ACCOUNTING STUDIES Stage 2
Centralian Senior Secondary College
TEST REVISION ON BALANCE DAY ADJUSTMENTS
2008
Fred Bumpkin is the proprietor of FRED’s CARYARD . He presents the following trial balance and
information to be used in the preparation of the final reports for the year ended 30 June 2006:
FRED’s CARYARD
Trial Balance as at 30 June 2006
Cash sales
Credit sales
Stock (beginning)
Delivery vehicles
Accumulated depreciation on delivery vehicles
Office equipment
Accumulated depreciation on office equipment
Delivery inwards
Rent
Telephone
Insurance
Stationery expense
Prepaid advertising
Salespeople’s salaries
Sales returns
Discount revenue
Debtors’ control
CARSrUS Pty Ltd (creditor)
Bad debts
Bank overdraft
Interest on overdraft
Capital
120 000
300 000
338500
70 000
36 000
62 000
24 000
6 400
45 000
7 000
6 400
2 300
22 600
86 000
6 000
12 200
45 000
47 000
5 200
45 000
3 300
120 100
Other Information at 30 June 2003
• Stock at end $71500
• A new delivery vehicle was purchased on 1 February 2003 at a cost of $18 000. This purchase has been
recorded.
• Delivery vehicles are depreciated at 10% per annum, using the straight line method.
• Office equipment is depreciated at 10% per annum, using the diminishing balance method.
• $1000 of stationery was on hand.
• Advertising expense for the year was $5500.
• Interest of $600 on overdraft is owing.
Things to Consider
Apply the correct rules for the balance day adjustments:
• When was the vehicle purchased? How much of the depreciation belongs to this period?
• Diminishing balance IS the reducing balance method
• Stationery on hand? Leftover at end of period -Asset or expense?
• We have only Prepaid in TB – but now we see we actually already used some –what accounts does this effect?
• If the interest is owing, what action to take? Do we add or subtract from interest for the period (remember we
need to write the true amount of interest belonging to this period)? Are we left with a prepaid/accrued
asset/liability.
a) Complete the profit and loss statement for the twelve months ended 30 June 2003. (7 Marks)
 remember to underline and think how to use the 3 columns
FRED’s CARYARD
Profit and Loss Statement for Twelve Months Ended 30 June 2003
$
$
$
REVENUE
COST OF GOODS SOLD
GROSS PROFIT
SELLING EXPENSES
ADMINISTRATIVE EXPENSES
FINANCIAL EXPENSE
NET PROFIT / LOSS
FRED’s CARYARD
Balance Sheet as at 30 June 2003
$
$
OWNER’S EQUITY
ASSETS
Current
Non-current
LIABILITIES
Current
NET ASSETS
$
Revision notes –
Study the relationship between the accounting period concept and balance day adjustments
Depreciation – using Acc concepts –explain why & how
Bad & Doubtful debts – relationship – how treated with/without existing provision
Current provision for Doubtful debts is $6000, Bad Debts for the period are $300. Debtors closing
balance is $60000. Provision for Doubtful debts for next period is 10% of Debtors.
a) Draw up the ledgers and the original balances for the period and the Balance day Adjustments.
(4 marks)
_________debtors control______________
____________Bad debts_____________
_________Doubtful Debts______________
____Provision for doubtful debts________
b) Fill in the General Journal with the appropriate entries
(2 Marks)
General Journal
Date
Particulars
c) Show the extract for the:
i) Balance Sheet
Dr
ii) Profit & Loss Statement
Cr
(2 Marks)