Reference no: EM132465769

Policy decision, analysis and chart of accounts

• Lewis Edwards decides to branch out on his own and set up his own private practice as an accountant.
• Events occurring in March 2016 are as follows. with GST.

March 1

2

3

4

7

8

12

14

19

24

31

1. Deposited $500 000 into a business bank account, set up under the business name of Lewis Edwards, Accountant.
2. Hired an office secretary who commenced work immediately.
3. Paid $6200 for the first month's rent of a suitable office.
4. Purchased office equipment and furniture for a total of $43 800. An initial $3800 is paid in cash immediately and the rest is to be paid in 3 months' time, with interest payable at 10% p.a. Paid $1800 for a 1-year insurance policy on the office equipment, effective from 1 March 2016. Paid $2600 in cash for office supplies.
5. Sent invoices to a number of clients for services rendered for a total amount of $14 000.
6. Edwards withdrew $1200 cash from the business for personal use. Paid the office secretary $1300 for services rendered to the business.
7. Received $8000 in cash from clients billed on 12 March. Received $16 000 in cash from clients who paid immediately for services rendered. These clients were not invoiced previously.
8. Paid $8000 for sundry expenses and wages of $1300 to the office secretary for the previous fortnight's work.

Required

Question A. After analysing the events above, suggest a chart of accounts, with appropriate numbering, that would be satisfactory for the business. Explain why you have used particular numbering in the chart of accounts.

Question B. Prepare general journal entries as necessary for each of the events, using the chart of accounts that you have created.

Question C. Explain why you have made these journal entries