loan 200
Stock purchases 16000
Office expenses 3200 26400
Change in cash 33600
+ Cash at start 12000
= Cash at end 45600
Just TVs.Income Statement for July 2028.
Revenue $ $
Sales 60000
Less Cost of Goods Sold
Cost of sales 20000
Gross profit 40000
Less other expenses
Interest on loan 200
Office expenses 3200
Advertising 2000 5400
Net profit 34600
Just TVs. Balance Sheet at 31/7/28
Assets $ Equities $
Stock 44000 Liabilities
Bank 45600 Kew loan 6000
Office assets 20000 Owners equity
Vehicle 28000 Capital 103000
Add net profit 34600
Less drawings (6000)
Total assets 137600 Total equities 137600
ASSETS LIABILITIES OWNERS EQUITY
Decrease stock $2000 Decrease $2000 due toadvertising expense
= +
Show the impact of memo #55 on the accounting equation:
ASSETS LIABILITIES OWNERS EQUITY
Increase $28000 Increase $28000 due tocapital contribution
= +
Show the impact of memo #56 on the accounting equation:
Assume that it is now discovered that wages of $2000 was not recorded in July 2028.
Explain how this error would impact on:
1. The Cash Flow Statement for July:Cash payments would be understated $2000 thus the cash balance at the end would be overstated$2000.
2. The Income Statement for July:Expenses would be understated $2000 thus profit would be overstated $2000.
3. The Balance Sheet at 31/7/28:
Assets: Bank would be overstated $2000.Liabilities: no impact.Owners equity: overstated $2000 due to profit impact.
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VCE Accounting Unit 3: Nano Exam 1. Marks = 34. Time = 34 minutes.
Stephanie owns and manages BusinessWorks trading in business equipment on a cash basis only.
On 3/7/27 the business took 2 printers from stock so that the salesperson could demonstrate them forpotential customers. Total value of stock = $1200.
1.1 What documentation would be used to record this transaction?
1 markMemo or journal note.
1.2 List two accounting records that would be used to record this transaction.2 marks
Record 1: General JournalRecord 2: Stock Cards (OUT and BAL)
1.3 Show the impact of this transaction on the accounting equation by completing this following table:2 marks
Cash Receipts Journal (CRJ)Date2027
Details Doc. BankCost ofSales
Sales Loan Capital Sundry
30/11 Totals 21000 4500 15000 1000 5000
Asset Liability Owners equity
Increase $________Decrease $1200
No change
Increase $________Decrease $_______
No change
Increase $________Decrease $1200
No change
1.4 Which document (Doc. #99) was probably used on 3/9? Give evidence to support your answer.1 mark
Cheque. Stock has come into the business and this business only trades on a cash basis. Doc #99
is most likely to be a cash purchase. (could be a capital contribution though unlikely).
1.5 Identify which journal would be used to record Doc. #99.1 mark
Cash payment journal.
1.6 List 3 separate types of transactions that may be recorded in the OUT column of the stock card.3 marks
Transaction 1: Cash salesTransaction 2: Drawings of stockTransaction 3: Stock taken for advertising purposes
1.7 Stock is an asset. Provide a definition of an asset.3 marks
A resource, under the control of the business, as a result of past events, that will provide economicbenefits in the future. Examples include stock, computers and vehicle.
STOCK CARD: Leather Chairs
2027 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/9 Balance 11 1000 11000
3/9 Doc. #99 17 1000 17000
1.8 Calculate and record the total Bank value for November 2027 in the above journal.1 mark
1.9 Indicate the impact of Loan $1000 on the following accounting equation:
2 marks
Assets Liabilities Owners Equity
Increase cash $1000 Increase loan $1000
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