ACCT1101 Tutorial Solutions – Week 3 (Tute 2)

CHAPTER 3
DISCUSSION QUESTION

D3. One often hears the statement: ‘Debits are bad and credits are good for the business.’ Do you
agree? Why or why not?
This statement is nonsense. The debits and credits are merely double-entry rules for recording transactions and
events. Even though expenses may be ‘debit’, so too are assets. ‘Debit’ implies neither good or bad. Likewise
for credits, which can be revenues or liabilities or equity.

Exercise 3.1 Identifying account categories

The following is a list of ledger account titles extracted from the general ledger of J. Wendall, marketing
consultant:

Wages and Salaries Motor Vehicles

Interest Rent
Cash at Bank Mortgage Payable
J. Wendall, Capital Consultancy Fees
Accounts Payable Investments
Land (Under Mortgage) Computers
Furniture Inventory, Marketing Materials
Accounts Receivable
Required
A. Identify each of the ledger accounts as either an asset, a liability, an income or an expense account.
If you think that any of the accounts might fit into more than one of these categories, explain why.
B. For each of the accounts listed, indicate (a) whether increases are recorded as debits or credits and
(b) whether the normal balance is a debit or a credit.

B.(b)
B.(a) Normal
A. Increases balance
1. Wages and Salaries – Expense debit debit
2. If Interest Revenue – Income credit credit
If Interest Expense – Expense debit debit
3. Cash at Bank – Asset debit debit
4. J. Wendall, Capital – Equity credit credit
5. Accounts Payable – Liability credit credit
6. Land (under mortgage) – Asset debit debit
7. Furniture – Asset debit debit
8. Accounts Receivable – Asset debit debit
9. Motor Vehicles – Asset debit debit
10. If Rent Revenue – Income credit credit
If Rent Expense – Expense debit debit
11. Mortgage Payable – Liability credit credit
12. Consultancy Fees – Income credit credit
13. Investments – Asset debit debit
14. Computers – Asset debit debit
15. Inventory, Marketing Materials – Asset debit debit

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Exercise 3.5 (A) Recording transactions in general journal and
analysis

The chart of accounts of Pellham Poster Printers contained the following accounts: Cash at Bank; Accounts
Receivable; Equipment; Accounts Payable; K. Pellham, Drawings; Printing Fees; Salaries Expense and
Advertising Expense. Ignore GST.

The following transactions occurred during the month of June:

June 1 K. Pellham withdrew $850 cash for personal use.

5 Purchased new equipment for $5000. Paid $500 deposit with the balance to be paid
within 60 days.
9 Paid for advertising in the local newspaper, $510.
14 Paid $320 to creditors for office supplies that had been purchased on credit in the
previous month.
18 Paid salaries of $970.
22 Received $500 from customers to reduce their account balances.
30 $12 000 in printing fees were due during the month. Of this, 20% of the fees were
collected in cash and 80% will be paid within 60 days.

Required
A. Prepare the general journal entries to record the transactions (ignore GST).

A.
PELLHAM POSTER PRINTERS
(ignoring GST)
June 1 K. Pellham, Drawings $850
Cash at Bank $850
K. Pellham withdrew $850 for personal use.

5 Equipment 5 000
Cash at Bank 500
Accounts Payable 4 500
Purchased equipment for cash $500 and the balance
payable in 60 days.

9 Advertising Expense 510

Cash at Bank 510
Payment for newspaper advertisements.

14 Accounts Payable 320

Cash at Bank 320
Payment to suppliers.

18 Salaries Expense 970

Cash at Bank 970
Payment for newspaper advertisements.

22 Cash at Bank 500

Accounts Receivable 500
Cash receipts from credit customers.

30 Cash at Bank 2 400

Accounts Receivable 9 600
Printing Fees Revenue 12 000
Printing fees received and receivable.
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 Problem 3.13 Journal entries, posting to running balance ledger accounts,
(A, B & C) and trial balance

In September 2016, Niem Duong opened a car hire business. The following transactions occurred during the
first month of the business (ignore GST).

Sep. 1 Niem opened a bank account to begin the business and deposited $500 000 of her own
money.
3 Paid $1200 rent for the premises for September.
4 Purchased ten motor vehicles costing $40 000 each and equipment costing $36 000
with $300 000 cash and a commercial loan for the balance.
5 Purchased supplies costing $12 500 on credit.
15 Recorded revenue for the first half of the month of $14 600 in cash and $28 500 on
credit.
18 Paid for supplies purchased on 5 September.
19 Paid insurance expense for September of $5000.
24 Received payment from customers on account of $12 400 and banked the receipts.
27 Purchased supplies costing $6200 on credit.
29 Recorded revenue for the second half of the month of $12 500 in cash and $32 800 on
credit.
30 Paid fuel expense of $16 200 in cash.

Use the following account titles and numbers:

Cash at Bank, 1–101

Accounts Receivable, 1–102
Supplies, 1–110
Equipment, 1–120
Motor Vehicles, 1-130
Accounts Payable, 2–101
Loan Payable, 2–110
N. Duong, Capital, 3–101
Revenue, 4–101
Rent Expense, 5–110
Insurance Expense, 5–120
Fuel Expense, 5–130

Required
A. Journalise the above transactions.
B. Post the entries from the general ledger to running balance general ledger accounts and enter the
posting references in the general journal.
C. Prepare a trial balance as at 30 September 2016.
D. Repeat requirements A to C adding a GST of 10% where necessary. Add two extra accounts: GST
Receivable, 1-105, and GST Payable 2-150
Also assume the following:
1. The cash paid 4 September was for $343 600.
2. The receipt on 24 September was for $13 640.

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A.
General Journal

2016
Sep. 1 Cash at Bank 1-101 500 000
N. Duong, Capital 3-101 500 000
Cash invested by owner

3 Rent Expense 5-110 1 200

Cash at Bank 1-101 1 200
Rent paid

4 Motor Vehicles 1-130 400 000

Equipment 1-120 36 000
Cash at Bank 1-101 300 000
Loan Payable 2-110 136 000
Equipment purchased for cash and
loan payable

5 Supplies 1-110 12 500

Accounts Payable 2-101 12 500
Supplies purchased

15 Cash at Bank 1-101 14 600

Accounts Receivable 1-102 28 500
Revenue 4-101 43 100
Revenue for first half of month

18 Accounts Payable 2-101 12 500

Cash at Bank 1-101 12 500
Payment for supplies

19 Insurance Expense 5-120 5 000

Cash at Bank 1-101 5 000
Cash paid for insurance

24 Cash at Bank 1-101 12 400

Accounts Receivable 1-102 12 400
Receipt of payment from customers

27 Supplies 1-110 6 200

Accounts Payable 2-101 6 200
Supplies purchased

29 Cash at Bank 1-101 12 500

Account Receivable 1-102 32 800
Revenue 4-101 45 300
Revenue for second part of month

30 Fuel Expense 5-130 16 200

Cash at Bank 1-101 16 200
Telephone expense paid

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B.
ACCOUNT: Cash at Bank Account No. 1-101
Date Explanation Post Debit Credit Balanc
Ref e
2016
1 9 N. Duong, Capital 500 000 500 000
3 9 Rent Expense 1 200 498 800
4 9 Equipment 300 000 198 800
15 9 Revenue 14 600 213 400
18 9 Accounts Payable 12 500 200 900
19 9 Insurance Expense 5 000 195 900
24 9 Accounts Receivable 12 400 208 300
29 9 Revenue 12 500 220 800
30 9 Fuel Expense 16 200 204 600

ACCOUNT: Accounts Receivable Account No. 1-102

Date Explanation Post Debit Credit Balance
Ref
15 9 Revenue 28 500 28 500
24 9 Cash at Bank 12 400 16 100
27 9 Revenue 32 800 48 900

ACCOUNT: Supplies Account No. 1-110

Date Explanation Post Debit Credit Balance
Ref
5 9 Accounts Payable 12 500 12 500
27 9 Accounts Payable 6 200 18 700

ACCOUNT: Equipment Account No. 1-120

Date Explanation Post Debit Credit Balance
Ref
4 9 Cash and Loan Payable 36 000 36 000

ACCOUNT: Motor Vehicles Account No. 1-130

Date Explanation Post Debit Credit Balance
Ref
4 9 Cash and Loan Payable 400 000 400 000

ACCOUNT: Accounts Payable Account No. 2-101

Date Explanation Post Debit Credit Balance
Ref
5 9 Supplies 12 500 12 500
18 9 Cash at Bank 12 500 0
27 9 Supplies 6 200 6 200

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ACCOUNT: Loan Payable Account No. 2-110
Date Explanation Post Debit Credit Balance
Ref
4 9 Equipment & GST 136 000 136 000
Receivable

ACCOUNT: N. Duong, Capital Account No. 3-101

Date Explanation Post Debit Credit Balance
Ref
1 9 Cash at Bank 500 000 500 000

ACCOUNT: Revenue Account No. 4-101

Date Explanation Post Debit Credit Balance
Ref
15 9 Cash and Receivables 43 100 43 100
29 9 Cash & Receivables 45 300 88 400

ACCOUNT: Rent Expense Account No. 5-110

Date Explanation Post Debit Credit Balance
Ref
3 9 Cash at Bank 1 200 1 200

ACCOUNT: Insurance Expense Account No. 5-120

Date Explanation Post Debit Credit Balance
Ref
19 9 Cash at Bank 5 000 5 000

ACCOUNT: Fuel Expense Account No. 5-130

Date Explanation Post Debit Credit Balance
Ref
30 9 Cash at Bank 16 200 16 200

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C.
NIEM DUONG, CAR HIRE
Trial Balance
as at 30 September 2016
Account Account Debit Credit
No.

Cash at bank 1-101 $204 600

Accounts receivable 1-102 48 900
Supplies 1-110 18 700
Equipment 1-120 36 000
Motor vehicles 1-130 400 000
Accounts payable 2-101 6 200
Loan payable 2-110 136 000
N. Duong, Capital 3-101 500 000
Revenue 4-101 88 400
Rent expense 5-110 1 200
Insurance expense 5-120 5 000
Fuel expense 5-130 16 200
$730 600 $730 600

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