Perdisco assignment
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You are currently working for the temporary accounting employment agency known as Accomptemp. Today you have been assigned the case of Intermaweb Computers, a small electronics store that operates in inner city Adelaide. The electronics store is owned by Jessica Cherenkov who, you later find out, started the business after leaving a career as a drummer.
Jessica tells you that she is hoping that the electronics store will be profitable enough that she will eventually be able to sell the business and live out her dream of creating innovative e-learning content for university students. She explains that times have been tough ever since the electronics store experienced the death of long time mentor, Chubbs McGoo.
The electronics store is set up as a single proprietorship with Jessica as the sole owner.
You are then asked by Jessica to complete the books for the month of June.
Accounting policies and procedures:
The reporting period for Intermaweb Computers is one month. At the start of each month, reversing entries are performed to reverse the adjusting entries that were recorded at the end of the previous period. The previous accountant has already recorded and posted the reversing entries required on 1 June.
Intermaweb Computers uses the perpetual inventory system and applies the FIFO method to allocate costs to inventory and cost of sales.
In addition to the general journal (GJ), the business uses four special journals to record recurring transactions, namely the sales journal (SJ), purchases journal (PJ), cash receipts journal (CRJ) and cash payments journal (CPJ). When a transaction that affects an item of inventory is recorded, the related inventory card is also updated at the same time, so that a record of the movements of inventory is maintained on a daily basis.
The totals of the columns in the special journals are posted to general ledger accounts at the end of the month. The exceptions are the entries in the ‘Other Accounts’ columns in the cash receipts journal and the cash payments journal, which are posted to the ledger on a daily basis. Additionally, any entry that affects the accounts receivable or accounts payable subsidiary ledger is posted to the subsidiary ledger on a daily basis. All transactions that are entered in the general journal are posted on a daily basis.
Purchases and sales are on credit, except where the transaction specifies that cash has been received or paid. Intermaweb Computers uses the gross method of recording purchases and sales. Purchases are recorded when Intermaweb Computers receives the goods and sales are recognised when the goods sold are delivered to the customers. All purchases are received on the same day and all inventory items sold are delivered to customers on the same day as recorded in the transaction list, except for purchase orders and sales orders, which are delivered at a later date.
Past experience has shown that offering discounts did not increase the likelihood of accounts receivable being paid promptly. Therefore, settlement discounts are not normally offered to credit customers except in exceptional circumstances.
Jessica has advised you to use the allowance method of accounting for bad debts. The amount of uncollected receivables is estimated to be 5% of net credit sales for the current month.
The business is a registered entity for GST purposes and the price of all goods are quoted inclusive of 10% GST. Two separate accounts are maintained to record GST paid to suppliers and GST received from customers during the month. The net difference of these two accounts is reported as a payable in the financial statements when the business is required to pay the net amount to the Australian Taxation Office. If the business is entitled to receive the net difference from the Australian Taxation Office, this net amount is reported as a receivable. No GST is due to be remitted in the month of June. Further, GST does not apply to interest revenue, bank charges, salaries, wages and drawings by the owner.
The principal of the bank loan is not due to be repaid within the next 12 months.
Intermaweb Computers rents a show room to assist in selling and distributing the products of the business. The rent for this premises is paid in advance. The business has a policy of recording prepayments as assets. At the end of the month, adjustments will be made to the relevant accounts to recognise the expense in the appropriate period.
The electricity and water expenses incurred during the month relate to the running of the show room. Additional expenses include an insurance policy to protect the business against inventory items being damaged or lost during deliveries.
For reporting purposes, Intermaweb Computers classifies cost of sales as the cost of the inventory that was sold during the period. All other costs relating to the selling and distribution of the merchandise are classified as distribution costs.
The business has only one full-time employee, Caphis Rayleigh. He works from home and handles all of the administrative tasks. He gets paid once at the end of each month. All other employees are sales staff who are employed on a part time basis in the showroom. The sales staff receive their wages on a weekly basis.
All entries are entered to the nearest whole dollar.
Transactions:
You will use the following five weeks of transactions as you complete the books for June. Note that the transactions are divided into five separate weeks. This is because you will not enter this whole list of transactions in any one page. You will be given five separate pages in which to enter the transactions for that week for each of the five weeks.