ACCG106 Practice Questions from Text Book (Solutions)
ACCG106 Practice Questions from Text Book (Solutions) This is a small sample of the full document, buy the full copy if you want all the chapters J CHAPTER 5 5.3 What are the debit and credit rules? How do these rules relate to the accounting equation? 1) Asset accounts are increased by debit entries and decreased by credit entries 2) Liability accounts are increased by credit entries and decreased by debit entries 3) Permanent owner’s equity (or capital) accounts are increased by credit entries and decreased by debit entries. Temporary owner’s equity accounts have the following rules: a. Withdrawal accounts are increased by debit entries and decreased by credit entries b. Revenue accounts are increased by credit entries and decreased by debit entries c. Expense accounts are increased by debit entries and decreased by credit entries This relates to the accounting equation as the double entry rule states that in the recording of a transaction, the total amount of the debit entries must be equal to the total amount of the credit entries for the transaction, just as how in the accounting equation the assets have to be equal to liabilities and owner’s equity. 5.9 What is an adjusted trial balance? Why is it used? An adjusted trial balance is a listing of all the account titles and balances contained in the general ledger after the adjusting entries for an accounting period have been posted to the accounts. The reason for preparing the adjusted trial balance is to ensure the adjusting entries were done correctly. This is the last step before preparing financial statements that are used by you, your creditors and your shareholders to monitor the performance of your business. If the balances entered into the financial statements are incorrect, the statements themselves will be inaccurate.
5.13 a) Date 01/07/15
10/07/15
25/07/15
Details Debit Cash Capital (Owner deposited cheque into business) Land and office GST paid Cash Loan payable (Purchased land and office) Supplies GST paid Accounts payable (Purchased supplies)
Credit 30 000
30 000
300 000 30 000
80 000 250 000
800 80
880
b)
Date
Source Documents
1/7
N. Sands personal cheque and receipt issued by Sands Realty.
10/7
Business cheque, EFT statement, legal documents for land and office building, and note.
25/7
Invoice received with supplies.
5.15
a) Date 04/05/15
15/05/15
28/05/15
31/05/15
Details Accounts receivable GST collected Service Revenue (Installed plumbing)
Debit 1980
Credit 180 1800
Cash GST collected Service Revenue (Plumbing repairs for customer) Telephone expense GST paid Cash (Paid telephone bills)
88
8 80
70 7
77
Salaries Expense Tax Payable Cash (Paid salaries and tax payable) Electricity expense GST paid Accounts payable (Electricity bill for June)
9000
900 8100
100 10
110
b)
Date
Source Documents
4/5
Bill (invoice/statement of account) issued to contractor.
15/5
Invoice and receipt issued to customer, customer’s cheque EFT
statement. 28/5
Telephone bill, business cheque, EFT statement
31/5
Payroll records, business cheque, EFT statement.
31/5
Utility bill.
5.18
Date 01/08/15
Details Inventory GST paid Cash (Purchased art supplies)
Debit 400 40
Credit 440
04/08/15
Accounts receivable GST collected Sales revenue
990
90 900
Cost of Goods sold Inventory (Sales of art supplies)
550
550
06/08/15
Inventory GST paid Accounts payable (Purchased art supplies)
700 70
770
10/12/15
Accounts payable Inventory GST collected (Returned defective art supplies) Cash GST collected Sales revenue Cost of Goods sold Inventory (Sold supplies) Sales return GST paid Cash
110
100 10
275
25 250 275
20 2
22
Cash Accounts receivable (Received payment for amount due on 4 August) Accounts Payable (770-110) Cash (Paid balance due)
990
990
660
660
12/12/15
13/12/15
15/12/15
25/12/15
275
5.22
a) i) Details Cash GST Collected Unearned rent revenue
Debit 1980 180
Credit 1800
ii) Rent revenue: 3/6 x 1800 = 900 Details Debit Credit Unearned rent revenue 900 900 Rent revenue b) If the adjusting entry had not been made, rent revenue and net income would have been understated by $900 on the income statement. On the balance sheet, unearned rent and total liabilities would have been overstated by $900. The owner’s capital account would have been understated by $900 due to the understatement of net income.
5.13 a) Date 01/07/15
10/07/15
25/07/15
Details Debit Cash Capital (Owner deposited cheque into business) Land and office GST paid Cash Loan payable (Purchased land and office) Supplies GST paid Accounts payable (Purchased supplies)
Credit 30 000
30 000
300 000 30 000
80 000 250 000
800 80
880
b)
Date
Source Documents
1/7
N. Sands personal cheque and receipt issued by Sands Realty.
10/7
Business cheque, EFT statement, legal documents for land and office building, and note.
25/7
Invoice received with supplies.
5.15
a) Date 04/05/15
15/05/15
28/05/15
31/05/15
Details Accounts receivable GST collected Service Revenue (Installed plumbing)
Debit 1980
Credit 180 1800
Cash GST collected Service Revenue (Plumbing repairs for customer) Telephone expense GST paid Cash (Paid telephone bills)
88
8 80
70 7
77
Salaries Expense Tax Payable Cash (Paid salaries and tax payable) Electricity expense GST paid Accounts payable (Electricity bill for June)
9000
900 8100
100 10
110
b)
Date
Source Documents
4/5
Bill (invoice/statement of account) issued to contractor.
15/5
Invoice and receipt issued to customer, customer’s cheque EFT
statement. 28/5
Telephone bill, business cheque, EFT statement
31/5
Payroll records, business cheque, EFT statement.
31/5
Utility bill.
5.18
Date 01/08/15
Details Inventory GST paid Cash (Purchased art supplies)
Debit 400 40
Credit 440
04/08/15
Accounts receivable GST collected Sales revenue
990
90 900
Cost of Goods sold Inventory (Sales of art supplies)
550
550
06/08/15
Inventory GST paid Accounts payable (Purchased art supplies)
700 70
770
10/12/15
Accounts payable Inventory GST collected (Returned defective art supplies) Cash GST collected Sales revenue Cost of Goods sold Inventory (Sold supplies) Sales return GST paid Cash
110
100 10
275
25 250 275
20 2
22
Cash Accounts receivable (Received payment for amount due on 4 August) Accounts Payable (770-110) Cash (Paid balance due)
990
990
660
660
12/12/15
13/12/15
15/12/15
25/12/15
275
5.22
a) i) Details Cash GST Collected Unearned rent revenue
Debit 1980 180
Credit 1800
ii) Rent revenue: 3/6 x 1800 = 900 Details Debit Credit Unearned rent revenue 900 900 Rent revenue b) If the adjusting entry had not been made, rent revenue and net income would have been understated by $900 on the income statement. On the balance sheet, unearned rent and total liabilities would have been overstated by $900. The owner’s capital account would have been understated by $900 due to the understatement of net income.
