ADDIS ABABA UNIVERSITY
SCHOOL OF COMMERCE
DEPARTMENT OF ACCOUNTING & FINANCE
COMPREHENSIVE ILLUSTRATIONS
FOR THE COURSE
AcFN 2011
December, 2023
1
Illustration 1.
Transaction Analysis in a tabular form
Ato Getu Girma establishes a sole proprietorship to be known as GG Garage, on September 1, 2016.
During September, the business completed the following transactions
Sept. 1: Ato Getu starts business by depositing Br. 100,000 in a bank account opened in the
name of GG Garage.
3: GG Garage bought land for Birr 20,000 in cash, to be used as a future site for the
business.
6: GG Garage bought office supplies for birr 2,500 on credit.
9: GG Garage earned service Fees of Birr 30,000 receiving the amount in cash for the
garage services rendered so far.
12: The Garage received a bill for Br. 1,000 from the daily news for advertising the
opening of its business, but postponed payments of the bill until a later date.
15: The Garage provided garage services of Br.20, 000 for customers. Cash
amounting Br.6, 000 was received from customers, and the balance
of Br. 14000 was billed to customers on account.
18: GG Garage paid Birr 15,000 for different types of expenses (birr 10,000 to
salary of employees, birr 3000 Telephone, birr 2,000 for rent)
23: It paid its daily News advertising bill of Br. 1,000 in cash.
27: The sum of Br. 8,500 in cash was received from customers who had
previously been billed for services provided on Sep.15.
30: Getu withdrew Br.3, 500 in cash form the business for his personal use.
30: The amount of office supplies remaining at hand on this date Br. 750
Instructions
A. Analyze the above business transactions in terms of the basic accounting equation and
prepare a tabular summary of the transactions.
B. Prepare an Income Statement, & Owner’s Equity Statement for the month of September 2016
and a Balance Sheet on September 30, 2016.
2
Assets
Date
Cash
A/Rec.
Supplies
=
Land
Liability
+
Capital
A/Payable
+
Getu Girma, Capital
Events
Affecting
SHE
3
GG, Garage
Income Statement
For the Month Ended, Sept. 30, 2016
GG, Garage
Statement of Change in Equity
For the Month Ended, Sept. 30, 2016
GG, Garage
Balance Sheet
Sept. 30, 2016
4
Illustration 2.
Accounting Cycle Activities (Service Organization)
Alemnesh Mitiku has been operating a laundry business in her home on a part-time basis for the last
few years. On January 1, 2009 she decided to move to rented house and to devote a full time to the
business which is named as ALS. She designed an accounting system and recruited employees in the
business. The following is the chart of accounts for the new business:
Assets:
Cash
Accounts Receivable
Laundry Supply
Prepaid Rent
Laundry Equipment
Accumulated Depreciation
Liability:
Accounts Payable
Owner’s Equity:
Alemnesh Mitiku, Capital
Alemnesh Mitiku, Drawing
Income Summary
Alemnesh Laundry Service
Chart of Account
Revenue:
11
Service Revenue
12
Expenses:
13
Supply Expense
14
Salary Expense
17
Advertising Expense
18
Rent Expense
Repair Expense
21
Utility Expense
Depreciation Expense
31
Telephone Expense
32
Miscellaneous Expense
33
41
51
52
53
54
55
56
57
58
59
The business conducted the following transactions (including initial investment made by the owner
in organizing the business in a new form) during the first month of its operation:
Date
Transaction
2009 On the first date, the owner invested the following assets which were in her home
January1: earlier: Cash Br.15, 000; Accounts Receivable Br. 1,800; Laundry Supplies Br.
1,200; and Laundry Equipment Br. 80,000. Receipt No.001 & Others
1:
2:
3:
3:
5:
8:
Paid Br 7,200 advance for three month house rent (from January 1, to march 31,
2009). Check No 1100
Purchased Br. 6,000 additional laundry equipment on account from Jumbo
Equipment Inc... Purchase Invoice No.122
Received Br.1, 200 from credit customers in payment of their account. ReceiptN0.
002
Received Br. 2,800 for laundry service sales of the first three days. (From Thursday
to Saturday). Receipt No.003
Purchased laundry supplies of Br. 5,000 paying Br.3, 000 soon and agreeing to pay
the rest in the future. Check No 1101 & Purchase Invoice No. 4728
Paid Br. 2,500 for newspaper advertisement. Check No. 1102
Received Br. 5,200 from laundry service sales for the second week of January.
10: Receipt No. 004
Paid Br. 4,000 to Jumbo Equipment Inc. to apply on the Br. 6,000 debt owed them.
13: Check No. 1103
Sales of laundry service on account for the last 17 days totaled Br. 2,600. Sales
17: Invoice No. 0023
5
Received Br. 8,000 from laundry service sales for the third week of January. Receipt
17: No. 005
20: Purchased Laundry supplies of Br. 3,300 in cash. Check No. 1104
23: Paid Br. 3,500 to suppliers on account on the credit purchase of January 5. Check
No. 1105
24: Received Br. 6,500 from laundry service sales for the fourth week of January.
Receipt No. 006
27: Paid Br. 1,500 for repair service of the washing machine. Check No.1106
29: Paid Br. 4,400 employees salary for the month of January. Check No. 1107
Paid Br. 560 for electricity & Br. 400 for water bill (both are utility expenses).
30: Check No 1108 & 1109 are issued for electric and water bill respectively.
30: Paid miscellaneous expense of Br. 250. Check No 1110
Sales of laundry service on account for the last 13 days totaled Br. 2,200. Sales
31: Invoice No. 0024
31: Received Br. 7,400 from laundry service sales for the fifth week of January. Receipt
No. 007
31: Alemnesh withdrew Br. 5,000 for her personal use. Check No.1111
NB: To reduce repetition, some of the transactions are stated as a summary. For example, sales of laundry
service for cash are ordinary recorded on a daily basis, but in the illustration, summery totals are given at
the end of each week. Similarly, all sales of service on account during the month are summarized as two
transactions bi-weekly.
Consider the following facts obtained from ALS, on January 31, 2009 for adjustment:
a) From the total laundry supplies available during the month, now only supplies of Br.
1,100 remaining at hand. (this is determined by inventory count made on January
31,2009)
b) Prepaid Rent of one month expired, because the business has already used the rented
house for one month(from January 1 up to 31,2009)
c) Expired cost of the laundry equipment for one month is Br. 860( 1 % of the cost of
the asset per month)
d) Telephone Expense of January Br. 600 is not yet paid. ALS usually receives
telephone bill of this month on the 5th of the next month.
ACTIVITIES
Based on all the information for ALS above, perform the following activities:
Activity 1: Journalize all the transactions of January in two-column general journal
Activity 2: Open four-column ledger accounts of ALs based on the chart of account and post
each items from the journal to the respective ledger account you opened
Activity 3: Prepare Trial-Balance (pre-closing trial balance) as of January 31, 2009
Activity 4: Prepare Worksheet as of January 31, 2009 end of one month fiscal period
Activity 5: Prepare Financial Statements as of January 31, 2009 end of one month fiscal period
Activity 6: Journalize and post both adjusting and closing entries as of January 31,2009
Activity 7: Prepare post-closing Trial-Balance as of January 31, 2009
6
GENERAL JOURNAL
DATE
ACCOUNT TITLE
PAGE:________
P/R
DEBIT
CREDIT
7
GENERAL JOURNAL
DATE
ACCOUNT TITLE
PAGE:________
P/R
DEBIT
CREDIT
8
Account Title:_____________________________
Date
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
Item
Account Title:_____________________________
Date
Item
Account Title:_____________________________
Date
Item
9
Account Title:_____________________________
Date
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
Item
Account Title:_____________________________
Date
Item
Account Title:_____________________________
Date
Item
Account Title:_____________________________
Date
Item
10
Account Title:_____________________________
Date
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
Item
Account Title:_____________________________
Date
Item
Account Title:_____________________________
Date
Item
Account Title:_____________________________
Date
Item
11
Account Title:_____________________________
Date
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
Item
Account Title:_____________________________
Date
Item
Account Title:_____________________________
Date
Item
Account Title:_____________________________
Date
Item
12
Account Title:_____________________________
Date
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
P/R
Account No.:___________
Balance
Debit
Credit
Debit Credit
Item
Account Title:_____________________________
Date
Item
Account Title:_____________________________
Date
Item
Account Title:_____________________________
Date
Item
Account Title:_____________________________
Date
Item
13
Account Title
Debit
Credit
14
ALEMNESH LAUNDRY SERVICE
Work Sheet
For the Month Ended Janu. 31, 2009
Account Title
Unadjusted TB
Dr.
Cr.
Adjustment
Dr.
Cr.
Adjusted TB
Dr.
Cr.
Income Statement
Dr.
Cr.
Balance Sheet
Dr.
Cr.
15
16
Account Title
Debit
Credit
17
Illustration 3.
Correcting a Trial Balance
Beza, who does not have any experience in accounting, prepared the trial balance presented
below for her business, which is out of balance
Beza Lawn Service
Trial Balance
March 31, 2006
Cash
Br.1, 528
Accounts Receivable
5,236
Supplies
1,544
Equipment
7,228
Accounts payable
Br. 8,604
Salary Payable
840
Beza, Capital
6,264
Beza, Drawing
600
Lawn Service Revenue
8,988
Salaries Expense
1,760
Repair Expense
580
Utilities Expense
100
Total
Br.26, 564
Br. 16,308
As a friend of Beza, you have been asked to determine why the trial balance does not balance. After
some investigation, you identified the followings:
a) The debit column in the trial balance was incorrectly added
b) The credit posting in the accounts payable ledger account of Br. 400 was as Br. 4000
c) Repair expenses were overlooked by Br. 72
d) The total debit in cash account amounted to Br. 7,492 and the credit totaled Br. 6,364
e) A debit posting of Br. 1,248 to accounts receivable was missing
f) A debit posting of Br. 936 to Beza, Drawing was made as accredit posting of Br. 936
g) A credit posting of Br. 272 to Lawn service revenue was missing
h) A salary of Br. 144 was not posted to salaries expense debit & salaries payable credit
Instructions
a) Prepare a correct trial balance
b) Prepare Income statement for Beza Lawn service for the month ended March 31, 2006
c) Prepare statement of owners equity for Beza Lawn service for the month ended March 31, 2006
assuming no additional investment during the month.
18
Illustration 4.
Accounting Cycle Activities for merchandisers
1) On June 23, 2009 XYZ Co purchased merchandise amounting Br. 340,000 on account from
ABC Co. Under the term 2/10, n/30, FOB shipping point. The transportation cost is Br. 20, 000
and prepaid as an accommodation by ABC. On June 25, 2009 XYZ returned merchandise
amounting Br. 40,000 for inferior quality and paid the balance on July 3,2009
Instruction
a) Record the purchase/sales both in the buyer’s and seller’s books
b) Record the return both in the buyer’s and seller’s books
c) Record the final settlement/collection both in the buyer’s and seller’s books
2) On April 28, 2009 Jelica Co sold merchandise amounting Br. 320,000(which is subject to 15%
VAT) on account to DuMo Co. Under the term 2/15, n/45 FOB shipping point. The
transportation cost is Br. 40,000 and prepaid by Jelica as an accommodation. On April 30,
2009 DuMo Co. returned merchandising amounting Br. 69,000(the 69,000 includes VAT in it)
for inferior quality and paid the balance on May 13.
Instruction
Assuming both are using periodic inventory system, record the following
a) Sales/purchase both in the seller’s and buyer’s books
b) Return both in the seller’s and buyer’s books
c) Receipt/payment both in the seller’s and buyer books
3) Given the following:
Sales………………………………………………………
?
Sales return and allowance………………………………. Br. 12,500
Sales Discount……………………………………………
7,500
Beginning Inventory……………………………………..
60,000
Purchase………………………………………………….
600,000
Purchase Return and Allowance…………………………
25,000
Purchase Discount……………………………………….
?
Freight-in…………………………………………………
30,000
Cost of merchandise purchase……………………………
590,000
Ending Inventory…………………………………………
100,000
Cost of merchandise available for sale…………………..
?
Cost of goods sold……………………………………….
?
Gross profit………………………………………………
200,000
Instruction
Compute each of the following figures
a) Sales
d) Cost of goods available for sale
b) Net sales
e) Cost of goods sold
c) Purchase discount
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4) The following are accounts balance of ABC CO. on December 31, 2009(end of the fiscal year) before
adjustment:
Cash
Accounts Receivable
Merchandise Inventory
Store Supplies
Office Supplies
Prepaid Insurance
Office Equipment
Acc. Dep- Office Equip.
Store Equipment
Acc. Dep- Store Equip.
Accounts Payable
Unearned Rent
Salary Payable
Interest Payable
Notes Payable,10 %
Common Stocks
Retained Earning
Income Summary
Sales
sales Discount
Sales Return & Allowance
Purchase
Purchase Discount
Purchase Ret. & All
Freight-in
Sales Salary Expense
Advertising Expense
Store Supplies Expense
Deprec. Exp. Store Eqip.
Miscellaneous Selling Exp.
Ofice Salary Expense
Insurance Expense
Office Supplies Expense
Dep.Exp_ Offic. Equip
Miscellaneous Admi Exp.
Interest Expense
Rent Income
66,500
26,000
120,000
4,400
4,800
24,000
200,000
40,000
100,000
20,000
15,000
48,000
____
____
100,000
220,000
124,200
___
650,000
17,000
13,000
480,000
20,000
30,000
90,000
56,400
18,000
____
____
2,500
40,000
___
___
___
4,600
___
___
20
The following are data obtained for adjustment:
➢ Ending Inventory on December 31
Merchandise……………………………………………………………. Br. 80,000
Office Supplies ……………………………………………………….
1,800
Store Supplies ………………………………………………………….
2,000
➢ Insurance Unexpired on Dec.31, 2009……………………………………
16,000
➢ Depreciation on both office and store equipment is calculated at 10% on cost
➢ Interest on Notes Payable is calculated yearly on December 31.
➢ Salaries accrued on December 31,2009:
Sales Salary……………………………………………………………… 3,600
Office Salary……………………………………………………………. 5,000
➢ Rent Income Earned in the current year…………………………………………… 36,000
Instructions:
a)
b)
c)
d)
e)
f)
g)
h)
Prepare the trial balance in the first pairs of columns in a ten- column worksheet
Plan the adjustments in the adjustment columns of the work sheet
Prepare the adjusted trial balance and complete the worksheet
Prepare both the single-step and multiple-step Income Statement
Prepare Statement of owner’s Equity
Prepare Balance Sheet
Record both the adjusting and closing journal entries in general journal form
Prepare post-closing trial balance.
21
Illustration 5.
Petty cash, change fund and bank reconciliation
1) A company established a $1,000 petty cash fund by issuing a check to the custodian (petty
cashier) on October 1. On October 15, the petty cash fund was replenished and increased to $1,250
in total. The contents of the petty cash fund at the time of the October 15 replenishment were:
Currency and coins
$112
Petty cash receipts for:
Transportation-in for inventory
$139
Delivery expense
238
Repairs to office equipment
147
Postage
214
Entertainment of customers
153
Total
891
$1,003
Required:
Prepare the general journal entry to record the establishment, the reimbursement and the
increase of the petty cash fund on October 15.
2) Record in general journal form the following transactions:
a) Voucher No.126 is prepared to establish a change fund of Br. 500
b) Check No. 120 is issued in payment of voucher No. 126
c) Cash sales for the day according to the cash register tapes, were Br.4655.30 and cash
on hand is Br. 5,153.5.
3) The cash account of Jojo Co. showed a ledger balance of Br. 3,969.85 on June 30, 2008. The bank
statement as of the same date showed a balance of Br. 4,150. Upon comparing the statement with
the cash records, the following facts were determined:
1. There were bank service charge for the month June of Br. 25
2. A bank memo stated that note of Br. 900 and interest of Br. 36 had been collected on June
29,by the bank for Jojo and the bank had made a charge of Br. 5.50 on the collection
3. Receipt of June 30 by Jojo from the sales of the day amounting Br. 2,890 is too late to appear
on the bank statement
4. Checks outstanding on June 30 totaled Br. 2,136.05
5. The bank had charged the Jojo co account for customer's uncollectible check amounting to Br.
453.20 on June 29
6. A customer's check for Br. 90 had been entered as Br. 60 in the cash receipt journal by Jojo on
June 15
7. Check # 742 in the amount of Br. 491 had been entered in the cashbook as Br. 419, and check
# 747 in the amount of Br. 58.20 had been entered as Br. 582. Both checks had been issued to
pay for purchase of equipment
Required
a) Prepare a bank reconciliation of Jojo Co. for the month of
b) Pass the necessary journal entries
22
4) The SMART SOFTWARE Company maintains a checking account at OIB bank. Bank statements
are prepared at the end of each month. The November 30, 2008, reconciliation of the bank balance
is as follows:
Balance per bank, November 30
Add: deposits in transit
Less: outstanding checks
Adjusted balance per bank, November 30
Br 3,231
1,200
(806)
Br 3,625
The company’s general ledger checking account showed the following for December:
Balance, December 1
Receipts
Disbursements
Balance, December 31
Br 3,625
42,650
(41,853)
Br 4,422
The December bank statement contained the following information:
Balance, December 1
Deposits
Checks processed
Service charges
NSF checks
Balance December 31
Br 3,231
43,000
(41,918)
(22)
(440)
Br 3,851
Additional Information
a. You discovered that Check #411for Br 320 was correctly recorded by bank but was incorrectly
recorded on the books as a Br 230 disbursement for advertising expense.
b. You also discovered that included in the bank’s deposits is a Br 1,300 deposit incorrectly credited
to the company’s account. The deposit should have been posted to the credit of SAMAR
SOFTWRE Company.
Required:
a. Determine the amount of deposit in transit on December 31, 2008.
b. Determine the amount of outstanding check on December 31, 2008.
c. Prepare a statement of bank reconciliation on December 31, 2008.
d. Prepare the necessary journal entries.
23