SkatesOn began operations on 1 June, buying and sellingskateboards, roller blades, scooters and the protective gear thatis essential when pursuing these types of sports. The structure ofthe business is that of a sole trader, with the owner being JasonKing.
Jason employed a sales assistant during the month who is to be paidfortnightly. Tax is deducted from the employee’s wages (PAYGwithholding tax) and remitted to the Australian Taxation Office(ATO) on a quarterly basis.
The business has not registered with theATO for the goods and services tax (GST) and has elected to use theaccrual basis of accounting.
Accounting recordsThe business records all transactions in the general journal. Thesetransactions are then posted to the appropriate account(s) in thegeneral ledger and the accounts receivable or accounts payablesubsidiary ledgers, where separate accounts are maintained for eachcustomer or supplier.
Chart of accountsThe chart of accounts for SkatesOn contains the accounts andaccount numbers below.
100
Cash at bank
110
Accounts receivable
120
Inventory
130
Prepaid insurance
171
Shop equipment (cost)
172
Accumulated depreciation – shopequipment
200
Accounts payable
210
Wages payable
220
PAYG withholding payable
230
Bank loan
300
Capital
310
Drawings
320
Profit or loss summary
400
Sales revenue
410
Sales returns and allowances
420
Discount received
500
Cost of sales
600
Depreciation expense
610
Discount allowed
620
Insurance expense
630
Interest expense
640
Rent expense
650
Wages expense
Transactions
June
1
The owner opened a bank account for thebusiness with a deposit of $24,600. This is capital provided byhim.
1
Purchased shop equipment (computer,cash register, shelving etc.) from Shop Outfitters Pty Ltd for$47,580. This was paid for with a loan of $43,270 from the bank andcheque for $4,310 from the business bank account. The bank loan isrepayable over 4 years.
2
Purchased inventory (skateboards,roller blades, helmets and other protective gear) from DaintreeImporters for $19,553 on terms on net 30.
2
Paid $2,988 for a 1-year insurancepolicy covering fire, theft, and public liability.
3
Paid rent of $2,020 for the shop forJune.
6
Cash sale of a skateboard andprotective equipment for $410 (cost of sales $191).
7
Returned some protective gear toDaintree Importers that was faulty and received an adjustment note(credit note) from them for $160.
8
Credit sale to Serious Fun ofskateboards and roller blades for $6,180 (cost of sales $2,937).This customer was given terms of 5/10, n/30.
10
Purchased scooters from Scoot Importsfor $9,380 on terms of 10/10, n/30.
14
Paid Daintree Importers $4,550 of theamount owing to them.
15
Credit sale to Action World of variousinventory items for $6,337 (cost of sales $2,753). Terms net30.
16
Received a cheque from Serious Fun forthe amount owing by them after deducting the prompt paymentdiscount.
17
Paid Scoot Imports the amount owing tothem less the prompt payment discount.
20
Credit sale to Toys Plus of 31 scootersat a discounted price of $409 each on terms of net 15. Cost ofsales $6,190.
21
Cash sale of inventory to the value of$744 (cost of sales $285).
22
Issued an adjustment note (credit note)to Action World for 5 helmets at $96 each that were not the stylethey prefer to sell. The cost of the helmets to us was $42 each andthey were put back into inventory.
24
Paid wages to James Paget the salesassistant of $480 less PAYG Withholding of $38 for the five days hehas been employed. In future he will be paid fortnightly.
27
The owner withdrew $1,030 cash from thebusiness bank account for his own personal use.
28
Purchased scooters from Scoot Importsfor $11,840 on terms of 10/10, n/30.
29
Received and banked a cheque from ToysPlus for the amount owing by them.
30
Credit sale to Serious Fun of scootersfor $5,070 (cost of sales $1,950). Terms 5/10, n/30.
30
A repayment of $1,090 was made on thebank loan.
The entries have been journalised below.
General journal
Date
Post
Description
ref.
Debit
Credit
20XX
June
1
Cash at bank
24,600
Capital
24,600
(Owner’s capital contribution)
1
Shop equipment (cost)
47,580
Cash at bank
4,310
Bank loan
43,270
(Computer, cash register, shelving etc. for shop;
loan repayable over 4 years)
2
Inventory
19,553
Accounts payable/Daintree Importers
19,553
(Inventory purchase on terms of net 30)
2
Prepaid insurance
2,988
Cash at bank
2,988
(1 year insurance policy)
3
Rent expense
2,020
Cash at bank
2,020
(June rent for shop)
6
Cash at bank
410
Sales revenue
410
Cost of sales
191
Inventory
191
(Cash sale)
7
Accounts payable/Daintree Importers
160
Inventory
160
Faulty protective gear returned to supplier
8
Accounts receivable/Serious Fun
6,180
Sales revenue
6,180
Cost of sales
2,937
Inventory
2,937
(Credit sale on terms of 5/10, n/30)
10
Inventory
9,380
Accounts payable/Scoot Imports
9,380
(Credit purchase on terms of 10/10, n/30)
14
Accounts payable/Daintree Importers
4,550
Cash at bank
4,550
(Part payment of amount owing)
15
Accounts receivable/Action World
6,337
Sales revenue
6,337
Cost of sales
2,753
Inventory
2,753
(Credit sale on terms of net 30)
16
Cash at bank
5,871
Discount allowed
309
Accounts receivable/Serious Fun
6,180
(Payment received less prompt payment discount)
17
Accounts payable/Scoot Imports
9,380
Discount received
938
Cash at bank
8,442
(Supplier paid less prompt payment discount)
20
Accounts receivable/Toys Plus
12,679
Sales revenue
12,679
Cost of sales
6,190
Inventory
6,190
(Credit sale on terms of net 15)
21
Cash at bank
744
Sales revenue
744
Cost of sales
285
Inventory
285
(Cash sale)
22
Sales returns and allowances
480
Accounts receivable/Action World
480
Inventory
210
Cost of sales
210
(Helmets returned by customer put back into inventory)
24
Wages expense
480
PAYG withholding payable
38
Cash at bank
442
(Wages paid to James Paget)
27
Drawings
1,030
Cash at bank
1,030
(Cash withdrawn for personal use)
28
Inventory
11,840
Accounts payable/Scoot Imports
11,840
(Credit purchase on terms of 10/10, n/30)
29
Cash at bank
12,679
Accounts receivable/Toys Plus
12,679
(Payment received from customer)
30
Accounts receivable/Serious Fun
5,070
Sales revenue
5,070
Cost of sales
1,950
Inventory
1,950
(Credit sale on terms of 5/10, n/30)
30
Bank loan
1,090
Cash at bank
1,090
(Loan repayment)
Post to the ledger accounts (T accounts for the general ledger,running balance accounts for the accounts payable and accountsreceivable subsidiary ledgers).
(Note: For multiple entries on the same date, enteraccounts in descending amounts.)
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