Week 3 tutorial

Topic 2: The recording process (Part 1): Double-entry accounting, general

journal, and ledgers.

HOMEWORK QUESTIONS

1. Chapter 2 – Questions 2.3 (p.116 of Financial Accounting - Reporting, Analysis and

Decision Making 7th Edition)
(a) Decrease assets, cash and increase expenses, cleaning expenses.
(b) Increase assets, equipment and decrease assets cash.
(c) Increase assets, cash and increase equity, share capital
(d) Decrease assets, cash and decrease liabilities, accounts payable.

2. What are the normal balances of the following accounts?

a) Accounts receivable Debit

b) Accounts payable Credit
c) Office supplies Debit
d) Electricity expense Debit
e) Wages payable Credit
f) Drawings Debit

3. Explain how each of the following transaction affects the basic accounting equation:

a) Received electricity bill for the month. Increase in liability (electricity payable)
and increase in expense (electricity expense)
b) Purchased a machine on credit. Increase in asset (machine) and increase in
liability (accounts payable)
c) Repaid bank loan in full. Decrease in asset (cash) and decrease in liability
(bank loan)
d) Received cash for services provided to customers. Increase in asset (cash)
and increase in income (service revenue)
e) Paid cash to purchase office supplies. Increase in asset (office supplies) and
decrease in asset (cash)

4. John opened a tennis coaching business on 1 July 2021. John will start giving tennis
classes in July. The following transactions occurred during the July operations:

July 1 Deposited $600,000 into a business bank account

2 Purchased new tennis equipment for a total of $9,000. An initial $4,800 is paid
in cash immediately, and the rest is to be paid in 2 months’ time.
10 Sent invoices to a number of clients for tennis classes for a total amount of
$18,000.

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 12 Paid $6,000 for a 1-year insurance policy on the tennis equipment, effective
from 12 July 2021.
16 Received $14,000 cash from clients billed on 10 July.
20 Received $20,000 cash from clients who paid immediately for tennis classes.
These clients were not invoiced previously.
25 John withdrew $12,000 cash from the business for personal use.
30 Received the remaining amount from clients billed on 10 July.
31 Paid rent for July, $1,000.

Required:
(a) Journalise the above transactions (narrations are NOT required).

(b) Open T accounts for the following accounts:

i) Cash
ii) Accounts receivable
iii) Service revenue

(a)
Date Account Name Debit ($) Credit ($)
1 July Cash 600,000
Capital 600,000

2 July Equipment 9,000

Cash 4,800
Accounts payable 4,200

10 July Accounts receivable 18,000

Service revenue 18,000

12 July Prepaid insurance 6,000

Cash 6,000

16 July Cash 14,000

Accounts receivable 14,000

20 July Cash 20,000

Service revenue 20,000

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25 July Drawings 12,000
Cash 12,000

30 July Cash 4,000

Accounts receivable 4,000

31 July Rent expense 1,000

Cash 1,000

(b)
Cash
1/7 Capital 600,000 2/7 Equipment 4,800
16/7 Accounts 14,000 12/7 Prepaid insurance 6,000
receivable
20/7 Service revenue 20,000 25/7 Drawings 12,000
30/7 Accounts 4,000 31/7 Rent expense 1,000
receivable
31/7 Closing balance 614,200
638,000 638,000
1/8 Opening balance 614,200

Accounts receivable
10/7 Service revenue 18,000 16/7 Cash 14,000
30/7 Cash 4,000

31/7 Closing balance 0

18,000 18,000
1/8 Opening balance 0

Service revenue
10/7 Accounts receivable 18,000
20/7 Cash 20,000

31/7 Closing balance 38,000

38,000 38,000
1/8 Opening balance 38,000

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 5. The following information relates to the business of Bruce’s Dry Cleaning Services for
the month of November 2021:
November 2 Paid $12,000 in advance for 3-month’s rent between December 2021 to
February 2022.
5 Purchased a block of land for $280,000. Paid a deposit of $60,000 and
a bank loan with XYZ Bank was arranged for the remaining balance.
7 Received $5,000 from customers for amounts owed from the previous
month.
10 Purchased supplies from Adrian Ltd costing $15,000 on credit, payable
in 30 days.
15 Earned revenue of $6,000. Of this, 40% of the fees were collected in
cash and 60% will be received within 30 days.
20 Received a payment in advance of $10,000 from a client for a service
to be performed in December 2021.
21 Paid $12,000 owed to suppliers for business supplies that had been
purchased on credit in the previous month.
26 Bruce withdrew $3,000 from the business bank account for personal
use.
27 Paid Adrian Ltd in full.

Required:
Prepare general journal entries for the business for the month of November 2021.
Narrations are NOT required.

Date Account Name Debit ($) Credit ($)

2 November Prepaid rent 12,000
Cash 12,000

5 November Land 280,000

Cash 60,000
Bank loan 220,000

7 November Cash 5,000

Accounts receivable 5,000

10 November Supplies 15,000

Accounts payable 15,000

15 November Cash 2,400

Accounts receivable 3,600

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 Service revenue 6,000

20 November Cash 10,000

Unearned revenue/revenue received in advance 10,000

21 November Accounts payable 12,000

Cash 12,000

26 November Drawings 3,000

Cash 3,000

27 November Accounts payable 15,000

Cash 15,000

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 6. Ferguson opened the ‘Ferguson’s Guitar School’ on 1 July 2021. The following
information relates to the business for the month of July 2021:
July 1 Invested $100,000 capital in the business.
7 Purchased equipment costing $42,000 on credit.
10 Paid salaries of $15,800.
14 Purchased supplies for $10,000. $6,000 was paid in cash and the
balance payable in 60 days.
15 Sent invoices to a number of clients for services provided for a total
amount of $18,000.
20 Ferguson withdrew $21,000 from the business for his personal use.
24 Paid $9,800 for advertising incurred.
28 Received $3,700 from customers to reduce the balance in their
accounts.
30 Earned $78,000 in tuition fees during the month. Of these, 25% of the
fees were collected in cash and 75% will be paid within 2 months.

Required:
(a) Prepare the general journal entries to record the above transactions that occurred
during June (narrations are NOT required).
(b) Post the entries to ledger T accounts.

Date Account Name Debit ($) Credit ($)

1 July Cash 100,000
Capital 100,000

7 July Equipment 42,000

Accounts payable 42,000

10 July Salaries expense 15,800

Cash 15,800

14 July Supplies 10,000

Cash 6,000
Accounts payable 4,000

15 July Accounts receivable 18,000

Service revenue 18,000

20 July Drawings 21,000

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 Cash 21,000

24 July Advertising expense 9,800

Cash 9,800

28 July Cash 3,700

Accounts receivable 3,700

30 July Cash 19,500

Accounts receivable 58,500
Service revenue 78,000

Cash
1/7 Capital 100,000 10/7 Salaries expense 15,800
Accounts
28/7 3,700 14/7 Supplies 6,000
receivable
30/7 Service revenue 19,500 20/7 Drawings 21,000
24/7 Advertising expense 9,800

31/7 Closing balance 70,600

123,200 123,200
1/8 Opening balance 70,600

Capital
1/7 Cash 100,000

Equipment
7/7 Accounts payable 42,000

Salaries expense
10/7 Cash 15,800

Supplies
Cash; accounts
14/7 10,000
payable

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 Accounts payable
7/7 Equipment 42,000
31/7 Closing balance 46,000 14/7 Supplies 4,000
46,000 46,000
1/8 Opening balance 46,000

Accounts receivable
15/7 Service revenue 18,000 28/7 Cash 3,700
30/7 Service revenue 58,500 31/7 Closing balance 72,800
76,500 76,500
1/8 Opening balance 72,800

Service revenue
15/7 Accounts receivable 18,000
Cash; accounts
31/7 Closing balance 96,000 31/7 78,000
receivable
96,000 96,000
1/8 Opening balance 96,000

Drawings
20/7 Cash 21,000

Advertising expense
24/7 Cash 9,800