ACC566 Accounting System and Process

i.    Prepare a memo to Harry, explaining what amounts need to be considered when calculating the net cost of the kites (inventory) to the business.

ii.   Prepare an Excel worksheet for the kites for October, using the average-cost method to keep track of the number of kites purchased, kites sold, kites on hand, cost of goods sold and gross profit made.  

iii.  Prepare journal entries in Excel (including any adjusting entries) for all of the business’s transactions for October (using the perpetual inventory system and average-cost method).  Include dates, references and narrations.

iv.  Prepare T-accounts in an Excel spreadsheet, and post all of the above journal entries to the T-accounts.  Include dates and references for each entry.  Total all of the T-accounts to determine their balances at the end of October 2019.  

v.   Prepare the ‘Adjusted Trial Balance’ in an Excel spreadsheet as at 31^st October 2019.  Use formulas to generate all of the figures in the ‘Adjusted Trial Balance’ from the balances in the T-Accounts.

vi.  Prepare the income statement, balance sheet, and statement of changes in equity in Excel. Use formulas to generate all of the figures in the financial statement reports from the ‘Adjusted Trial Balance’.  

vii.  Calculate the business’s gross profit percentage and current ratio, and explain what these ratios tell us.  Also explain why these ratios should be carefully monitored by Harry Smith