TACC601 Principles of Accounting Week 2:  Income Statement and Balance Sheet

TACC401 Principles of Accounting

TACC601 Principles of Accounting 

Week 2:  Income Statement and Balance Sheet

Seminar Guide

Seminar Activity 2.1:  Transactions and Financial Statements

Jock O’Donoghue has recently started Jock’s Tool Supplies, a retailer of tools and other supplies to the heavy haulage and earth moving industry.  The following transactions have occurred in the first month of the business’ operations:

Jan    4       Jock commenced business by contributing cash of $4 000, inventory of $15 000, furniture of $1 500, a building $68 000 and a mortgage on the building of $40 000.

          4       Purchased a computer on credit for $3 000.

          6       Sold inventories for cash of $2 200.  The cost price of the inventory was $1 075.

          8       Purchased inventory on credit for $8 000.

          9       Paid cash of $400 for the telephone calls for the month.

        13       Jock took $150 cash and $50 of inventory for his own personal use.

        17       Sold tools on credit to a local logging contractor for $5 600.  These tools originally cost $540.

        18       Paid $2 000 to creditors towards the amount owing.

        22       Paid light and power of $250 by cash.

        25       The business repaid $1 000 of the mortgage.

        27       Paid interest on the mortgage of $100.

        28       Another business is renting a small part of the building as office space.  The paid $500 for January’s rent.

        28       Purchased some tools for resale from a local manufacturer.  They cost $700 and the manufacturer was paid in cash.

Required

Complete a worksheet for the month of January using the above data and prepare an income statement and balance sheet at 31st January 2018.

Worksheet of Jock’s Tool Supplies
 Cash atInventoryAccountsOfficeOfficeBuilding AccountsMortgageCapitalProfit &
 bank ReceivableFurnitureEquip. =PayableLoan loss
4           
4           
6           
            
8           
9           
13           
17           
            
18           
22           
25           
27           
28           
28           
            
TOTALS           


Jock’s Tool Supplies
Income Statement
For the month ended 31st January 2018
$
Sales 
Less Cost of goods sold 
Gross Profit 
  
Add Other Revenue 
Rent revenue 
  
Less Other Expenses 
Interest expense 
Light and power expense 
Telephone expense 
  
Net Profit 
Jock’s Tool Supplies 
Balance Sheet
as at 31st January 2018
$
Current assets 
Cash at bank 
Inventory 
Accounts receivable 
Total Current Assets 
  
Non current assets 
Office furniture 
Office equipment 
Building 
Total Non Current Assets 
Total Assets 
  
Current liabilities 
Accounts payable 
Total Current Liabilities 
  
Non-current liabilities 
Mortgage Loan 
Total Non Current Liabilities 
Total Liabilities 
  
Net Assets 
  
Equity 
Capital 
Add Net Profit 
Total Equity 

Seminar Activity 2.2:  Transactions and Financial Statements

 Joe Henry started a new business on 1 January 2017 under the name of Henry’s Hardware. The following transactions took place during the first month of the businesses’ life.

  1. Henry deposited $30 000 of his own savings into a bank account in the name of his new business.
  2. Henry purchased a building costing $60 000 from which to run his business. This was financed by a mortgage loan of the same amount arranged with the businesses’ bank.
  3. Henry purchased furniture and fittings for the business, drawing a cheque for
    $10 000 from the businesses’ bank account.
  4. Henry purchased inventory for resale on credit for $20 000.
  5. Henry needed $500 urgently for personal reasons and withdrew $500 from the businesses’ bank account.
  6. Sold goods for $3 000 cash which was deposited in the bank account. These goods had cost the business $2 200.
  7. Paid $250 by cheque for a series of newspaper advertisements to appear in January.
  8. Sold goods for $5 000 on credit. These goods had cost the business $3 200.
  9. Paid $4 000 by cheque being part of the amount owing to creditors.
  10. Henry took some goods home for his personal use which had cost the business $400.
  11. Paid $180 by cheque for telephone use in January.
  12. Paid $600 wages by cheque to the person Henry had employed earlier in the month.
  13. Received $3 500 from debtors which was deposited in the bank account.

Required

Prepare worksheet entries for these transactions. Balance the columns and prepare an income statement and a balance sheet at the end of the month.

Worksheet of Henry’s Hardware
Assets=Liabilities+Equity
 Cash atDebtorsInventoryBuildingFurniture & CreditorsMortgage CapitalProfit
 bank   fittings Loan  and loss
1-Jan           
2           
2           
3           
4           
5          
6           
            
7           
8           
            
9           
10           
11           
12           
13           
TOTALS           
Henry’s Hardware Income Statement
For the month ended 31 January 2017
 $
Income  
Sales 
Less cost of goods sold 
Gross Profit 
  
Less Other Expenses 
Advertising 
Telephone 
Wages 
  
Net Profit 
Henry’s Hardware 
Balance Sheet as at 31 January 2017
 $
Current assets 
Cash at bank 
Debtors 
Inventory 
Total Current Assets 
  
Non current assets 
Building 
Furniture and fittings 
Total Non Current Assets 
Total Assets 
  
Current liabilities 
Creditors 
Total Current Liabilities 
  
Non-current liabilities 
Mortgage Loan 
Total Non Current Liabilities 
Total Liabilities 
  
Net Assets 
  
Owners’ equity 
Capital 
Add Net Profit 
Total Owners’ Equity 
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