Topic notes 7: General Ledger

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Rosamund Haynes
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1 Topic notes 7: General Ledger Balance Day Adjustments 1. Accrued Expense 2. Prepaid Expense 3. Accrued Income 4. Income Received in Advance 5. Bad Debts & Doubtful Debts 6. Depreciation 7. Leave Entitlements ********************************************************************************** 1. Accrued Expense Wages due but not paid on 30/6/08 $ (Wages paid from 1/7/07 to 28/6/08 $18,000.) 30/6/08 Wages 400 Accrued Expenses 400 (Wages due but not paid) Wages Accrued Expenses 28/6/08 Bal b/d 18,000 30/6/08 Wages /6/08 Accrued 400 Expenses ******************************************************************************************************************* 2. Prepaid Expenses premium paid on 1/3/08 for 1 year $6,000 (plus GST 600) 30/6/08 Prepaid Expenses 4,000 4,000 ( prepaid : 6,000 x 8/12)* Prepaid Expenses 1/3/08 Bank 6,000 30/6/08 Prepaid Exp 4,000 30/6/08 4,000 *GST is not included in the calculation as it has been recorded in the GST account when the insurance premium was paid. SakaiSharePoint/CertIVonline/FNSACCT407B/version1/ Page 1 of 5

2 NOTE: Alternatively, the Prepaid Expense/Prepaid account can be debited when the insurance premium was paid. A standing journal entry (recurring transaction in MYOB) is made at the end of every month to transfer the monthly insurance expense to the insurance account. Prepaid Expenses/Prepaid 1/3/08 Bank 6,000 31/3/08 30/4/08 31/5/08 30/6/08 31/3/08 30/4/08 31/5/08 30/6/ Accrued Income Interest on fixed deposit for 3 months (1/5/08 to 31/7/08) to be received on 31/7/08 $750 (Interest received from 1/7/07 to 30/4/08: $2,250) 30/6/0 Accrued Income Interest Income (Accrued interest income : 750 x 2/3) Accrued Income Interest Income 30/6/08 Int. Income 30/4/08 Bal b/d 2,250 30/6/08 Wages ********************************************************************************** 4. Income Received in Advance Rent income for 3 months (May. June & July) received on 1/5/08 $4,200 (Rent received from 1/7/07 to 30/4/08: $14,000) 30/6/08 Rent income 1,400 Income Received In Advance 1,400 (Rent received in advance: 4,200/ x 13) 30/6/08 Income rec d in advance Interest Income Income Received In Advance 1,400 30/4/08 Bal b/d 22, 30/6/08 Interest Income 1/5/08 Bank 4, Bad Debts & Doubtful Debts SakaiSharePoint/CertIVonline/FNSACCT407B/version1/ Page 2 of 5 1,400

3 A/C Receivable Control-Slowpay balance 30/6/08 $8,600 (a) Bad debts to be written off $600 (b) Provide for doubtful debts 3 % of A/C Receivable (a) Bad Debts 30/6/08 Bad debts 600 A/C Receivable Control 600 Slowpay (Bad debts written off) Bad Debts A/C Receivable Control 30/6/08 A/C Rec /6/08 Bal b/d 8,600 30/6/08 Bad debts 600 Subsidiary Ledger Slowpay 30/6/08 Bal b/d /6/08 Bad debts 600 NOTE: If the bad debts is recorded in the general journal in MYOB, the Subsidiary account of Slowpay is not updated. Therefore, writing off bad debts in MYOB has to be recorded in the Sales module as a negative invoice. (b) Doubtful Debts 30/6/08 Doubtful Debts 240 Provision for Doubtful Debts 240 [Provision for Doubtful Debts : (8, ) x 3%] Ledger accounts 30/6/08 Provision for Doubt. Debts Doubtful Debts Provision for Doubtful Debts /6/08 Doubtful Debts 240 Extract of Balance Sheet Current Assets A/C Receivable 8,000 less Provision for Doubtful Debts 240 7, Depreciation SakaiSharePoint/CertIVonline/FNSACCT407B/version1/ Page 3 of 5

4 Equipment was purchased on 1/7/07 at cost $5,600. The estimated useful life is 4 years. Depreciation method straight line method 30/6/08 Depreciation 1,400 Accumulated Depreciation - Equipment 1,400 (Depreciation for the year: 5,600 x ¼) 30/6/08 Accum Depn - Equipment Depreciation Accumulated Depreciation - Equipment 1,400 30/6/08 Depreciation 1,400 Extract of Income Statement as at the end of year 1 Administrative Expenses Depreciation 1,400 Extract of Balance Sheet as at the end of year 1 Non Current Assets Equipment 5,600 less Accumulated Depreciation (1,400) 4,200 SakaiSharePoint/CertIVonline/FNSACCT407B/version1/ Page 4 of 5

5 7. Leave Entitlements Provide for leave entitlements for the year 1/7/07 to 30/6/08 - annual leave $1,200 - sick leave $ - long service leave $ /6/08 Annual leave 1,200 Provision for annual leave 1,200 (Provision for annual leave) Sick leave Provision for sick leave (Provision for sick leave) Long service leave 800 Provision for long service leave 800 (Provision for long service leave) Annual leave Provision for annual leave 30/6/08 Prov n for AL 1,200 30/6/08 Annual leave 1,200 Sick leave Provision for sick leave 30/6/08 Prov n for SL 30/6/08 Sick leave Long service leave Provision for long service leave 30/6/08 Prov n for L SL /6/08 Long service leave 800 SakaiSharePoint/CertIVonline/FNSACCT407B/version1/ Page 5 of 5

Fundamentals of Accounting Resources

Fundamentals of Accounting Resources Contents Figure 1 - The Profit and Loss statement example... 2 Figure 2 - Balance sheet example... 3 Figure 3 - Example of a Balance Sheet... 4 Figure 4 - Example of a Profit & Loss Sheet... 5 Figure 5-10