Accounting Principles

ACC106 Accounting Principles
This document explains the requirements for the Task 2A group task.
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Tony Booker decides to start a new business (Booker’s Sporting Goods) as a sole
trader and commences operations on 1 July 2022. The business will sell a range of
sporting goods (eg rugby league balls, cricket bats etc) online from a warehouse in
Caloundra West, Queensland.
The chart of accounts for the business is shown below:
Account
number
Account name
Assets 1001 Cash at bank
1002 Accounts receivable
1003 Inventory
1004 Office supplies
1005 Prepaid rent
1006 Prepaid advertising
1101 Office equipment
1102 Accumulated depreciation – office equipment
1103 Warehouse fixtures and fittings
1104 Accumulated depreciation – warehouse
fixtures and fittings
Liabilities 2001 Accounts payable
2002 Wages payable
2003 Interest payable
2004 Phone and internet payable
2101 Bank loan
Equity 3001 T. Booker, Capital
3002 Drawings
3101 Profit or loss summary
Income 4001 Sales income
Expenses 5001 Cost of sales
5002 Advertising expense
5003 Wages expense
5004 Insurance expense
5005 Phone and internet expense
5006 Electricity expense
5007 Office supplies expense
5008 Rent expense
5009 Interest expense
5010 Depreciation expense – office equipment
5011 Depreciation expense – warehouse fixtures
and fittings
Specific task requirements:
Complete the following steps in the financial accounting process, using the EXCEL
spreadsheet template provided on Blackboard (‘ACC106 S2 2022_Task 2A
template.xls’) for Booker’s Sporting Goods for the month of July 2022:
Step 1: Record the inventory purchases and sales transactions in the
inventory schedules:
• NOTE: The business uses the perpetual inventory system and
the FIFO (first-in-first-out) cost flow assumption (refer to
example in Step 1 worksheet and example 10.17 on pp. 558-559
of Deegan textbook);
• Use appropriate Excel formulae to calculate totals/balances;
• Two (2) decimal places should be used in all schedules;
Step 2: Record ALL of the transactions below from 1 to 31 July 2022 in the
general journal:
• Link account names and numbers from chart of accounts to the
general journal entries for each transaction;
• For inventory purchase transactions:
• only 1 entry is required for all inventory items purchased
in each transaction;
• link to total dollar amounts under ‘Purchased’ in
inventory schedules in step 1;
• For each inventory sales transaction, 2 journal entries are
required:
1. Based on selling prices (1 entry for all inventory items
sold in each transaction):
▪ Debit Cash at bank or Accounts receivable
▪ Credit Sales income
2. Based on cost prices (link to total dollar amounts under
‘Sold’ in inventory schedules in step 1) (1 entry for all
inventory items sold in each transaction):
▪ Debit Cost of sales
▪ Credit Inventory
• Include a brief narration/explanation for all entries;
• Zero (0) decimal places should be used in all entries
Step 3: Post/transfer the general journal entries to the relevant ledger accounts:
• Link account names and amounts from general journal entries
to ledger accounts;
• Use appropriate formulae to calculate balances;
• Zero (0) decimal places should be used in all accounts
Step 4: Using the additional information below:
(a) Record the necessary adjusting entries in the general journal:
• Link account names and numbers from chart of accounts to
general journal entries;
• Include a brief narration/explanation for all entries;
• Zero (0) decimal places should be used in all entries
(b) Post the entries to the relevant ledger accounts:
• Link account names and amounts from general journal entries
to ledger accounts;
• Zero (0) decimal places should be used in all accounts
Step 5: Prepare a trial balance of all ledger accounts:
• Refer to example on p. 436 of Deegan textbook;
• Link closing balances from ledger accounts (after step 4(b)) to
trial balance;
• Zero (0) decimal places should be used;
• Use appropriate Excel formulae to calculate totals
Step 6: Prepare an income statement for the month ending 31 July 2022:
• Refer to example on p. 523 of Deegan textbook;
• Gross profit should be calculated;
• Expenses should be listed as they appear in the chart of
accounts and tax expense should be ignored;
• Link account balances from trial balance (Step 5) to income
statement;
• Use appropriate Excel formulae to calculate totals
Step 7: (a) Record the necessary closing entries in the general journal:
• Link account names and numbers from chart of accounts to
general journal;
• Link closing balances from ledger accounts to general journal;
• Include a brief narration/explanation for all entries;
• Zero (0) decimal places should be used in all entries
(b) Post the entries to the relevant ledger accounts:
• Link account names and amounts from general journal to
ledger accounts;
• Zero (0) decimal places should be used in all accounts
Step 8: Prepare a post-closing entry trial balance including all ledger accounts
still open after closing entries have been recorded and posted:
• Refer to example on p. 438 of Deegan textbook;
• Link closing balances from ledger accounts (after step 7(b)) to
post-closing entry trial balance;
• Zero (0) decimal places should be used;
• Use appropriate Excel formulae to calculate totals
Step 9: Prepare a balance sheet as at 31 July 2022:
• Refer to example on pp. 438-439 of Deegan textbook;
• For non-current assets, accumulated depreciation should be
shown and subtracted from asset balances. Net asset balances
should also be shown;
• Link account balances from trial balance (Step 8) to balance
sheet;
• Zero (0) decimal places should be used
• Use appropriate Excel formulae to calculate totals
Transactions for 1 to 31 July 2022:
Below are the transactions for Booker’s Sporting Goods for its first month of
operations:
1 July Tony Booker invested $25,000 of his own cash to start the
business.
1 July Borrowed $75,000 cash from the NBA Bank on a 5-year bank
loan.
1 July Signed a 3-year commercial lease to rent a vacant warehouse in
Caloundra West. Prepaid $36,000 cash in advance for the first
12 months’ rent on the warehouse till 30 June 2023.
1 July Purchased office equipment for $8,350 cash.
1 July Smith & Sons installed various fixtures and fittings in the
warehouse. The total cost was $21,545 which is due to be paid
in 35 days.
2 July Purchased office supplies for $350 cash.
2 July Purchased the following inventory items from various suppliers
on 14 days credit:
• Gray Nicolls cricket bats: 50 bats @ $45.60 per bat;
• Wilson basketballs: 35 balls @ $27.50 per ball;
• Adidas rugby league boots: 30 pairs @ $57.25 per pair
• Kookaburra hockey sticks: 25 sticks @ $38.40 per stick;
• Yonex tennis racquets: 40 racquets @ $67.80 per racquet;
• Everlast boxing gloves: 20 pairs @ $21.65 per pair;
2 July Prepaid $7,350 cash to MixFM Advertising for a multimedia
advertising campaign across the remainder of 2022.
3 July Sold the following inventory items for cash:
• 25 Gray Nicolls cricket bats for $125 per bat;
• 22 Wilson basketballs for $69 per ball;
• 18 pairs of Adidas rugby league boots for $149 per pair;
• 17 Kookaburra hockey sticks for $87 per stick;
• 23 Yonex tennis racquets for $135 per racquet;
6 July Sold 5 pairs of Everlast boxing gloves on credit for $65 per pair.
Amount is due from customer within 14 days.
8 July Paid a total of $3,520 wages in cash to 5 casual employees.
12 July Paid cash to suppliers for inventory purchased on credit on 2
July.
13 July Purchased the following inventory items from various suppliers
on 14 days credit:
• Gray Nicolls cricket bats: 15 bats @ $48.20 per bat;
• Wilson basketballs: 20 balls @ $31.25 per ball;
• Adidas rugby league boots: 17 pairs @ $64.30 per pair
• Kookaburra hockey sticks: 10 sticks @ $41.55 per stick;
• Yonex tennis racquets: 20 racquets @ $75.40 per racquet;
• Everlast boxing gloves: 8 pairs @ $27.50 per pair;
14 July Paid a total of $3,470 wages in cash to 5 casual employees.
16 July Received amount owing from customer for credit sale on 6 July.
17 July Sold the following inventory items for cash:
• 20 Gray Nicolls cricket bats for $128.50 per bat;
• 16 Wilson basketballs for $73 per ball;
• 12 pairs of Adidas rugby league boots for $155 per pair;
• 10 Kookaburra hockey sticks for $91.25 per stick;
• 28 Yonex tennis racquets for $139.50 per racquet;
• 10 Everlast boxing gloves for $68.75 per pair.
20 July Paid insurance expense for July of $1,230 in cash.
21 July Sold 10 Wilson basketballs for $75 per ball to a customer on
credit. Amount is due from customer within 14 days.
21 July Paid a total of $3,650 wages in cash to 5 casual employees.
22 July Paid cash to suppliers for inventory purchased on credit on 13
July.
23 July Sold 5 Gray Nicolls cricket bats for $133.60 per bat and 4 pairs
of Everlast boxing gloves for $72.15 per pair to a customer on
credit. Amount is due within 14 days.
24 July Purchased the following inventory items from various suppliers
on 14 days credit:
• Gray Nicolls cricket bats: 40 bats @ $53.40 per bat;
• Wilson basketballs: 25 balls @ $36.70 per ball;
• Adidas rugby league boots: 50 pairs @ $68.75 per pair
• Kookaburra hockey sticks: 20 sticks @ $45.20 per stick;
• Yonex tennis racquets: 30 racquets @ $79.50 per racquet;
• Everlast boxing gloves: 20 pairs @ $32.45 per pair;
25 July Paid $648 cash for electricity expenses for July.
25 July Sold 21 pairs of Adidas rugby league boots for $159.60 per pair
for cash.
27 July Sold 15 Yonex tennis racquets for $146.55 per racquet for cash.
28 July Paid a total of $3,550 wages in cash to 5 casual employees.
29 July Sold 13 Wilson basketballs for $77.15 per ball to a customer on
credit. Amount is due from customer within 14 days.
30 July Sold 30 Gray Nicolls cricket bats for $136.40 per bat for cash.
30 July Received amount owing from customer for credit sale on 21
July.
31 July Tony Booker withdrew $10,000 cash from the business to help
pay for a new jet ski for personal use.
31 July Received bill for $843 phone and internet expenses for the
month of July. Amount is due to be paid on 9 August.
Additional information (for adjusting entries in step 4 above):
Below is some additional information relating to the transactions for the business
for July 2022:
• The business incurred one month of rent expense on the warehouse by 31
July;
• MixFM Advertising performed $2,130 worth of multimedia advertising services
during July.
• Wages of $1,635 (in total) were owing to the 5 casual employee at the end of
July, with the next payday in early August;
• Interest on the bank loan is charged at a rate of 4% per annum and paid in
arrears to the bank on 30 June each year, ie the first interest payment is due
on 30 June 2023. One month of interest expense was incurred during July
2022;
• Tony performed a stocktake at the end of the month and there was $187
worth of office supplies on hand;
• Additional information for calculating depreciation expense on each of the
non-current assets for July (ie one month) were as follows:
o Straight-line depreciation was used for both assets:
o Office equipment: estimated useful life = 4 years, estimated residual
value = $1,340;
o Warehouse fixtures and fittings: estimated useful life = 5 years;
estimated residual value = $4,535.
General task requirements:
• Your group’s assignment must be completed only by members of your
group. If it is suspected that your group has copied any part of the
assignment from another group, or committed any other form of academic
misconduct (eg paying someone else to prepare the assignment), the
necessary action will be taken under the University’s Student Academic
Integrity – Governing Policy (https://www.usc.edu.au/learn/studentsupport/academic-and-study-support/online-study-resources/academicintegrity#). Penalties for proven cases of academic misconduct can range
from a formal written warning to failure in the course to suspension from the
University;
• If your group wishes to apply for an extension to your submission date,
please email the course coordinator (Dr Peter Baxter pbaxter@usc.edu.au)
to explain the circumstances and attach appropriate supporting
documentation in your request. According to the University’s Assessment:
Courses and Coursework Programs – Procedures
(https://www.usc.edu.au/explore/policies-and-procedures/assessmentcourses-and-coursework-programs-procedures), the following are the only
acceptable grounds for an extension: illness or serious health problems;
serious personal trauma; service with a recognised emergency management
service; religious or cultural grounds; exceptional family, work or personal
circumstances which are outside of the control of the student.
• Late penalties will be applied to all assignments submitted after the deadline
and without an approved extension. More details on the specific late
penalties are provided in the course outline.
• If/when you have any queries about preparing your assignment, you should
post them to the Task 2 discussion board on Canvas.
ACC106 Accounting Principles
Semester 2 2022
Assessment Task 2 Rubric
Criteria HD (85% – 100%) DN (75% – 84%) CR (65% – 74%) PS (50% – 64%) FL (0% – 49%)
Analysis and
interpretation of
business
transactions
(inventory
schedules, journal
entries and ledger
accounts)
(50%)
Inventory
schedules. journal
entries and ledger
accounts reveal
insightful analysis
of the accounting
data and skilful and
accurate choice of
accounting
treatments.
Inventory
schedules. journal
entries and ledger
accounts reveal
clear and/or
consistent
examination of the
accounting data
and demonstrates
knowledge of
accounting
treatments.
Inventory
schedules. journal
entries and ledger
accounts show an
understanding of a
variety of different
accounting
treatment options
that are mostly
completed
accurately.
Inventory
schedules. journal
entries and ledger
accounts show
parts of the
transactions are
correctly identified
and entered and/or
are partially
completed.
Limited inventory
schedules, journal
entries and ledger
accounts and/or
many errors that
show a lack of
understanding
of the accounting
treatments.
Completion of the
accounting cycle
according
to the business’s
accounting policies
(adjusting entries,
closing entries and
trial balances)
(25%)
Skilful and
proficient
recording and
posting of
adjustments,
closing entries and
preparation of trial
balances.
Careful and
judicious
recording and
posting of
adjustments,
closing entries and
preparation of trial
balances
Records and posts
most adjustments
and closing entries
accurately and with
adherence to
accounting policies.
Trial balances are
mostly correct
Attempts to close
the accounting
cycle by entering
the adjustments
and/or closing
entries and
preparing trial
balances. There
may be many
omissions or errors.
Limited or no
attempt to complete
the accounting
cycle, and/or many
errors throughout
the process.
Structure,
organisation
and presentation of
financial
statements
(income statement
and balance sheet)
(15%)
Financial
statements
produced are
consistent with the
accounting records,
presented in a
professional
business format,
with no evidence of
imperfections or
inconsistencies.
Financial
statements
are complete, well
presented and
have a clear
connection to the
accounting records
and required
professional format.
Financial
statements
are presented in a
careful and
organised way.
There are some
gaps,
inconsistencies
with the accounting
records, and/or
discrepancies with
the required
business format.
Attempts to
produce the
financial
statements but with
obvious errors in
the format, content
or figures. The
statements may
have many
omissions or
discrepancies.
Limited or no
attempt to complete
the financial
statements, or
many errors
throughout that
demonstrate a lack
of understanding or
integrity in their
creation.
Demonstration of
digital literacy
applicable to the
accounting
profession
(10%)
Superior use of a
wide range of Excel
functions
throughout
including linking,
formulas,
formatting. Shows
an advanced level
of skills in the
software.
Appropriate use of
a variety of Excel
functions that are
used consistently
and accurately.
Linking, formulas
and formatting are
incorporated.
Relevant Excel
functions are used
in accordance with
the requirements of
the spreadsheet.
Basic use of Excel
functions that
shows some
understanding of
simple functions.
May be omissions
or inconsistent use
of functions.
Limited or no use of
simple Excel
functions that
shows a lack of
skills in the
software.