Activity 4

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School

Monarch Institute *

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Course

FNS40222

Subject

Accounting

Date

Jan 9, 2024

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docx

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Uploaded by DeaconFerretMaster1034

Activity 4: Credit Purchases and Credit Sales 4.1 When developing the policies and procedures in relation to credit sales, outline the processes you would include in relation to: o checking invoices o preparing journal entries for these invoices o authorising these journal entries o filing invoices for auditing purposes (this may be related to the invoice numbering system) Note: The learning content for these questions may not be found solely in the textbook. Use your understanding of recording credit sales to arrive at your answers and research other sources to assist you. For example, preparing invoices would include ensuring that an invoice contains an invoice number, company details, customer details, details of the good sold and credit terms. a. Process for checking invoices: This process involves verifying that the invoices are accurate and complete. The following steps can be taken to ensure that invoices are checked properly: - Verify that the invoice is addressed to the correct customer. - Check that the invoice date is correct. - Verify that the invoice amount is correct. b. Process for preparing journal entries for these invoices: This process involves recording the transactions in the accounting system. The following steps can be taken to ensure that journal entries are prepared properly: - Record the transaction in the accounting system. - Ensure that the journal entry is accurate and complete. - Verify that the journal entry is posted to the correct account. c. Process for authorising these journal entries: This process involves ensuring that the journal entries are authorized by the appropriate person. The following steps can be taken to ensure that journal entries are authorized properly: - Verify that the journal entry has been reviewed and approved by the appropriate person. - Ensure that the journal entry is authorized in accordance with the company's policies and procedures.

d. Process for filing invoices for auditing purposes (this may be related to the invoice numbering system): This process involves ensuring that invoices are filed in a secure and organized manner for auditing purposes. The following steps can be taken to ensure that invoices are filed properly: - Establish a system for numbering invoices (e.g. sequential numbering). - File invoices in a secure and organized manner (e.g. by date, customer name, invoice number). - Keep a record of all invoices issued and received for auditing purposes. - Ensure that invoices are kept for the required length of time according to legal and regulatory requirements 4.2 You will now use the policies and procedures you developed in above (in Activity 7.1). ABC School Supplies sells 1,000 books at $15 each (including GST) to Ben Smith (123 Smith St, Smithville 9015), on 30-day terms, based on order #236, invoice #89. Shipped on 16 June 2020 via Alpha Couriers. a. Use the above information to complete the following tax invoice template for ABC School Supplies: ABC School Supplies 12 Mountain Rd, Hill Top NSW 3101 ABN: 11 123 123 123 Tax Invoice No.: 89 Date: 16/06/2020 To: Ben Smith 123 Smith Street, Smithville 9015 Your Order No: 236 Date Shipped: 16/06/2020 Shipped Via: Alpha Couriers Terms: 30 Days Quantity Description Price Total (incl GST) 1,000 Books 15.00 15,000

ABC School Supplies sells 15 iPads at $770 each (including GST) to Carrie Carrigan (999 High St, Ringstone 9777), on 30-day terms, based on order #315, invoice #127. Shipped on 15 February 2021 via Beta Couriers. b. Use the above information to complete the following tax invoice template for ABC School Supplies: ABC School Supplies 12 Mountain Rd, Hill Top NSW 3101 ABN: 11 123 123 123 Tax Invoice No.: 127 Date: 15/02/2021 To: Carrie Carrigan 999 High Street, Ringstone 9777 Your Order No: 315 Date Shipped: 15/02/2021 Shipped Via: Beta Couriers Terms: 30 Days Quantity Description Price Total (incl GST) 15 iPad 770.00 11,550 c. Copy the tax invoice you completed in part b of this activity and paste it into a new word document. Save this new word document with the filename: Invoice127_ABCSS Include this separate document in your assessment submission. NOTE : You must include the Invoice127_ABCSS file with submission of this Assessment workbook.

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4.3 General Ledger Below are selected transactions from the general journal of Brian Smith Catering for the month of March. These journals are in line with its policies and procedures and have been approved by the Finance Accountant. General Journal - Brian Smith Catering Date Particulars Folio Debit Credit March 01 Catering Supplies GST Paid Accounts Payable - Andrea Credit purchase of catering stock 715 125 210.01 600 60 660 20 Catering Supplies GST Paid Accounts Payable – Dave Credit purchase of catering stock 715 125 210.03 300 30 330 27 Accounts Payable – Andrea Bank Payment of account 210.01 100 660 660 30 Telephone GST Paid Accounts Payable – Telstra Telephone account received 765 125 210.04 100 10 110 31 Accounts Payable – Office Shop Bank Payment of account 210.02 100 88 88

a. In line with its policies and procedures, post from the general journal to the general ledger and to the individual creditor accounts in the accounts payable subsidiary ledger. The opening balances have been entered for you. General Ledger - Brian Smith Catering Date Details Folio Debit Credit Balance Bank 100 01/03 Balance 10,000 DR 01/03 Catering Supplies, GST 660 10.660 DR 20/03 Catering Supplies, GST 330 10.990 DR 27/03 Accounts Payable 660 10,330 DR 30/03 Telephone, GST 110 10,440 DR 31/03 Office Shop 88 10,352 DR GST Paid 125 01/03 Bank 60 60DR 20/03 Bank 30 90DR 30/03 Bank 10 100DR Accounts Payable Control 210 01/03 Balance N/A 88 CR 01/03 Bank N/A 660 748 CR 20/03 Bank N/A 330 1,078 CR 27/03 Bank N/A 660 1, 738 CR N/A N/A Telephone 765 30/03 Bank N/A 100 100DR Catering Supplies 715 01/03 Bank N/A 600 600DR 20/03 Bank N/A 300 900DR

Payables Subsidiary Ledger - Brian Smith Catering Date Details Folio Debit Credit Balance Andrea 210.01 01/03 Bank N/A 660 660 CR 20/03 Bank N/A 660 1,320 CR Office Shop 210.02 01/03 Balance N/A 88 CR 31/03 Bank N/A ` 88 176 CR Dave 210.03 20/03 Bank N/A 330 330 DR Telstra 210.04 30/03 Bank N/A 100 100 DR b. Prepare a schedule of accounts payable as of 31 March: Schedule of Accounts Payable Amounts Supplier Name: $ Dave 330.00 CR Telstra 110.00 CR Total (must equal balance as per Accounts Payable Control Account) 440 CR

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c. Use the following template to write an email to management specifying the amounts owing to each creditor, ask that them to confirm the accuracy and authorise payment of the balance of the Accounts Payable Control Account: Send  To: Management Subject: Accounts Payable Schedule of Accounts Payable Good afternoon, Please see attached the Schedule of Accounts Payable. Please confirm details are correct and authorise payment. Regards Accounts

4.4 Paymore Landscapers supplies you with the following information for October:

a. Enter the above transactions into the General Journal: General Journal – Paymore Landscapers Date Particulars Folio Debit Credit 03/10 Bank N/A 660 03/10 Landscaping N/A 600 03/10 GST Collected N/A 60 Credit Sales Invoice 81 N/A 11/10 Bank N/A 1,100 11/10 Landscaping N/A 1,000 11/10 GST Collected N/A 100 Credit Sales Invoice 82 N/A 16/10 Bank N/A 660 16/10 Revenue N/A 660 Receipt 71 N/A 19/10 Bank N/A 330 19/10 Landscaping N/A 300 19/10 GST Collected N/A 30 Credit Sales Invoice 83 N/A 24/10 Bank N/A 1,100 24/10 Revenue N/A 1,100 Receipt 72 N/A 28/10 Bank N/A 330 28/10 Revenue N/A 330 Receipt 73 N/A 30/10 Bank N/A 770 30/10 Landscaping N/A 700 30/10 GST Collected N/A 70 Credit Sales Invoice 84 N/A 30/10 Bank N/A 770 30/10 Revenue N/A 700 30/10 GST Received N/A Cash Sales Receipt 74 N/A

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b. Post to the General Ledger and to the individual debtor accounts in the Receivables Subsidiary Ledger. General Ledger - Paymore Landscapers Date Details Folio Debit Credit Balance Bank 03/10 Me Kong N/A 660 660 DR 24/10 Hilltown Hotel N/A 1,100 1,760 DR 28/10 Grace Park N/A 330 2,090 DR 30/10 Service Revenue N/A 770 2,860 DR Accounts Receivable Control 03/10 Service Revenue GST Collected N/A 660 660 DR 11/10 Service Revenue GST Collected N/A 1,100 1,760 DR 16/10 Bank N/A 660 1,100 DR 19/10 Service Revenue N/A 1,100 2,200 DR 24/10 Bank N/A 1,100 1,100 DR 28/10 Bank N/A 330 770 DR 30/10 Delice Resort N/A 770 1,540 DR GST Collected 3/10 Me Kong N/A 60 60 CR 11/10 Hilltown Hotel N/A 100 160 CR 19/10 Grace Park N/A 100 260 CR 30/10 Delice Resort N/A 70 330 CR 30/10 Bank N/A 70 400 CR Service Revenue 3/10 Me Kong N/A 600 600 CR 11/10 Hilltown Hotel N/A 1000 1,600 CR 19/10 Grace Park N/A 1000 2,600 CR 30/10 Delice Resort N/A 700 3,300 CR 30/10 Bank N/A 700 4,000 CR

Receivables Subsidiary Ledger - Paymore Landscapers Date Details Folio Debit Credit Balance Me Kong Restaurant 8/10 GST Collected N/A 660 660 DR 16/10 Bank N/A 660 0 Hilltown Hotel 11/10 GST Collected N/A 1,100 1,100 DR 24/10 Bank N/A 1,100 0 Grace Park 19/10 GST Collected N/A 1,100 1,100 DR 24/10 Bank N/A 330 770 DR Delice Resort 30/10 Accounts Receivable N/A 770 770 DR N/A c. Prepare a schedule of Accounts Receivable as of 31 October: Schedule of Accounts Receivable Amounts Supplier Name: $ Grace Park 770 Delice Resort 770 Total (must equal the balance of the Accounts Receivable Control account) 1,540 d. Under industry codes of practice and best practices, what must you create when setting up subsidiary ledgers? You must create a Schedule of accounts Receivable and Accounts Payable. e. Outline the steps you would take if (in part c of this activity) the total of the subsidiary ledger did not reconcile with the control account balance? Check that all transactions have been entered and entered correctly.

The following invoice was issued to Blue Gum Organics and payment was received on 22/10/2020. The funds were banked and the following journal entry was recorded in Paymore Landscaper’s Cash Receipts Journal: Dr Bank $55 Cr Debtors $55 A receipt was emailed to Blue Gum Organics on 23/10/2020 acknowledging their payment of $550: 4.5 Check the invoice for Blue Gum Organics, above. In accordance with the firm’s policies and procedures, an adjustment to rectify the error must be made. Record the adjustment needed in the Cash Receipts Journal to correct the error. Cash Receipts Journal Date Receipt No. Details A/C No. Sales Debtors GST Collected Amount Banked XXXXXXX XXXXX Correction Cash Receipt Blue Gum Organics N/A 445 45 495

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Your firm received the following invoice from Maxi Mowers and payment was made on 4/2/2021. The following journal entry was recorded in the Cash Payments Journal: Dr Creditors $250 Cr Bank $250 A receipt was emailed from Maxi Mowers on 5/2/2021 acknowledging their receipt of $270.

4.6 Check the invoice for Maxi Mowers, above. In accordance with the firm’s policies and procedures, an adjustment to rectify the error must be made. Record the adjustment needed in the Cash Payments Journal to correct the error. Cash Payments Journal Date Receipt No. Details A/C No. Admin Exp Creditors GST Paid Bank XXXXXXX XXXXX Correction Cas Receipt N/A 20 20