7
THE GENERAL LEDGER
AND GENERAL JOURNAL
SUGGESTED SOLUTIONS
7.1
The general journal is introduced to capture subsidiary information, such as details of the
actual transaction which gave rise to the entry in the general ledger and information, such as
the dates and the documents involved. It also includes document numbers which are filed and
in the event of there being a query, the general journal enables the accountant to go back to
the source document, find it in the files, and verify the details of the transaction.
The general ledger is the primary source of accounting information. However, there are large
amounts of subsidiary information, that is information of secondary importance, but essential
to the smooth running of the business and to maintaining adequate records, especially in the
event of queries or errors that may arise.
7.2
When the owner invests money into the business, it serves as the capital. Its purpose is to buy
assets necessary for conducting the operations of the business, and to pay expenses which
will arise before income has been earned. The profit or loss, which the business makes at the
end of the period, is the difference between income received from operating the business and
expenses incurred in operating the business. If an owner withdraws cash or goods it is not a
business operating expense. It is a reduction in the owner’s claim against the business, but it
is not part of the net profit or loss.
Another way of looking at the profit of a business is to see it as the amount of money which
the business can be expected to make in future periods as a result of business operations, all
other things being equal. The withdrawals by the owner have nothing to do with business
expenses or income and therefore should never be included in the profit and loss account.
Fundamental Accounting 8th edition / Chapter 7
Page 1
7.3
JOAN ARENDSE
GENERAL JOURNAL FOR MARCH
Dr
1 Rent expense
Bank
Pay January rent
2 Office supplies
Accounts payable
Purchased office supplies on credit
11 Equipment
Bank
Accounts payable
Purchased equipment
13 Bank
Accounts receivable
Cash received form Accounts receivable
17 Bank
Capital
Arendse invested further capital
19 Accounts payable
Bank
Paid accounts payable
24 Drawings
Bank
Owner withdrew cash for personal use
25 Accounts receivable
Fee revenue
Charged bookkeeping fees
31 Wages
Bank
Paid wages for the month
31 Depreciation expense
Office equipment
Estimated depreciation on office equipment
31 Office supplies expense
Office supplies
Cost of office supplies used taken into account
Fundamental Accounting 8th edition / Chapter 7
Page 2
Cr
200
200
250
250
1 400
800
600
4 500
4 500
500
500
1 600
1 600
300
300
1 200
1 200
150
150
100
100
320
320
7.4
DR JAMES SMITH
GENERAL JOURNAL FOR MARCH
2 Bank
Capital
Capital increased (D/S 71)
8 Bank
Fee revenue
Cash received from patients (C/S 110-120)
12 Bank
Office equipment
Sold old typewriter (R11)
16 Bank
P Platt
Platt settled his account (R12)
16 Bank
Fee revenue
Bank cash received from patients (C/S 121-130)
20 Bank
Operations equipment
Dental equipment sold to P Bandy (R13)
22 Bank
G Grey
Received cheque in full settlement (R14)
24 Bank
Rent received
Cheque received from L Brown for rental of store
room (R15)
26 Electricity and water
Bank
Paid electricity and water (C264)
Salaries and wages
Bank
Paid salaries and wages (C265)
Fundamental Accounting 8th edition / Chapter 7
Page 3
Dr
1 000
Cr
1 000
760
760
300
300
200
200
640
640
2 000
2 000
650
650
100
100
280
280
640
640
7.5
1
PMH
GENERAL JOURNAL FOR JUNE
Dr
1000000
Bank
Capital
Capital invested
3 Rent expense
Bank
Paid first month’s rent
4
Furniture and Equipment
Accounts payable
Purchased F & E on credit
Vehicles
Bank
Purchased second hand bakkie
Medical supplies
Bank
Purchased medical supplies
5
Stationery expense
Bank
Purchased stationery
Surgical supplies
Accounts payable
Purchased surgical supplies on credit
Security fees
Bank
Paid security fees via EFT
Cleaning expense
Bank
Paid cleaning expense out of petty cash
14 Drawings
Furniture and Equipment
Marc took excess furniture home
Training expenses
Bank
Paid training expense by cheque
16 Bank
Services rendered
Cash services rendered
Accounts receivable
Services rendered
Credit services rendered
Fundamental Accounting 8th edition / Chapter 7
Page 4
Cr
1000000
12000
12000
18500
18500
54000
54000
22000
22000
840
840
18000
18000
680
680
400
400
1800
1800
6200
6200
16000
16000
18000
18000
25
26
28
30
Salaries
Bank
Paid salaries via EFT
Accounts payable
Bank
Paid a creditor (FQ)
Bank
Accounts receivable
Received R6000 as part payment on account
Bank
Services rendered
Cash services rendered
43000
43000
1850
1850
6000
6000
26000
26000
7.6
SMP - SQUARED
GENERAL JOURNAL FOR JANUARY
Dr
1
2
3
4
5
6
7
8
Bank
Capital
Capital invested
Vehicles
Bank
Loan
Purchased a vehicle with cash and loan
Rent expense
Bank
Paid first month’s rent
Equipment
Bank
Accounts payable
Purchased equipment - 25% deposit & 75% credit
Equipment
Accounts payable
Purchased computer on credit
Beauty products asset
Bank
Purchased beauty products by cheque
Stationery expense
Cleaning material expense
Bank
Purchased stationery and cleaning mat by cheque
Bank
Accounts receivable
Services rendered
Fundamental Accounting 8th edition / Chapter 7
Page 5
Cr
50000
50000
63000
25200
37800
1500
1500
92000
23000
69000
6300
6300
17000
17000
840
420
1260
44100
18900
63000
9
10
11
12
13
14
15
16
Cash and credit services rendered
Training expenses
Bank
Paid training expenses
Salaries
Bank
Paid salaries via EFT
Accounts payable
Bank
Paid a creditor (J-Stylistics)
Electricity
Bank
Paid electricity by cheque
Loan
Interest expense
Bank
Paid the loan and interest on the loan
Stationery asset
Stationery expense
Stationery on hand
Drawings
Bank
Withdrew R1000 for moms birthday gift
Beauty products expense
Beauty products asset
Beauty products expense for the month
Fundamental Accounting 8th edition / Chapter 7
Page 6
1200
1200
18000
18000
2300
2300
450
450
2250
250
2500
240
240
1000
1000
9200
9200
7.7
SEW-EASY
1
GENERAL JOURNAL
Dr
4
July
7
19
24
Cr
Drawings
Bank
Withdrew cash for personal use
200
Bank
Capital
Further capital invested
Drawings
Bank
Cheque paid for private use
Drawings
Supplies inventories
Took supplies for personal use
500
200
500
55
55
110
110
2 and 3
Dr
1
Balance b/d
Aug 1 Balance b/d
Dr
4
19
24
Dr
1
7
Bank
Bank
Supplies inventory
SEW-EASY
GENERAL LEDGER
Supplies inventories
1 800
24 Drawings
31 Balance c/d
1 800
1 690
Drawings
200
31
55
110
365
Capital
680
500
Aug 1 Balance b/d
1 180
925
Fundamental Accounting 8th edition / Chapter 7
4
19
31
Page 7
Cr
365
365
Bank
Balance b/d
Capital
Cr
110
1 690
1 800
Drawings
Drawings
Balance c/d
Cr
200
55
925
1 180
Dr
31
Drawings
Balance c/d
Capital
365
1
4 175
7
31
4 540
Aug
1
Balance b/d
Bank
Profit and loss
Cr
3 400
500
640
4 540
Balance b/d
4 175
4
SEW-EASY
STATEMENT OF FINANCIAL POSITION AS AT 31 JULY
EQUITY AND LIABILITIES
Owner’s equity
Capital 1 July
3 400
Add: Further investment
500
Net profit
640
4 540
Less: Drawings
365
4 175
7.8
1
PILLAY’S POSTER PAINTINGS
STATEMENT OF FINANCIAL POSITION AS AT 1 DECEMBER
ASSETS
Non-current assets
Motor vehicles
Current assets
Accounts receivable
Inventory of materials
Cash at bank
TOTAL ASSETS
2 700
2 700
3 000
700
1 500
800
5 700
EQUITY AND LIABILITIES
Owner’s equity
Capital* (Note 1)
Non-current liabilities
Loan from Sam Naidoo
Current liabilities
Accounts payable
TOTAL EQUITY AND LIABILITIES
3 400
3 400
2 000
2 000
300
300
5 700
Note 1
Capital is the balancing figure to be calculated.
Fundamental Accounting 8th edition / Chapter 7
Page 8
2
PILLAY’S POSTER PAINTINGS
GENERAL JOURNAL
Dr
1 Bank
Operating income*
Cash received for posters
3 Accounts payable
Bank
Paid L Munsamy
4 Inventory of materials
Accounts payable
Bought materials on credit
6 Drawings
Bank
Withdrew cash for personal use
8 Petrol expense
Bank
Paid for petrol by cheque
11 General expenses
Bank
Paid for general expenses
14 Bank
Accounts receivable
L Sans paid account
17 Petrol expense
Bank
Paid for petrol by cheque
19 Inventory of materials
Bank
Paid for materials by cheque
21 Accounts receivable
Operating income
Income received
24 Interest expense **
Bank
Paid interest for 3 months [R2 000 x 15% x 3/12]
26 Wages and salaries
Bank
Paid wages and salaries
31 Depreciation
Vehicles
Motor vehicles depreciated
31 Materials expense
Inventory of materials
Materials used for the month
(1 500 + 90 + 80 – 1 400)
Fundamental Accounting 8th edition / Chapter 7
Page 9
Cr
800
800
120
120
90
90
20
20
60
60
180
180
300
300
50
50
80
80
2 400
2 400
75
75
2 100
2 100
200
200
270
270
Dr
31
Interest prepaid
Interest expense
Adjustment – interest prepaid [R75 x 2/3]
Cr
50
50
*
Operating income is a general name used by a service business. Other names such as
fee revenue, services rendered or sales are acceptable.
**
The fact that two months’ interest is prepaid must be taken into account in
establishing the profit or loss for the month.
PILLAY’S POSTER PAINTINGS
GENERAL LEDGER
3
Real accounts
Dr
Dr
1
1
14
31
Capital
1
Balance b/d
Bank
Balance b/d
Operating income
Accounts receivable
Balance c/d
800
800
300
785
3
6
8
11
17
19
24
26
Accounts payable
Drawings
Petrol expense
General expense
Petrol expense
Inventory of materials
Interest expense
Wages and salaries
Jan
1
Balance b/d
2 685
Dr
1
Balance b/d
Motor vehicles
2 700
31 Depreciation
31 Balance c/d
2 700
Jan
1
Balance b/d
2 500
Dr
1
21
Balance b/d
Operating income
Accounts receivable
700
14 Bank
2 400
31 Balance c/d
3 100
Jan
1
Balance b/d
2 800
Fundamental Accounting 8th edition / Chapter 7
Page 10
Cr
3 400
Cr
120
20
60
180
50
80
75
2 100
2 685
785
Cr
200
2 500
2 700
Cr
300
2 800
3 100
Dr
1
4
19
Jan
1
Balance b/d
Accounts Payable
Bank
Balance b/d
Dr
Dr
3
31
Dr
6
Dr
31
Inventory of materials
1 500
31 Materials expense
90
31 Balance c/d
80
1 670
Bank
Interest expense
1 670
1 400
Loan from S Naidoo
1
Balance b/d
Bank
Balance c/d
Cr
270
1 400
Accounts payable
120
1
Balance b/d
270
4
Inventory of materials
390
Jan
1
Balance b/d
Drawings
20
Interest prepaid
50
Cr
2 000
Cr
300
90
390
270
Cr
Cr
Nominal accounts
Dr
Dr
8
17
Dr
11
Operating income
1
Bank
19 Accounts receivable
Bank
Bank
Bank
Cr
800
2 400
3 200
Petrol expense
60
50
110
Cr
General expense
180
Cr
Fundamental Accounting 8th edition / Chapter 7
Page 11
Dr
24
Bank
Dec
31
Total b/f
Dr
26
Dr
31
Dr
31
Interest expense
75
31 Interest prepaid
31 Total c/f
75
25
Wages and salaries expense
2 100
Bank
Cr
Depreciation
200
Motor vehicles
Inventory of materials
4
Cr
50
25
75
Cr
Materials expense
270
Cr
PILLAY’S POSTER PAINTINGS
TRIAL BALANCE AS AT 31 DECEMBER
Dr
Real accounts
Capital
Cash at bank
Motor vehicles
Accounts receivable
Inventory of materials
Loan form S Naidoo
Accounts payable
Drawings
Interest prepaid
3 400
785
2 500
2 800
1 400
2 000
270
20
50
Nominal accounts
Operating income
Petrol expense
General expense
Interest expense
Depreciation
Materials expense
Wages and salaries expense
Fundamental Accounting 8th edition / Chapter 7
Cr
3 200
110
180
25
200
270
2 100
9 655
Page 12
9 655
PILLAY’S POSTER PAINTINGS
GENERAL JOURNAL
5
Dr
2 885
Profit and loss
Petrol expense
General expense
Interest expense
Wages and salaries
Depreciation
Materials expense
Expenses transferred to profit and loss
Operating income
Profit and loss
Income transferred to profit and loss
Profit and loss
Capital
Net profit transferred to capital
Capital
Drawings
Drawings transferred to capital
Cr
110
180
25
2 100
200
270
3 200
3 200
315
315
20
20
PILLAY’S POSTER PAINTINGS
GENERAL LEDGER
(after closing transfers)
Real accounts
Dr
31
Dr
1
1
14
31
Drawings
Balance c/d
Balance b/d
Operating income
Accounts receivable
Balance c/d
Capital
20
1
3 695
31
3 715
Jan
1
Cash at bank
800
3
800
6
300
8
785
11
17
19
24
26
2 685
Jan
1
Fundamental Accounting 8th edition / Chapter 7
Page 13
Balance b/d
Profit and loss
Cr
3 400
315
3 715
Balance b/d
3 695
Accounts payable
Drawings
Petrol expense
General expense
Petrol expense
Inventory of materials
Interest expense
Wages and salaries
Cr
120
20
60
180
50
80
75
2 100
2 685
Balance b/d
785
Dr
1
B/d
Motor vehicles
2 700
31 Depreciation
31 Balance c/d
2 700
Jan
1
Balance b/d
2 500
Dr
1
21
Balance b/d
Operating income
Accounts receivable
700
14 Bank
2 400
31 Balance c/d
3 100
Jan
1
Balance b/d
2 800
Dr
1
4
19
Jan
1
Balance b/d
Accounts payable
Bank
Balance b/d
Dr
Dr
3
31
Dr
6
Dr
31
Inventory of materials
1 500
31 Materials expense
90
31 Balance c/d
80
1 670
Bank
Interest expense
Cr
300
2 800
3 100
Cr
270
1 400
1 670
1 400
Loan from S Naidoo
1
Balance b/d
Bank
Balance c/d
Cr
200
2 500
2 700
Accounts payable
120
1
Balance b/d
270
4
Inventory of materials
390
Jan
1
Balance b/d
Drawings
20
31
Capital
Interest prepaid
50
Fundamental Accounting 8th edition / Chapter 7
Page 14
Cr
2 000
Cr
300
90
390
270
Cr
20
Cr
Nominal accounts
Dr
31
Dr
8
17
Dr
11
Dr
24
31
Dr
26
Dr
31
Dr
31
Profit and loss
Bank
Bank
Bank
Bank
Total b/f
Bank
Motor vehicles
Inventory of materials
Dr
Petrol expense
General expenses
Interest expense
Wages and salaries
Depreciation
Materials expense
Capital (net profit)
Operating income
3 200
1
Bank
19 Accounts receivable
3 200
Cr
800
2 400
3 200
Petrol expense
60
31 Profit and loss
50
110
Cr
110
110
General expense
180
31 Profit and loss
Cr
180
Interest expense
75
31 Interest prepaid
31 Total c/d
75
25
31 Profit and loss
Cr
50
25
75
25
Wages and salaries expense
2 100
31 Profit and loss
Cr
2 100
Depreciation
200
31 Profit and loss
Cr
200
Materials expense
270
31 Profit and loss
Cr
270
Profit and loss summary
110
Operating income
180
25
2 100
200
270
315
3 200
Fundamental Accounting 8th edition / Chapter 7
Page 15
Cr
3 200
3 200
PILLAY’S POSTER PAINTINGS
STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE
FOR THE MONTH ENDED 31 DECEMBER
Operating income
3 200
Less: Expenses
2 885
Petrol expenses
110
General expenses
180
Interest expense
25
Wages and salaries
2 100
Depreciation
200
Materials expense
270
Net profit
315
6
7
PILLAY’S POSTER PAINTINGS
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER
ASSETS
Non-current assets
Motor vehicles
Current assets
Accounts receivable
Inventory of materials
Interest prepaid
TOTAL ASSETS
2 500
2 500
4 250
2 800
1 400
50
6 750
EQUITY AND LIABILITIES
Owner’s equity
Capital (1 December)
Add: Net profit
3 695
3 400
315
3 715
20
Less: Drawings
Non-current liabilities
Loan form S Naidoo
Current liabilities
Bank overdraft
Accounts payable
TOTAL EQUITY AND LIABILITIES
2 000
2 000
1 055
785
270
6 750
8
A complete set of accounts has been processed for Pillay’s Poster Paintings. The most
important point to note is that the financial performance is only for one month. If December
is a normal month and there are no seasonal fluctuations in the poster painting business, the
annual profit will be in the region of R315 x 12 = R3 780. This would give Norah Pillay a
return on her investment of 3 780/3 695 = 10% which is very good. However, December may
be a better month than most.
Fundamental Accounting 8th edition / Chapter 7
Page 16
It must be emphasised that adjustments were taken into account in establishing the profit for
December, so it is quite an accurate number. However, with inflation it is possible that
salaries and wages may have to be increased. It is also possible that certain expenses have not
been recorded. For example, there is no rent expense, she may be working from home. The
general expenses also seem a little low, for example, have electricity and telephone been
included?
The main problem is the large bank overdraft. This is because accounts receivable owe
money. Accounts receivable have increased from R700 at the beginning of the month to
R2 800 at the end of the month. Norah must try to get the accounts receivable to pay without
losing their business in the future, or she will have to invest more cash of her own, borrow
more, or be prepared to pay the high bank overdraft interest rates. In general the business
seems to be doing well and, if managed properly, could grow and become even more
successful.
7.9
1 and 2
YOUNG BEAUTY SALON
GENERAL LEDGER
Dr
Dr
1
10
Dr
1
Dr
22
Dr
1
4
Capital (B1)
1
Balance b/d
Bank (B6)
12 Bank (B6)
Total c/d
Bank (B6)
Drawings (B2)
8 465,10
66,00
8 531,10
Cr
46 450,90
10 000,00
7 000,00
63 450,90
Cr
Cr
Balance b/d
Land and buildings (B3)
35 000,00
Cr
Bank (B6)
Vehicles (B4)
18 700,00
Equipment (B5)
11 679,40
4 720,80
16 400,20
Cr
Balance b/d
Bank (B6)
Fundamental Accounting 8th edition / Chapter 7
Page 17
Dr
1
1
6
12
14
18
24
31
Balance b/d
Capital (B1)
Current income (N1)
Current income (N1)
Capital (B1)
Current income (N1)
Current income (N1)
Current income (N1)
Sept
1
Balance b/d
Dr
Dr
1
7
15
Dr
1
27
Dr
1
Dr
1
Dr
1
Bank (B6)
898,60
1
10 000,00
4
4 010,35
7
5 860,44
10
7 000,00
15
3 215,13
22
4 000,00
27
6 300,23
29
29
31
41 284,75
Rent expense (N4)
Equipment (B5)
Consumable stores (N2)
Drawings (B2)
Consumable stores (N2)
Vehicles (B4)
Salaries (N3)
Water (N5)
Telephone (N6)
Balance c/d
7 453,44
Current income (N1)
1
Total c/d
6
Bank (B6)
12 Bank (B6)
18 Bank (B6)
24 Bank (B6)
31 Bank (B6)
Total c/f
Bank (B6)
Bank (B6)
Balance b/d
Bank (B6)
Bank (B6)
Bank (B6)
Bank (B6)
Cr
500,00
4 720,80
1 210,24
66,00
640,89
18 700,00
7 400,90
312,90
279,58
7 453,44
41 284,75
Consumable stores (N2)
1 480,70
1 210,24
640,89
3 331,83
Salaries (N3)
8 433,60
7 400,90
15 834,50
Rent expense (N4)
500,00
Water and electricity (N5)
312,90
Telephone (N6)
279,58
Fundamental Accounting 8th edition / Chapter 7
Page 18
Cr
19 506,50
4 010,35
5 860,44
3 215,13
4 000,00
6 300,23
42 892,65
Cr
Cr
Cr
Cr
Cr
3
YOUNG BEAUTY SALON
TRIAL BALANCE AS AT 31 AUGUST
Fol
Debits
Real accounts
Capital
Drawings
Land and buildings
Vehicles
Equipment
Bank
B1
B2
B3
B4
B5
B6
Nominal accounts
Current income
Consumable stores
Salaries
Rent expense
Water and electricity
Telephone
N1
N2
N3
N4
N5
N6
4
Credits
63 450,90
8 531,10
35 000,00
18 700,00
16 400,20
7 453,44
42 892,65
3 331,83
15 834,50
500,00
312,90
279,58
106 343,55
106 343,55
YOUNG BEAUTY SALON
STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 AUGUST
Income
42 892,65
Current income
42 892,65
Less: Expenses
20 258,81
Consumable stores
3 331,83
Salaries
15 834,50
Rent expense
500,00
Water and electricity
312,90
Telephone
279,58
Net profit
22 633,84
Fundamental Accounting 8th edition / Chapter 7
Page 19
YOUNG BEAUTY SALON
STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST
ASSETS
Non-current assets
Land and buildings
Vehicles
Equipment
Current assets
Bank
TOTAL ASSETS
70 100,20
35 000,00
18 700,00
16 400,20
7 453,44
7 453,44
77 553,64
EQUITY AND LIABILITIES
Owner’s equity
Capital
Add: Net income
77 553,64
63 450,90
22 633,84
86 084,74
8 531,10
Less: Drawings
TOTAL EQUITY AND LIABILITIES
77 553,64
7.10
1
GREEN LAWNS GARDEN SERVICES
GENERAL JOURNAL
Dr
1
1
4
4
9
9
9
Telephone
Bank
Paid telephone for August (C81)
Bank
Services rendered
Cash takings in (R100-112)
Machinery
Bank
Bought lawn mower from Lawns Unlimited (C82)
Consumable expense
Bank
Green Grow delivered the manure and fertilisers (C83)
Bank
Machinery
Sold second hand mower to Mr Fixit (R113)
Advertising
Bank
Received account from Constantiaberg Bulletin (C84)
Bank
Services rendered
Landscaped half acre (R114)
Fundamental Accounting 8th edition / Chapter 7
Page 20
Cr
56
56
1 678
1 678
483
483
253
253
105
105
20
20
2 500
2 500
15
15
17
28
28
28
28
Drawings
Bank
Owner sent flowers to his wife (C85)
Drawings
Repairs
Bank
Sent cheque to Bobby’s Motors for repairs to both the
firm’s bakkie and the owner’s son’s car (C86)
Wages
Bank
Paid wages of staff (C87)
Loan
Interest on loan
Bank
Paid part of loan plus interest for the month (C88)
Fuel
Bank
Paid Bobby’s Motors for fuel (C89)
Bank
Services Rendered
Money received for gardening services (R115)
Office equipment
Stationery
Bank
Bought typewriter and ribbon from Rank Xerox (C90)
Dr
30
Cr
30
75
132
207
469
469
2 000
250
2 250
152
152
2 879
2 879
900
75
975
GREEN LAWNS GARDEN SERVICES
GENERAL LEDGER
Real accounts section
Dr
1
1
9
9
28
Oct
1
Bank
Balance
Services rendered
Machinery
Services rendered
Services rendered
Balance b/d
9 540
1 678
105
2 500
2 879
1
4
4
9
15
15
15
17
28
28
28
28
28
30
16 702
11 807
Fundamental Accounting 8th edition / Chapter 7
Page 21
Telephone
Machinery
Consumable expenses
Advertising
Drawings
Drawings
Repairs
Wages
Loan: Standard Bank
Interest on loan
Fuel
Office equipment
Stationery
Balance c/d
Cr
56
483
253
20
30
75
132
469
2 000
250
152
900
75
11 807
16 702
Dr
1
Balance b/d
Cash float
50
Dr
Dr
1
15
15
Dr
1
Capital
1
Total b/f
Bank
Bank
Cr
Vehicles
Cr
24 653
Dr
1
4
Balance b/d
Bank
Machinery
9 809
9
483
30
10 292
Oct
1
Balance b/d
10 187
Dr
28
30
Bank
Bank
Balance c/d
Balance b/d
Cr
10 000
Drawings
1 000
30
75
1 105
Balance b/d
Dr
30
Cr
Bank
Balance c/d
Office equipment
900
Loan: Standard Bank @ 12% p.a.
2 000
1
Balance b/d
23 000
25 000
Oct
1
Balance b/d
Cr
105
10 187
10 292
Cr
Cr
25 000
25 000
23 000
Nominal accounts section
Dr
1
1
Total c/d
Bank
Telephone
341
56
397
Fundamental Accounting 8th edition / Chapter 7
Page 22
Cr
Dr
1
4
Dr
1
9
Dr
1
15
Dr
1
17
Dr
1
28
Dr
1
28
Dr
1
28
Dr
Total c/d
Bank
Total c/d
Bank
Total c/d
Bank
Total c/d
Bank
Total c/d
Bank
Consumable expense
3 890
253
4 143
Advertising
703
20
723
Total c/d
Bank
Cr
Repairs
Cr
Wages
Cr
682
132
814
2 478
469
2 947
Interest on loan
1 000
250
1 250
Fuel
Total c/d
Bank
Cr
Cr
Cr
560
152
712
Stationery
109
75
184
Services rendered
1
Total c/d
1
Bank
9
Bank
28 Bank
Fundamental Accounting 8th edition / Chapter 7
Page 23
Cr
Cr
19 815
1 678
2 500
2 879
26 872
2
GREENLAWNS GARDEN SERVICES
TRIAL BALANCE AS AT 30 SEPTEMBER
Debits
Real accounts
Bank
Cash float
Capital
Drawings
Vehicles
Machinery
Office equipment
Loan: Standard bank @ 12% p.a.
11 807
50
10 000
1 105
24 653
10 187
900
23 000
Nominal accounts
Telephone
Consumable expense
Advertising
Repairs
Wages
Interest on loan
Fuel
Stationery
Services rendered
397
4 143
723
814
2 947
1 250
712
184
59 872
3
Credits
26 872
59 872
Adjustments for prepayments and accruals, as well as for items such as depreciation,
would ensure better matching and therefore a better indicator of financial performance
and position based on historic costs.
7.11
PRO-CLEAN
GENERAL JOURNAL
(narrations omitted)
1
1
1
1
Dr
35 000
Bank
Capital
Rent prepaid
Bank
Equipment
Clean Care (Pty) Ltd
Cleaning materials
Bank
Fundamental Accounting 8th edition / Chapter 7
Cr
35 000
2 100
2 100
9 000
9 000
480
480
Page 24
3
3
3
3
8
14
14
14
20
20
25
25
25
25
31
31
31*
*
*
Vehicles
Capital
Office equipment
Modquip
Trading licence
Bank
Stationery
Bank
Bank
S Jones
P Wilson
Stuttafords
Services rendered
Cleaning materials
Clean Care (Pty) Ltd
Advertising
Argus
Wages
Bank
Cash float
Bank
Stationery expense
Bank
Bank
S Jones
Insurance prepaid (or expense)
Bank
Clean Care (Pty) Ltd (9 000/9) + 751
Bank
Bank charges
Bank
Depreciation
Steam cleaning equipment
Vehicles
Office equipment
Cleaning materials inventory
Cleaning materials expense
Inventory of stationery
Stationery expense
Rent expense (2 100/3 x 1)
Rent prepaid
Insurance expense
Insurance prepaid
Dr
12 640
Cr
12 640
14 640
14 640
850
850
105
105
583
160
85
1 380
2 208
751
751
145
145
245
245
200
200
78
78
160
160
192
192
1 751
1 751
46
46
1 080
200
240
640
231
231
63
63
700
700
16
16
These adjustments are made because a profit and loss account has been requested.
Information is available in the question in order to make the necessary adjustments.
Fundamental Accounting 8th edition / Chapter 7
Page 25
2
PRO-CLEAN
GENERAL LEDGER
Dr
1
8
25
Dr
20
Dr
31
Dr
1
Dr
25
Dr
1
Dr
3
Bank
Capital
Services
S Jones
Bank
35 000
583
160
3
3
14
20
20
25
25
25
Profit and loss
summary (net loss)
Capital
1
1 994
1
Clean Care (Pty) Ltd
Equipment
9 000
31
Bank
Rent prepaid
Cleaning materials
Trading licence
Stationery expense
Wages
Cash float
Stationery expense
Insurance expense
Clean Care (Pty) Ltd
Bank charges
Cash float
200
Bank
Vehicles
Depreciation expense
Capital
Vehicles
12 640
31
Modquip
Office equipment
14 640
31 Depreciation expense
Modquip
3
Services rendered
S Jones
160
25
Fundamental Accounting 8th edition / Chapter 7
Page 26
Cr
2 100
480
850
105
245
200
78
192
1 751
46
Cr
Clean Care (Pty) Ltd
1 751
1
Equipment
14 Cleaning materials
Dr
Dr
8
1
Depreciation expsense
Office equipment
Bank
Cr
35 000
12 640
Cr
200
Cr
9 000
751
Cr
240
Cr
640
Cr
14 640
Cr
160
Dr
8
Dr
31
Dr
31
Dr
8
Services rendered
Cleaning materials
Stationery
Services rendered
P Wilson
85
Cleaning materials inventory
231
Cr
Inventory of stationery
63
Cr
Stuttafords
1 380
Dr
Dr
1
Dr
25
Cr
Argus
14
Cr
Advertising
Cr
145
Bank
Rent prepaid
2 100
31 Rent expense
Cr
700
Bank
Insurance prepaid
192
31 Insurance expense
Cr
16
Cleaning materials
480
31 Cleaning materials
751
inventory
31 P&L summary
1 231
Cr
Nominal accounts section
Dr
1
14
Dr
3
Dr
1
20
Bank
Clean Care (Pty) Ltd
Bank
Bank
Bank
Trading licence
850
31 P&L summary
Stationery expense
105
31 Inventory of stationery
78
P&L summary
183
Fundamental Accounting 8th edition / Chapter 7
Page 27
231
1 000
1 231
Cr
850
Cr
63
120
183
Dr
31
Dr
14
Dr
14
Dr
25
Dr
31
Dr
31
Dr
31
Dr
31
P&L summary
Services rendered
2 208
8
Bank
8
S Jones
8
P Wilson
8
Stuttafords
2 208
Cr
583
160
85
1 380
2 208
Argus
Advertising
145
31 P&L summary
Cr
145
Bank
Wages
245
31
P&L summary
Cr
245
Bank charges
46
31 P&L summary
Cr
46
Rent expense
700
31 P&L summary
Cr
700
Insurance expense
16
31 P&L summary
Cr
16
Depreciation expense
200
31 P&L summary
240
640
1 080
Cr
1 080
Bank
Rent prepaid
Insurance prepaid
Equipment
Vehicles
Office equipment
Profit and loss summary account
Rent expense
700
31 Services rendered
Cleaning materials
1 000
Capital (net loss)
Trading licence
850
Stationery expense
120
Advertising
145
Wages
245
Insurance expense
16
Depreciation expense
1 080
Bank charges
46
4 202
Fundamental Accounting 8th edition / Chapter 7
Page 28
1 080
Cr
2 208
1 994
4 202
3
PRO-CLEAN
GENERAL JOURNAL
Dr
4 202
Profit and loss summary
Rent expense
Trading licence
Cleaning materials
Stationery expense
Advertising
Wages
Insurance expense
Depreciation
Bank charges
Closing transfer
Services rendered
Profit and loss summary
Closing transfer
Capital
Profit and loss summary
Transfer of net loss
Cr
700
850
1 000
120
145
245
16
1 080
46
2 208
2 208
1 994
1 994
Return on equity = (-1 994 x 12)/47 640 = -50,2%. (It is unlikely that Hill will continue to
make such a large loss. As this is the first month of business, improvement can be expected in
future.)
4
PRO-CLEAN
(DRAFT) STATEMENT OF FINANCIAL POSITION AS AT 31 MAY
Equipment
Vehicles
8 800
12 400
Office equipment
Accounts receivable: Wilson
Stuttafords
Cash float
Bank
Rent prepaid
CM inventory
Inventory of stationery
Insurance prepaid
14 000
85
1 380
200
29 696
1 400
231
63
176
68 431
Fundamental Accounting 8th edition / Chapter 7
Page 29
Capital (35 000 + 12 640 – 1 994)
Accounts payable:
Clean Care (Pty) Ltd
Modquip
Argus
45 646
8 000
14 640
145
68 431
7.12
1
SWEET & SOUR
GENERAL JOURNAL
1
2
3
4
5
6
7
8
9
10
11
12
13
Bank
Capital
Joe Blogg increased his capital
Bank
Accounts receivable
Received cheque in settlement of account from P Platt
Consumable stores expense
Bank
Bought chemicals from Sasko
Bank
Accounts receivable
Received cheque from S Scott in settlement
Stationery expense
Accounts payable
Purchased stationery from Paperbacks on credit
Bank
Fees received
Cash takings from services rendered
Drawings
Machinery
Owner took redundant machine for personal use
Accounts receivable
Fees received
Rendered services on credit for Platt (R65) and Scott
(R66)
Machinery
Accounts payable
Bought machinery on credit
Telephone expense
Bank
Paid telephone account
Advertising
Accounts payable
Received statement for advertising
Bank
Accounts receivable
Received cheque in full settlement
Bank charges
Bank
Statement received
Fundamental Accounting 8th edition / Chapter 7
Page 30
Dr
2 000
Cr
2 000
165
165
210
210
235
235
155
155
578
578
350
350
112
112
2 300
2 300
120
120
355
355
900
900
15
15
14
14
Depreciation expense
Vehicles (20 000 – 15%)
Machinery (10 000 – 350 + 2 300) – 10 500
Depreciation on non-current assets
Inventory of stationery
Stationery expense
Stationery unused on hand
2
Dr
4 450
Cr
3 000
1 450
150
150
SWEET & SOUR
GENERAL LEDGER
Statement of financial position
Real accounts sections
Dr
1
1
2
4
6
12
Dr
30
30
Bank
Balance b/d
Capital
Accounts receivable
Accounts receivable
Fees received
Accounts receivable
Drawings
Balance c/d
6 000
2 000
165
235
578
900
Cr
3
10
13
Capital
2 350
1
33 845
1
30
Consumable stores
expense
Telephone expense
Bank charges
Balance b/d
Bank
Profit and loss summary
(net profit)
36 195
Dr
1
Dr
1
9
Balance b/d
Machinery
Drawings
2 000
30
350
2 350
Balance b/d
Vehicles
20 000
30
Balance b/d
Accounts Payable
Machinery
10 000
1
2 300
30
Fundamental Accounting 8th edition / Chapter 7
Cr
27 000
2 000
7 195
36 195
May
1
Dr
1
7
210
120
15
Page 31
Balance b/d
Capital
33 845
Cr
2 350
2 350
Depreciation
Cr
3 000
Drawings
Depreciation
Cr
350
1 450
Dr
1
8
Balance b/d
Fees received
Dr
Dr
31
Accounts receivable
1 400
2
Bank
112
4
Bank
12 Bank
Accounts payable
1
Balance b/d
5
Stationery expense
9
Machinery
11 Advertising
Stationery expense
Inventory of stationery
150
Cr
165
235
900
Cr
740
155
2 300
355
Cr
Nominal accounts section
Dr
30
30
Dr
1
3
Dr
1
5
Dr
30
Vehicles
Machinery
Balance b/f
Bank
Balance b/f
Accounts payable
Profit and loss
Depreciation
3 000
30 Profit and loss
1 450
4 450
Cr
4 450
Consumable stores expenses
250
30 Profit and loss
210
460
Cr
460
Stationery expense
300
30 Inventory and stationery
155
30 Profit and loss
455
Fees received
16 350
1
6
8
8
16 350
Fundamental Accounting 8th edition / Chapter 7
Page 32
Balance b/f
Bank
Accounts receivable
Accounts receivable
4 450
460
Cr
150
305
455
Cr
15 660
578
65
47
16 350
Dr
1
11
Dr
1
Dr
1
10
Dr
13
Balance b/f
Accounts payable
Balance b/f
Balance b/f
Bank
Bank
Dr
Depreciation
Consumable stores
expense
Stationery expense
Advertising expense
Rent paid
Telephone
Bank charges
Capital (net profit)
Advertising expense
140
30 Profit and loss
355
495
Rent paid
3 000
30
Profit and loss
Cr
495
495
Cr
3 000
Telephone expense
310
30 Profit and loss
120
430
Cr
430
Bank charges
15
30 Profit and loss
Cr
15
Profit and loss summary
4 450
30 Fees received
460
305
495
3 000
430
15
7 195
16 350
Fundamental Accounting 8th edition / Chapter 7
430
Cr
16 350
16 350
Page 33
3
SWEET & SOUR
GENERAL JOURNAL
Dr
9 155
Profit and loss summary
Depreciation
Consumable stores expense
Stationery expense
Advertising expense
Rent paid
Telephone expense
Bank charges
Closing transfer
Fees received
Profit and loss summary
Closing transfer
Profit and loss summary
Capital
Transfer of net profit
Cr
4 450
460
305
495
3 000
430
15
16 350
16 350
7 195
7 195
4
SWEET & SOUR
STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 APRIL 20X2
Income
Fees received
16 350
Less: Expenses
9 155
Depreciation
4 450
Consumable stores expense
460
Stationery expense
305
Advertising expense
495
Rent paid
3 000
Telephone
430
Bank charge
15
Net profit
7 195
SWEET & SOUR
STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 20X2
Non-current assets
27 500
Owner’s equity
Office equipment
17 000
Capital
27 000
Machinery
10 500
Add: Investment
2 000
Current assets
9 895
Net profit
7 195
Cash
9 533
36 195
Accounts receivable
212
Less: Drawings
2 350
Stationery
150
Current liabilities
Accounts payable
37 395
Fundamental Accounting 8th edition / Chapter 7
Page 34
33 845
3 550
37 395
5
The return on equity = 7 195/33 845 = 21,3%. This return is for the period under
review, not just for one month. This seems to be a reasonable return. The statement of
financial position indicates there is a good mix between non-current and current
assets. There also appears to be adequate short-term assets to pay the accounts
payable. Blogg has not engaged in any long-term borrowing. The absence of a salaries
account indicates that Blogg has been the only employee and that he has only
withdrawn R2 350 during the year. The business will have to grow during the next
financial year in order to provide adequate income for the owner.
Fundamental Accounting 8th edition / Chapter 7
Page 35