Professional Documents
Culture Documents
hk
Introduction
to Double Entry
Accounting ()
Reference:
Chapter 1 6 (p. 1 58)
1
P.1
(A) Introduction to
Accounting
Accounting:
provides
P.2
Assets ()
Capital ()
Liabilities ()
(Resources
= (Resources + (Resources
in the
supplied by
supplied by
business)
the owner)
outsiders)
e.g.
Assets
Bank
Cash
Machinery
Fixtures
Stock
Debtors
Motor Vehicles
Land
Building
Capital
Capital:
Chan
Capital:
Lee
Liabilities
Creditors
Bank overdraft
Bank loan
Loan: Cheung
P.3
Examples of Expenses
Purchases, Rent
Commission,
Interest expenses,
Electricity,
Wages and salaries,
Depreciation,
Returns inwards
P.4
Definition of Drawings ()
The sole proprietor may take cash, stock or
other assets from the business for private use.
P.5
P.6
Definition
Every transaction are entered into two T-accounts,
one in debit (Dr.) side and the other in the credit
(Cr.) side.
Format of a T-account:
Name of the T-account
Date Particular
Dr
Date Particular
Cr
7
P.7
P.8
Cash
Assets
Increase
Dr.
Dr. Cash
Capital:
Chan
Capital
Increase
Cr.
Cr. Capital:
Chan
Dr. Cr.
Assets
Dr.
Liabilities
2008
Capital
Incomes
Expenses +
Drawings
Dr.
2008
Cash
$
Cr.
2008
Capital: Chan
$
Cr.
2008
Jan 1 Cash
1000
P.9
P.10
P.11
Class
12
P.12
Final Accounts
References
Chapter 7 to 10 (P. 59-113)
P.13
Trial Balance ()
A trial balance is a list of debit balances and
credit balances in the books of accounts
The total of debit balances and the total of
credit balances are equal. If not, errors are
needed to identitied.
Trial balance is the basis for preparing final
accounts (Trading and profit and loss A/C;
Balance Sheet).
P.14
Leungs Company
Trial Balance
for the year ended 31 December, 2008
$
Sales
Returns inwards
Stock as at 1 January, 2008
Purchases
Returns outwards
Carriages inwards
Rental income
Commission received
Rent
Commission
Electricity
Rates
1010
10
100
530
20
10
100
50
120
30
150
50
P.15
1000
700
500
500
1000
500
1500
400
80
1000
500
3000
100
1000
600
7280
7280
P.16
B Trading A/C
Gross profit:
Net Sales>Cost of sales
Function:
Calculate the gross profit or gross loss.
Net Purchases =
Purchases Returns
outwards
Gross loss:
Cost of sales>Net sales
P.17
P.18
Leungs Company
Trading A/C
for the year ended 31 December, 2008
$
$
Sales
LessReturns inwards
Net Sales
LessCost of goods sold
Stock as at 1 January,2006
AddPurchases
530
LessReturns outwards 20
Net purchases
510
AddCarriage inwards
10
1010
10
1000
100
520
620
LessStock as at 31 December, 2006 120
Gross profit
500
500
P.19
Leungs Company
Trading A/C
for the year ended 31 December, 2008
$ $
$
Opening Stock
AddPurchases
100
530
LessReturns outwards 20
Net purchases
510
AddCarriage inwards 10 520
620
LessClosing stock
120
Cost of goods sold
500
Gross profit c/d
500
1000
Sales
1010
LessReturns inwards 10
Net Sales
1000
1000
P.20
Other income=
rental income + commission income+
Net loss:
Expenses>Gross profit+Income
P.21
P.22
10
Vertical form
Leungs Company
Profit and loss
for the year ended 31 December, 2008
$
$
Gross profit
500
Add Rental income
100
Commission income
50
650
LessExpenses
Rent
120
Commission
30
Electricity
150
Rates
50
350
Net Profit
300
P.23
11
P.24
12
D Balance Sheet
Balance sheet is a statement to record
the balances of assets, liabilities and
capital at the end of the accounting period.
Assets*Liabilities**Capital***
*AssetsNon-current assetsCurrent assets
**LiabilitiesCurrent liabilitiesLong-term liabilities
***Capital:
Opening capitalNet profitCapitalClosing capital
P.25
13
D1 Non-current Assets
Non-current assets have a long life and
are to be used in the business.
The non-current assets is not bought
for resale.
E.g. Land and building, Furniture,
Fixtures and fitting, Office equipment,
Machinery, Motor vehicles
P.26
14
Non-current assets
Land and building
Furniture
Fixtures and fittings
Office equipment
Machinery
Motor vehicles
P.27
15
D2 Current assets
Current assets are likely to be
converted into cash in the short term
(i.e. within 1 year) or items having a
short life.
E.g. Stock, Debtors, Prepayment, Bank,
Petty cash, Cash
P.28
16
17
D3 Long-term Liabilities
Long-term liabilities do not have to
have in the near future (i.e. longer than
1 year)
e.g. Bank loan, Loan: Mr. Cheung,
Debentures
P.30
18
D4 Current liabilities
Current liabilities are to be paid in the
near future (i.e. within 1 year).
e.g.Creditors, Accruals, Bank
overdraft
Current assetsCurrent liabilitiesWorking Capital
P.31
19
P.32
20
Leungs Company
Balance Sheet
as at 31 December, 2008
$
$
Non-current assets
Land and building
1000
Furnitures
700
Fixtures and fittings
500
Office equipment
500
Machinery
1000
Motor vehicles
500
4200
P.33
21
Current assets
Stock
Debtors
Bank
Cash
LessCurrent liabilities
Debtors
Bank overdraft
Working capital
120
1500
400
80
2100
1000
500
1500
600
4800
P.34
22
Capital
Capital as at 1 January, 2008
AddNet profit
LessDrawings
Capital as at 31 December, 2008
Long-term Liabilities
Bank loan
LoanMr. Cheung
500
$
3000
400
3400
100
3300
1000
1500
P.35
4800
23
P.36
24
P.37
A Introduction
Books to record all the T accounts.
The expansion of the business,
transactions increasethe numbers
of T accounts are numerous.
Thus the T accounts are classified
into 3 Ledgers and 7 Books (Books
of Original Entry).
P.38
Transactions
Cash and
cheque
Returns receipts
Outwards
and
payment
Others
Returns Returns
Sales Purchases Inwards Outwards Cash Book/
Petty Cash Journal
Journal
Journal
Book
Journal
Journal
p. 116
P.40
Ledgers
3 kinds of ledgers
Sales ledgerrecords each debtors T A/C
Purchases ledgerrecords each creditors T A/C
General ledger records the rest of the accounts,
such as expenses, Fixed assets, capital, etc.
P.41
P.42
*Trade discount:
**Cash discounts:
2008
Jan 5
15
28
31
Sales Journal
Particular
Inv. No. $
Rabbit Co
495
Pepper Co
100
Pump Co
495
Transferred to sales A/C 1090
(in General Ledger)
P.45
D2 Sales Ledger
After recording each transaction in the
Sales Journal, the transaction is posted to
the Debtors A/C in the Sales Ledger.
At the end of month or year, the total of
the Sales Journal is posted to the Sales
A/C in the General Ledger.
P.46
10
Sales Journal
Record each credit sales
Sales Ledger
Debtors: Rabbit Co.
Dr.
General Ledger
Sales A/C
Cr.
$
P.47
11
E1 Purchases Journal
Record all credit purchases
There is no credit items in Purchases
A/C, so the Purchases A/C
transforms to a statement(), i.e,
Purchases Journal.
P.48
12
13
2006
Feb 6
17
27
28
Purchases Journal
Particular
Celery Co.
Carrot Co.
Spinach Co.
Inv. No.
$
198
100
198
496
P.50
14
E2 Purchases Ledger
After recording each transaction in the
Purchases Journal, the transaction is
posted to the Creditors A/C in the
Purchases Ledger.
At the end of month or year, the total of
the Purchases Journal is posted to the
Purchases A/C in the General Ledger.
P.51
15
Purchases Journal
Posting each
purchases transaction
General Ledger
Purchases
Dr.
Purchases Ledger
Creditors: Celery Co
Cr.
P.52
16
()
Customers (Debtors) demand to return goods to
our company. When we accept the goods returned,
we issue a Credit noteto the customers.
Examples
Goods returned to Cucumber Co in March, 2006
are as follows
March 1, Rabbit Co. returned $50 goods to us
(After deducted 1% trade discounts).
March 10, Pepper Co. returned $10.
You are required to prepare
The Returns Inwards Journal to record the above
transaction.
P.53
17
$
50
10
60
P.54
18
General Ledger
Returns Inwards A/C
Dr.
Posting each
returns transaction
Sales Ledger
Debtors: Carrot Co.
Cr.
P.55
19
20
$
20
10
30
P.57
21
Posting each
transaction in debit
notes
Purchases Ledger
Creditors: Celery Co.
Dr.
General Ledger
Returns Inwards A/C
Cr.
P.58
22
H Classification of T Accounts
T
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Accounts
Personal
Accounts
Debtors
(Sales Ledger)
Creditors
(Purchases
Ledger)
Impersonal
Accounts
Real Accounts
Nominal
Accounts
Records
Records
expenses,
assets
incomes,
and
Liabilities and Capital
in General in General
Ledger
Ledger
P.59
23
Cash Book ()
References
Chapter 15-16(P.152)
P.60
P.61
P.62
2007
11
15
125
$
1000
300
1300
2007
21 200
2007
$
15900
900 110
115
200
131200
900
1300
$
100
800
900
800
P.64
P.65
1 Trade discounts
Offered to attract large quantity purchase.
2 Cash discounts
Offered to encourage early repayment of debts.
Discounts received
P.66
Accounting entries ()
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Debit
Trade Discounts
Discounts
Allowed
Discounts
Received
Credit
No entry is required
Discounts
Allowed
Debtors X Ltd.
X
Creditors Y Ltd.
Y
Discounts
Received
P.67
$9500
$9025
$475
$9500
P.68
$800
$800
$800
$784
$16
P.69
10
P.70
11
Jan 1
Balances: Cash $100, Bank $2000
11 $ 100$ 2000
Jan 5
Cash purchases $500
15$500
Jan 10 Cash Sales $800
110$800
Jan 15 Deposited $400 cash to bank.
115$400
Jan 20 Received a cheque from Mr. Lam for paying $2000 debt, and enjoyed 2% discount.
120$20002%
Jan 25 Paid Mr. Chan by cheque to settle $1500 debts and enjoyed 2% discount.
125$15002%
You are required to prepare
Three columns cash book.
P.71
12
2007
2007
$
11
110
115
120 40
** 40
2007
21
$
100
800
900
2000 15
115
400 125 30
1960
131
4360
** 30
500
400
1470
900
2890
4360
2890
**
P.72
13
P.73
14
P.74
P.75
Imprested System
P.77
P.78
Journal
1
P.79
A Uses of Journal
P.80
2007
Jan 1
Journal
Particular
Dr. Cr.
$
XX
$
XX
XX
3
P.81
4
P.82
Examples of Journal
2007
11
$
$
30000
30000
110
4800
4800
120
1000
2000
3000
6
P.84
Homework:
Use Journal to record the entries:
Ex.
Class work:
Use Journal to record the entries:
:
Ex7.3, 7.4, 7.5 (p.78-79)
:
Ex.7.6X, 7.7X (p.80-81)
7
P.85
P.86
Accrued Expenses
Definition: Accrued expense is an expense
which has been incurred, but has not yet
been paid for.
1100
$
1200
100
1200
1200
P.88
Exercise 1
P.89
220
20
240
240
240
P.90
Prepaid Expenses
Definition:
Prepaid expense is an expense to be
incurred in the following period, but
which has been paid in advance.
P.91
2600 2400
200
2600
2600
P.92
Exercise 2
P.93
390
360
30
390
390
P.94
$5200$330
P.95
10
5200
4800
5200
400
5200
P.96
11
330
360
30
360
360
P.97
12
Revenue in arrears
Definition:
Revenue in arrears / Accrued revenue
means other revenue earned by the
firm which has not been received at the
end of the period.
P.98
13
P.99
14
2400
2200
200
2400
2400
P.100
15
Exercise 4
P.101
16
3600
3300
300
3600
3600
P.102
17
Revenue in advance
Definition:
Revenue in advance / Prepaid revenue is the
other revenue to be earned in the next period
but which has been received in advance
P.103
18
7200
$
7800
600
7800
7800
P.104
19
Exercise 5
P.105
20
4800
5200
400
5200
5200
P.106
21
$6500$1820
$140
P.107
22
6000
6500
500
6500
6500
P.108
23
1960
1820
140
1960
1960
P.109
24
Rent
Rental income
Rates
Commission
received
P.110
25
20081231
$
P.111
26
This accounting
period
Last accounting
period
Accrued expenses
Add
Less
Prepaid expenses
Less
Add
Accrued revenues
Add
Less
Prepaid revenues
Less
Add
P.112
27
Balance Sheet(Extracted)
as at 31 December 2008
$
Current Assets
Prepaid expenses
Accrued incomes
Current Liabilities
Accrued expenses
Prepaid incomes
P.113
28
()
20081231
$
P.114
29
Capital expenditure
Recording as the
cost of fixed
assets
Revenue expenditure
Recording as
expenses
P.116
Capital Expenditures
P.117
P.118
Revenue Expenditures
P.119
P.120
Exercises
Ex. 21.6 (p.242)
Ex. 21.8 (p.243)
Ex. 21.9 (p.243)
Ex. 22.3 (p.238)
Ex. 22.5 (p.239)
Ex. 22.6 (p.239)
P.121
Capital Income
Revenue Income
9
P.123
A Definition of Depreciation
Depreciation is
cost allocation of
fixed assets,
consumed during
its useful life.
Depreciation is
the expense of
the company.
P.125
B Causes of Depreciation
Physical
deterioration, e.g.
wear and tear,
erosion, rusting, rot
and decay.
Economic factors, e.g.
obsolescence,
inadequacy.
Time factor, e.g.
amortization
(patent); depletion
(silver mines)
P.126
1 Straight-line Method
Calculating the
average depreciation
of the fixed assets.
The depreciation is
the same during the
useful lives.
P.127
1 Straight-line Method
Depreciation Cost*Residual Value** Estimated Useful life
OR Depreciation Cost*Residual Value** Depreciation rate
1
***
***
*
**
P.128
Repairs
Depreciation
1st
year
2nd
year
3rd
year
4th
year
5th
year
P.129
($5000$500)10%
$450
P.131
2
*
* / /
P.132
$200010%$200
$2000$20010%$180
$2000$200$18010%
$162
P.133
10
Repairs
Depreciation
1st
year
2nd
year
3rd
year
4th
year
5th
year
P.134
11
$400010%$400
$4000$40010%$360
P.135
$4000$400$36010%$324
12
3 Revaluation Method
Calculate low valued fixed
assets, e.g. Loose tools,
Stationery.
e.g. The details of the
loose tools of Pepper Co.
are as follows:
Opening balance of loose
tools $500
Bought $1,000 loose tools
during 2005
Closing balance of loose
tools $400
Calculate the depreciation
for loose tools in 2005
$500
2005
$1,000
$400
P.136
13
2005
2005
$500
$1000
$1500
$400
$1100
P.137
14
$800
2008$2,000
$900
P.138
15
2005
$800
$2000
$2800
$900
2005 $1900
P.139
16
P.140
17
P.141
18
19
1.
2.
P.143
20
21
P.145
22
P.146
23
Balancing-off: Calculate
the profit or loss on
disposal.
If Dr. is larger than Cr., there
is loss on disposal
Dr. Profit and loss
Cr. Disposal: Motor vehicles
Or
If Cr. Is larger than Dr., there
is gain on disposal
Dr. Disposal: Motor vehicles
Cr. Profit and loss
P.147
24
200611
$500
$50
52008
11$200
12
31
20062007
2008
(a)
(b)
(c)
(d)
P.148
(e) 25
(a)
2006
$ 2006
$
11 500 1231 500
2007
2007
11 500 1231 500
2008
2008
11 500 11 500
P.149
26
(b)
2006
$ 2006
1231 90 1231
$
90
2007
2007
1231 180 11
1231
180
90
90
180
2008
2008
11180 11 180
P.150
27
(c)
2008
11
$ 2008
$
500 11 180
11 200
1231* 120
500
500
*
P.151
28
(d)
2006
2007
1231
$
90
90
2008
120
P.152
29
(d)
1231
$
2006
500
90 410
2007
500
180 320
P.153
30
10
A Bad Debts
Definition: It is the
amount of debt that the
debtor is unable to
repay.
Accounting records:
Dr. Bad Debts
Cr. Debtors
Dr. Profit and Loss
Cr. Bad Debts
P.155
Example:
was insolvent. A
Co. decided to
write off the
debt.
P.156
Answer:
$100
$100
$100
$100
P.157
Exercise
B Co. sold $200
goods to Mr.
Cheung. Mr.
Cheung became
bankrupt. B Co.
decided to write
off the debts.
$200
P.158
Answer
Dr. Bad Debts $200
Cr. Debtors: Mr.
Cheung
$200
$200
$200
Dr. Profit and loss $200
$200
$200
P.159
Definition: Provision
for bad debts is an
expense that
likely to be bad.
Calculation of
Provision for bad
X ?%
debts
(Debtors - Bad debts) X ?%
P.160
20X5
20X6
20X7
20X8
Bad
debts
written
off
Provision for
bad debts
(1%)
Increase /
Decrease in
Provision for
bad debts
30,400
200
302
+302
283
-19
453
+170
150
-303
28,700
45,900
15,300
400
600
300
Entries to record
the Provision for
bad debts
Increase in Provision
for bad debts:
Dr. Profit and loss
Cr. Provision for bad
debts
Decrease in Provision
for bad debts:
Dr. Provision for bad
debts
Cr. Profit and loss
P.162
Example 1
On 31 December 2008,
the balance of debtors
is $1,020. $20 debts is
needed to be written
off. The rate of
provision for bad
debts is 3%.
20081231
$1 020$20
3%
P.163
$20
$20
$20
$20
$30
()$30
Answer
Dr. Bad Debts
Cr. Debtors
$20
$20
P.164
Example 2
On 31 December 2008,
the balance of debtors
is $2,040. $40 debts is
needed to be written
off. The rate of
provision for bad
debts is 3%. The
provision for bad
debts for last year was
$70.
20081231
$2 040$40
$70
3%
P.165
Answer
$40
$40
$40
$40
()$10
$10
$40
$40
P.166
()
$
Decrease in
Provision
for bad
debts
()
()
P.167
()
()
:
P.168
Exercise
The debtors for Chong Ho
Co. on 31 December 2005
was $10,200. $200 debts
would be written off. The
company decided to
provide 5% provision for
bad debts on the debtors
after deducting the bad
debts.
You are required to prepare:
(a) Provision for bad debts
(b) Profit and loss (extract)
(c) Balance sheet (extract)
20051231
$10 200$200
5%
2005
(a)
(b)()
(c)()
P.169
Definition:
Provision for
discount allowed
shows the
estimated total
be deducted when
debtors pay their
accounts within
Increase in Provision
for discounts allowed:
discounts allowed
Decrease in Provision
discounts allowed
Example
The debtors for Ka Ka Co.
was $4,000 on 31
December 2008. $200
provision for bad debts
would be provided for
2008. The company
made a provision for
discounts allowed of 2%
on the remaining debtors.
Required:
Show the Provision for
discount allowed A/C to
record the above
transaction.
20081231
$4000
$200
2%
P.172
Answer
$76
Dr. Profit and loss $76
()
Cr. Provision for bad
$76
debts (Increase) $76
($4000-$200) X 2%
P.173
P.174
Accounting records:
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Cr. Debtors
2 Debts written off and
recovered in different year
Dr. Debtors
Cr. Bad debts recovered
Dr. Cash / Bank
Cr. Debtors
Dr. Bad debts recovered
Cr. Profit and loss
P.175
Example:
20051231
$2002006
71
P.176
Example:
$200
$200
$200
$200
$200
$200
$200
$200
P.177
11
P.178
P.179
B.
Bank Statement
Dr. Cr.
2005
1/12
$
Bal. b/f
15/12 Cheque
31/12 Bank
charges
Bal.
$
2005
400 Cr
1/12
60 460 Cr
20
440 Cr
400()
15/12
31/12
60 460()
440()
20
P.180
2.
Unpresented Cheques
The drawee ()has
not yet presented ()
the cheque drawn by the
firm into his bank.
(Payment)
Uncredited Items / Bank
lodgement not yet credited
by bank The firm has
not yet presented ()
the cheque in the bank. /
The deposited cheque has
not yet appeared in the
bank statement (Receipt)
1.
()
2.
()
P.181
Recorded in Bank
Statement, but not
recorded in Cash Book:
1. Credit transfer Direct money transfer
to the firmss bank
account without
using a cheque.
(Receipt)
2. Dishonoured
cheques The drawer
() may not
have enough money
in the current account
causing the bank
cannot pay money to
the drawee, i.e. the
firm. (Payment)
[Dr.Debtors Cr.Bank]
1.
(
)
2.
()
P.182
3 -
()
4
(
)
()
6
(/
)
P.183
Stale Cheques
Cheques have not
presented more than 6
months. If the entries
was recorded, the
correcting entries is Dr.
Bank Cr. Creditors
7 -
P.184
transfer, Dishonoured
cheques, Bank charges,
Standing Order, Autopay,
Post-dated cheque, Stale
Cheques
Prepare the Bank
Reconciliation Statement
with the remaining items:
Unpresented Cheques ,
Uncredited Items / Bank
lodgement not yet credited
by bank
P.185
Cash Book
$
Balance b/f
Bank charges
Credit
transfer
Dishonoured
cheques
Standing
order
Autopay
Balance c/f
P.186
20061231
()
P.187
10
(2)
P.188
11
12
20061231
$
P.190
13
(3)
P.191
14
15
20061231
$
P.193
16
Summary:
Unpresented Cheque
Credit transfer
Uncredited items
Standing order
Bank charges
Autopay
Dishonoured cheques
+
P.194
17
13
(1)
-
(2)
-
P.196
(1)
(2)
(3)
(4)
(5)
(6)
P.197
(1)Errror of Commission:
entered in a wrong
persons A/C
Sales to Mr Cheung
recorded in Mr. Chens A/C
e.g. 1
On 1 May 2009, credit sales
of $500 to A Co. wrongly
recorded in B Co.
(1)
(1)
200951
$500
P.198
Correcting Entry:
Journal
Dr.
$
2009
May 1
DebtorsA Co.
DebtorsB Co.
Cr.
$
500
$
$
2009
51
500
500
500
P.199
(2)Errors of Principle
entered in the wrong type
of A/C
Motor expenses A/C
wrongly entered in the
Motor Car A/C
e.g. 2
On 1 June 2009, purchases
$1,000 machinery wrongly
recorded in the purchases
A/c
(2)
(2)
200961
$1000
P.200
Correcting Entry:
Journal
Dr.
$
2009
June 1
Machinery
Purchases
Cr.
$
1000
2009
61
1000
Dr.
$
Cr.
$
1000
1000
P.201
(3)
(3)
200971
$500
$5000
P.202
Correcting Entry:
Journal
Dr.
$
2009
July 1
Sales
Debtors
C Co
Cr.
$
4500
Dr.
$
2009
71
4500
Cr.
$
4500
4500
P.203
(4)
(4)
200881
$300
P.204
Correcting Entry:
Journal
Dr.
$
2008
Aug. 1
Purchases
CreditorsD Co.
Cr.
$
300
2008
81
300
Dr.
$
Cr.
$
300
300
P.205
(5)
(5)
2008930
$100
$100
P.206
Correcting Entry:
Journal
Dr.
$
2008
Sept. 1
Sales
Purchases
Cr.
$
100
2008
930
100
Dr.
$
Cr.
$
100
100
P.207
(6)
(6)
2008101
$500
P.208
Correcting Entry:
Journal
Dr.
$
2008
Oct. 1
Cash
DebtorsC Co.
($500x2)
Cr.
$
1000
Dr.
$
2008
101
1000
-
($500x2)
Cr.
$
1000
1000
P.209
14
1. Incorrect addition
in any account
2. Omit one of the
entry (debit /
credit)
3. The amount in
debit is different in
the credit side
1.
2.
3.
P.211
B Suspense Account
A suspense
account is an
account showing a
balance equal to
the difference in
the trial balance
totals.
P.212
P.213
Example:
On 31 December 2008, there is a shortage of $77 on debit
side of Trial Balance. A suspense account was opened for
the difference. In 8 January 2009, the following errors
made in 2008 was found:
(i) Cheque $150 issued to Mr. Kwan only recorded in
Cash Book, but omitted in Mr. Kwans ledger account.
(ii) Purchases undercasted by $20.
(iii) $93 cheque received from Mr. Sun recorded in the
Cash Book, but omtted in Mr. Suns ledger account.
You are required to prepare
(a)
Journal to correct the above errors;
(b)
Suspense account
(c)
Statement correcting the net profit ( Net profit is $2200)
P.214
:20081231$77
$77
(i)$150
(ii)$20
(iii)$93
(a)
(b)
(c)($2200)
P.215
(a)
Journal
Dr.
$
2008
Jan. 8
(i)
Cr.
$
150
150
20
20
93
93
P.216
(a)
2008
18 (i) -
(ii)
(iii)
-
150
150
20
20
93
93
P.217
(b)
Suspense A/C
2008
Jan.
8
2008
Balance b/f
15
0
93
20
(ii) Purchases
170
17
0
P.218
(b)
2008
18
2008
77 18 -
93
170
150
20
170
P.219 10
(c)
Statement correcting net
profit
for the year ended 31 December
2008
$
Net profit before corrections
Add : Purchases undercast
Net profit after corrections
2200
20
P.220 11
2180
(c)
20081231
$
2200
20
2180
P.221 12
Control Accounts
Reference:
Chapter 27 (p. 338)
P.222
P.223
Revision
Books of original entries and Ledgers
7 books: Sales journal, Purchases
journal, Returns inwards journal,
Returns outwards journal, Cash book,
Petty cash book, Journal
3 ledgers: Sales ledger, Purchases
ledger, General ledger
Original
documents
7 books
Posting
3 ledgers
P.224
Original
documents
Sales /
Purchases
Journals
(7 books)
General ledger
Sales and
Purchases a/c
Sales /
Purchases ledgers
Debtors /
Creditors a/c
Trial
Balance
posting
extracting
P.225
2008
Dec 1 Balance b/f
2008
(h)
31 Sales
(b)
31 Returns inwards
(i)
(c)
31 Cash / Bank
(j)
31 Set-off
(k)
31 Interest received
(e)
31 Discounts allowed
(l)
(f)
31 Bad Debts
(m)
31 Balance c/f
(g)
31 Balance c/f
(n)
X
P.226
Items
(a)
(f)
Returns inwards
(j)
(k)
(l)
Discounts allowed
Sources
Sales ledger
Sales journal
Cash book
Cash book
Journal
Journal
Sales ledger
Sales ledger
Returns inwards journal
Cash book
Journal
Cash book
Journal
P.227
Sales ledger
2008
(g)
31 Returns outwards
(b)
31 Purchases
(h)
31 Cash / Bank
(c)
31 Cash / Bank
(i)
31 Set-off
(d)
31 Bank
(j)
31 Discounts received
(e)
31 Interest expenses
(k)
31 Balance c/f
(f)
31 Balance c/f
(l)
P.228
Items
Sources
Purchases ledger
Cash book
Journal
Cash book
Purchases ledger
Purchases ledger
Purchases journal
Cash book
Cash book
Journal
PurchasesP.229
ledger
15
NON-PROFIT MAKING
ORGANIZATION
Reference:
Chapter 28 (p. 359)
28 (p. 385)
P.230
2
P.231
A summary of actual
receipts and
payments
Similar to Cash Book
3
P.232
XXX
XX
Subscriptions received
in 2009
XXX
Stadium repairs
XX
Rental income
XX
XXX
P.233
4
20091231
$
P.234
5
An account used to
calculate the
surplus (net profit)
or deficit (net
loss).
Similar to a profit
and loss account.
The income and
expenses recorded
subject to the yearended adjustment,
i.e. accruals and
prepayment.
6
P.235
20091231
$
XX
XX
XX
XX
$
XXX
XX
XX
P.237
8
If a non-profit making
organization involves
activities making
profit, a bar trading
A/C is used to
calculate the profit
or loss.
E.g. a bar operated in
a golf club.
Expenses related to
the bar operation are
recorded in the Bar
Trading A/C (not in
the Receipts and
Payment A/C
P.238
Bar Taking
LessCost of goods sold
Opening bar stock
AddBar purchases
LessClosing bar stock
Gross profit
LessWages of bartender
Profit to Income and Expenditure A/C
1000
100
500
600
150
450
550
150
400
P.239
10
20061231
$
1000
100
500
600
150
450
550
150
400
P.240
11
Balance Sheet
+ Liabilities = Assets
12
P.241
Fixed Assets
Property
Current Asset
Bar Stock
Cash
Less: Current Liabilities
Bar Creditors
10,000
1,000
1,000
2,000
1,000
Financed by:
Accumulated fund as at 31 December 2008
Add Surplus
400
1,000
11,000
10,600
P.242
13
20051231
10,000
1,000
1,000
2,000
1,000
1,000
11,000
10,600
400
11,000
P.243
14
F
If
Subscription
there is no
subscription in arrear or
in advance, the amount
of subscription in the
Receipts and payment A/C
will be recorded in the
Income and Expenditure
A/C
If there are subscription
in arrear and advance
presented, the following
adjustments are to be
made:
Subscription (in I & E)
= Subscription (in R & P)
+ In arrear (this year)
- In advance (this year)
- In arrear (last year)
+ In advance (last year)
15
P.244
arrear and
subscriptions in
16
P.245
G
Donations and Entrance Fees
17
P.246
Life Membership
18
P.247
16
Manufacturing Accounts
Reference
Chapter 29 (p. 385)
35
(p. 424)
P.248 1
Manufacturing Company ()
and Manufacturing Accounts ()
P.249 2
Manufacturing Accounts
Manufacturing accounts is
used to calculate the
Production cost of goods
completed.
Prime cost
Factory overhead
Opening work-in-progress
Closing work-in-progress
Production cost of goods completed
P.250 3
Direct materials
Direct labour
Direct expenses
Prime cost
P.251 4
C1
C1
5000
49000
54000
3000
51000
5000
50000
1000
51000
2000
49000
54000
3000
51000
P.252 5
C2
Direct Labour
C3
Direct Expenses
P.253 6
manufactured items;
factory, wages of
foremen, depreciation
of the factory plant and
machinery
P.254 7
Other
Administrative expenses
(e.g. wages of the
management, rent of the
office, depreciation of office
equipment)
Selling and distribution
expenses (e.g. wages and
commission of the
salesmen, carriage
outwards, depreciation of
delivery van, advertising
expenses. )
Administrative expenses
and Selling and distribution
expenses are recorded in
the Profit and Loss
Accounts.
)
(
P.255 8
5000
49000
54000
LessStock of raw materials as at 31 Dec 20X7 3000
Cost of raw material consumed
51000
P.256 9
Factory Overhead
Factory electricity
Indirect wages
Depreciation of machinery
Factory rent
15000
5000
8000
20000
$
51000
10000
20000
81000
48000
129000
P.25710
129000
AddWork-in-progress as at 1 Jan 20X7
20000
149000
Less Work-in-progress as at 31 Dec 20X7 25000
Production cost of goods completed c/d 124000
P.25811
20071231
$
50000
1000
51000
2000
$
5000
49000
54000
3000
51000
P.259
51000
10000
20000
81000
15000
5000
8000
20000
48000
129000
P.260
129000
20000
149000
25000
124000
P.261
Trading Account in
Manufacturing company
Sales
Less:Cost of goods sold
300000
50000
AddProduction cost of goods completed 124000
174000
Less: Stock of finished goods as at 1 Jan 20X760000 114000
Gross profit
186000
15
Stock of finished goods as at 1 Jan 20X7
P.262
G
Download site: http://www.just.coms.hk
20071231
$
300000
50000
124000
174000
60000 114000
186000
P.263
Current assets
StocksRaw material
Finished goods
Work-in-progress
Debtors
Bank
Cash
3000
60000
25000
80000
70000
20000
58000
P.26417
H ()
Download site: http://www.just.coms.hk
()
20071231
3000
60000
25000
80000
70000
20000
258000
P.265