BFA507 - The Accounting Framework
Assignment – Semester One 2009
Manual Accounting Task - Borderline Ltd
The objective of this assignment is for you to become familiar with the process of entering transaction data into a manual accounting system and to test your understanding of accounting concepts and practice. To undertake this assignment, you need to enter the transaction data contained in this information sheet in the appropriate journals and ledgers, prepare the required reports and answer the additional questions detailed below.
Working in groups
As indicated in the Unit Outline, you are required to work in groups of two or three on the assignment. If you are a Distance student you may opt to undertake this assignment individually. I would assume face to face students have already formed groups.
A group performance form can be found at the end of this information sheet. This form must be attached to the assignment when submitting the assignment. If it is drawn to my attention that a member of a group is not making a reasonable contribution, then that person will be required to submit an individual assignment and will be subject to the late penalty.
The assignment will be marked out of 50. Part A is worth 40 marks, Part B is worth 20 marks and Part C is worth 20 marks. Part A involves entering the transaction data into the manual accounts and Part B involves entering a set of conceptual questions.
Penalties will be incurred for:
• Late submission (10% of mark deducted for each working day late);
• Face to face students ensure your work includes the names of all group members and ID number;
• Complete the group performance form (face to face students)
Part A – Manual Accounting (40 Marks)
Complete the following tasks for the month of June 2018 for Borderline Ltd.
• Read the attached information carefully.
• Enter the transactions into the appropriate journals – you are expected to use General and Special Journals.
• Post the transactions to the General Ledger accounts and balance the Accounts. (I recommend you also prepare a trial balance at this stage to check your work). Enter Subsidiary Ledgers as appropriate.
• Prepare a bank reconciliation, along with any general journal entries required.
• Complete any required adjusting and closing journal entries and prepare a post-closing trial balance.
• Prepare a Statement of Financial Performance for June and a Statement of Financial Position as at 30 June 2018.
You must submit the following information:
• All journals and the full set of T accounts.
• Post Closing Trial Balance at 30 June
• Statement of Financial Performance for June
• Statement of Financial Position as at 30 June
• Bank Reconciliation at 30 June
• Company information for Borderline Ltd:
• Borderline Ltd run a small to medium sized wholesale business that sells building supplies to local builders and other retailers in Tasmania. The business was set up by James and Jess Jordenson who registered the company on 1 July 2016 by issuing 60 000 $1 par shares. James and Jess were allotted 52% of share capital and the balance to the general public.
• The company has not yet declared or paid any dividends. In the first year of its life the company made a profit after tax of $33 730.
• Borderline Ltd uses sales, purchases, cash receipts, cash payments and general journals along with subsidiary ledgers for debtors and creditors. The majority of their customers pay in cash but they do offer credit to a handful of valued customer. When Borderline makes credit sales, the terms are 3/10, n/10.
• Borderline rent a local warehouse and shopfront paying rent of $1500 per month.
• The company’s shop fittings are being depreciated over 10 years with an estimated residual value of $5 400. The company’s one Motor Vehicle, a delivery van, is being depreciated over 5 years with an estimated residual value of $5 000.
• The loan is a 5 year loan fully payable in five years time with interest to be paid at 9% per annum in arrears on the 1st July each year. Interest for the year to date (up to 31 May) has already been recorded in the accounts.
• Provision for doubtful debts is always adjusted at the end of each month to equal 3% of the value of total debtors at the end of that month.
• The company account for GST on an accrual basis and reconcile and pay GST every quarter. All figures are GST inclusive. GST was last paid in April this year and is next due to be paid in July 2018.
• Joenhysen Ltd prepare their financial reports on a monthly basis at a cost of $250.
• All the transaction information provided includes GST unless otherwise indicated.
• All figures are to be rounded to the nearest dollar.
The trial balance of the company at 31 May 2018 was as follows:
Post Closing Trial Balance
at 31 May 2018
1000 Cash at bank 25 200
1100 Debtors control 9 000
1200 Provision for doubtful debts 300
1300 Inventory 85 000
1400 Shop Fittings and Equipment 60 000
1410 Acc depreciation –Shop fittings and Equip 10 465
1500 Motor Vehicles 35 000
1510 Accumulated depreciation –M/Vehicles 11 500
2000 Creditors control 14 000
3000 Share capital 60 000
3100 Retained profits 81 735
5000 GST Paid 4 300
5010 GST Collected 8 500
5020 Loan 32 000
$218 500 $218 500
Schedule of Debtors Schedule of Creditors
as at 31 May 2018 as at 31 May 2018
Shade Ltd 2 750
Roar Ltd 1 300 Mane Ltd 250
Zane Ltd 1 700 Purple Ltd 3 200
Jones Ltd 1 100 Pink Ltd 0
Wide Ltd 1 900 Yard Ltd 4 550
Mane 250 Zale Ltd 6 000
$9 000 $14 000
The following transactions occurred in June 2018 for Borderline Ltd:
June 1 Received a cheque for $1 200 from Roar Ltd in full settlement of its
account and deposited it in the bank account
3 Sold inventory for $905(before any discounts have been applied) to Jones Ltd on credit (the company was given a trade discount of $80, then the normal credit terms) COGS was $420
4 Paid rent for June $1 500, chq no. 561 (Assume the rent is GST free)
5 Purchased inventory on credit from Pink $1 397, terms 2/10, n/15
6 Paid Yard $4 500 being full settlement of amount owing, chq no. 562
8 Received and deposited payment in full from Wide Ltd (no discount
11 Paid Pink in full by cheque, chq no. 563
12 Paid telephone account by cheque of $320, chq no. 564
13 Received a cheque for $700 from Jones Ltd in part payment of their account and deposited it in the bank account (no discount allowed).
14 Banked cash sales for the first two weeks of the month totalling $20 900 (COGS was $9 800).
14 Withdrew cash from the bank account to pay wages totalling $5 200, gross
wages were $7 400 (wages before tax)
17 Paid $220 for cash register rolls and other stationery, chq no.565
18 Sold inventory on credit to Zane Ltd $2 750 (COGS was $1 200)
21 Sold inventory on credit to Wide $715 (COGS was $320)
23 Paid Purple Ltd $3 200 (no discount allowed), chq no. 566
27 Paid sundry expenses of $435 (GST free items), chq no. 567
28 Wrote off the full amount owed by Mane Ltd as a bad debt
29 Deposited Cash Sales of $27 500 ( COGS was $12 000)
30 Withdrew cash from the bank to pay wages of $5 600, gross wages were
30 Zane Ltd returned inventory which we had sold to them for $154 (COGS was $70). The returned inventory was in good condition and returned to the shelves and a credit note was issued to them.
30 Purchased inventory on credit from Purple Ltd of $4510 after being allowing a trade discount of $90 and on terms of 1/10, n/30
(COGS was $2 100)
30 Banked Cash Sales for the remainder of the month totalling $6 200.
30 Paid the balance of the account for Zale Ltd (no discount was allowed) chq
• Gross Wages owing at the end of the month total $1 320 and electricity owing for the month of June is $1 100.
• Advertising owing for the month was $3 500
• Income tax for the month of June 2018 is estimated to be $12 430
No entry had been made in the accounts to allow for any of these items.
The bank statement received at the end of June shows the following information:
2018 Debit Credit Balance
June 1 Balance 20 770 CR
deposit 5 400 26 170 CR deposit 1 200 27 370 CR
3 chq.no. 498 650 26 720 CR
4 chq.no. 499 320 26 400 CR
5 chq no. 561 1 500 24 900 CR
8 chq. no. 562 4 500 20 400 CR
deposit 1 900 22 300 CR
14 deposit 700 23 000 CR
14 deposit 20 900 43 900 CR
14 cash withdrawal 5 200 38 700 CR
19 chq. no. 564 320 38 380 CR
27 chq. no. 566 3 200 35 180 CR
29 deposit 27 500 62 680 CR
30 cash withdrawal 5 600 57 080 CR
31 Bank fees/charges 23 57 057 CR
31 Interest 83 57 140 CR
At 31 May 2018 there were two outstanding cheques- cheque no. 498 for $650 and cheque no. 499 $320 and one outstanding deposit of $5 400.
Part B - Interpretative Questions (20 Marks)
There are 4 questions in Part B. Each question is worth 5 marks. As a guide no response to each question should exceed 200 words. You must write your answers in your own words. If you do use any other resources in preparing your answer you will need to acknowledge these as a reference (see the Unit Outline and the Faculty’s Guide for Students).
(a) What does the information in the financial reports tell us about a company? What does the information in the reports you have prepared for Borderline Ltd tell us about this company?
(b) What is the difference between a pre and post adjusting/closing trial balance? Why would you want to prepare both?
(c) Explain the purpose of both adjusting and closing entries providing an example(s) for Borderline Ltd of both.
(d) What is the purpose of preparing a bank reconciliation? What information did you discover about this company by preparing a bank reconciliation?
Part C – Short Essay [20 marks]
James and Jess have been avid environmentalists for many years. While they lead personal lives that reflect this concern they wonder how this might become part of the way Borderline Ltd is conducted.
Write a brief essay indicating the following to assist James and Jess in advising their Board of Directors what actions the company might take. While together they hold 52% of the share capital they wish to be seen as both transparent and collegial in involving other interested parties.
1. What environmental concerns may need to be addressed
2. How these concerns might be addressed
3. What might be the financial impact of these decisions
4. Why you believe it is important to address these concerns
BFA507 The Accounting Framework
Assignment – Group Performance Report
(1) Circle the appropriate response to the following questions:
- we were able to meet at a time convenient to each of us YES / NO
- we were each given an opportunity to contribute to the assignment YES / NO
- we each contributed fairly to the assignment YES / NO
If each member of your group is unable to answer “YES” to any of these questions, please give reasons.
(2) Explain briefly how work on the assignment was distributed between the members of your group.
Signed __________________________ __________________________
(THIS FORM SHOULD BE COMPLETED AND SUBMITTED WITH THE ASSIGNMENT. If you need more space, write on the reverse of this sheet.)