Faculty of Creative Industries & Business
Department of Accounting & Finance
Thursday 23 August 2012
6.30 pm
1 hour 30 minutes. There is no reading time.
40 marks
Instructions:
20% of course mark
Answer the questions directly in the answer booklet provided.
Show your workings.
You may use a silent non-programmable calculator.
1 The Accounting Cycle
40
Total 40
ALAF NZ501 Accounting Practices, Test One Semester Two, 2012 1

James Jones commenced his plumbing business on 1 July 2012, trading as Jones
Plumbing Services. He registered his business for GST on the invoice basis and set his balance date as 31 July. The transactions for his first month of business are given below. James records the payments for insurance as a prepayment (Prepaid
Insurance) and records the corresponding expenses on balance date.
All amounts are inclusive of GST, where applicable
July 1 James commenced business with a cash deposit of $5,000.
6 Purchased equipment for $4,600, on account.
7 Paid net wages of $420 and recorded PAYE of $110.
11 Invoiced customer for plumbing services, $1,610.
12 Took out bank loan for $4,000, which is to be repaid in November 2014.
14 Performed plumbing services for cash, $575.
16 Paid insurance for July, August and September by electronic transfer, $690.
18 Paid telephone bill, $230.
19 Wrote cheque for drawings, $400.
21 Received partial payment from a credit customer $1,000.
25 Received an invoice for advertising, $253
30 Made partial payment on equipment purchased on 6 July, $200.
Further information as at 31July 2012:

Electricity expenses of $400 (exclusive of GST) were owing for July. An invoice had not been received on balance date.

The depreciation expense for the equipment for July is determined to be
$350.

Insurance prepaid for August and September is $400 (exclusive of GST).

Services performed but not invoiced amounted to $713 (GST inclusive).
ALAF NZ501 Accounting Practices, Test One Semester Two, 2012 2

REQUIRED:
In the answer book provided: a) Record the transactions for July 2012 for Jones Plumbing including the end of month adjustments, in the General Journal provided. (Narrations are not required.)
(16 marks) b) Post your journal entries to the General Ledger accounts provided. (You are not required to post to the Accounts Payable account or to the GST account.)
(10 marks) c) Prepare the Adjusted Trial Balance as at 31 July 2012.
(2 marks) d) Prepare reversing journal entries as at 1 August 2012.
(2marks) e) Explain the purpose of closing entries.
(1 mark) f) Prepare an unclassified Income Statement for Jones Plumbing for the month ending 31 July 2012.
(2 marks) g) Prepare a classified Balance Sheet for Jones Plumbing as at 31 July 2012.
(5 marks) h) On 3 August James recorded the purchase of a van, in error, as:
Dr Motor Expenses
Cr Accounts Payable
4,600
4,600
Record the correcting entry and state what effect, if any, the error would have made on the financial statements, had it not been corrected.
(2 marks)
ALAF NZ501 Accounting Practices, Test One Semester Two, 2012 3