sol unit 1 chapter 2 adding gst

1 2. Adding GST to the accounting process. VCE Accounting Unit 1

SOLUTIONS

Chapter 2

Adding GST to the accounting process SOLUTIONS


SOLUTIONS

Use the following information and calculate the GST

liability, or asset, at the end of each reporting period.

1. The following data is provided for the March quarter ending 31/3/19:

Barry the Bricklayer: Balance Sheet (extract) at 31/12/18

Assets $ Equities $

Liabilities

GST owing to ATO 2000

Cash Receipts Journal (CRJ) CFS √ √ √

IS X √ rev. X

BS √ calc. X √ calc.

Date Details Doc. Bank Takings Sundry GST

31/3/19 Totals —- 33000 30000 3000

Cash Payments Journal (CPJ) CFS √ √ √ √ √ √ √ √ √

IS X √ exp. X X √ exp. √ exp. √ calc. √ exp. X

BS √ calc. X √ √ calc. X X Stock at end X √ calc.

Date Details Doc. Bank Wages Drawings Loan Interest Expense

Rent Supplies Office Exps.

Sundry GST

31/3/19 Totals — 32680 13000 10000 4900 3100 800 880

Calculation of GST liability or asset at 31/3/19. Show workings. $ BALANCE AT START 2000

ADD GST COLLECTIONS 3000 SUB-TOTAL 5000 LESS GST PAYMENTS (880) BALANCE AT END 4120

Show how the GST you calculated would be reported at 31/3/19.


Assets $ Equities $

Liabilities

GST OWING TO ATO 4120

2. The following data is

provided for the September quarter ending 30/9/21:


Assets $ Equities $

Liabilities


Cash Receipts Journal (CRJ) CFS √ √ √

IS X √ rev. X

BS √ calc. X √ calc.


30/9/21 Totals —- 66000 60000 6000






Sundry GST

30/9/21 Totals — 44520 18000 12000 5200 4900 3100 1320





Assets $ Equities $

Liabilities



SOLUTIONS



1. The following data is provided for the March quarter ending 31/3/16:

Lean & Mean: Balance Sheet (extract) at 31/12/15

Assets $ Equities $

Liabilities


Cash Receipts Journal (CRJ)


31/3/16 Totals —- 20900 19000 1900

Cash Payments Journal (CPJ)



Sundry GST

31/3/16 Totals — 54520 16000 13000 12000 5000 6200 2320

Calculation of GST liability or asset at 31/3/16. Show workings.

$ BALANCE AT START 300

ADD GST COLLECTIONS 1900 SUB-TOTAL 2200 LESS GST PAYMENTS (2320) BALANCE AT END (120)



Assets $ Equities $

GST OWING FROM ATO 120 Liabilities

2. The following data is provided for the December quarter ending 31/12/18:


Assets $ Equities $

GST owed from ATO 500 Liabilities



31/12/18 Totals —- 44000 40000 4000




Sundry GST

31/12/18 Totals — 55260 17000 9000 13000 6400 7200 2660

Calculation of GST liability or asset at

31/12/18. Show workings. $ BALANCE AT START (500)




Assets $ Equities $

Liabilities


Explain why GST received from customers is not reported as revenue. BECAUSE IT DOES NOT MATCH THE DEFINTION OF REVENUE WHICH IS — A TRANSACTION THAT LEADS TO AN INCREASE IN OWNERS EQUITY, EXCLUDING CAPITAL CONTRIBUTION. GST RECEIVED FROM CUSTOMERS INCREASES AN ASSET (CASH) AND A LIABILITY (GST) BUT NOT OWNERS EQUITY.


SOLUTIONS



1. The following data is provided for the June quarter ending 30/6/17:

A+ Insurance Brokers: Balance Sheet (extract) at 31/3/17

Assets $ Equities $

Liabilities



Date Details Doc. Bank Fees Sundry GST

30/6/17 Totals —- 41800 38000 3800


Date Details Doc. Bank Wages Drawings Loan ATO

Payments Rent Supplies

Office Exps.

Sundry GST

30/6/17 Totals — 29100 9600 9000 1700 6000 1200 800 800

Calculation of GST liability or asset at 30/6/17. Show workings. $

BALANCE AT START 1700

ADD GST COLLECTIONS 3800 SUB-TOTAL 5500 LESS GST PAYMENTS (800) LESS ATO PAYMENTS (1700) BALANCE AT END 3000



Assets $ Equities $

Liabilities


The following data is provided for the next 3 months: the September quarter ending 30/9/17:


Date Details Doc. Bank Fees Sundry GST

30/9/17 Totals —- 22000 20000 2000




Office Exps.

Sundry GST

30/9/17 Totals — 42320 12000 15000 3000 7000 2400 1800 1120


ADD GST COLLECTIONS 2000

SUB-TOTAL 5000 LESS GST PAYMENTS (1120) LESS ATO PAYMENTS (3000) BALANCE AT END 880



Assets $ Equities $

Liabilities


GST is usually a liability. Explain how GST can become an asset. ASSUMING NO OPENING GST BALANCE, IF GST PAYMENTS EXCEED GST COLLECTIONS DURING THE REPORTING PERIOD, GST WILL BE AN ASSET, THAT IS, THE ATO OWES THE BUSINESS. THIS IS UNUSUAL.


SOLUTIONS



1. The following data is provided for the June quarter ending 30/6/18:

Sparkles Window Cleaning: Balance Sheet (extract) at 31/3/18

Assets $ Equities $

GST owing from ATO 1900 Liabilities

Bank overdraft 11000


Date Details Doc. Bank Takings Sundry GST GST

Refund

30/6/18 Totals —- 30500 26000 2600 1900




Sundry GST

30/6/18 Totals — 18700 3900 6000 4200 2600 1200 800

Calculation of GST liability or asset at 30/6/18. Show workings. $ BALANCE AT START (1900)

ADD GST COLLECTIONS 2600 ADD GST REFUND 1900 SUB-TOTAL 2600 LESS GST PAYMENTS (800) BALANCE AT END 1800


Sparkles Window Cleaning: Balance Sheet (extract) at 30/6/18

Assets $ Equities $

Liabilities


Show how the GST received and/or paid would be reported in the Cash Flow Statement (extract) for the quarter ending 30/6/18.

Sparkles Window Cleaning: Cash Flow Statement (extract) for June quarter 2018.

Cash Receipts $ $

GST REFUND 1900

GST COLLECTIONS 2600

Cash Payments

GST PAYMENTS 800

Explain how the GST received and/or paid would be reported in the Income Statement. GST HAS NO IMPACT ON THE INCOME STATEMENT SINCE GST RECEIVED IS NOT REVENUE AND GST PAID IS NOT AN EXPENSE.


Date Details Doc. Bank Takings Sundry GST GST

Refund

30/9/18 Totals —- 9900 9000 900




Office Exps.

Sundry GST

30/9/18 Totals — 24090 4400 7000 1800 4200 3800 1900 990

The following data is provided for the next 3 months: the September quarter ending 30/9/18:

Calculation of GST liability or asset at 30/9/18. Show workings. $1800 + $900 — $1800 — $990 = $90 ASSET (WHICH IS UNUSUAL).

Calculate the cash balance at 30/9/18. Show workings. ($11000) + $30500 — $18700 + $9900 — $24090 = ($13390) OVERDRAFT.


SOLUTIONS

Debbie’s Dental Services: Balance Sheet at 31/12/22

Assets $ Equities $

Bank 18000 Liabilities

Stock of supplies 4900 NAB loan 7000

Equipment 26000 GST owing to ATO 2000

Office assets 15000 Owners Equity

Capital, Debbie 54900

Total assets 63900 Total equities 63900

Bendigo Bank

Date: 5/1/23

To: HiSi Traders

For: Dental supplies

(drugs, amalgam etc) including $100 GST

This cheque $1100

Cheque number 179 Debbie’s Dental Services

INTERNET TRANSFER: PAYMENT. 012

DATE: 13/1/23

FROM: DEBBIE’S DENTAL SERVICES

A/C: 876-D1118932

TO: JITHENDRI A/C: 098-J88871120

FOR: WAGES, $1400

Debbie’s Dental

Services Receipt # 37

Date: 1/1/23

From: Customers

For:

Dental fees including

$80 GST

$: $880

Thank you

Transactions for Debbie’s Dental Services, January 2023:

Debbie’s Dental

Services Receipt # 38

Date: 8/1/23

From: Customers

For:


$200 GST

$: $2200

Thank you

Bendigo Bank

Date: 9/1/23

To: HiSi Traders



This cheque $330


Debbie’s Dental Services Receipt # 39

Date: 16/1/23

From: Customers

For:


$60 GST

$: $660

Thank you

Bendigo Bank

Date: 20/1/23

To: AAA Real Estate

For: Rent including $250 GST

This cheque $2750



DATE: 23/1/23


A/C: 876-D1118932

TO: DEBBIE A/C: 058-D99855

FOR: DRAWINGS, $2800

Bendigo Bank

Date: 28/1/23

To: HiSi Traders


(drugs, amalgam etc)

including $90 GST

This cheque $990


GJ Note #18

31/1/23

Stocktake of supplies.

$3700

Supplies for this business would include drugs, amalgam etc.

Dentistry is Debbie’s revenue activity which she calls ‘Dental Fees’.

Record in the journals.


SOLUTIONS




Date Details Doc. Bank Wages Drawings NAB Loan

Interest Expense

Rent Dental

Supplies Office Exps.

Sundry GST

5/1/23 D/SUPPLIES 179 1100 1000 100

9/1 D/SUPPLIES 180 330 300 30

13/1 WAGES 012 1400 1400

20/1 RENT 181 2750 2500 250

23/1 DRAWINGS 013 2800 2800

28/1 D/SUPPLIES 182 990 900 90

31/1 TOTALS 9370 1400 2800 2500 2200 470

Journals for January:

General Journal (GJ)

Date Details $

31/1/23 STOCKTAKE OF SUPPLIES, GENERAL JOURNAL NOTE #18 3700

Total the cash journals at the end of January.

Calculations/schedules for January:

Dental supplies schedule at 31/1/23

$

Balance at start 4900

Add purchases (CPJ) 2200

Subtotal 7100

Less stocktake (GJ) (3700)

Supplies expense 3400

Accounting reports for January:

Debbie’s Dental Services: Cash Flow Statement for Jan. 2023

Cash Receipts $ $

Dental fees 3400

GST collections 340 3740

Cash Payments

Purchases of dental supplies 2200

GST payments 470

RENT 2500

DRAWINGS 2800

WAGES 1400 9370

Change in cash (5630)

Cash balance at start 18000

Cash balance at end 12370

1. Cash Flow Statement: 2. Income Statement:

Debbie’s Dental Services:

Income Statement for Jan. 2023

Revenue $ $

DENTAL FEES 3400

Less Expenses

Dental supplies exp. 3400

WAGES 1400

RENT 2500 7300

Net Loss (3900)

See the top section of the cash journals to help you identify the revenue and expenses.

Don’t forget the supplies

expense from the schedule!

GST schedule at 31/1/23

$

GST at start 2000

Add GST collections (CRJ) 340

Subtotal 2340

Less GST payments (CPJ) (470)

GST at end 1870

Businesses call this type of schedule a Business Activity Statement or BAS.

Usually GST collected is more than GST paid per period. The balance at the end is owed to the ATO, hence it is a liability.

GST is not reported in

the Income Statement.

Cash Receipts Journal (CRJ) CFS √ √ √ √ √ √

IS X √ rev. X X √ X

BS √ calc. X √ calc. √ calc. X √ calc.

Date Details Doc. Bank Dental Fees

Cash Capital

NAB Loan

Interest Revenue

Sundry GST

1/1/23 DENTAL FEES 37 880 800 80

8/1 DENTAL FEES 38 2200 2000 200

16/1 DENTAL FEES 39 660 600 60

31/1 TOTALS 3740 3400 340


SOLUTIONS

GST is not an expense for the business and the business does not bear the cost of GST. Only the final consumer, such as you, wears the cost of GST. The business is an unpaid tax collector for the ATO! Most small business’s remit GST collections, less any GST the business has paid to its suppliers, once every 3 months.


Assets $ Equities $ $

BANK 12370 Liabilities

STOCK OF SUPPLIES 3700 GST OWING TO ATO 1870

EQUIPMENT 26000 NAB LOAN 7000 8870

OFFICE ASSETS 15000 Owners Equity


LESS NET LOSS (3900)

LESS DRAWINGS (2800) 48200


GST is usually a liability. This amount

is owed to the ATO.

3. Balance Sheet:

Bendigo Bank

Date: 7/2/23

To: HiSi Traders



This cheque $440



DATE: 12/2/23


A/C: 876-D1118932

TO: JITHENDRI A/C: 098-J88871120

FOR: WAGES, $1300


Date: 2/2/23

From: Customers

For:


$120 GST

$: $1320

Thank you

Transactions for Debbie’s Dental Services, February 2023:


Date: 9/2/23

From: Customers

For:


$100 GST

$: $1100

Thank you

Bendigo Bank

Date: 10/2/23

To: HiSi Traders



This cheque $715



Date: 15/2/23

From: Customers

For:


$175 GST

$: $1925

Thank you

Bendigo Bank

Date: 21/2/23

To: AAA Real Estate

For: Rent including $250 GST

This cheque $2750



DATE: 25/2/23


A/C: 876-D1118932

TO: DEBBIE A/C: 058-D99855

FOR: DRAWINGS, $1500

Bendigo Bank

Date: 27/2/23

To: HiSi Traders



This cheque $550


GJ Note #20

28/2/23 Stocktake of supplies. $4100.

GJ Note #19 24/2/23 Owner took equipment for private use, $1000.


Date: 22/2/23

From: Customers

For:


$90 GST

$: $990

Thank you

Record in the journals.


SOLUTIONS




Date Details Doc. Bank Dental Fees

Cash Capital

NAB Loan

Interest Revenue

Sundry GST

2/2/23 DENTAL FEES 40 1320 1200 120

9/2 DENTAL FEES 41 1100 1000 100

15/2 DENTAL FEES 42 1925 1750 175

22/2 DENTAL FEES 43 990 900 90

28/2 TOTALS 5335 4850 485

Journals for February:


Date Details $

24/2/23 DRAWINGS OF EQUIPMENT, GENERAL JOURNAL NOTE #19 1000

28/2 STOCKTAKE OF SUPPLIES, GENERAL JOURNAL NOTE #20 4100

Calculations/schedules for February:

Dental supplies schedule at 28/2/23

$



Subtotal 5250



Accounting reports for February:

Debbie’s Dental Services: Cash Flow Statement for Feb. 2023

Cash Receipts $ $

Dental fees 4850

GST collections 485 5335

Cash Payments

Purchases of dental supplies 1550

WAGES 1300

DRAWINGS 1500

RENT 2500

GST PAYMENTS 405 7255

Change in cash (1920)


Cash balance at end 10450

1. Cash Flow Statement: 2. Income Statement:

Debbie’s Dental Services:

Income Statement for Feb. 2023

Revenue $ $

DENTAL FEES 4850

Less Expenses

Dental supplies 1150

WAGES 1300

RENT 2500 4950

Net loss (100)

See the top section of the cash journals to help you identify the revenue and expenses.

Don’t forget the supplies

expense from the schedule!

GST schedule at 28/2/23

$

GST at start 1870


Subtotal 2355


GST at end 1950

GST is not reported in the Income Statement.

Get the GST balance at the start from the last Balance Sheet or the last GST schedule.

Equipment schedule at 28/2/23

$


Less drawings equipt. (GJ) (1000)

Balance at end 25000




Date Details Doc. Bank Wages Drawings NAB Loan

Interest Expense

Rent Dental

Supplies Office Exps.

Sundry GST

7/2/23 D/SUPPLIES 183 440 400 40

10/2 D/SUPPLIES 184 715 650 65

12/2 WAGES 014 1300 1300

21/2 RENT 185 2750 2500 250

25/2 DRAWINGS 015 1500 1500

27/2 D/SUPPLIES 186 550 500 50

28/2 TOTALS 7255 1300 1500 2500 1550 405

Total the cash journals at the end of February.

Drawings for February

$

Cash drawings (CPJ) 1500

Other drawings (GJ) 1000

Total drawings 2500


SOLUTIONS




STOCK OF SUPPLIES 4100 GST OWING ATO 1950

EQUIPMENT 25000 NAB LOAN 7000 8950



LESS NET LOSS (100)



3. Balance Sheet:

Summary of the accounting process so far:

Start of reporting period

Business transactions are evidenced by documents such

as receipts, cheque butts, memos & internet transfers.

Transactions are recorded in journals:

Cash Receipts Journal Cash Payments Journal

General Journal

End of reporting period

Calculations/schedules such

as GST schedule, supplies

expense schedule, loan schedule etc.

Prepare Accounting Reports: Cash Flow Statement

Income Statement Balance Sheet

Inputs

Processing

Processing

Outputs


SOLUTIONS

For each of the following examples, assume that GST is a liability — this is usually the case!

1. Takings revenue $5000 + $500 GST.

ASSETS LIABILITIES OWNERS EQUITY

INCREASE $5500 DUE TO CASH

INCREASE $500 DUE TO GST INCREASE $5000 DUE TO TAKINGS REVENUE

= +

2. Paid rent $2000 + $200 GST.


DECREASE $2200 DUE TO CASH

DECREASE $200 DUE TO GST DECREASE $2000 DUE TO RENT

EXPENSE.

= +

3. Bought computer for cash $3300 including $300 GST.


DECREASE $3300 DUE TO CASH AND INCREASE $3000 DUE TO COMPUTER. NET DOWN $300.

DECREASE $300 DUE TO GST NO IMPACT

= +

4. Takings revenue $3300 including $300 GST.




= +

5. Owner took $1000 cash for private use.



NO IMPACT DECREASE $1000 DUE TO INCREASE IN DRAWINGS

= +

6. Borrowed $7000 from ANZ Bank.



INCREASE $7000 DUE TO LOAN NO IMPACT

= +

7. Paid $2000 to ANZ Bank to reduce loan.



DECREASE $2000 TO LOAN NO IMPACT

= +

8. Paid $990 for advertising including $90 GST.



DECREASE $90 DUE TO GST DECREASE $900 DUE TO ADVERTISING EXPENSE

= +

9. Takings revenue $6600 including $600 GST.




= +

GST


SOLUTIONS

Tony’s Tattooing: Balance Sheet at 30/6/19


Stock of supplies 1600 Liabilities

Tattoo machine 12000 GST owing to ATO 2600

Office assets 8500 Kew Bank loan 8000 10600

Bank 4800 Owners Equity

Capital, Tony 16300


Supplies would

include inks and needles

etc.




Date Details Doc. Bank Takings Cash

Capital Kew Bank

Interest Revenue

Sundry GST

31/7 TOTALS — 20540 11400 3000 5000 1140


Date Details $

31/7 Owner took home some supplies for private use, memo #65 150

Stocktake of supplies, memo #66 700

Sundry, $3000, is for a new furniture, asset.

Transactions for July have been recorded and totalled above. Complete the following schedules and the accounting reports for July 2019.

Supplies expense schedule at 31/7/19

$

Stock at start 1600


Sub-total 2800

Less drawings (GJ) (150)



Loan schedule at 31/7/19

$


Add new loans (CRJ) 5000

Sub-total 13000

Less loan payments (CPJ) (1200)


Drawings schedule at 31/7/19

$


+ other drawings (GJ) 150

= total drawings 1950

Tony’s Tattooing: Cash Flow Statement for July 2019

Cash Receipts $ $

TAKINGS 11400

CAPITAL 3000

LOAN—KEW BK. 5000

GST COLLECT. 1140 20540

Cash Payments

ADVERTISING 560

INTERNET EXPS. 290

DRAWINGS 1800

LOAN—KEW BK. 1200

INTEREST 150

OFFICE EXPS. 830

SUPPLIES 1200

FURNITURE 3000


Change in cash 10922

Cash bal. at start 4800

Cash bal. at end 15722

Tony’s Tattooing: Income Statement for July 2019

Revenue $ $

TAKINGS 11400

Less expenses

SUPPLIES 1950

ADVERTISING 560

INTERNET EXPS 290

INTEREST 150

OFFICE EXPS. 830 3780

Net Profit 7620

Tony’s Tattooing: Balance Sheet at 31/7/19

Assets $ $

BANK 15722

STOCK OF SUPP. 700

TATTOO MACH. 12000

OFFICE ASSETS 8500

FURNITURE 3000

Total Assets 39922

Equities

Liabilities

GST OWE ATO 3152

LOAN—KEW BK. 11800 14952

Owners Equity

CAPITAL, TONY 19300

ADD PROFIT 7620

LESS DRAW. (1950) 24970

Total Equities 39922


IS X √ exp. √ exp. X X √ exp. √ exp. √ calc. X

BS √ calc. X X √ √ calc. X X Stock at end √ calc.

Date Details Doc. Bank Advertising Expenses

Internet Exps.

Drawings Kew Loan

Interest Office Exps.

Supplies Sundry GST

31/7 TOTALS 9618 560 290 1800 1200 150 830 1200 3000 588

Note the different presentation of the

Balance Sheet.

GST at 31/7/19

$



Sub-total 3740


Balance at end 3152

Capital at 31/7/19

$


Add new capital (CRJ) 3000



SOLUTIONS

Kim’s Medical Services: Balance Sheet at 1/6/15

Assets $ Equities $

Bank 10000 GST owing to ATO 1500

Stock of supplies 3000 AMP Loan 8000

Other assets 60000 Capital, Kim 63500


The following transactions occurred during June 2015:

Takings, $44000 inc. $4000 GST.

Capital contribution of cash $5000

Purchases of more supplies $770 inc. $70 GST.

Other expenses $22000 inc. $2000 GST.

Paid $2000 off the AMP loan principal.

Stocktake of supplies at 30/6 = $400.

Prepare the following 3 reports.

Kim’s Medical Services Cash Flow Statement for June 2015

Receipts $

TAKINGS 40000


CAPITAL CONTRIBUTION 5000

Total receipts 49000

Payments

SUPPLIES 700

GST PAYMENTS 2070

LOAN—AMP 2000

OTHER EXPENSES 20000

Total payments 24770


Add balance at start 10000

Equals balance at end 34230

Kim’s Medical Services Income Statement for June 2015

Revenue $

TAKINGS 40000

Less Expenses

SUPPLIES 3300


Total expenses 23300

Profit 16700

Kim’s Medical Services: Balance Sheet at 30/6/15



STOCK OF SUPP. 400 GST OWE ATO 3430

OTHER ASSETS 60000 LOAN-AMP 6000 9430

OWNERS EQUITY

CAPITAL 68500

ADD PROFIT 16700 85200


Working space if required: SUPPLIES EXPENSE: $3000 + $700 — $400 = $3300

GST: $1500 + $4000 — $2070 = $3430 LIABILITY AMP LOAN: $8000 — $2000 = $6000

CAPITAL: $63500 + $5000 = $68500

Supplies would include drugs,

bandages etc.


SOLUTIONS

Kimberley’s Engineering Services: Balance Sheet at 1/6/15

Assets $ Equities $

Stock of supplies 1400 GST owing to ATO 17000

Other assets 72000 Bank overdraft 13000

Cash on hand 200 ANZ Loan 1800

Capital, Kimberly 41800


The following transactions occurred during June 2015: Takings, $66000 inc. $6000 GST.

Capital contribution of other assets $7000.

Purchases of more supplies $1100 inc. $100 GST.

Drawings of cash $9000.

Other expenses $13200 inc. $1200 GST. Paid $800 off the ANZ loan principal, interest $90.

Stocktake of supplies 30/6 = $600.

Prepare the following 3 reports.

Kimberly’s Engineering Services Cash Flow Statement for June 2015

Receipts $

TAKINGS 60000


Total receipts 66000

Payments

SUPPLIES 1000

DRAWINGS 9000


ANZ LOAN 800

INTEREST 90

GST PAYMENTS 1300

Total payments 24190


Add balance at start (13000)

Equals balance at end 28810

Kimberly’s Engineering Services Income Statement for June 2015

Revenue $

TAKINGS 60000

Less Expenses

SUPPLIES 1800


INTEREST 90

Total expenses 13890

Profit 46110

Kimberly’s Engineering Services: Balance Sheet at 30/6/15


STOCK OF SUPP. 600 Liabilities

BANK 28810 ANZ LOAN 1000

OTHER ASSETS 79000 GST OWE ATO 21700 22700

CASH ON HAND 200 OWNERS EQUITY

CAPITAL 48800

ADD PROFIT 46110


TOTAL ASSETS 108610 TOTAL EQUITIES 108610

Working space if required: SUPPLIES EXPENSE: $1400 + $1000 — $600 = $1800

GST: $17000 + 6000 — $1300 = $21700 LIABILITY

ANZ LOAN: $1800 — $800 = $1000

OTHER ASSETS: $72000 + $7000 = $79000 CAPITAL: $41800 + $7000 = $48800


SOLUTIONS

Rapid Removals: List of elements for the 6 months ending 30/6/19

Item $ Classification

Takings 94000 R

Bank 11630 A

Stock of supplies (1/1/19) 2600 A

Purchase of supplies 4200 Schedule

Vehicles 98000 A

Office assets 24000 A

Wages 15000 E

GST owing to ATO 6030 L

ANZ Loan 11000 L

Rent 32000 E

Capital 106800 OE

Drawings 24000 —OE

Office expenses 3100 E

Advertising 2400 E

Interest on loan 900 E

Complete the classification column using A, L, OE, —OE, R or E.

A stocktake of supplies at 30/6/19 = $1200

Cash data for 6 months ending 30/6/19:

Cash balance at 1/1/19 = ($2000) overdraft Cash receipts: Takings $94000

GST collections $9400 Cash payments: Supplies $4200, Wages $15000, Rent $32000, Office expenses $3100, Advertising $2400, GST payments $4170, Drawings $24000, ANZ loan repayments $4000 and Interest on loan $900.

Rapid Removals: Cash Flow Statement for 6 months ending 30/6/19

Cash Receipts $ $

TAKINGS 94000

GST COLLECTIONS 9400 103400

Cash Payments

SUPPLIES 4200

WAGES 15000

RENT 32000

OFFICE EXPENSES 3100

ADVERTISING 2400

GST PAYMENTS 4170

DRAWINGS 24000

LOAN—ANZ 4000

INTEREST ON LOAN 900 89770


+ cash bal. at start (2000)

= cash bal. at end 11630

Rapid Removals: Income Statement for

6 months ending 30/6/19.

Revenue $ $

TAKINGS 94000

Less expenses

SUPPLIES 5600

WAGES 15000

RENT 32000


ADVERTISING 2400

INTEREST 900 59000

NET PROFIT 35000

Calculations:

SUPPLIES EXPENSE: $2600 + $4200 — $1200 = $5600

Rapid Removals: Balance Sheet at 30/6/19


STOCK OF SUPP. 1200 Liabilities

BANK 11630 GST OWE TO ATO 6030

VEHICLE 98000 ANZ LOAN 11000 17030

OFFICE ASSETS 24000

Owners Equity

Capital 106800

ADD NET PROFIT 35000




SOLUTIONS

Ace Roofing Repairs: List of elements for the 3 months ending 31/3/20

Item $ Classification

Stock of materials 1/1/20 2700 A

Takings 59000 R

Cash at Bank 6760 A

Purchase of materials 8400 Schedule

Tools and equipment 29000 A

Wages 12000 E

Van 30000 A

Office expenses 4100 E

Office assets 7000 A

GST owing to ATO 7450 L

NAB Loan 34000 L

Interest on loan 300 E

Capital 34810 OE

Drawings 35000 —OE

Complete the classification column using A, L, OE, —OE, R or E.

A stocktake of materials at 31/3/20 = $3400

Cash data for 3 months ending 31/3/20: Cash balance at 1/1/20 = $5090 overdraft. Cash receipts:

Takings $59000, GST collections $5900, Capital $4000

and NAB Loan $6000. Cash payments: Wages $12000, Materials $8400, Drawings $35000, Office expenses $4100, NAB Loan $2000, Interest on NAB loan $300 and GST payments $1250.

Ace Roofing Repairs: Cash Flow Statement for 3 months ending 31/3/20

Cash Receipts $ $

TAKINGS 59000


CAPITAL 4000

NAB LOAN 6000 74900

Cash Payments

WAGES 12000

MATERIALS 8400

DRAWINGS 35000


NAB LOAN 2000

INTEREST ON LOAN 300



+ cash bal. at start (5090)

= cash bal. at end 6760

Ace Roofing Repairs: Income Statement

for 3 months ending 31/3/20.

Revenue $ $

TAKINGS 59000

Less expenses

MATERIALS 7700

WAGES 12000


INTEREST 300 24100

NET PROFIT 34900

Calculations:

MATERIALS EXPENSE: $2700 + $8400 — $3400 = $7700

Ace Roofing Repairs: Balance Sheet at 31/3/20


STOCK OF MAT. 3400 Liabilities

BANK 6760 GST OWING TO ATO 7450

TOOLS & EQUIPT. 29000 NAB LOAN 34000 41450

VAN 30000


Capital 34810





SOLUTIONS


SOLUTIONS

CASH RECEIPTS JOURNAL CFS √ √ √ √ √

IS X √ rev. X X X ?

BS √ calc. X √ calc. √ calc. √ calc. √ calc.

Date Details Doc. BANK Takings GST Capital NAB Loan

Sundry

31/1 TOTALS --- 56000 40000 4000 7000 5000

GENERAL JOURNAL

Date Details $

31/1 Eunice, owner, contributed more office assets, memo #24 5000

Physical stocktake of supplies, memo #25 600

Calculation of Cash Balance at 31/1/18

$


Add cash receipts (CRJ) 56000

Sub-total 79000

Less cash payments (CPJ) (25910)

Equals cash balance at end 53090

Eunice Services: Balance Sheet at 1/1/18

Assets $ Equities $

Bank 23000 GST owing to ATO 1000

Stock of Supplies 1700 NAB Loan 9000

Office assets 40000 Capital, Eunice 90700

Vehicle 36000


Completed journals for January 2018:

Complete the following schedules for January:

Calculation of Supplies expense: Jan.

$


Add purchases supplies (CPJ) 1200

Sub-total 2900

Less stocktake supplies (GJ) (600)

= Supplies expense 2300

Calculation of GST at 31/1/18

$



Sub-total 5000


= GST at end 4490

Calculation of Loan balance at

31/1/18

$



Sub-total 14000


= balance at end 12200

Calculation of Office assets at 31/1/18

$


Add new office assets (GJ) 5000


CASH PAYMENTS JOURNAL CFS √ √ √ √ √ √ √ √ √ √

IS X √ exp. √ exp. X X √ used-up √ exp. √ exp. √ exp. ? X

BS √ calc. X X √ calc. √ calc. Stock at end X X X ? √ calc.

Date Details Doc. BANK Wages Interest

Exp.

NAB Loan

Draw. Supplies

Etc. Rent Advert

Office Exp.

Sund. GST

31/1 TOTALS --- 25910 15000 500 1800 3000 1200 3000 700 200 510

January

Calculation of Capital at 31/1/18

$


Add new capital (GJ + CRJ) 12000



SOLUTIONS

Eunice Services:

Income Statement for January 2018

Revenue $ $

TAKINGS 40000

LESS EXPENSES

SUPPLIES 2300

WAGES 15000

INTEREST 500

RENT 3000

ADVERTISING 700

OFFICE EXPENSES 21700 200

NET PROFIT 18300





OFFICE ASSETS 45000 LOAN—NAB 12200 16690

VEHICLE 36000

OWNERS EQUITY

CAPITAL 102700




Eunice Services: Cash Flow Statement for January 2018

Cash Receipts $ $

TAKINGS 40000


CAPITAL 7000

LOAN—NAB 56000 5000

Cash Payments

WAGES 15000

INTEREST 500

LOAN-NAB 1800

DRAWINGS 3000

SUPPLIES 1200

RENT 3000

ADVERTISING 700

OFFICE EXPENSES 200



Add cash at start 23000

Equals cash at end 53090

The definition of profit is …. REVENUE EARNED LESS EXPENSES INCURRED OVER THE REPORTING PERIOD.

Circle correct responses:

Revenue leads to an decrease/increase in owners equity (excluding capital contribution) and expenses lead to a decrease/increase in owners equity (excluding drawings).



DECREASE $5O DUE TO GST DECREASE $500 DUE TO

ADVERTISING EXPENSE

Show the impact of the following transactions on the following accounting equations. Assume GST is a liability. 1. Paid advertising expense $550 including $50 GST.



DECREASE $700 DUE TO LOAN DECREASE $70 DUE TO

INTEREST EXPENSE.

2. Paid loan $770 which included $70 interest expense.

=

= +

+


SOLUTIONS




Date Details Doc. BANK Takings GST Capital NAB Loan

Sundry

28/2 TOTALS --- 48200 42000 4200 2000

GENERAL JOURNAL

Date Details $

28/2 Drawings of office assets, memo #26 5000

Physical stocktake of supplies, memo #27 300

Calculation of Cash Balance at 28/2/18

$


Add cash receipts (CRJ) 48200

Sub-total 101290

Less cash payments (CPJ) (27810)

= Cash balance at end 73480

Complete the following schedules for February:

Calculation of Supplies expense for Feb.

$


Add purchases supplies (CPJ) 800

Sub-total 1400

Less stocktake supplies (GJ) (300)

= Supplies expense 1100

Calculation of GST at 28/2/18

$



Sub-total 8690


= GST at end 8280

Calculation of Loan balance at 28/2/18

$



Sub-total 12200


= Balance at end 11400

Calculation of Office assets at 28/2/18

$


Less drawings of office assets (GJ) (5000)

= Balance at end 40000

Calculation of Drawings for February

$


Other drawings (GJ) 5000

= Total drawings 12000

February


IS X √ exp. √ exp. X X Schedule √ exp. √ exp. √ exp. ? X

BS √ calc. X X √ calc. √ calc. Stocktake X X X ? √ calc.


Exp.

NAB Loan

Draw. Supplies

Etc. Rent Advert

Office Exp.

Sund. GST

28/2 TOTALS --- 27810 15100 400 800 7000 800 3000 200 100 410

Calculation of Capital at 28/2/18

$


Add new capital (CRJ) 2000

= Capital at end 120000


SOLUTIONS

Eunice Services:

Income Statement for February 2018

Revenue $ $

TAKINGS 42000

LESS EXPENSES

SUPPLIES 1100

WAGES 15100

INTEREST 400

RENT 3000

ADVERTISING 200


NET PROFIT 22100





OFFICE ASSETS 40000 LOAN—NAB 11400 19680

VEHICLE 36000

OWNERS EQUITY

CAPITAL 120000




Eunice Services: Cash Flow Statement for February 2018

Cash Receipts $ $

TAKINGS 42000


CAPITAL 48200 2000

Cash Payments

WAGES 15100

INTEREST 400

LOAN—NAB 800

DRAWINGS 7000

SUPPLIES 800

RENT 3000

AVERTISING 200

OFFICE EXPENSES 100



Add cash at start 53090

Equals cash at end 73480

Circle correct responses: Assets/liabilities will provide future economic benefits to the business while liabilities/assets will lead to a future

sacrifice of economic benefits.

List four factors which can cause a change in the value of owners equity: 1. REVENUE OR PROFIT 2. EXPESNSES OR LOSS

3. CAPITAL CONTRIBUTIONS 4. DRAWINGS Owners equity is the same value as: A. Revenue less expenses

B. Liabilities less assets C. Assets less liabilities

D. Assets plus liabilities Under what circumstances would GST be reported as an asset? WHEN GST PAYMENTS ARE GREATER THAN GST COLLECTONS, THE BUSINESS IS OWED THE

DIFFERENCE BY THE ATO AND IT IS REPORTED AS AN ASSET. NOTE THAT THE OPENING BALANCE MAY IMPACT ON THE FINAL BALANCE.

Distinguish between purchases of supplies, supplies expense and stock of supplies. PURCHASES OF SUPPLIES ARE RECORDED IN THE CASH PAYMENTS JOURNAL AND REPORTED IN

THE CASH FLOW STATEMENT AND REPRESENTS THE ACQUISITION OF SUPPLIES DURING THE REPORTING PERIOD. SUPPLIES EXPENSE IS REPORTED IN THE INCOME

STATEMENT AS AN EXPENSE AND REPRESENTS THE SUPPLIES USED-UP OR CONSUMED DURING

THE REPORTING PERIOD. THE CALCULATION FOR SUPPLIES EXPENSE IS STOCK OF SUPPLIES AT THE START OF THE REPORTING PERIOD PLUS PURCHASES OF SUPPLIES DURING THE PERIOD LESS STOCK OF SUPPLIES AT THE END OF THE REPORTING PERIOD.

STOCK OF SUPPLIES IS AN ASSET AND WILL BE RECORDED IN THE GENERAL JOURNAL AND REPORTED IN THE BALANCE SHEET AT THE END OF THE REPORTING PERIOD. ITS VALUE IS

DETERMINED BY A STOCKTAKE.


SOLUTIONS

Snappy, Balance Sheet at 1/12/16

ASSETS $ EQUITIES $

Stock of film 1200 Bank overdraft 2500

Vehicle 50000 C/Wealth loan 15000

Office assets 6000 GST owing 900

Capital, Beth ?

Total Assets 57200 Total Equities 57200

Practice Test.

Beth owns and operates a business, Snappy, providing photography services over Melbourne. This is the Balance Sheet at 1/12/16. Calculate her Capital!

The following transactions occurred during December 2016:

1/12/16, Takings $1100 including $100 GST, receipt #34. 3/12/16, Purchased film $990 including $90 GST, cheque #123. 4/12/16, Takings $3000 + $300 GST, receipt #35 6/12/16, Paid C/Wealth Bank $4100 off loan including $100 interest expense, internet transfer (IT).

9/12/16, Takings $1700 + $170 GST, receipt #36 10/12/16, Drawings of office assets (computer) for own use, Memo # 34, $1700 11/12/16, Cash drawings $900, internet transfer. 14/12/16, Paid advertising expense $1500 + $150 GST, cheque #124 17/12/16, Takings $2900 + $290 GST, receipt #37. 19/12/16, Beth contributed office assets (fax) to business, $1000, Memo #35. 21/12/16, Paid office expenses $800 + $80 GST, cheque # 125.

22/12/16, Takings $4100 + $410 GST, receipt #38. 25/12/16, Purchased film $600 + $60 GST, cheque #126. 29/12/16, Increased C/Wealth loan $7000, internet transfer. 30/12/16, Beth took home film for personal use, $300, Memo #36. 31/12/16, Takings $5000 + $500 GST, receipt #39. 31/12/16, Cash capital contribution, $3000, internet transfer.

31/12/16, Stocktake of film, $700, Memo #37.




Date Details Doc. BANK Takings GST Capital C/W Loan

Sundry

1/12/16 TAKINGS 34 1100 1000 100

4/12 TAKINGS 35 3300 3000 300

9/12 TAKINGS 36 1870 1700 170

17/12 TAKINGS 37 3190 2900 290

22/12 TAKINGS 38 4510 4100 410

29/12 LOAN-C/W IT 7000 7000

31/12 TAKINGS 39 5500 5000 500

31/12 CAPITAL IT 3000 3000

31/12 TOTALS 29470 17700 1770 3000 7000

GENERAL JOURNAL

Date Details $

10/12/16 DRAWINGS COMPUTER (OFFICE ASSETS), MEMO #34 1700

19/12 CAPITAL CONTRIBUTION FAX (OFFICE ASSETS), MEMO #35 1000

30/12 DRAWINGS FILM, MEMO #36 300

31/12 STOCKTAKE OF FILM, MEMO #37 700


IS X √ exp. √ exp. X X Schedule √ exp. √ exp. √ exp. ? X

BS √ calc. X X √ calc. √ calc. Stocktake X X X ? √ calc.


Exp.

C/W Loan

Draw. Film Rent Advert Office Exp.

Sund. GST

3/12/16 FILM 123 990 900 90

6/12 LOAN—C/W IT 4100 100 4000

11/12 DRAWINGS IT 900 900

14/12 ADVERTISING 124 1650 1500 150

21/12 OFFICE EXPS. 125 880 800 80

25/12 FILM 126 660 600 60

31/12 TOTALS 9180 100 4000 900 1500 1500 800 380


SOLUTIONS

Film expense schedule for December

$


Add purchases of film (CPJ) 1500

Sub-total 2700

Less drawings of film (GJ) (300)

Less stocktake of film at end (GJ) (700)

Film expense for December 1700

GST at 31/12/16

$



Sub-total 2670


GST payable/owing at end 2290

Drawings schedule for December

$


Add other drawings (GJ) 2000

Total drawings 2900

Loan at 31/12/16

$


Add increases in loans (CRJ) 7000

Sub-total 22000



Snappy: Cash Flow Statement for December 2016

Cash Receipts $ $

TAKINGS 17700


CAPITAL 3000

LOAN—C/W 7000 29470

Cash Payments

INTEREST 100

C/W LOAN 4000

DRAWINGS 900

FILM 1500

ADVERTISING 1500

OFFICE EXPENSES 800



Add cash bal. at start (2500)

Equals cash bal. at end 17790

Snappy: Income Statement for December 2016

Revenue $ $

TAKINGS 17700

Less Expenses

FILM 1700

INTEREST 100

ADVERTISING 1500


NET PROFIT 13600

Snappy: Balance Sheet at 31/12/16

ASSETS $ EQUITIES $ $

OFFICE ASSETS 5300 LIABILITIES

BANK 17790 GST OWING TO ATO 2290

STOCK OF FILM 700 LOAN—C/WEALTH 18000 20290

VEHICLE 50000

OWNERS EQUITY

CAPITAL 42800




Notes (if required)

Calculations ...

Capital at 31/12/16

$


Add new capital (CRJ + GJ) 4000


Office assets at 31/12/16

$


Add additional office assets (GJ) 1000

Sub-total 7000

Less drawings of office assets (GJ) (1700)

Balance at end 5300

Reports


SOLUTIONS

1. Cash drawings $500.


Decrease by $500 due to decrease in cash.

Decrease by $500 due to increase in drawings.

2. Borrowed $3000 cash from the ANZ Bank



INCREASE $3000 DUE TO LOAN NO IMPACT

3. Takings $660 included $60 GST. Assume GST is already a liability.




4. Paid rent $2200 including $200 GST. Assume GST is already a liability.



DECREASE $200 DUE TO GST DECREASE $2000 DUE TO

RENT EXPENSE

How do the following transactions impact on the accounting equation? One example has been done for you. PS: Assume GST is a liability!

During a reporting period, GST payments were more than GST collections. Assuming a zero GST balance at the start of the reporting period, how would the business report GST in the Balance Sheet?

ASSET SINCE ATO OWES BUSINESS GST. During a reporting period, GST payments were less than GST collections. Assuming a zero GST balance at the

start of the reporting period, how would the business report GST in the Balance Sheet?

LIABILITY. BUSINESS OWES ATO GST. Explain how GST collections impact on the Income Statement?

NO IMPACT. DOES NOT MEET DEFINITION OF REVENUE. Explain how GST payments impact on the Income Statement?

NO IMPACT. DOES NOT MEET DEFINTIOIN OF

EXPENSE. During the reporting period a business made a cash payment of $5000 to settle their GST debt. How would this impact on the accounting equation?

Assets: DECREASE $5000 DUE TO CASH OR BANK.

Liabilities: DECREASE $5000 DUE TO REDUCTION IN GST LIABILITY.

Owners equity: NO IMPACT.

A business is owed $3000 from the Australian Taxation Office. When this $3000 is received, how would this impact on the accounting equation?

Assets: INCREASE $3000 DUE TO CASH AND DECREASE $3000 DUE TO CANCELLING OUT OF GST ASSET. NO IMPACT ON LIABILITIES OR OWNERS EQUITY.

Consider the following information:

Sam’s Solarium:

Balance Sheet (extract) at 30/6/21

Assets $ Equities $


Cash Receipts Journal (CRJ) extract


31/12/21 Totals —- 5200

Cash Payments Journal (CPJ) extract

Date Details Doc. Bank Sundry GST

31/12/21 Totals —- 3700

Calculate the GST owing or owed for the 6 months ending 31/12/21. Show workings. $400 + $5200 — $3700 = $1900.

How would the GST owing or owed that you calculated in the last question be reported in the Balance Sheet at 31/12/21? Show this below:

Sam’s Solarium:

Balance Sheet (extract) at 31/12/21

Assets $ Equities $

GST OWE ATO 1900

= +

= +

= +

= +

sol unit 1 chapter 2 adding gst

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