Review_Lecture_7111AFE

Review_Lecture_7111AFE - Source documents ry nt ge try en...

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1 Review Lecture Week 12 The Accounting Cycle Source documents 1. Recognise & record transaction 2. General ledgers 3. Unadjusted Trial Balance 4.Adjusted Trial Balance 5. Financial reports Subsidiary ledgers P o s t i n g Adjusting C l e r y R ever Reporting Summarizing Journalising ACCOUNTING FOR SERVICE INDUSTRY RETAIL INDUSTRY Financial Statements Example of a company in the service industry Revenue from insurance services $50,000 Less: Salaries expense 14,275 Supplies expense 250 Rent expense 3,600 Utilities expense 625 Interest expense 600 Depreciation 650 Net profit $30,000 Prensa Insurance Income Statement Year Ended December 31, 2006 Prensa Insurance Equity , January 1, 2006 $100,000 Add: Net profit 30,000 Prensa Insurance Equity , December 31, 2006 $130,000 Prensa Insurance Statement of Changes in Equity Year Ended December 31, 2006 Assets: Cash $189,150 Accounts receivable 5,000 Supplies 100 Prepaid rent 1,000 Office equipment 5,000 Less: Accumulated depreciation 250 4,750 Total assets $200,000 Prensa Insurance Balance Sheet As At December 31, 2006
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2 Liabilities: Electricity payable $ 150 Interest payable 600 Accounts payable (supplies) 250 Salaries payable 4,100 Bank loan 64,900 Total liabilities $ 70,000 Total Owner’s equity 130,000 Total liabilities and owner’s equity $200,000 Financial Statements Example Operating Cycle of a Retailing Business Cash Inventory Cash Inventory Accounts Receivable Purchase and Cash Sale Purchase and Sale on Account GST (Goods and Services Tax) ± Most retailers are registered for GST; ± The GST paid is claimed back from the ATO. ± The GST collected is paid to the ATO. ± (Reality – net difference is paid or claimed) ± So sales and purchases are shown net of GST. ± Retailers who are not registered; ± They do not charge GST on sales. ± GST paid on purchases is added to the cost. Perpetual Periodic Inventory Systems Perpetual systems maintain a running record to show the inventory on hand at all times. Periodic systems do not keep a continuous record of inventory on hand. Inventory Accounting Systems Debit Cash or Accounts Receivable Credit Sales Revenue Debit Cost of Goods Sold Credit Inventory Perpetual System Debit Inventory Credit Cash or Accounts Payable
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3 Perpetual System (see page 369 text) Item: Sandals Quantity Quantity Quantity Date Received Sold on Hand Nov. 1 5 7 12 26 30 Totals 25 25 50 6 13 21 40 10 4 29 16 41 20 20 Periodic System
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Review_Lecture_7111AFE - Source documents ry nt ge try en...

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