Galilee College. Principles of Accounting 1 Course No. ACC 111

Transcription

1 Galilee College Principles of Accounting 1 Course No. ACC 111 Galilee Corporate Centre Joe Farrington Road P.O. Box EE Nassau, Bahamas Tel. (242) Fax (242) galilee@coralwave.com

2 TABLE OF CONTENTS ABOUT THE ACCOUNTING LECTURER ACCOUNTING PRINCIPLES I SYLLABUS Chapter 1: Accounting and the Business Environment Chapter 2: Recording Business Transactions Chapter 3: Measuring Business Income: the Adjusting Process Chapter 4: Completing the Accounting Cycle Chapter 5: Merchandising Operations and the Accounting Cycle Chapter 6: Accounting Information Systems: Special Journals, Control Account, and Subsidiary Ledgers Chapter 7: Internal Control, Managing Cash, and Making Ethical Judgments Chapter 8: Accounts and Notes Receivable Chapter 9: Merchandise Inventory Chapter 10: Plant Assets and Intangible Assets Chapter 11: Current Liabilities and Payroll Appendix 1: Accounting Terms Appendix 2: Associate Degree Program (Accounting) Appendix 3: Bachelor s Degree in Accounting Appendix 4: Accounting Courses Description Appendix 5: Accounting News Supplies Needed Current Accounting Principles Text Calculator Note Book/Pencil/Pen Ten columnar pad (three students can combine to reduce the cost) Four columnar pad (three students can combine to reduce the cost) 2

3 ABOUT THE ACCOUNTING LECTURER Dr. Willis L. Leon Johnson, CPA Dr. Willis L. Johnson is a Chartered Accountant and a renowned veteran educator. For the past five years he has been directing the Galilee CPA Review program. Dr. Johnson has nurtured scores of Certified Public Accountants in the Bahamas. He received his early education at Sandilands Primary School and R.M. Bailey Senior High School, Nassau, Bahamas. Having an earnest quest for knowledge, Dr. Willis Johnson, pursued studies in Accounting at Brewster Adult Technical Institute and Tampa College in Tampa Florida. He further went on to Tiffin Ohio, where he enrolled at Tiffin University. At the completion of his study tenure at Tiffin University, he became the first student in the School s history to simultaneously earn three Bachelor of Arts Degrees. Additionally, he has acquired a Master of Business Administration degree, a Master of Theology degree and a Doctorate degree in Philosophy. Dr. Johnson s vocational background showcases a tenure at Coopers and Lybrand Accounting Firm where he served as a Staff Accountant. Following his departure from Coopers and Lybrand he served as the Chief Accountant at Blanco Chemicals. Dr. Johnson was climbing higher, after serving Blanco Chemicals for five years, he moved on to Bahamas Telecommunications Corporation where he was appointed Cost and Budget Accountant. At Batelco he moved through the ranks of Accountant to Manager, then Senior Manager and finally Executive Manager. Dr. Johnson retired in 1999 and took on full-time oversight of the Galilee Education System which comprises of Galilee Academy, Galilee College and Galilee CPA Review and Galilee Professional Institute. In 2005, Dr. Johnson established the Bahamas Association of Christian Counselors. Dr. Johnson passed the Certified Public Accountant s Exam in 1986 and become a member of the Colorado Society of Accountants, Colorado State Board of Accountancy and the American Institute of Certified Public Accountants. He became a member of The Bahamas Institute of Chartered Accountants in 1989, and has subsequently served on the executive committee as; Chairman of the Continuing Education Committee, Treasurer and Second Vice President. Dr. Johnson is also a member of the American Academy of Financial Management where he serves on the Board of and The American Institute of Certified Public Accountants. Dr. Johnson is a Master Financial Professional and serves on Global Board of Academic Advisors and Professors of the American Academy of Financial Management. Dr. Johnson is also a Certified Marriage and Family Counselor. He currently serves an the treasurer for the Association of Tertiary Institutions of the Bahamas. Called to the gospel ministry, Dr. Johnson is an ordained Minister. He is the founding Pastor of Galilee Ministries International, a locally mission based entity that is designed to bringing relief to persons who are bereft of precious commodities such as food, clothing, shelter and education. 3

4 For the past five years he has been engaged in directing the Galilee CPA Review program. He is known for his profound academic theatrics as he delivers the CPA curriculum. His success rate is phenomenal and measures alongside in the region. Dr. Johnson was the guest of the AICPA and NASBA at a joint meeting in New York, New York on December 15, 2003 as they announced the final changes to the new computer-based CPA exam. During this joint meeting in New York, Dr. Johnson played an integral part in the discussions, as well as, other prominent Review providers, such as Dr. Irvin Gleim, and Dr. Jim Rigos. The AICPA invited him again to attend the joint meeting and follow-up session on December 6, 2004 in Jersey City, New Jersey. During that session, Dr. Johnson advocated for the AICPA to consider its Prometric testing outside the of the U.S. such as the Bahamas. A committee has been appointed to present a paper on this possibility. Dr. Johnson is married to the former Yvette M. Bethell. The couple has five children, Jeremiah, Joshua, Joel, Jude and Jamés. 4

5 Galilee College Course Outline COURSE NUMBER: ACC 111 COURSE TITLE: Principles of Accounting I DEPARTMENT: Accounting CREDIT VALUE: 3.0 COURSE DURATION: 1 SEMESTER DATE PREPARED: July 2006 PREREQUISITES None REQUIRED TEXTS: Accounting Principles I, Willis L. Johnson SUPPLEMENTAL MATERIALS Ledger forms, columnar pads, journal forms, etc., COURSE DESCRIPTION A study of the conceptual framework which explains financial accounting with an emphasis on the business and economic information generated in the accounting process. Students are encouraged to understand the increasing prominence of accounting in virtually all aspects of business activity. COURSE OBJECTIVE The primary objective of this course is to provide a strong foundation for future courses in business administration by introducing the accounting principles, concepts, procedures, and techniques underlying financial accounting and reporting with emphasis on business and economic information generated in the accounting process, and by encouraging an awareness of the prominence of accounting in virtually all aspects of business activity. A secondary objective is to initiate course work leading to a major and career in accounting. Program Context: This course is a first year core component of all Accounting and Business and Public Administration Programs Course Learning Outcomes: Learning outcomes identify the knowledge, skills and attitudes that successful students will have developed and reliably demonstrated as a result of the learning experiences and evaluations during this course. Evaluation Strategies and Grading: Class Attendance Full participation and attendance is expected for this course. Students who miss a class are 5

6 responsible for any information discussed, assigned or distributed in that class period. Final Project 50% Home Work 30% Quiz/Exams 40% 100% Note that violation of academic honesty can affect the course grade. "Cheating" on an exam (i.e., the giving or receiving of aid) will result in a course grade of "F." Note that classroom behavior (for example, talking to other students during lecture) can negatively affect course grades by as much as three letter grades, e.g., an "A" can become a "D." GRADING SYSTEM: A 94% - 100% Excellent 4.00 D 68% - 74% Passed 1.00 B 87% - 93% Good 3.00 F 0% - 67% Failed 0.00 C 75% - 86% Average 2.00 COVERAGE ABOUT THE ACCOUNTING LECTURER ACCOUNTING PRINCIPLES I SYLLABUS Chapter 1: Accounting and the Business Environment Chapter 2: Recording Business Transactions Chapter 3: Measuring Business Income: the Adjusting Process Chapter 4: Completing the Accounting Cycle Chapter 5: Merchandising Operations and the Accounting Cycle Chapter 6: Accounting Information Systems: Special Journals, Control Account, and Subsidiary Ledgers Chapter 7: Internal Control, Managing Cash, and Making Ethical Judgments Chapter 8: Accounts and Notes Receivable Chapter 9: Merchandise Inventory Chapter 10: Plant Assets and Intangible Assets Chapter 11: Current Liabilities and Payroll Appendix 1: Accounting Terms Appendix 2: Associate Degree Program (Accounting) Appendix 3: Bachelor s Degree in Accounting Appendix 4: Accounting Courses Description Appendix 5: Accounting News 6

7 Chapter 1: Accounting and the Business Environment Introduction to Accounting Accounting can be defined as an information system which identifies, records, and communicates financial information to decision makers. Decision makers can be divided into two broad categories: external and internal. In financial accounting we are concerned with external decision makers such as business owners, potential owners, creditors, etc. There are various branches of accounting such as financial, managerial (accounting for internal decision makers), tax, auditing, cost, and so forth. The importance of accounting is that it is the language of business and a basic understanding of it is necessary for almost any job in the business world. Bookkeeping should be distinguished from accounting. Bookkeeping refers to the recording of business transactions which is one part of accounting. The term accounting refers to the entire process of identifying, processing, and communicating economic events to decision makers. At the outset of our study of accounting, we want to emphasize the importance of business ethics. We'll shortly see that one of the important responsibilities of the accountant is to evaluate business performance. Accountants compute net income, cost resources owned by the business, determine cash flows, etc. If decision makers can't have confidence in the financial reports prepared by accountants, then our entire economic system is subject to collapse. As the authors note, fortunately most individuals in business are ethical. As you know, there are various kinds of enterprises such as for-profit, non-profit, government, etc. In our study of accounting we will concentrate on for-profit businesses which operate as corporations. We will touch on other forms of business structure including sole proprietorships (single owner business) and partnerships (two or more individuals co-own the business) but our emphasis will be on accounting for corporations. A corporation can be defined as a legal entity organized under state law and having ownership divided into transferable shares of stock. Financial accounting is governed by rules or guidelines called Generally Accepted Accounting Principles (GAAP). As we begin to study accounting we will gradually introduce these principles and concepts. Two basic principles and concepts are: 1. Economic Entity Concept: An accounting entity is a separate and distinct unit, standing apart from its owners or shareholders. 2. Monetary Unit Concept: Only business transactions that can be expressed in terms of money are included in accounting records and no adjustment is made for inflation. 7

8 Two agencies have primary responsibility for establishing generally accepted accounting principles. The primary agency is a private organization, the Financial Accounting Standards Board (FASB), which issues Statements of Financial Standards. The second agency is a government organization, the Securities and Exchange Commission. A basic tool used by accountants to explain business transactions is the accounting equation. It can be expressed variously as: Resources = Equities Assets = Liabilities and Owner's Equity Assets = Liabilities and Stockholders' Equity Stockholders' Equity consists of two parts: Paid In Capital (investment by owners) and Retained Earnings (net income accumulated over the life of the corporation less any dividends paid). Brief definitions of other terms in the accounting equation are as follows: Assets Economic resources owned by the organization Liabilities Debts owned to third parties Owner's Equity Owner's interest in net assets Stockholders' Equity Shareholders' interest in net assets Net assets Assets - Liabilities All business transactions can be expressed in terms of the accounting equation and it is important to gain some mastery over describing business transactions in terms of the accounting equation. An account is a summary device used by accountants to describe changes in assets, liabilities, and stockholders' equity. Note that there are various kinds of asset accounts such as cash, land, accounts receivable, etc. Also there are various kinds of liability accounts such as accounts payable, taxes payable, etc. For our purposes now there are just two categories of owner s equity accounts: (Capital) Paid In Capital and Retained Earnings. Note that revenue increases retained earnings and expenses decrease retained earnings. Finally, note that dividends (distribution of earnings and profits to stockholders) decrease retained earnings. Please carefully review the ten business transactions analyzed using the accounting equation. Note that the accounting must balance (A = L + OE) after each transaction. The end product of the accounting process is the production of financial statements which describe in some detail how the business organization is performing. The four basic financial statements required by GAAP are: Income Statement Statement of Retained Earnings Balance Sheet Statement of Cash Flows 8

9 Please take some time to review examples of these financial statements, their headings, time period covered, format, accounts included in each financial statement, and the interrelationship of financial statements. The "expert" in financial accounting is the Certified Public Accountant. The CPA Exam consists of the following four parts: Auditing and Attestation Financial Accounting and Reporting Regulation Business Environment and Concepts Since many people rely on accounting information it is important that accountants maintain the highest ethical standards. As we discuss various topics we will consider the ethical aspect of the actions we take. The Accounting Equation The assets of a business belong to the resource providers who are said to have claims on the assets. In other words, every asset has its own source provided by an owner or a creditor. Therefore, there may not be any claim without an appropriate asset or vice versa. The accounting equation is: Assets = Claims Claims in their turn are divided into two categories: owners' claims (equity) and creditors' claims (liabilities): _ Claims Assets = Liabilities + Equity Algebraically, the amount of total assets minus total liabilities equals equity. Because equity is equal to the net difference between assets and liabilities, it is also called net assets. 9

10 For example, suppose Our Company has assets of $800, liabilities of $300, and equity of $500. These amounts appear in the accounting equation: Claims Assets = Liabilities + Equity $800 = $300 + $500 Now, let's see how the elements of accounting equation change during an operating cycle. We will have a few events and will follow the changes in the accounting equation. 1) Friend Company is created when their owners invest $5,000 into the business. The effects of the acquisition on the accounting equation are as follows: Claims Assets = Liabilities + Equity $5,000 = 0 + $5,000 Note that this single transaction is recorded twice, once as an asset and a second time as the source of that asset (equity). Every transaction is recorded at least twice. This process is known as double-entry bookkeeping. Since this transaction provided assets to the entity, the transaction will be called an asset source transaction. Asset source transactions increase both an asset account and one of the claims accounts. 10

11 Chapter 1 Exercises Chapter 1 Homework Problem 11

12 Chapter 2: Recording Business Transactions 12

13 13

14 14

15 15

16 Chapter 2 Class Exercise Instructions: Analyze the transactions and do the following:- i. Post to T Accounts ii. Prepare a Chart of Account iii. Record in the General Journal Shell Shelly Company For June 2006 Transactions (dates) 1. Received Cash from owner as an investment, $8, Paid for insurance, $ Bought supplies on account from Swan s Supply Company, $ Bought supplies on account from York Company, $ Returned Merchandise to Swan s Supply Company $50 6. Paid cash on account to Swan s Company, $50 7. Bought Equipment for Cash $1, Sold merchandise on account to Evans Company, $1, Paid cash for rent, $ Paid cash for advertisement, $ Paid Salaries $ Paid cash on account to York Company, $ Sold merchandise for cash $1, Shell Shelly withdrew $300 16

17 Chapter 2 Home Work Exercise Jack Jacky, For April 2006 Analyze the transactions and do the following:- 1. Post to T Accounts 2. Prepare a Chart of Account 3. Record in the General Journal 4. Post to the General Ledger 5. Prepare a Trial Balance 6. Prepare a Six Column Worksheet 7. Prepare an Income Statement 8. Prepare a Capital Statement 9. Prepare a Balance Sheet 10. Prepare Closing Entries 11. Prepare a Post-closing Trial Balance Transactions (dates) 1. Received cash from owner as an investment, $ Bought supplies on account from Helfrey Company, $ Paid cash for insurance, $ Sold merchandise for cash $1, Bought Equipment for Cash $1, Paid cash for supplies, $50 7. Paid cash on account to Helfrey Company, $ Sold merchandise on account to Susan Company, $ Paid cash for rent, $ Returned Merchandise to Helfrey Company $ Paid cash for advertisement, $ Susan Company returned merchandise $ Salaries, $ Jack Jacky Withdrew $200 Instructions: Analyze the transactions and do the following:- 1. Post to T Accounts 2. Prepare a Chart of Account 3. Record in the General Journal 4. Post to the General Ledger 5. Prepare a Trial Balance 6. Prepare a Six Column Worksheet 7. Prepare an Income Statement 8. Prepare a Capital Statement 9. Prepare a Balance Sheet 10. Prepare Closing Entries 11. Prepare a Post-closing Trial Balance 17

18 Chapter 2 Forms T Accounts Chart of Accounts 18

19 General Journal General Ledger Trial Balance 19

20 Six Column Worksheet Financial Statements 20

21 Closing Entries 21

22 Post-Closing Balance 22

23 Chapter 3: Measuring Business Income: the Adjusting Process 23

24 24

25 Chapter 3 - Accruals and Deferrals: Class Exercise 1 1. On January 1, 2004 PEN PENNY received a Utility Bill from BEC for $10,000, the bill was due on February 28, (a) Show the entries on January 1, 2004 and February 28, On March 1, 2004 PEN PENNY company borrowed $400,000 from the Royal Bank of Canada and issued a notes payable to pay interest at the rate of 6% at the end of each quarter. a. Show the entry to record the amount borrowed, and the interest expense for March 31 st. 3. On August 1, 2004 PEN PENNY company received rent of $30,000 from a tenant for three months rent. a. Show the entries on August 1, 2004 and August 31, On July 1, 2004 PEN PENNY Company Paid its insurance for two years $24,000. a. Show the entries on July 1, 2004 and December 31, On October 1, 2004 PEN PENNY earned royalty of $20,000 but did not receive the amount until February 3, a. Show the entries on October 1, 2004 and February 3, Accruals and Deferrals: Home Work Exercise 1 6. On October 3, 2004 TED TEDDY received a Telephone Bill from BTC for $15,000, the bill was due on November 1, (a) Show the entries on October 3, 2004 and November 1, On February 1, 2002 TED TEDDY company borrowed $100,000 from the Bank of Nova Scotia and issued a notes payable to pay interest at the rate of 5% at the end of each quarter. a. Show the entry to record the amount borrowed, and the interest expense for February 1 st. 8. On March 1, 2003 TED TEDDY company received rent of $45,000 from a tenant for five months rent. a. Show the entries on March 1, 2003 and March 31, On January 1, 2004 TED TEDDY company Paid its insurance for three years $36,000. a. Show the entries on January 1, 2004 and December 31, On November 1, 2004 TED TEDDY earned royalty of $50,000 and received $25,000 on December 31, 2004 and $25,000 on January 31, a. Show the entries on November 1, 2004, December 31, 2004 and January 31, Depreciation Class Exercise 2 Milk Milky purchased a new computer on January 1, 2005 at a cost of $25,000. The computer had a life of 4 years and salvage of $5, Using the straight-line method, record the following:- 1. The purchase on January 1, The Depreciation for What is the book value of the computer at December 31, 2005 and December 31, 2006? Depreciation Home Work Exercise 2 Stuck Stucky purchased a new truck on July 1, 2005 at a cost of $20,000. The truck had a life of 7 years and salvage of $6, Using the straight-line method, record the following:- 1. The purchase on July 1, The Depreciation for What is the book value of the truck at December 31, 2005, and December 31, 2006? 25

26 Chapter 4: Completing the Accounting Cycle 26

27 27

28 28

29 Class Exercise 29

30 Home Work Exercise 30

31 Chapter 5: Merchandising Operations and the Accounting Cycle 31

32 32

33 33

34 34

35 35

36 36

37 Class Exercise Home Work Exercise Class Exercise 1 Instructions: 1. Under both the perpetual and periodic inventory methods, record all transactions on Page 1 of a General Journal. Home Work Exercise 1 Use the information in Exercise Under both the perpetual and periodic inventory methods, record all transactions on Page 1 of a General Journal. Class Exercise 2 Use the information in Exercise If the purchase term was 5/10 N 30, what is the entry to record the purchase on January 4 th on account? 2. What is the entry if payment was made on January 13 th 3. What is the entry if payment was made on January 25 th 4. What is the entry if 30% of the January 20 th purchase was returned due to defectiveness? 5. If the January 20 th purchase excluded freight of $1,000 and duty of 35% of the total cost, what is the entry to record all transactions. a. USE T ACCOUNTS ALONG WITH THE GENERAL JOURNAL, PAGE 2 Home Work Exercise 2 Use the information in Exercise If the purchase term was 10/15 N 30, what is the entry to record the purchase on March 7 th on account? 2. What is the entry if payment was made on March 16 th 3. What is the entry if payment was made on March 27 th 4. What is the entry if 20% of the January 0 th purchase was returned due to defectiveness? 5. If the March 11 th purchase excluded freight of 5% on the invoice and duty of 40% of the total cost, what is the entry to record all transactions. a. USE T ACCOUNTS ALONG WITH THE GENERAL JOURNAL, PAGE 2 Class Exercise 3 Use the information in Exercise 1. Assume that the sale on January 20 th had credit terms of 5/15 N Record the sale on January 20 th 2. On January 25 th, customers returned 15% of the goods due to defective packaging. Record the entry. 3. What is the entry if the customers paid for the goods on January 30 th? 4. What is the entry if the customers paid for the goods on February 10 th? a. USE T ACCOUNTS ALONG WITH THE GENERAL JOURNAL, PAGE 3 37

38 Home Exercise 3 Use the information in Exercise 1. Assume that the sale on March 15 th had credit terms of 3/10 N Record the sale on March 15 th. 6. On March 18 th customers returned 30% of the goods due to defective packaging, but was allowed a 25% credit due to its standing policy. Record the entry. 7. What is the entry if the customers paid for the goods on March 20 th 8. What is the entry if the customers paid for the goods on March 27 th a. USE T ACCOUNTS ALONG WITH THE GENERAL JOURNAL, PAGE 3 38

39 Chapter 6: Accounting Information Systems: Special Journals, Control Account, and Subsidiary Ledgers 39

40 40

41 41

42 42

43 Class Exercise Special Journals Class Exercise Ken Kenny owns a bicycle and motorcycle store. The Balances in the Accounts Receivables and Accounts Payable were as follows on November 1, 2005:- Accounts Receivables Accounts Payable Loree Adams $ 3,200 Visa Cycle $ 3,000 Victor Droste $ 4,200 Delay Motor Cycles $ 2,600 Wayne Ivory $ 2,000 Walden Supplies $ 120 Robert Melvin $ 1,000 Action Cycles $ 2,200 Esther Lorand $ 1,700 United Bicycle Co. $ 1,000 Celia Sotelo $ 500 Baker Supply $ 150 Leonard Kane $ 1,147 Cycle World $ 1,650 Jonathan Hunt $ 200 Instructions: 1. Journalize the following transactions completed during November of the current year. Use page 18 of all journals. A 6% sales tax has been added to each sale. Source documents are abbreviated as follows: check, C; memorandum, M; purchase invoice, P; receipt, R; sales invoice, S; cash register tape, T. 2. Post the journals to the subsidiary ledgers and general ledgers 3. Prepare a Trial Balance Nov 1. Ken Kenny invested $10,000 in the business, R 111 Nov 2. Paid cash for rent, $1, C244. Nov 2. Ken Kenny, partner, withdrew cash for personal use, $600. C245. Nov 2. Ken Kenny, partner, withdrew cash for personal use, $600. C246. Nov 3. Paid cash for electric bill, $ C247. Nov 3. Purchased merchandise on account from Visa Cycle Co., $2, P58. Nov 4. Paid cash on account to Delay Motorcycles, $1,360.00, covering P56. C248. Nov 5. Sold merchandise on account to Loree Adams, $1, plus sales tax, $67.80; total, $1, S61. Nov 5. Paid cash for office supplies, $ C249. Nov 6. Purchased merchandise for cash, $ C250. Nov 7. Recorded cash and credit card sales, $5,850.00, plus sales tax, $351.00; total, $6, S62. Nov 9. Sold merchandise on account to Victor Droste, $358.00, plus sales tax, $21.48; total, $ S62. Nov 9. Received cash on account from Wayne Ivory, $1, covering S57. R112. Nov 11. Bought office supplies on account from Walden Supply $ M43. Nov 12. Purchased merchandise for cash, $ C251. Nov 12. Received cash on account from Robert Melvin, $996.40, covering S58. R113. Nov 13. Paid cash on account to Action Cycles, $1,365.00, covering P57. C252. Nov 14. Ken Kenny, partner, withdrew merchandise for personal use, $3, M44. Nov 14. Recorded cash and credit card sales, $2, plus sales tax, $160.80; total, $2, T14. Nov 16. Ken Kenny, partner, withdrew, cash for personal use, $ C253. Nov 16. Ken Kenny, partner, withdrew cash for personal use, $ C

44 Nov 17. Purchased merchandise on account from United Bicycle Co., $ P59. Nov 18. Purchased merchandise for cash, $ C255. Nov 18. Bought store supplies on account from Baker Supply, $ M45. Nov 19. Paid cash on account to Walden Supply, $68.00, covering M43. C256. Nov 21. Recorded cash and credit card sales, $2,430.00, plus sales tax, $145.80; total, $2, T21. Nov 23. Discovered that a payment of cash for advertising in October was journalized and posted in error as a debit to Miscellaneous Expense instead of Advertising Expense, $ M46. Nov 23. Paid cash for office supplies, $ C257. Nov 23. Received cash on account from Esther Lorand, $630.70, covering S59. r114. Nov 24. Sold merchandise on account to Celia Sotelo, $325.00, plus sales tax, $19.50; total $ S63. Nov 27. Purchased merchandise on account form Cycle World, $1, P60. Nov 27. Paid cash for advertising, $ C258. Nov 28. Recorded cash and credit card sales, $2,680.00, plus sales tax, $160.80; total, $2, T28. Nov 28. Received cash on account from Leonard Kane, $1,147.00, covering S60. R115. Nov 30.Sold merchandise on account to Jonathan Hunt, $45.00, plus sales tax, $2.70; total, $ S64. Nov 30. Paid cash to replenish the petty cash fund, $301.00: office supplies, $62.00; store supplies $71.00; advertising, $88.00; miscellaneous, $ C259. Nov 30.Recorded cash and credit card sales, $640.00, plus sales tax, $38.40; total, $ T30. 44

45 45

46 Special Journal (Class Exercise - Completed Journal) 46

47 47

48 48

49 49

50 Special Journal (Home Work Exercise) John Johnny owns a toy store. The Balances in the Accounts Receivables and Accounts Payable were as follows on August 1, 2005:- Accounts Receivables Accounts Payable Jacky Eve $ 4,300 Master Rode $ 4,500 Moses Deals $ 5,100 Faster Supplies Co. $ 3,300 Kevin Blacks $ 6,500 United Supplies Co. $ Rocky Grant $ 1,600 Quick Enterprises $ 5,690 Vashti Coleby $ 2,300 UPS Co. $ 2,940 Cynthia Pasto $ 1,200 Chefte Company $ Francis Plum $ 1,900 Donnie Supply $ 2,880 David Brown $ 2,700 Instructions: 1. Journalize the following transactions completed during August of the current year. Use page 6 of all journals. A 7% sales tax has been added to each sale. Source documents are abbreviated as follows: check, C; memorandum, M; purchase invoice, P; receipt, R; sales invoice, S; cash register tape, T. a. Note: You have to calculate all Sales Taxes (Sales times 7%) 2. Post transactions to all Subsidiary Ledger Accounts 3. Post to all General Ledger Accounts 4. Prepare a Trial Balance 5. Prepare a Schedule of Accounts Receivables & Accounts Payable Aug 1. John Johnny invested $18,200 in the business, R 321 Aug 2. Paid cash for rent, $1, C415. Aug 2. John Johnny, partner, withdrew cash for personal use, $900. C416. Aug 3. Paid cash for Utility Bill, $ C417. Aug 3. Purchased merchandise on account from Master Rode Co., $3, P28. Aug 4. Paid cash on account to Faster Supplies Co., $2,450.00, C418. Aug 5. Sold merchandise on account to Jacky Eve, $1, plus sales tax, S31. Aug 5. Paid cash for office supplies, $ C419. Aug 6. Purchased merchandise for cash, $ C250. Aug 7. Recorded cash and credit card sales, $5,850.00, plus sales tax, S32. Aug 9. Sold merchandise on account to Moses Deals, $600.00, plus sales tax S32. Aug 9. Received cash on account from Kevin Blacks, $2,100 R322. Aug 11. Bought office supplies on account from United Supplies Co. $100. M13. Aug 12. Purchased merchandise for cash, $ C251. Aug 12. Received cash on account from Rocky Grant, $1,310,. R323. Aug 13. Paid cash on account to Quick Enterprises, $2100, C252. Aug 14. John Johnny, withdrew merchandise for personal use, $2,350. M14. Aug 14. Recorded cash and credit card sales, $2, plus sales tax, T14. Aug 16. Paid on Account to Master Rode $ C253. Aug 16. John Johnny, withdrew cash for personal use, $ C254. Aug 17. Purchased merchandise on account from UPS Co., $1, P29. 50