Scribd
Upload
44 views

Tutorial Meeting 2

The document provides instructions for two accounting tasks. Task 4 involves recording transactions for a new bookshop business throughout January 2017. Students are asked to record the transactions using journal entries and T-accounts. Task 5 involves preparing adjusting journal entries in November and February for various expenses and revenues related to planning a conference. Students are asked to discuss the impact of each entry on the income statement and balance sheet, and identify whether each entry is an accrual or deferral.

Uploaded by

Ve Dek
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
44 views

Tutorial Meeting 2

The document provides instructions for two accounting tasks. Task 4 involves recording transactions for a new bookshop business throughout January 2017. Students are asked to record the transactions using journal entries and T-accounts. Task 5 involves preparing adjusting journal entries in November and February for various expenses and revenues related to planning a conference. Students are asked to discuss the impact of each entry on the income statement and balance sheet, and identify whether each entry is an accrual or deferral.

Uploaded by

Ve Dek
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

TUTORIAL MEETING 2

Literature: Weygandt et al. (2019), Chapter 2 & Chapter 3


Videos: - Accrual accounting
Additional exercises: - By the end of the week, practice some more by making the additional
exercises that we created on the Wiley Plus website

IMPORTANT: You are expected to prepare the two tasks below before the tutorial meeting
using the information in the video and in Chapters 2 & 3 of the textbook.

Task 4 Recording Transactions

Our three students, Peter, Tom, and Sandra have recently founded their bookshop with the
name ‘Bookmarker’. The company buys and sells new and second-hand books.
During January 2017, the following economic events took place:
▪ On January 1, Peter, Tom, and Sandra each contributed €2,000 capital to
Bookmarker.
▪ On January 1, a five-year bank loan of € 200,000 at an annual rate of interest of 9
percent was obtained. Interest has to be paid monthly, starting on 31 January 2017.
▪ On January 1, a store location was found. Our friends pay €150,000 to become the
owner of this location.
▪ On January 15, new and second-hand books were bought and paid, totaling €2,000.
▪ On January 31, various store equipment was purchased on account at a total cost of
€10,000, which is to be paid within 60 days.
▪ On January 31, the monthly payment of interest on the bank loan is made (loan
€200,000, 9% annual interest rate).
▪ On January 31, additional second-hand books were bought and paid, totaling
€2,500. New books were bought on account for €3,500.

How should Bookmarker keep record of these transactions? Sandra remembers something
about the double-entry system, journal entries, and posting on T-accounts. She also remembers
that there were rules about debit and credit. Sandra decides to record all these transactions by
using transaction analysis as illustrated in Chapter 2, pages 2-14 to 2-18. For each transaction,
she performs the basis analysis, equation analysis, debit-credit analysis, journal entry, and
posting on T-accounts.
Task 5 A Simple Exercise in Accrual Accounting

You work for an organization that offers various events to its members. You spent the months
of October and November organizing a conference to be held the following February and
marketed it to your members. The conference will run for five days, with the first and last day
being half days. Note that your organization has a fiscal year-end of 31 December.

The following events took place:


a. The marketing efforts were successful: 100 people, the maximum capacity, registered
in November for the conference. They paid their €850 registration fee at the time they
registered. The registration fee includes the cost of the conference sessions, all meals,
transportation to the conference venue, and the hotel stay.
b. You signed a contract with four people to work at the conference as representatives of
your organization. The cost of their services is €1,000 per person to be paid at the end
of the conference.
c. You reserved 104 hotel rooms for four nights (100 rooms for registered participants and
4 rooms for the people you hired to work at the conference). The total cost of the rooms
was €40,000. You paid a 20% deposit in cash upon reserving the rooms in November.
The balance is due at the end of the conference, at which time you will provide the
payment in cash.
d. You signed a contract with the hotel to provide food and beverage services for all
breakfasts, lunches, breaks and dinners. The total cost of these services is €13,000. A
deposit of 20% is required in November with the remainder due in February, at the end
of the conference.
e. Using your excellent negotiation skills, you convinced the hotel to allow the use of two
conference rooms at no charge, as a result of your booking rooms and signing a food
and beverage contract with the hotel.
f. You reserved busses to transport the participants to the conference venue at a total cost
of €500. The transportation company agrees to bill you at the end of the conference and
you have 30 days to pay the bill after receiving it. No deposit or advance payment is
required and you can cancel this reservation at any time.
g. You signed contracts with 10 speakers for the conference. The total cost amounts to
€20,000 and is payable within 30 days of the end of the conference.
Requirements
1. Why are adjusting entries needed in accounting?
2. Name and explain (in theory) the different types of adjusting entries that are required
under accrual accounting.
3. For each event, prepare, if necessary, the journal entries in both November and
February. In addition, for each event:
a. Discuss the effect on the income statement.
b. Discuss the effect on the balance sheet.
c. Indicate whether the adjusting entry is a deferral or an accrual.

You might also like