Reference no: EM132292524

Technology and Accounting Processes Assignment - Business Simulation

Purpose - This assessment casts you in the role of an accountant and requires you, in a team of three, to develop financial reports for a small to medium sized business. You will record typical transactions for a small business over a one month period from source documents. This assessment will develop your ability to prepare financial information for a small business and prepare a concise business report and follow the work processes expected within a professional business environment.

Assessment Brief - In teams of three you are required to account for typical transactions for the final month of a 12 month reporting period. Using the financial reports produced, you will analyse the business performance and write a brief report to the business owner summarising your findings.

You are required to:

Download a copy of the business information and working papers available from the Bus285 LMS (under the tab 'Assignment'). There are two stages to this assessment.

Stage One: Recording transactions

In stage one you must:

i. Form a team of three with students from any workshop (this must be finalised by the Session 4 workshop).

ii. Review the available business information.

a. Using the working papers provided on LMS, record the transactions for the month in the relevant journals, ledgers and subsidiary reports.

Stage Two: Business Analysis

Your team must submit a final report that contains the working papers and your analysis of the business performance for the past 12 months (note: only one report is required from each team). Students are advised to do the assignment themselves in order to be able to discuss the preferred approach taken by the group. Your analysis should focus on:

1. The things your group consider the business did well (200 words)

2. The areas where your group believe the business could improve (200 words);

3. The strategies you would recommend the business could implement to improve its performance in the future (200 words).

Business background -

Fitness Factory Pty Ltd is a small retail business that has operated successfully for some years, buying and selling fitness equipment. The structure of the business is that of a small proprietary company, with the owners/members being Roger and Sarah Fitzgerald.

The owners work in the shop, and they employ a part-time clerk/salesperson. Rita Steiner, who is paid fortnightly, based on an hourly rate. Tax is deducted from the employee's wages (PAYG withholding tax) and remitted to the Australian Taxation Office (ATO) on a quarterly basis.

The business is registered with the ATO for the goods and services tax (GST), and its Australian Business Number (ABN) is 78 303 823 798. It reports and pays amounts owing for GST and PAYG withholding quarterly via the business activity statement (BAS). The business has elected to use the accrual basis of accounting for both accounting and GST purposes.

Accounting policies -

ACCURALS: Expenses incurred but not paid at the end of a period, such as the liability to pay employees for time worked between the last pay date and the end of the month, are entered into the journal at the end of the month as an accrual, and reversed by general journal entry at the start of the next month.

BAD AND DOUBTFUL DEBTS: The business uses the direct write-off method when accounting for bad bets as they only occur infrequently.

DISCOUNTS AND CREDIT TERMS: Customers are seldom offered a discount for prompt payment, and terms given are net 30 days. Some suppliers give the business a prompt payment discount Trade or volume discounts given to customers or received from suppliers reduce the cost of the goods purchased or sold, and are not recognised separately in the financial statements.

INVENTORY: The business maintains a perpetual inventory system and uses the average method to calculate the costs of goods sold for its completed range of goods.

PREPAYMENTS: Expenses paid in advance for their use, such as insurance, are initially recorded as assets. Any used portion at the end of period is entered into the journal as an expense.

PROPERTY, PLANT AND EQIUPMENT: The business has adopted the ATO rates of depreciation for all depreciated assets. These rates are based on the ATO's estimate of useful life, with no residual value. The straight line method is used for the calculation of depreciation on these assets. Amounts calculated are rounded to the nearest dollar.

The business maintains the books or original entry set out below. These have been customised to suit the operations of Fitness Factory.

• General journal (GJ): to record all transactions that cannot be recorded in the special journals.
• Sales journal (SJ): to record all sales of goods or services on credit, cost of goods sold, freight outwards and GST collected.
• Purchases journal (PJ): to record all credit purchases of goods for resale, freight inwards, inventory and GST paid.
• Cash receipts journal (CRJ): to record all receipts of cash, including cash sales of goods or services.
• Cash payments journal (CPJ): to record all payments made on the business's cheque account, including cash purchases of goods for resale.
• Petty cash journal (PCJ): to record all payments made from petty cash and reimbursement of petty cash. If you are not familiar with accounting for petty cash, it is covered in the Carlon text in Chapter 7.
• Accounts receivable and accounts payable subsidiary ledgers; separate accounts are maintained for each customer and each supplier.
• Inventory subsidiary ledger: stock cards are maintained for all inventory items.
• General ledger: separate accounts are maintained for income, expense, asset, liability and equity accounts.

ACCOUNTING PROCEDURES -

At the start of each month, reversing general journal entries are prepared and posted. On a daily basis, all relevant source documents are collected and transactions recorded in the appropriate journals. Transactions recorded in the 'other accounts' columns and all entries relating to accounts or inventory items in the subsidiary ledgers are posted daily. On a monthly basis, special journals are totalled and posted after the bank statement has been received and any missing items have been recorded. A worksheet is then prepared from the general ledger and a monthly income statement and balance sheet are produced, together with schedules of accounts receivable, accounts payable and inventory. At the end of each month, adjusting and closing general journal entries are prepared and posted to the general ledger accounts.

Inventory Records - Acquisitions are recorded on the inventory cards on the day the invoices and goods are received from suppliers. A note is made on the invoice when stock has been entered on the inventory cards, to avoid duplication or omission. Purchase invoices are stored in alphabetical and invoice-date order until paid and, when paid, are filed alphabetically. All stock movements out of the shop are recorded at the time of sale. All purchases are recorded on the cards at the cost price, excluding GST.

Cost of sales is determined from the inventory cards on the day of the sale using the average method and recorded in a separate column in the sales or cash receipts journal. Freight inwards is recorded in a separate column in the purchases journal, and the total is posted at month-end to a 'freight' cost of sales account.

Cash receipts - All cash receipts from customers and other sources are banked into the business cheque account at the Bank West bank. A deposit slip is prepared for this purpose. The person making a cash sale is required to record the receipt on the sales invoice, indicating how the customer paid (e.g. cash, cheque, EFT or credit card). Cash sales, other than those paid by EFT or credit card, are not banked until early the following week.

Cash payments - All payments, except those made from petty cash, are made by cheque drawn on the Bank West bank; appropriate details are recorded on the cheque butt. Cheque butts provide information for recording in the cash payments journal. When purchase invoices are paid, 'Paid' is written on the invoice, together with the date paid and the cheque number. An imprest petty cash system is used and a petty cash book is maintained. Either a petty cash voucher or a shop docket provides information for recording transactions in the petty cash journal. A running balance is maintained in this journal and periodically this is checked against actual cash on hand.

Bank reconciliation - A bank statement is received at the end of each month, and this is compared with the cash journals. Items missing from the cash journals are entered before final closing and a monthly bank reconciliation statement is then prepared. The bank reconciliation statement prepared at the end of October 2018 is set out below.

Bank reconciliation as at 31 October 2018 -

Balance as per bank statement Cr $29 698.30

Add: Outstanding deposit 176.00

29 874.30

Less: Unpresented cheques 3298.00

Number 2211 200.00

Number 2215

Balance as per cheque account 3498.00

Dr $26376.30

Account Balances - Accounts receivable (customer) opening balances, including invoice details are shown in figure 1.1. Accounts payable (supplier) opening balances, including invoice details, are shown in figure 1.2. Opening balances for the inventory subsidiary ledger are shown in figure 1.3. The post-closing trial balance for Fitness Factory as at 31 October 2018 is shown in figure 1.4.

Schedule of Accounts Receivable as at 31 October 2018 -

Customer	Invoice No.	Terms	Date of Invoice	Amount Due
Yarra City Council	5190	N30	2/10/2018	$5,150.50
Melbourne High School	5137	N30	16/10/2018	3, 187.00
Docklands Sporting Club	4236	N30	27/09/2018	990.00
				$9 327.50

Figure 1.1 Accounts receivable as at 31 October 2018.

Schedule of Accounts Payable as at 31 October 2018 -

Supplier	Invoice No.	Terms	Date of Invoice	Amount Due
Herrin Wholesalers	11972	5%10/N30	31/10/2018	$1694.00
Slogger Pty Ltd	9266	N30	09/10/2018	7175.00
Willow Equipment	7268	2%10/N30	29/10/2018	2585.00
				$11 454.00

Figure 1.2 accounts payable as at 31 October 2018.

Schedule of Inventory as at 31 October 2018 -

Code	Description	Quantity	Amount	Selling Price (excluding GST)
ACP	Armour Cricket Pads	18	$  900	$ 90
BCB	Blaster Cricket Bat	23	1, 380	100
BSB	Blaze Soccer Ball	11	275	50
DGB	Diablo Golf Ball (box of 12)	32	480	30
GNB	Gifford Netball	12	240	40
HFB	Herrin Football	17	1  275	150
JBB	Jordan Basketball	15	600	80
MCB	Marsh Cricket Ball	40	200	10
NBS	Netball Stand	2	80	90
SBB	Slammer Backboard	4	240	130
SFB	Strike Football Boots	29	2030	160
SGS	Slogger Golf Set	9	4500	1100
			$12 200

Figure 1.3 inventory as at 31 October 2018.

Fitness Factory Trial Balance as at 31 October 2018 -

Account Number	Account	Debit	Credit
100	Cheque Account - Bank West Bank	$26 376.30
105	Petty Cash	100.00
110	Accounts Receivable	9 337.50
120	Merchandise Inventory	12 200.00
130	Prepaid Insurance	3 728.00
140	Prepaid Rates & Taxes	4 400.00
150	GST Paid (outlays)	921.20
160	Buildings & Improvement (cost)	980 000.00
161	Accumulated Depreciated  - Bldgs & Imp		$58 800.00
170	Motor Vehicles  ( Cost)	18 800 .00
171	Accumulated Depreciation - Motor Vehicles		5 640.00
180	Store Equipment ( Cost)	26 100 .00
181	Accumulated Depreciation - Store Equip		11 700.00
200	Accounts Payable		11 454.00
210	GST Collected		1750.70
220	PAYG Withholding Payable		320.00
230	Superannuation Payable		144.00
240	Wages & Salaries		200.00
280	Bank Loan		620 000.00
310	Share Capital		360,000.00
315	Dividends paid	17 000.00
320	Retained Earnings		30,404.00
400	Sales		69 020.00
420	Discounts Received		392.30
430	Freight Collected		175.00
500	Cost of Sales	31 160.00
520	Freight Expense	324.00
600	Advertising	480.00
610	Bank Charges	42.40
615	Cleaning	850.00
620	Depreciation	9 086.00
625	Electricity	380.50
630	Insurance	1864.00
635	Interest Expense	15 750.00
640	Motor Vehicle Expenses	816.00
650	Postage & stationery	102.00
655	Rates	2 200.00
660	Repairs & Maintenance	75.00
670	Staff Amenities	68.60
675	Superannuation	612.00
680	Telephone	426.50
685	Wages & Salaries	6 800.00
		$1 170 000.00	$1 170 000.00

Figure 1.4 trial balance as at 31 October 2018.

Instructions -

1. Read the information provided in this assignment to gain familiarity with the various source documents, business operations, accounting policies and procedures, accounting system and GST.

2. Prepare a chart of accounts from the trial balance provided in figure 1.4. Identify the account number and account name and what element it is. For assets and liabilities, identify whether the element is current or non-current. Make sure you allow for additional items that may arise after the 31st October trial balance but which will be in the general ledger or final accounts (for example profit or loss summary).

3. Record the opening balances at 1 November 2018 in the appropriate accounts in the general ledger.

4. Record the opening balances of customers (figure1.1), suppliers (figure1.2) and inventory items (figure1.3) in the appropriate subsidiary ledgers.

5. Prepare and post reversing general journal entries in accordance with accounting procedures and office memoranda.

6. Record the transactions in the appropriate general or special journals for the month of November. Record and post all transactions in accordance with accounting procedures.

7. Enter all details of stock movements on the inventory cards.

8. Check the cash journals against the bank statement and prepare a bank reconciliation statement at the end of the month.

9. Complete and post all journals.

10. Prepare schedules of accounts receivable, account payable, and inventory as at 30 November 2018, and reconcile these with the control accounts in the general ledger.

11. Prepare a trial balance at as 30 November 2018 on the worksheet provided.

12. Record balance-day adjustments and complete the worksheet.

13. Record the balance-day adjustments in the general journal and post to the general ledger.

14. Prepare a statement of profit or loss for the period 1 July to 30 November 2018 and a balance sheet (Statement of Financial Position) as at 30 November 2018.

15. Prepare and post, closing general journal entries for the period.

16. Prepare a post-closing trial balance.

Attachment:- Assignment Files.rar