Assessment

LESSON 11 - ASSIGNMENT 1. Outline the differences between the cash and accrual methods of determining profit in 2-3 sentences. 2. Distinguish between the cash method and the modified cash method of accounting in one paragraph. 3. What are balance day adjustments? Explain in 2-3 sentences. 4. What is an accrued expense? Define 1-2 sentences 5. Explain what is meant by the term prepaid revenue? How is prepaid revenue classified in a balance sheet? Write 100-200 words. 6. What is the purpose of a reversing entry? Use an example to help explain your answer. 7. Explain the role played by a ten column worksheet. Write 80-100 words. 8. Use bullet points to list the differences between the asset approach and the expense approach to recording prepaid expenses. 9. State the double entry for the balance day adjustments for prepaid expenses if (a) the asset approach and (b) the expense approach is adopted.

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10. The following information has been supplied by Classic Furniture Repairs. Classic Furniture Repairs: Trial Balance as at 31 December, 1998 Cash at bank $ Advertising Equipment Office furniture Vehicle Insurance Interest Stock of Repair materials Rent Assistants wages Debtors Telephone Stock of Stationery Term Deposit $ 2 500 3 300 21 000 4 000 24 000 3 400 8 400 22 800 21 000 23 000 1 000 740 660 6 000 141 800 Capital Jones $ 27,600 Repair fees 92 000 Accum. Depn equipt 8 400 Accum. Depn office furn. 800 Accum. Depn vehicle 6 000 Loan AC Finance 7 000

141 800

Note: Stock of repair materials listed here was as at the beginning of the period 1st January 1998 The asset approach has been taken with regard to repair materials. Adjustments required: 1. Stock of repair materials as at 31 December 1998 was $800 2. The term deposit was taken out on 1 June 1998 for 12 months and is returning 9% per annum. No interest has been received as yet. 3. Insurance paid in advance amounted to $100 4. Telephone expense owing is $120. 5. The repair fees in the trial balance includes $2 000 which has been paid in advance for work to be done in January 1999. 6. Stationery on hand as at 31 December 1998 was $140

Depreciation entries required for the year: Vehicle 25% p.a on the reducing balance Equipment 20% p.a on straight line method Office furniture 10% p.a straight line method (a) Prepare all adjusting entries in the general journal. (b) Prepare the general ledger accounts for the following expense and revenue accounts (based on the updated trial balance): repair materials, interest revenue, insurance, telephone, repair fees and stationery. (c) Close off the following general ledger accounts to the Profit and Loss account in the general ledger: repair materials, interest revenue, insurance, telephone, repair fees and stationery. (d) Prepare a Profit and Loss Statement for the year ended 31 December 1998 (e) Prepare a Balance Sheet as at 31 December 1998.
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(f) Enter the reversing entries into the general ledger as at 1 Jan 1999

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Copyright 2008. International Career Institute

 Copyright 2008. International Career Institute