Account Identification, Transaction Analysis and the Accounting Equation

SECTION 1 CHAPTER 2 ACCOUNT IDENTIFICATION, TRANSACTION ANALYSIS AND THE ACCOUNTING EQUATION

Solution 2.1 (a) A = L + OE (b) (i) A – L = OE (ii) OE + L = A Solution 2.2 (a) Items owned by the business which will be of use to future accounting periods. (b) Amounts owed by the business for goods and services received but not paid for or financed. (c) Owners’ investment in the business, represented by net assets. Solution 2.3 Assets = Liabilities + Proprietorship (a) Cash $10 000 = Nil + Capital $10 000

(b) Cash 5 000 + Capital $11 000 A/C Receivable 6 000 ______$11 000 = Nil + $11 000

(d) Cash 9 000 + Capital $21 000 Inventory 5 000 A/C Receivable 7 000 ______$21 000 = Nil $21 000

(e) Cash $9 000 = A/C Payable $3 000 + Capital $6 000

(f) Cash 4 000 A/C Payable $2 000 + Capital $5 500 Inventory 3 500 ______$7 500 = $2 000 + $5 500

1 Solutions to Accounting – A Practical Approach

Solution 2.4 Assets = Liabilities + Proprietorship (a) Cash 8 000 A/c payable $1 500 + Capital $20 500 Inventory 9 000 A/C Receivable 5 000 ______$22 000 = $1 500 $20 500

(b) Plant & mach 22 000 A/c payable $3 700 + Capital $35 200 Inventory 14 000 Cash 2 400 Petty cash 500 ______$38 900 = $3 700 + $35 200

(c) Motor vehicle 42 800 Bank o/d $5 700 + Capital $60 600 A/C Receivable 14 300 Inventory 9 200 ______$66 300 = $5 700 + $60 600

(d) Computer 27 300 Bank o/d $11 300 + Capital $136 Equipment 200 Furniture & fittings 18 200 Mortgage 45 000 Land & bldg 147 000 ______$192 500 = $56 300 $136 200

Solution 2.5 (a) OE = $28 000 (b) L = $13 000 (c) OE = $21 500 (d) A = $18 600 (e) L = $32 200 Solution 2.6 (a) OE increases $8 400 (b) OE decreases $5 200 (c) OE increases $7 900 (d) OE increases $10 000 (e) OE decreases $18 500 (f) OE increases $1 800 (g) OE decreases $1 600 (h) OE decreases $9 900 Solution 2.7

Assets, Liabilities, Owner’s equity, Income and Expense.

Solution 2.8 (a) Current assets are assets that will be converted into cash or used by the business within the next 12 months (such as accounts receivable). That is, they will be fully used up by the business in its operations within the next 12 months. Examples of current assets include: petty cash, bank, accounts receivable, inventory and GST paid.

Non-current assets are assets that could be used by the business for a period greater than 12 months. These are assets that have a longer life span than just one year and include: land, buildings, motor vehicles, office equipment and computers.

(b) Current liabilities are obligations that the business must pay within 12 months. Examples of current liabilities include: accounts payable, short-term loans, GST collected and bank overdraft.

Non-current liabilities are obligations that the business will repay over a time span longer than 12 months. Examples include: mortgages and long-term loans.

(c) Liabilities are amounts owed to third parties. Owner’s equity is the amount owed to the business owner after all other liabilities have been paid.

(d) Assets are items that have value to the business. Expenses are items that have been spent in order for the business to operate and have no ongoing value.

(e) Income is revenue received by the business from its operations and liabilities are amounts owing by the business.

2 Chapter 2: Account Identification, Transaction Analysis and the Accounting Equation

Solution 2.9 (a) Current assets include bank, accounts receivable, inventory and petty cash (other accounts may be acceptable). (b) Current liabilities include accounts payable, bank overdraft and GST collected (other accounts may be acceptable). (c) Non current assets include land, buildings, office equipment, motor vehicles and computer equipment (other accounts may be acceptable). (d) No current liabilities include mortgages and loans (other accounts may be acceptable). (e) Income accounts include sales, interest income, services revenue and dividends received (other accounts may be acceptable) Solution 2.10 Current Assets Non-current Assets Inventory Motor vehicles Sundry debtors Plant & machinery Cash at bank Solution 2.11 Current Assets Current Liabilities Petty cash Bank overdraft Inventory Sundry creditors Solution 2.12 Current Liabilities Current Assets Non-current Assets Bank overdraft A/C receivable Premises A/C payable Petty cash GST Collected Inventory

Solution 2.13 Current Assets Current Liabilities Non-current Assets Cash at bank Sundry creditors Furniture & fittings Petty cash GST collected Land Loan to brother Buildings GST paid Premises Non-current Liabilities Owners’ Equity Mortgage on buildings Capital Drawings Solution 2.14 Current Assets Current Liabilities Expenses Petty cash Bank overdraft Rates & taxes Inventory GST collected Advertising GST Paid Interest on bank overdraft Electricity Telephone Solution 2.15 Income Expenses Sales Stationery Rent received Cost of goods sold Commission received Advertising Fees earned Printing Salaries & wages Donations Water rates Bad debts Payroll tax Insurance Solution 2.16 Current Assets Non-current Assets Current Liabilities Cash at bank Warehouse buildings A/C payable Petty cash Factory machinery GST collected Shares in CIQ Ltd

Non-current Liabilities Owners’ Equity Income Loan from mother Drawings Fees received Mortgage on Warehouse buildings Capital Commission received Rent received Dividends received

3 Solutions to Accounting – A Practical Approach

Expenses Repairs & maintenance Wages & salaries paid Interest paid Photocopying Accounting fees Solution 2.17 (a) The chart of accounts is a listing of account names in a logical order. Accounts have been classified under one of the five major classifications (assets, liabilities, owners’ equity, income and expenses). Assets and liabilities have been further classified as current or non-current. It is also common to classify expenses as cost of sales, marketing, general & administrative and financial expenses. (b) Allows efficient management of accounts by the business. Allows for efficient and accurate preparation of financial reports. Solution 2.18 (Other solutions are possible.)

Assets Current assets 10 Cash at bank 20 Inventory 30 Accounts receivable 30.1 A Dove Non-current liabilities 30.2 R Sparrow 300 Mortgage on premises 30.3 D Magpie Owners’ Equity 400 Capital Non-current assets 100 Premises Income 110 Plant & machinery 500 Sales 120 Computer equipment 510 Interest received 130 Goodwill Expenses Liabilities 600 Cost of goods sold Current liabilities 610 Stationery 200 Accounts Payable 620 Telephone 200.1 A Blue 630 Electricity 200.2 T Ongue 640 Bank charges 200.3 L Izard 650 Rent 220 GST collected 660 Salaries & wages Solution 2.19 (Other solutions are possible.) Current assets (0–99) 05 Inventory 10 Sundry debtors 10.1 T Hair Owners’ Equity (300–349) 10.2 S Hegoes 300 Capital 15 Petty cash 305 Drawings 20 GST Paid Income (350–399) Non-current assets (100–199) 350 Sales 100 Land and buildings 355 Rent received 105 Motor vehicles 360 Commission received 110 Shares in PQ Ltd 365 Interest received 115 Patents 370 Dividends received 120 Trademarks Expenses (400–499) Current liabilities (200–249) 400 Cost of goods sold 200 Sundry creditors 415 Advertising 200.1 M Yold 420 Sales staff salaries 200.2 P Lace 425 Telephone 210 Bank overdraft 430 Office salaries 220 GST collected 435 Bad debts

4 Chapter 2: Account Identification, Transaction Analysis and the Accounting Equation

440 Interest on mortgage Non-current liabilities (250–299) 445 Bank fees 250 Mortgage on land & buildings 450 Interest on overdraft

Solution 2.20 (a) Current assets (b) Current liabilities (c) Non-current assets (d) Current assets (e) Revenue/income (f) Non-current liabilities (probably)

Solution 2.21 Assets = Liabilities + Owners’ Equity 1 *Cash $150 000 *Capital $150 000

2 *Cash $95 000 *GST paid $5 000 *Machinery $50 000 = Capital $150 000 $150 000 $150 000

3 Cash $95 000 Machinery $50 000 *GST paid $6 200 *Inventory $12 000 = *A/cs Payable $13 200 + Capital $150 000 $163 200 $13 200 $150 000

4 *Cash $81 800 = + Capital $150 000 Machinery $50 000 *A/cs Payable Nil GST paid $6 200 Inventory $12 000 $150 000 Nil $150 000

Solution 2.22 Assets = Liabilities + Owners’ Equity 1 *Cash $15 000 *Capital $25 000 *Office furniture $10 000 = $25 000

2 *Cash $4 000 Office furniture $10 000 *GST paid $1 000 *Inventory $10 000 = Capital $25 000 $25 000

3 Cash $4 000 *Office furniture $4 000 GST paid $1 000 Inventory $10 000 *A/c receivable $6 600 = *GST collected $600 Capital $25 000 $25 600 $600 $25 000

Solution 2.23 Assets = Liabilities + Owners’ Equity 1 *Cash 17 000 *Capital 20 000 *Inventory 3 000 ______$20 000 = Nil $20 000

2 Cash 17 000 *Creditors 23 100 + Capital 20 000 Inventory 3 000 *GST paid 2 100

5 Solutions to Accounting – A Practical Approach

*Motor vehicle 21 000 ______$43 100 = $23 100 $20 000

3 *Cash 15 900 Creditors 23 100 + Capital 20 000 Inventory 3 000 *GST paid 2 200 Motor vehicle 21 000 *Office equip 1 000 ______$43 100 = $23 100 $20 000

4 *Cash 15 400 *Creditors 22 600 + Capital 20 000 Inventory 3 000 GST paid 2 200 Motor vehicle 21 000 Office equip 1 000 ______$42 600 = $22 600 $20 000

5 *Cash 23 400 Creditors 22 600 + *Capital 28 000 Inventory 3 000 GST paid 2 200 Motor vehicle 21 000 Office equip 1 000 ______$50 600 = $22 600 $28 000

Solution 2.24 (a) A business may receive cash for a number of reasons (for example the sale of a non current asset). This is no income for the business. Not all receipts are income. (b) An expense is a cost to the business of conducting their operations. Again, not all cash paid out relates to expenses of the business. Some may be the acquisition of a non current asset. Solution 2.25 (a) Not initially – the purchase is recorded as a current asset (inventory). It does not affect profit until the inventory is sold. (b) Yes – interest received is an income account. (c) No – land is a non current assets and the purchase of this does not affect profit. Solution 2.26 (a) No – a delivery truck is a non current assets and the purchase of this does not affect profit. (b) Not if the burglar alarm is considered as part of th cost of the delivery truck (this is covered later). (c) Yes – registration and insurance of the truck are expenses of operating the truck on business activities. (d) Yes – the sign writing is not permanent and could be considered an expense (such as advertising). Solution 2.27 (a) No – the escalator is a non current asset. (b) No – the escalator is a non current asset. (c) Yes – the escalator is a non current asset and does not affect profit in either year. Solution 2.28 Owners’ Assets = Liabilities + Equity + Revenue – Expenses $5 2.7.20X5 Bank $5 000 = Capital 000 15.7.20X5 *Bank 600 *GST paid 400 *Inventory 4 000 = Capital 5 000 $5 $5 000 + 000

Solution 2.29 Owners’ Assets = Liabilities + Equity + Revenue – Expenses

6 Chapter 2: Account Identification, Transaction Analysis and the Accounting Equation

$12 $12 4.3.20X7 Bank 000 = *Capital 000 10.3.20X7 *Bank 10 900 Capital 12 000 *Rent 1 000 *GST paid 100 $11 $12 000 = + 000 – 1 000 *GST *Fee 15.3.20X7 *Bank 13 540 = collected 240 Capital 12 000 Inc 2 400 Rent 1 000 GST paid 100 $13 $12 640 = $240 + 000 + $2 400 – $1 000

Solution 2.30 Owners’ Assets = Liabilities + Equity + Revenue – Expenses $15 $15 4.5.20X9 Inventory 000 = Capital 000 11.5.20X9 *Inventory 22 000 *Accounts *GST paid 700 = Payable 7 700 + Capital 15 000 $22 $15 700 = $7 700 + 000 Accounts 15.5.20X9 *Bank 3 410 = Payable 7 700 + Capital 15 000 + *Sales 3 100 – *COGS 2 100 *GST *Inventory 19 900 collected 310 GST paid 700 $24 $15 010 = $8 010 + 000 + $3 100 – $2 100

Solution 2.31 Owners’ Assets = Liabilities + Equity + Revenue – Expenses $11 $11 4.4.20X6 *Inventory 000 = *Capital 000 *GST 13.4.20X6 *Bank 5 720 = collected 520 + Capital 11 000 + *Sales 5 200 – *COGS 3 200 *Inventory 7 800 $13 $11 520 = $520 + 000 + $5 200 – $3 200 *GST 15.4.20X6 Bank 5 720 = collected 1 010 + Capital 11 000 + *Sales 10 100 – *COGS 6 100 *Inventory 4 900 *Accounts Receivable 5 390 $16 $11 $10 010 = $1 010 000 100 $6 100 GST 24.4.20X6 Bank 5 720 collected 1 010 *Accounts Inventory 4 900 = Payable 19 030 + Capital 11 000 + Sales 10 100 – COGS 6 100 Accounts Receivable 5 390 *GST paid 1 730 *Motor Vehicle 17 300 $35 = $20 + $11 + $10 – $6 100

7 Solutions to Accounting – A Practical Approach

040 040 000 100

Solution 2.32 Owners’ Assets = Liabilities + Equity + Revenue – Expenses *Motor $23 $23 4.1.20X3 Vehicle 000 = *Capital 000 Motor *Accounts 11.1.20X3 Vehicle 23 000 = Payable 1 430 Capital 23 000 *GST paid 130 *Mowing equipment 1 300 $24 $23 430 = $1 430 + 000 Motor Accounts 15.1.20X3 Vehicle 23 000 = Payable 1 430 + Capital 23 000 + *Fees 900 – *GST GST paid 130 collected 90 Mowing equipment 1 300 *Bank 990 $25 $23 420 = $1 520 + 000 + $900 – Motor Accounts 21.1.20X3 Vehicles 23 000 = Payable 1 430 + Capital 23 000 + Fees 900 – GST *Petrol GST paid 135 collected 90 expenses 50 Mowing equipment 1 300 = *Bank 935 $25 $23 370 = $1 520 + 000 + $900 – $50

Solution 2.33 Owners’ Assets = Liabilities + Equity + Revenue – Expenses 4.7.20X2 *Bank $9 000 = *Capital $9 000 7.7.20X2 *Bank 6 360 = Capital 9 000 *Inventory 2 400 *GST paid 240 9 000 = $9 000 *Accounts 10.7.20X2 Bank 6 360 = Payable 1 430 + Capital 9 000 *Inventory 3 700 *GST paid 370 $10 430 = $1 430 + $9 000 Accounts 27.7.20X2 Bank 6 360 = Payable 1 430 + Capital 9 000 + *Sales 870 – *COGS 470 *GST *Inventory 3 230 collected 87 GST paid 370 *Accounts Receivable 957 $10 917 = $1 517 + $9 000 + $870 – $470

8 Chapter 2: Account Identification, Transaction Analysis and the Accounting Equation

Note – Inventory could be called supplies or stock.

Solution 2.34 (a) debit; (b) credit; (c) credit; (d) debit; (e) debit; (f) credit; (g) credit; (h) debit; (i) credit; and (j) debit. Solution 2.39 Account Name Account type Usual account balance accounts receivable current asset debit capital owners’ equity credit cost of goods sold expense debit rent received income credit bank overdraft current liability credit motor vehicles non-current asset debit petty cash current asset debit sales income credit interest paid expense debit accounts payable current liability credit drawings owner’s equity debit repairs & maintenance expense debit computer equipment non-current asset debit electricity expense debit Solution 2.36 Complete the table below (the first one has been completed as an example) using the perpetual inventory system: Type of Effect of Transaction Accounts Affected Account Transaction Double entry required Purchased goods on credit Inventory Asset Increased Debit inventory GST collected Liability Decreased Debit GST collected Accounts payable Liability Increased Credit accounts payable Paid cash for advertising Advertising Expense Increased Debit advertising GST paid Asset Increased Debit GST paid Bank Asset Decreased Credit bank Sold goods for cash Bank Asset Increased Debit bank Sales Revenue Increased Credit sales GST collected Liability Increased Credit GST collected Cost of goods sold Expense Increased Debit COGS Inventory Asset Decreased Credit inventory Paid accounts payable Accounts payable Liability Decreased Debit accounts payable Bank Asset Decreased Credit bank Received interest income Bank Asset Increased Debit bank Interest received Revenue Increased Credit interest received Received payment from customer who previously bought goods on credit Bank Asset Increased Debit bank Accounts receivable Asset Decreased Credit accounts receivable Paid telephone account Telephone Expense Increased Debit telephone GST paid Asset Increased Debit GST paid Bank Asset Decreased Credit bank Received rent from tenant Bank Asset Increased Debit bank Rent received Revenue Increased Credit rent received GST collected Liability Increased Credit GST collected Received invoice from supplier Inventory Asset Increased Debit inventory GST paid Asset Increased Debit GST paid Accounts payable Liability Increased Credit accounts payable Paid supplier for earlier credit purchase Accounts payable Liability Decreased Debit accounts payable

9 Solutions to Accounting – A Practical Approach

Bank Asset Decreased Credit bank Solution 2.37 Complete the table below using the perpetual inventory system: Type of Effect of Transaction Accounts Affected Account Transaction Double entry required Bought motor vehicle on credit Motor vehicles Asset Increased Debit motor vehicles GST paid Asset Increased Debit GST paid Accounts payable Liability Increased Credit accounts payable Owner introduced additional capital of cash and office furniture Bank Asset Increased Debit bank Office furniture Asset Increased Debit office furniture Capital Owners’ equity Increased Credit capital Purchased computer and office equipment for cash Computer Asset Increased Debit computer Office equipment Asset Increased Debit office equipment GST paid Asset Increased Debit GST paid Bank Asset Decreased Credit bank Paid wages Wages Expense Increased Debit wages Bank Asset Decreased Credit bank Sold goods for credit Accounts receivable Asset Increased Debit accounts receivable Sales Revenue Increased Credit sales GST collected Liability Increased Credit GST collected Cost of goods sold Expense Increased Debit COGS Inventory Asset Decreased Credit inventory Customer returned over-supplied goods Sales (returns) Revenue Decreased Debit sales GST collected Liability Decreased Debit GST collected Accounts receivable Asset Decreased Credit accounts receivable Inventory Asset Increased Debit inventory Cost of goods sold Expense Decreased Credit COGS Owner withdrew goods from business for personal use Drawings Owners’ equity Decreased Debit drawings Inventory Asset Decreased Credit inventory GST paid Asset Decreased Credit GST paid Paid for motor vehicle previously purchased on credit Accounts payable Liability Decreased Debit accounts payable Bank Asset Decreased Credit bank Purchased goods for cash Inventory Asset Increased Debit inventory GST paid Asset Increased Debit GST paid Bank Asset Decreased Credit bank Paid rent Rent expenses Expense Increased Debit rent expense GST paid Asset Increased Debit GST paid Bank Asset Decreased Credit bank Fees received in cash for services rendered Bank Asset Increased Debit bank Fees received Revenue Increased Credit fees received GST collected Liability Increased Credit GST collected Solution 2.38 Effect of Transaction Accounts affected Type of account transaction Double entry required Owner contributed cash and motor vehicles on commencement of business Bank Asset Increase Debit Bank Motor vehicle Asset Increase Debit Motor vehicle Capital Owner’s equity Increase Credit Capital Purchased inventory on credit from ABC Supplies Inventory Asset Increase Debit Inventory GST paid Asset Increase Debit GST paid

10 Chapter 2: Account Identification, Transaction Analysis and the Accounting Equation

A/C payable – ABC Sup Liability Increase Credit A/C payable – ABC Sup Paid rent on commercial premises to J H Lookout Rent Expense Increase Debit Rent GST paid Asset Increase Debit GST paid Bank Asset Decrease Credit Bank Paid wages to staff Wages Expense Increase Debit Wages Bank Asset Decrease Credit Bank Sold goods for cash to C Ustomer Bank Asset Increase Debit Bank Sales Income Increase Credit Sales GST collected Liability Increase Credit GST collected Cost of goods sold Expense Increase Debit COGS Inventory Asset Decrease Credit Inventory Returned goods to ABC supplies because they were faulty A/C payable – ABC Sup Liability Decrease Debit A/C payable – SBC Sup Inventory Asset Decrease Credit Inventory GST paid Asset Decrease Credit GST paid Received interest from the bank Bank Asset Increase Debit Bank Interest Received Income Increase Credit Interest received Sold goods on credit to N One A/C Receivable – N One Asset Increase Debit A/C Rec. – N One Sales Income Increase Credit Sales GST collected Liability Increase Credit GST collected Cost of goods sold Expense Increase Debit COGS Inventory Asset Decrease Credit Inventory Paid electricity to Energy Suppliers Electricity Expense Increase Debit Electricity GST paid Asset Increase Debit GST paid Bank Asset Decrease Credit Bank Received payment from N One ( a customer) Bank Asset Increased Debit bank A/C Receivable – N One Asset Decrease Credit A/C Receivable – N One Purchase a new motor vehicle for sales deliveries on credit from P Dutton Motors Motor vehicle Asset Increase Debit Motor vehicle GST paid Asset Increase Debit GST paid A/C Payable – P Dutton Liability Increase Credit A/C payable – P Dutton

Solution 2.39 Effect of Transaction Accounts affected Type of account transaction Double entry required Owner commenced business with cash, inventory, motor vehicle, machinery and a bank loan Bank Asset Increase Debit Bank Inventory Asset Increase Debit Inventory Motor vehicle Asset Increase Debit Motor vehicle Machinery Asset Increase Debit Machinery Bank loan Liability Increase Credit Bank loan Capital Owner’s equity Increase Credit Capital Repaid bank loan Bank Loan Liability Decrease Debit Bank loan Bank Asset Decrease Credit Bank Paid motor vehicle repairs Motor vehicle repairs Expense Increase Debit Motor Vehicle Repairs GST paid Asset Increase Debit GST paid Bank Asset Decrease Credit Bank Paid wages Wages Expense Increase Debit Wages Bank Asset Decrease Credit Bank Sold goods on credit A/C Receivable Asset Increase Debit A/C Rec Sales Income Increase Credit Sales GST collected Liability Increase Credit GST collected

11 Solutions to Accounting – A Practical Approach

Cost of goods sold Expense Increase Debit COGS Inventory Asset Decrease Credit Inventory Goods returned by customer because they were incorrect Inventory Asset Increase Debit Inventory Cost of goods sold Expense Decrease Credit COGS GST collected Liability Decrease Debit GST collected Sales Income Decrease Debit sales A/C Receivable Asset Decrease Credit A/C Receivable Purchase inventory on credit Inventory Asset Increase Debit Inventory GST paid Asset Increase Debit GST paid A/C payable Liability Increase Credit A/C payable Purchased milk for morning tea (no GST applicable) Staff Amenities Expense Increase Debit Staff amenities Bank Asset Decrease Credit Bank Purchased cleaning supplies Cleaning supplies Expense Increase Debit Cleaning supplies GST paid Asset Increase Debit GST paid Bank Asset Decrease Credit Bank Owner withdrew cash for personal reasons Drawings Owner’s equity Decrease Debit Drawings Bank Asset Decrease Credit Bank Owner took inventory for own personal use Drawings Owner’s equity Decrease Debit Drawings Inventory Asset Decrease Credit Inventory GST paid Asset Decrease Credit GST paid

Solution 2.40 J Jones Balance Sheet as at 30 June 20X5 Assets Liabilities Inventory 15 000 Cash at bank 10 000 25 000 Owners’ equity Capital 25 000 ______25 000 $25 000 $25 000

Solution 2.41 F Brown Balance Sheet as at 30 June 20X6 $ $ $ $ Assets Liabilities Inventory 10 000 Creditors 1 500 Petty cash 500 1 500 Cash at bank 6 000 Owners’ equity 16 500 Capital 15 000 ______15 000 $16 500 $16 500

Solution 2.42 H Smith Balance Sheet as at 30 June 20X0 $ $ $ $ Assets Liabilities Inventory 8 300 Bank overdraft 1 300 A/cs receivable 16 400 1 300 Petty cash 700 Owners’ equity 25 400 Capital 24 100 24 100 $25 400 $25 400

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Solution 2.43 T Dodemaide Balance Sheet as at 30 June 20X1 $ $ $ $ Assets Liabilities Current A/cs payable 3 600 Inventory 12 400 3 600 A/cs receivable 4 100 Owners’ equity Cash at bank 11 700 Capital 170 000 28 200 Non-current 170 000 Land & buildings 145 400 ______145 400 $173 600 $173 600

Solution 2.44 D Leamey Balance Sheet as at 30 September 20X7 $ $ $ $ Assets Liabilities Current Current Inventory 36 690 Sundry creditors 16 130 Sundry debtors 11 630 Bank overdraft 18 890 Petty cash 600 GST collected 2 100 48 920 37 120 Non-current Non-current Mortgage 40 000 Buildings 243 600 40 000 Motor vehicles 34 600 278 200 Owners’ equity Capital 250 000 ______250 000 $327 120 $327 120

Solution 2.45 S Booth Balance Sheet as at 31 March 20X8 $ $ $ Current Assets Inventory 15 960 Sundry debtors 28 140 Petty cash 400 44 500 Non-current Assets Plant & machinery 11 430 Office furniture & equipment 12 380 Goodwill 6 000 29 810 Total Assets 74 310 Current Liabilities Sundry creditors 3 450 Bank overdraft 18 310 GST collected 2 100 23 860 Non-current Liabilities Loan from finance company 9 000 9 000 Total Liabilities 32 860 Net Assets $41 450

13 Solutions to Accounting – A Practical Approach

Owners’ Equity Capital 41 450 $41 450

Solution 2.46 J Archer Balance Sheet as at 31 August 20X6 $ $ $ Current Assets Accounts receivable 66 870 Cash at bank 15 550 82 420 Non-current Assets Factory buildings 145 000 Computer equipment 11 220 Shares in QP Ltd 14 380 170 600 Total Assets 253 020 Current Liabilities Accounts payable 23 140 GST collected 1 050 24 190 Non-current Liabilities Mortgage 45 000 45 000 Total Liabilities __69 190 Net Assets $183 830

Owners’ Equity Capital 183 830 $183 830

Solution 2.47 W Safire Balance Sheet as at 31 May 20X8 $ $ $ Current Assets Sundry debtors 20 210 Petty cash 800 21 010 Non-current Assets Machinery 16 460 Motor vehicles 24 600 Copyrights 13 700 54 760 Total Assets 75 770 Current Liabilities Sundry creditors 12 400 Bank overdraft 1 440 GST collected 1 100 14 940 Non-current Liabilities Loan from Finance Co 17 500 14 940 Total Liabilities _32 440 Net Assets $43 330

14 Chapter 2: Account Identification, Transaction Analysis and the Accounting Equation

Owners’ Equity Capital 43 330 $43 330

Solution 2.48 H Lawson Balance Sheet as at 31 March 20X5 $ $ $ Current Assets Inventory 16 490 Accounts receivable 24 330 GST paid 320 Cash at bank 7 100 48 240 Non-current Assets Land & buildings 247 630 Furniture & fittings 11 210 Motor vehicles 28 200 Investment in Kleen Water Company 40 000 327 040 Total Assets 375 280 Current Liabilities GST collected 2 350 Mortgage (1 years payments) 10 000 Accounts payable 12 930 25 280 Non-current Liabilities Mortgage (4 years payments) 40 000 40 000 Total Liabilities __65 280 Net Assets $310 000

Owners’ Equity Capital 310 000 $310 000

Solution 2.49 J Jackson Income Statement for the year ended 30 June 20X2 $ $ $ Revenue – Fees 150 000 Less Expenses Supplies 20 000 Wages 50 000 Rent 15 000 Other expenses 11 200 Total Expenses 96 200 Net profit 53 800

Solution 2.50 Emmy Winter Income Statement for the year ended 30 June 20X3 $ $ $ Revenue Fees income 285 000 Interest received 1 200 Total income 286 200 Less Expenses Advertising 15 000

15 Solutions to Accounting – A Practical Approach

Wages 92 550 Rent 21 610 Electricity 960 Telephones 1 155 Total Expenses 131 275 Net profit 154 925

Solution 2.51 Carl John Income Statement for the year ended 30 June 20X4 $ $ $ Revenue Sales 875 650 Interest received 2 960 Total income 878 610 Less Expenses Cost of sales 395 100 Marketing expenses 29 500 Salaries 258 405 Office expenses 25 610 Rent 18 000 Other expenses 51 400 Total Expenses 778 015 Net profit 100 595