CHAPTER ONE Introduction Mario's Pizza Palace is a manual practice set, produced primarily as a teaching aid to be used in association with introductory accounting texts and the international accounting standards. This practice set provides experience in manually recording and posting a variety of business transactions common to a small business so that students gain an understanding of the flow of data in an accounting system. Many of these processes are out of sight in a computerized accounting system. Completion of the practice set for a one-month period should ensure a greater appreciation of: the steps in the accounting cycle for small businesses the use of special journals for processing data more efficiently the use of subsidiary ledgers to remove detail from the general ledger and subsidiary ledgers edger close. balancday adumentsand how the accounting cycle culminates in the preparation of financial statements the variety of source documents how to extract information from source documents to record transactions. Business background: Mario's Pizza Palace Mario's Pizza Palace is a small business that has operated successfully for some years. The business buys ingredients from a number of suppliers, then makes and sells pizzas on both a cash and credit basis. The structure of the business is that of a sole trader, with the owner being Mario Italiano. The owner works in the business and his wife Maria keeps the accounting records, which are recorded using the accrual basis of accounting. There is one employee who is paid fortnightly. Tax is deducted from the employee's wages (PAYG withholding tax) and remitted to the Australian Taxation Office (ATO) on a quarterly basis.
The Australian Business Number (ABN) for the business is 19 463 520 440 and although in practice, the business would be required to be registered with the ATO for the goods and services tax (GST) because of its turnover, in this practice set students are not required to account for the impact of GST on transactions. Accounting system information The financial year-end for this business is 30 June, and they use the following journals to suit their operations. that have been customized General journal (GJ): to record all transactions that cannot be recorded in the special journals, including any sales or purchase returns Sales journal (SJ): to record all sales on credit. Purchases journal (PJ): to record all credit purchases and freight inwards. Cash receipts journal (CRJ): to record all receipts of cash, including cash sales Cash payments journal (CPJ): to record all payments made on the business's cheque account. CHAPTER 1: INTRODUCTION 1 Accounting procedures Transactions are Recorded in the appropriate journals (rounded to the nearest dollar) from source documents on a daily basis. All cash receipts from customers and other sources are banked into the business cheque account at the Community Bank. A deposit slip Cash sales, other than those paid electronically by EFT, are often not banked until a few days after receipt. All payments are made by cheque drawn on the Community Bank; appropriate details are recorded on the cheque butt and these provide information for recording in the cash payments journal. When invoices are paid as soon as received, they are recorded in the cash payments journal and the note is made on the invoice of the date paid and the cheque number. The business maintains subsidiary ledgers for accounts receivable and accounts payable, with separate accounts for each customer and each supplier. Transactions that affect the subsidiary ledger accounts, or general ledger accounts were prepared for this purpose. general journal transaction red in the ' Another column of the special journals, and At the end of the month, special journals are totaled and posted to the ledger. A worksheet is then prepared from the general ledger and adult general journal entries are recorded and posted to the general ledger. A statement of profit or loss and a statement of financial position are produced, together with schedules of accounts receivable and account payable. At the end of the financial year closing general journal entries are prepared and posted to the general ledger accounts. The business uses a periodic inventory system and a physical stocktake is undertaken at the end of that date. the financial year to determine the value of inventory on hand Note: General ledger accounts included. Check which format to use with your tutor before commencing the exercise. both 'running balance' and 'T account' formats are Account balances Opening balances for customers, including invoice details, are shown in figure 1.1. Supplier opening balances, including invoice details, are shown in figure 1.2. The trial balance for Mario's Pizza Palace as at 31 May 2016 is shown in figure 1.3. Schedule receivable as at 31 May 2016 Date Customer Invoice No. Invoice Terms Amount Due Port City Motors Princess May Theatre 30/05/2016 389 385 N30 $400 330 N30 13/05/2016 FIGURE 1.1 Accou as at 31 May 2016 $730 Schedule of Accounts Payable as at 31 May 2016 Supplier Invoice No. Terms Date of Invoice Amount Due Foodmart Wholesalers Fresh Food Markets 27369 N30 1/05/2016 31/05/2016 9/05/2016 $1090 320 860 4182 5/10.N30 N15 Italian Store 19265 FIGURE 1,2 Accounts payable $2.270 2 MARIO'S PizZA PALACE Mario's Pizza Palace Trial Balance as at 31 May 2016 Account Account Debit Credit Number 100 Cash at Bank- Community Bank $33 705 110 Cash Float 50C Accounts Receivable 120 730 130 Inventory Food 1 250 Inventory Packaging Prepaid Advertising Prepaid Insurance Motor Vehicles (Cost) Accumulated Depreciation Motor Vehicles 140 980 150 640 160 1 980 170 17 700 171 11 680 Store Equipment (Cost) Accumulated Depreciation Store Equipment 180 4 860 18: 11 500 200 Accounts Payable PAYG Withholding Payable 2 270 210 840 220 Superannuation Payable 266 280 Bank Loan 18 900 Owner's Capital Owner's Drawings 300 51 674 310 38 400 400 Sales Income 172 300 410 Sales Returns & Allowances 50 420 Discounts Received 480 500 Food Purchases 49 870 Purchase Returns & Allowances 510 90 520 Packaging Costs 8 375 Discount Given 530 600 Accountancy Fees 1 200 605 Advertising 3520 615 Electricity& Gas Insurance Expense 2310 620 2030 010 625 Interest Expense 630 Motor Vehicle Expenses 8 Printing, Postage & Stationery Rent Evpense 635 640 24 200 Repairs & Maintenance 645 660 650 Sundry Exnens 0zE 655 Sun uation 3 190 a 660 Telephone 580 665 Wages 33 600 FIGURE 1.3 Trial halance as $ 270 000 $270.000 at 31 May 2016 Instructions Read the information provided in this chapter and the appendices to gain familiarity with the various source documents, business 1. erations, and accounting procedures. 2. Confirm that the opening balances at 1 June 2016 in the general ledger and the subsidiary ledgers agree with the amounts shown in the figures above. CHAPTER 1: INTRODUCTION 3 3 Record the transactions for the month of June from the source documents provided on pages 5 to 15 in the appropriate general or special journals. Post all transactions in accordance with accounting procedures. Total all special journal columns and post to the appropriate ledger account in the general ledger. 4 modules of accounts receivable and accounts payable in the general lodger at 30 June DUe 2016 and reconcile these with the control Prepare an unadjusted trial balance as of 30 June 2016 on the worksheet provided. Record balance-day adjustments and complete the worksheet. Record the balance-day adjustments in the general journal and post to the general ledger. Prepare and a statement of financial position as at 30 June 2016 10. Prepare and post the closing general journal entries for the period. 11. Prepare a post-closing trial balance. 6 7 8 statements of profit or loss for the period 1 July 2015 to 30 June 2016 Conclusion This concludes the introduction to the practice setting. The structure of the practice set is listed below. Chapter 2 contains the source documents to be used for the transactions for June 2016 to be entered into the manual accounting system. month The intervening segments of the practice set contain the journals, ledgers and report Appendix 1 is a glossary of source documents. Appendix 2 provides guidance on how to record transactions in special journals. At the conclusion of the practice set, users will have acquired a greater understanding of the functioning of a manual accounting system. 4 MARIO'S PIZZA PALACE 2 CHAPTER TWO Source documents June 2016 Transactions for Mario's Pizza Palace for the month of June 2016 are to be recorded from these source documents. A glossary is provided in appendix 1. Daily cash sales are recorded on the cash register and banked on Monday or Friday. When a customer pays by cheque, it is banked together with other money received prior to or on the date shown on the bank deposit slip. MARIO'S PIZZA PALACE Invoice Invoice No. 4220 ABN 19 463 520 440 95 Adelaide Street Fremantle WA 6160 Phone: (08) 9335 5555 Date: 1/06/2016 T PO# 1345 Sold To: ne Arts Centre Fremantle WA 6160 Description Qty 12 Price Amount Pizza 1 It bottles soft drink $18 $216 32 $248 $0 8 $4 Sale Amount: Freight: Total Amount: $248 Tax Invoice The Professionals Invoice No.: 779263 PO Box 1066 Invoice Date: 1/06/2016 Fremantle WA 6960 Phone: 9335 1000 Terms: On Receipt ABN 25 138 411 986 To Mario's Pizza Palace 95 Adelaide Street PAID 2/06/16 Fremantle WA 6160 Cheque 1001 Description Amount Rent for the period 1 June to 30 June $2 200 Total (including $200 GST) $2 200 CHAPTER 2 SOURCE DOCUMENTS-JUNE 2016 5 Date: 2/06/16 Date: 2/06/16 Date: 3/06/16 To: The Professionals For: Rent Expense To: Sam Conti For: Wages $1 400 less PAYG Withholding $210 To: Italian Store For: Inv. 19265 Bal, B/F: Bal. De Bal. B Deposit Balance: $ This Chq: $860 Bal, C/F: Balance: $ This Chq: $1 190 Bal. C/F: $ Balance: $ This Chq: $2 200 Bal, C/F: $ 001001 001002 001003 Fresh Food Markets Tax Invoice 9769 505 Invoice No.: Invoice Terms: 4346 3/0 5/10 N30 1015 63 K Jandakot WA 6164 Phone: (08) 3260 9710 PO # Sold To: Mario's Pizza Palace 95 Adelaide Street Fremantle WA 6160 Qty Item Description Unit Price Amount ($) 100 kg 50 kg 15 bunches 50 kg Onions Capsicum Baby spinach Mushrooms 500 50 200 $4.00 $2.00 $6.00 30 300 Total 580 Cash Register Totals 30/05/16 31/05/16 1/06/16 2/06/16 $370 $480 $570 $950 Community Bank DEPOSIT Date: 3/06/2016 Branch: Notes: Coins: Cheques: Fremantle 2 200 Account Name: Account Number Signature of Depositor Mario's Pizza Palace 512-170 11595 Maria Italiano 170 Total: 2 370 Particulars of Cheques Drawer Bank Branch Amount MARIO'S PIZZA PALACE Date: 4/06/16 Date: 4/06/16 To: Foodmart Wholesalers For: Inv. 27369 To: Fresh Food Markets For: Inv. 4182 less discount Bal. B/F: $ Bal. B/F: $ Balance: $ This Chq:$ 304 Bal. C/F Balance: $ This Chq: $1090 Bal. C/F: $ 001004 001005 Foodmart Wholesalers Tax Invoice ABN 23 982 884 801 Invoice No.: Invoice Date: 17 Bannister Road Canning Vale WA 6155 Phone: (08) 9455 8545 28488 7/06/2016 Net 30 Terms: PO # 1016 Sold To: Mario's Pizza Palace 95 Adelaide Street, Fremantle WA 6160 Qty Item Description Price Amount GST Assorted soft drinks 10kg bag flour Grated Mozzarella cheese 500 100 100 100 25 500 50 1 000 100 12 200 120 Cans tomato paste Cans olives 5 500 500 3 700 370 50 20 50 Subtotal GST Total $4 070 Cash Register Totals 3/06/16 4/06/16 5/06/16 6/06/16 $905 $870 $950 $690 Community Bank DEPOSIT Date: Branch: 7/06/2016 Fremantle Mario's Pizza Palace Account Number: 512-170 11595 Signature of Depositor: Maria Italiano Account Name: 3 000 Notes: Coins: Cheques: 4 330 Total: 3 745 Particulars of Cheques Drawer Bank Branch Amount Princess May Theatre CBA Fremantle 330 CHAPTER 2: SOURCE DOCUMENTS-JUNE 2016 7 Invoice MARIO'S PIZZA PALACE Invoice No. 4221 Date: 10/06/2016 N30 16267 ABN 19 463 520 440 Terms: PO #: Fremantle WA 6160 Phone: (08) 9335 5555 Sold To: Fremantle Port Authority PO Box 600 Fremantle WA 6960 Qty Description Price Amount $360 Pizza 20 bottles soft drink Sale Amount: Freight: Total Amount: $420 $C $420 Cash Register Totals 7/06/16 8/06/16 $550 9/06/16 $790 $280 Community Bank DEPOSIT Date: 10/06/2016 Branch: Fremantle Account Name: Mario's Pizza Palace Notes: Coins: Cheques: 1550 Account Number: 512-170 11595 Signature of Depositor: 70 Maria Italiano 1 620 Total: Particulars of Cheques Bank Branch Drawer Amount Date: 11/06/16 Date: 11/06/16 Australia Post ABN 42 720 097 886 Tax Invoice To: Fresh Food Markets For: Inv, 4346 less discount To: Australia Post For: Stamps & Stationery 11/06/16 $ Postage stamps ionery Total 70.00 Bal. B/F: $ Deposit: $ Balance: $ This Chq: $ 551 Bal. C/F: $ Bal. B/F: $ 105.00 Deposit: $ Balance: $ This Chq:$ 105 Bal, C/F: $ Cheque 105.00 Total includes GST $9.55 001006 001007 8 MARIO'S PIZZA PALACE Cash Register Totals 10/06/16 $845 11/06/16 12/06/16 $830 $570 Community Bank DEPOSIT Date: 13/06/2016 Branch Fremantle 2 200 Account Name: Mario's Pizza Palace Notes: Account Number: 512-170 11595 Coins: 45 Signature of Depositor: Maria Italiano 400 Cheques: Total: 2 645 Particulars of Cheques Drawer Bank NAB Branch Amount Port City Motors Fremantle 400 Westside Packaging Co. Tax Invoice 229 Railway Parade Bassendean WA 6054 Phone: (08) 9273 5333 Invoice No.: Invoice Date: 14/06/2016 Terms PO#: ABN 28 091 724 739 7789 N30 1017 To: Mario's Pizza Palace 95 Adelaide Street Fremantle WA 6160 Description Amount $5 500 10,000 pizza boxes 55 Freight Total (including $505 GST) $5 555 MARIO'S PIZZA PALACE Invoice Invoice No. 4222 ABN 19 463 520 440 95 Adelaide Street Date: 15/06/2016 Terms: 10/10,N30 Fremantle WA 6160 hone: (08) 9335 5555 Angel Sailors Club 8 Elder Place Sold To: Fremantle WA 6160 Qty 80 Description Price Amount Family Size Pizza $25 $2 000 $2 000 Sale Amount: Freight: Total Amount: $C $2 000 CHAPTER 2: SOURCE DOCUMENTS-JUNE 2016 9 Foodmart Wholesalers Adjustment Note 2 884 801 Invoice No.: Invoice Date: Terms: 28498 15/06/2016 Net 30 Canning Vale WA 6155 Phone: (03) 9455 8545 Mario's Pizza Palace 95 Adelaide Street. Sold To: Fremantle WA 6160 Item Description 10kg bag flour (weevils in the bags) Qty 10 Price GST Amount 10 1 1 Subtotal 10 GST Total $11 Date: 17/06/16 Date: 17/06/16 To: Sam Conti For: Wages $1 400 less PAYG Withholding $210 To: Australian Super For: Super Payable Bal. B/F: $ Bal. B/F: $ Deposit: $ Balance: $ This Chq: $1 190 Bal, C/F: $ Denosit: Balance: $ This Chq: $266 Bal. C/F: $ 001008 001009 Cash Register Totals 13/06/16 14/06/16 15/06/16 16/06/16 $170 $360 $620 $1050 Community Bank DEPOSIT Date: 17/06/2016 Fremantie 2 200 Branch: Notes Coins: Account Name: Account Number Signature of Depositor Mario's Pizza Palace 512-170 11595 Maria Italiano Cheques: Total: 2 200 Particulars of Cheques Drawer Branch Bank Amount 10 MARIO'S PIZZA PALACE We were unable to transcribe this imageTelstra GPO Box 990 Tax Invoice Invoice No.: 289467 3001 Me 13 3333 Invoice Date: 21/06/2016 ABN 25 465 815 356 To Mario's Pizza Palace 95 Adelaide Street Fremantle WA 6160 Description Telephone line rental and phone calls Amount $297 Total (includes $27 GST) $297 Invoice MARIO'S PIZZA PALACE Invoice No. Date: 4223 24/06/2016 N30 16277 ABN 19 463 520 440 95 Adelaide Street Fremantle WA 6160 Terms: PO #: Phone: (08) 9335 5555 Fremantle Port Authority Sold To: PO Box 600 Fremantle WA 6960 Oty Description Price Amount Pizza 300ml bottles soft drink 20 20 $18 $360 420 Sale Amount: Freight Total Amount: 0S $420 ITALIAN STORE Tax Invoice ABN 95 000 029 729 Invoice No.: Invoice Date: 19356 24/06/2016 237 Oxford Street Leederville WA 6007 Phone: (08) 9444 9644 Terms: PO #: N15 1018 Sold To: Mario's Pizza Palace 95 Adelaide Street, Fremantle WA 6160 Qty Item Description Price $ Amount $ GST $ 10 kg 60 kg Anchovies Italian sausage 40 400 40 20 1 200 12C 60 kg Pepperoni 1 200 120 20 Basil & oregano (fresh) 4 40 Subtotal Freight GST 4 640 20 2 466 Total $5 126 12 MARIO'S PIZZA PALACE Cash Register Totals 20/06/16 21/06/16 $280 22/06/16 $570 23/06/16 $830 $310 DEPOSIT Community Bank Date: 24/06/2016 Branch: Fremantle Account Name: Mario's Pizza Palace Account Number: 512-170 11595 Coins: Signature of Depositor: Maria Italiano Cheques: 1 800 Total: 3 790 Particulars of Cheques Drawer Bank Branch Amount Angel Sailors Club Fremantle WBC 1800 Tax Invoice Western Power GPO Box 6060 Perth WA 6001 Account No.: Invoice Date: 24/06/2016 111177 ABN 25 465 815 356 To: Mario's Pizza Palace 95 Adelaide Street PAID 27/06/16 Cheque 1011 Fremantle WA 6160 Description Amount Electricity supplied for the period 21/04/16 to 23/06/16 $475 Total (including GST) $475 MARIO'S PIZZA PALACE Invoice Invoice No.: Date: Terms: 4224 ABN 19 463 520 440 25/06/2016 Fremantle WA 6160 N30 PO #: 917 Phone: (08) 9335 5555 Sold To: Princess May Theatre 17 Cantonment Street Fremantle WA 6160 Qty Description Price Amount 20 Small size pizza 1lt bottles soft drink $10 $200 10 4 Sale 40 Freight: Total Amount: $10 $250 CHAPTER 2 SOURCE DOCUMENTS-JUNE 2016 13 Date: 27/06/16 Date: 27/06/16 To: Western Power For: Electricity To: M. Italiano For: Drawings Bal, B/F $ Deposit$ Balance: $ This Chq:$475 Bal, C/F: $ Bal, B/F $ Deposit: $ Balance: $ This Chq:$3 200 Bal, C/F: $ 001011 001012 Cash Register Totals 24/06/16 $745 25/06/16 26/06/16 $630 $670 Community Bank DEPOSIT Date: 27/06/2016 Fremantle Notes: Account Name: Mario's Pizza Palace 45 512-170 11595 Account Number: Coins: Signature Depositor Maria Italiano Cheques: Total: 2045 Particulars of Cheques Branch Drawer Bank Amount MARIO'S PIZZA PALACE Invoice Invoice No. 4225 30/06/2016 ABN 19 463 520 440 Date: 95 Adelaide Street Terms: PO #: N30 Fremantle WA 6160 Phone: (08) 9335 5555 2176 Sold To: Port City Motors 24 Queen Victoria Street Fremantle WA 6160 Qty Description Price Amount Family size pizza Small size pizza 1lt bottles soft drink $2 8 $10 $4 Sale Amount: 32 $312 $0 Freight: Total Amount: $312 14 MARIO'S PIZZA PALACE Cash Register Totals 27/06/16 28/06/16 29/06/16 $380 $510 $420 Community Bank DEPOSIT Date: 30/06/2016 Branch Fremantle 1 295 Mario's Pizza Palace 512-170 11595 Account Name: Account Number: Signature of Depositor: Notes: Coins: 15 Maria Italiano Cheques: Total: 1 310 Particulars of Cheques Branch Drawer Bank Amount Pakenham St Service Station Tax Invoice Invoice No.: 1221 30/06/2016 Net 7 days 727 Pakenham St Fremantle WA 6160 Phone: 9335 2000 Invoice Date: Terms: ABN 36 091 500 319 To Mario's Pizza Palace 95 Adelaide Street Fremantle WA 6160 Description Amount Fuel purchases for the month 360 TOTAL $360 OFFICE MEMORANDUM Date: 30/06/2016 To: Maria Italiano SUBJECT: End of period adjustments Adjusting journal entries are required for the folllowing: 1. Wages payable at the end of June are $1300 Transfer 1/3rd of the prepaid insurance to the expense account Superannuation payable for June is $266 5. Record depreciation for the year. Use the straight line (prime cost) method and the rates shown below: Motor Vehicles-20% Store Equipment 10% h Interest charged on the bank loan for the month was $84 Cash from sales of pizzas on 30/06/16 were $760 and this money was not banked until July. (Hint: post to the cash float account) 8, The end of June stocktake has determined that the closing inventory value of food is $1840 and packaging $4125 6 Signed: Accountant CHAPTER 2 SOURCE DOCUMENTS-JUNE 2016 15. Get Accounting Homework Help Today
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