BAP12A Accounting For Business

Orange Pty Ltd started business on the 1 August 2016. During the first months of operations the following transactions occurred:

Date: Transactions

Aug 1 The business issued shares and shareholders invested $110,000 cash in the business.

Aug 2 The business borrowed $25,000 from KMP Bank Ltd and received the funds in cash.

Aug 3 Purchased office furniture for $13,500, paying $6,000 in cash and the balance on account (i.e. credit), to be paid on 31 December 2016.

Aug 5 Received $9,000 in cash from a customer for services performed.

Aug 7 Purchased supplies on account (i.e. credit) of $7,500

Aug 10 Performed services for a customer on account (i.e. credit) and invoiced customer $4,200.

Aug 15 Paid $1,500 in cash for office rent for August 2016.

Aug 16 Received $2,000 in cash from a customer as an advance payment for services to be completed by 31 October 2016.

Aug 20 Paid $7,500 in cash for supplies purchased on account. (Refer to transaction on 7 Aug 2016)

Aug 27 Paid $600 in cash for a 12-month business insurance policy will commence on 1 September 2016 and end on 31 August 2017.

Aug 28 Paid an employee cash wages of $2,200 for work performed during August 2016.

Aug 29 Received $4,200 in cash from a customer invoiced on 10 October.

Aug 31 Paid $1200 dividend in cash to shareholders.

The company’s chart of accounts reveal the following relevant account listing:

?Cash ?Office Equipment ?Share Capital

?Supplies ?Accounts Payable ?Dividends

?Accounts Receivable ?Income Received in advance ?Service Revenue

?Prepaid Insurance ?Bank Loan ?Rent Expense

?Wage Expense

a)Prepare journal entries to record the transactions for October 2016.

b)Post the October 2016 journal entries to the relevant general ledger accounts.

c)Prepare a trial balance at 31 October 2016.

1. Define accounting and describe the accounting process.

2. What is the conceptual framework and what purpose does it serve?

3. What is retained earnings. What items increase or decrease the balance in retained earnings?

4. Explain what an account is and how it helps in the recording process.

5. Define debits and credits and explain how they are used to record accounting transactions

6. Identify the basic steps in the recording process?

7. Explain what a journal is and how it helps in the recording process.

8. Explain what a general ledger is and how it helps in the recording process

9. Explain what posting is and how it helps in the recording process

10. Explain the purposes of a trial balance.

11. Describe the accounting information system and the steps in the recording process.

12. Identify the elements of each of the four main financial statements?