PASS Business Worksheet 3

PASS Business Worksheet 3

Activity 1: Transactions

Prepare the general journal entries to record the following transactions for the business for the month of May 2016 (ignore GST):

May
1     Owner deposited $50,000 of his own money into the business’ bank account.
3     Employed a part-time worker to begin work on the first Monday of next month, earning a salary of $450 per week.
5     Purchased office supplies for $80 and a laptop for $2,500, both on credit.
5     Bought $8,000 worth of new inventory on credit to be sold in the shop.
6     Paid rent of $900.
7     Received $2,000 cash from a client for services provided.
9 Sold inventory for $1,750 cash, and $4,150 on credit. The inventory had cost the business $4,000
10   A short-term bank loan of $10,000 was taken out to help with some equipment purchases.
12   Owner took home $1,500 for personal use.
19   Invoiced a client for $2,100 for services provided.
21   Paid electricity of $412.
23   Paid $2,000 of accounts payable.
25   Received cash for $3,000 of accounts receivable.
30   Paid $300 principle off the loan and a further $35 interest.
31   Office supplies used this month total $38.

General Journal Template                                                                                                                                       GJ1

GJ2

Activity 2: General Ledger

Post the entries from the general journal into a general ledger using both the running balance format and the t-form format. Use the account numbers from the Chart of Accounts from Topic 1.

T-form Template

DR                                                                                                                                          CR
Cash at Bank                                       1-1100

Accounts Receivable                             1-1104

Inventory                                          1-1115

Office Supplies                                 1-2120

Office Equipment                               1-2120

Accounts Payable                                 2-1200

Short-term Loan Payable                   2-1210

Capital                                                  3-1300

Drawings                                              3-1310

Sales                                                     4-1000

Service Fee Revenue                          4-2000

Cost of Goods Sold                               5-1000

Electricity Expense                              6-2547

Office Supplies Expense                      6-2555

Rent Expense                                       6-3570

Interest Expense                                    6-3575

Running Balance Template
Cash at Bank                                                         1-1100

Accounts Receivable                                             1-1104

Inventory                                                               1-1115

Office Supplies                                                      1-2120

Office Equipment                                                 1-3170

Accounts Payable                                                  2-1200

Short-term Loan Payable             2-1210

Capital                                                                   3-1300

Drawings                                                                3-1310

Sales                                                                       4-1000

Service Fee Revenue                                             4-2000

Cost of Goods Sold                                               5-1000

Electricity Expense                                               6-2547

Office Supplies Expense                                       6-2555

Rent Expense                                                         6-3570

Interest Expense                                                   6-3575

Activity 3:  Trial Balance Template

Prepare a trial balance as at 31 May 2016.

Limitations of Trial Balance (Answers)

• May balance but still contain errors:
  • a transaction may have been left out altogether
  • amounts may have been posted to the correct side but the wrong account (Electricity instead of Telephone)
  • a transaction may have been duplicated
  • there may be a compensating mistake
• If it does not balance there is definitely an error but it doesn’t 'show' where the error is
• Errors detected after posting should be corrected with another entry designed to 'fix' the error

What is a Ledger? (Answer)

Information from journals is transferred or 'posted' into a Ledger

• A journal records each transaction, the ledger records the effect each transaction has on individual accounts
• The main ledger is called the general ledger
• Within the ledger, each asset, liability, equity, income and expense item has a separate record, called an account
• Increases and decreases to each item during a period are recorded in the accounts using the debit and credit rules

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