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Transcript of NCEA LEVEL 2 ACCOUNTING -...
NCEA Level 2 Accounting Accounts Receivable Solutions page 1
Example: – Aged Debtors’ Report – page 2
Aged Debtors’ Report
as at 1 April 2012
March February January December
M Jenkins 3,100 2,000
D Noble 700 900 500
J Zachos 600
A Michel 1,200
Totals 5,000 2,900 500 600
Example: – Kids Rags – page 5
Kids Rags Sales Journal
Date Debtor
Invoice
Total
Including
GST
GST
Sales
Excluding
GST
Freight
Excluding
GST
3-Apr Gold's Garments 4,416 576 3840
7-Apr Li and Co 2,208 288 1920
10-Apr Kids Plus 3,312 432 2880
14-Apr Gold's Garments 1,495 195 1200 100
21-Apr Green Scene 1,196 156 960 80
24-Apr Kids Plus 1,794 234 1440 120
30-Apr Li and Co 2,484 324 2160
Totals 16,905 2,205 14,400 300
Kids Rags Sales Returns Journal
Date Debtor
Credit Note
Total
Including
GST
GST
Sales
Excluding
GST
16-Apr Gold’s Garments 138 18 120
25-Apr Kids Plus 276 36 240
Totals 414 54 360
Kids Rags Cash Receipts Journal
Date Particulars Discount
Allowed Bank GST Sales
Accounts
Receivable
20-Apr Gold's Garments 260 3,000 -39 3,299
20-Apr Li and Co 1,000 1,000
24-Apr Green Scene 60 600 -9 669
29-Apr Kids Plus 1,500 1,500
320 6,100 -48 0 6,468
NCEA Level 2 Accounting Accounts Receivable Solutions page 2
Kids Rags General Ledger
Accounts Receivable Control
1-Apr Balance 5,760 Dr
30-Apr Sales, Freight and GST 16,905 22,665 Dr
Sales Returns and GST 414 22,251 Dr
Bank, Discount Allowed and GST 6,468 15,783 Dr
Note: Sales total and Freight totals could be separated. Each would need to include GST. If combined the
particulars must clearly indicate that both sales and freight are included in the debit posting. Likewise
particulars for the payment must clearly indicate that the total includes discount allowed or discount
allowed and GST could be separated from the bank.
Alternative answer showing separate details for sales, freight, bank and discount allowed:
Accounts Receivable Control
1-Apr Balance 5,760 Dr
30-Apr Sales and GST 16,560 22,320 Dr
Freight and GST 345 22,665 Dr
Sales Returns and GST 414 22,251 Dr
Bank 6,100 16,151 Dr
Discount Allowed and GST 368 15,783 Dr
Kids Rags Accounts Receivable Subsidiary Ledger
Gold's Garments
1-Apr Balance 3,299 Dr
3-Apr Sales and GST 4,416 7,715 Dr
14-Apr Sales, Freight and GST 1,495 9,210 Dr
16-Apr Sales Returns and GST 138 9,072 Dr
20-Apr Bank, Discount Allowed and GST 3,299 5,773 Dr
Li and Co
1-Apr Balance 1,792 Dr
7-Apr Sales and GST 2,208 4,000 Dr
20-Apr Bank 1,000 3,000 Dr
30-Apr Sales and GST 2,484 5,484 Dr
Green Scene
1-Apr Balance 669 Dr
21-Apr Sales, Freight and GST 1,196 1,865 Dr
24-Apr Bank, Discount Allowed and GST 669 1,196 Dr
Kids Plus
10-Apr Sales and GST 3,312 3312 Dr
24-Apr Sales, Freight and GST 1,794 5,106 Dr
25-Apr Sales Returns and GST 276 4,830 Dr
29-Apr Bank, Discount Allowed and GST 1,500 3,330 Dr
NCEA Level 2 Accounting Accounts Receivable Solutions page 3
Kids Rags
Schedule of Accounts Receivable
as at 30 April 2012
Gold's Garments 5,773
Li and Co 5,484
Green Scene 1,196
Kids Plus 3,330
Balance per Accounts Receivable Control 15,783
Note:
Labelling the total Balance per Accounts Receivable Control meets the requirement to understand
reconciliation of the accounts receivable subsidiary ledger with the accounts receivable control account.
By labelling the total students are indicating that they recognise that this total should agree with the balance
in the Accounts Receivable Control account. Students need to be encouraged to demonstrate this
understanding for Excellence. The end user needs to know that the subsidiary ledger agrees with the control.
Additional Exercises
Exercise One – page 10
Josephs Tents
Aged Debtors’ Report as at 1 April 2012
March February January December November
Takawe Tours 2,410 2,410
Green Camping 1,990
Outdoor Gear 3,270
Wilderness Store 3,300 1,650
Waitawheta Scouts 290 290
Awanui Journeys 2,100
4,800 3,560 5,710 1,650 1,990
Cash Receipts Journal
Date Particulars
Discount
Allowed Bank GST Sales
Accounts
Receivable
7-Apr Waitawheta Scouts 290 290
7 Outdoor Gear 3,270 3,270
16 Awanui Journeys 87 2,000 -13 2,100
20 Takawe Tours 104 4,700 -16 4,820
21 Sales 4,540 592 3,948
24 Tui Tents 590 590
29 Wilderness Store 990 990
191 16,380 563 3,948 12,060
NCEA Level 2 Accounting Accounts Receivable Solutions page 4
General Journal
30-Apr Bad debts 1,730.43
GST 259.57
G Green/Accounts Receivable 1,990.00
write off bad debt
7-May Awanui Journeys 290.00
Takawe Tours 290.00
correct error in processing invoice
Accounts Receivable Control
1-Apr Balance 17,710 Dr
30-Apr Tent Sales plus GST 10,350 28,060 Dr
Tent Repairs plus GST 1,380 29,440 Dr
Sales Returns plus GST 2,560 26,880 Dr
Bank, discount and GST 12,060 14,820 Dr
Bad debts and GST
1,990 12,830
Takawe Tours
1-Apr Balance 4,820.00 Dr
10 Sales, Repairs, GST 1,760.00 6,580.00 Dr
20 Bank, discount, GST 4,820.00 1,760.00 Dr
30 Repairs, GST 290.00 2,050.00 Dr
7-May Repairs error 290.00 1,760.00 Dr
Green Camping
1-Apr Balance 1,990 Dr
30 Bad Debts, GST 1,990 0
Outdoor Gear
1-Apr Balance 3,270.00 Dr
7 Sales, Repairs, GST 2,880.00 6,150.00 Dr
7 Bank, discount, GST 3,270.00 2,880.00 Dr
14 Sales, GST 3,470.00 6,350.00 Dr
16 Sales Returns, GST 1,200 5,150.00 Dr
Wilderness Store
1-Apr Balance 4,950.00 Dr
25 Sales Returns, GST 1,360.00 3,590.00 Dr
29 Bank 990 2,600.00 Dr
Waitawheta Scouts
1-Apr Balance 580.00 Dr
7 Bank 290.00 290.00 Dr
NCEA Level 2 Accounting Accounts Receivable Solutions page 5
Awanui Journeys
1-Apr Balance 2,100.00 Dr
7 Repairs, GST 380.00 2,480.00 Dr
16 Bank, discount, GST 2,100.00 380.00 Dr
7-May Repairs error 290.00 670.00 Dr
Tui Tents
24-Apr Sales, GST 2,950.00 2,950.00 Dr
24 Bank 590.00 2,360.00 Dr
Schedule of Debtors
Takawe Tours 1,760.00
Outdoor Gear 5,150.00
Wilderness Store 2,600.00
Waitawheta Scouts 290.00
Awanui Journeys 670.00
Tui Tents 2,360.00
Balance per Accounts Receivable Control 12,830.00
Exercise Two – page 11
Kiwi Gardens Cash Receipts Journal
Date Particulars Discount
Allowed Bank GST Sales
Accounts
Receivable
3-May Sales 824.00 107.48 716.52
S Bush 25.83 564.30 -3.87 594.00
4-May K Fell 34.78 1,120.00 -5.22 1,160.00
Sales 795.00 103.70 691.30
9-May Sales 349.00 45.52 303.48
10-May Sales 1,324.00 172.70 1,151.30
J Rose 600 600
60.61 5,576.30 420.30 2,862.61 2,354.00
Kiwi Gardens General Journal
4-May T Bell 340.00
K Fell 340.00
correct error in processing invoice
Bad debts 593.91
GST 89.09
C Rivers/Accounts Receivable 683.00
write off bad debt
NCEA Level 2 Accounting Accounts Receivable Solutions page 6
Kiwi Gardens General Ledger
Accounts Receivable Control
1-May Balance 4,634 Dr
12-May Sales and GST 1,052 5,686 Dr
Landscaping and GST 467 6,153 Dr
Sales Returns and GST 62 6,091 Dr
Bank, Discount and GST 2,354 3,737 Dr
Bad Debts and GST 683 3,054 Dr
Kiwi Gardens Accounts Receivable Subsidiary Ledger
T Bell
1-May Balance $1,027
4 Sales error 340 1,367
K Fell
1-May Balance $1,500
4 Sales error 340.00 1,160
4 Bank, discount, GST 1,160.00 -
J Rose
1-May Balance $830
3 Landscaping and GST 267.00 1,097
10 Sales and GST 238.00 1,335
Bank 600 735
11 Sales Returns and GST 28 707
C Rivers
1-May Balance $683
4 Bad debts and GST $683 -
S Bush
1-May Balance $594
3 Bank, discount, GST 594.00 -
7 Sales and GST 429.00 429
9 Sales returns and GST 34 395
A Li
7-May Sales, Landscaping and GST 585.00 585.00
Schedule of accounts receivable
T Bell 1,367
K Fell -
J Rose 707
S Bush 395
A Li 585.00
Balance per control 3,054
NCEA Level 2 Accounting Accounts Receivable Solutions page 7
Exercise Three – page 13
Riverstone Aged Debtors' Report as at 1 June
May April March February
Garden Gurus $2,820 $1,790
Ground Control $2,000 $2,400
Green Space $2,590 $570
Green Scape $1,800 $1,700
Nature's Garden $2,600
$8,010 $4,360 $4,200 $1,700
Riverstone Cash Receipts Journal
Date Particulars Discount
Allowed Bank GST Sales
Accounts
Receivable
3-Jun Sales 3,620.00 472.17 3,147.83
Nature's Garden 113.04 2,470.00 -16.96 2,600.00
Garden Gurus 122.61 4,469.00 -18.39 4,610.00
5-Jun Sales 4,170.00 543.91 3,626.09
Green Space 95.65 2,660.00 -14.35 2,770.00
9-Jun Green Scape 700.00 700.00
10-Jun Sales 3,740.00 487.83 3,252.17
Ground Control 3,000.00 3,000.00
11-Jun Green Planet 522.00 522.00
331.30 25,351.00 1,454.22 10,026.09 14,202.00
Riverstone General Journal
4-Jun Green Scape 390
Green Space 390
12-Jun Green Scape 30
Overdue Fees 30
Riverstone General Ledger
Accounts Receivable Control
1-Jun Balance 18,270.00 Dr
12-Jun Sales and GST 5,840.00 24,110.00 Dr
Sales returns and GST 390.00 23,720.00 Dr
Overdue Fees 30.00 23,750.00 Dr
Bank, discount and GST 14,202.00 9,548.00 Dr
NOTE: Bank and Discount plus GST can be separate
NCEA Level 2 Accounting Accounts Receivable Solutions page 8
Accounts Receivable Subsidiary Ledger
Garden Gurus
1-Jun Balance 4,610.00 Dr
3 Bank, discount and GST 4,610.00 -
7 Sales 1,270.00 1,270.00 Dr
Ground Control
1-Jun Balance 4,400.00 Dr
3 Sales 1,040.00 5,440.00 Dr
9 Sales 850.00 6,290.00 Dr
10 Bank 3,000.00 3,290.00 Dr
11 Sales returns 250.00 3,040.00 Dr
Green Space
1-Jun Balance 3,160.00 Dr
4 Sales error 390.00 2,770.00
5 Bank, discount and GST - 2,770.00 - Dr
Green Scape
1-Jun Balance 3,500.00 Dr
4 Sales error 390.00 3,890.00
9 Bank 700.00 3,190.00 Dr
12 Overdue fees 30.00 3,220.00 Dr
Nature's Garden
1-Jun Balance $2,600 Dr
3 Bank, discount and GST 2,600.00 -
7 Sales 940.00 940.00 Dr
9 Sales Returns 140.00 800.00 Dr
Green Planet
11-Jun Sales 1,740.00 1,740.00 Dr
3 Bank, discount and GST 522.00 1,218.00 Dr
Schedule of Debtors
Garden Gurus 1,270.00
Ground Control 3,040.00
Green Space -
Green Scape 3,220.00
Nature’s Garden 800.00
Green Planet 1,218.00
Balance per control 9,548.00
NCEA Level 2 Accounting Accounts Receivable Solutions page 9
Exercise Four – page 14
Part A
There is plenty of information on which to base a class discussion about how Keri manages her debtors. As
she deals with motels, which are businesses, bad debts are not her major concern.
Students could discuss efficiency such as emailing customers, receiving payment weekly, being helpful in
dealing with complaints etc. They could discuss that weekly payments allow Keri to pay cash for fresh local
breakfast ingredients keeping her costs down.
Eg: she might go to the local market to source fresh free range eggs and need cash to pay. Having received
the cash from her motel customers she has it to pay for her ingredients.
Part B
Example of a manual solution. This exercise was actually designed to be completed using accounting
software so the solution is a little artificial.
Note the discounted breakfasts have been rounded to the nearest $ and could be combined with the
breakfast sales on 16 January for Seaside Motel as they were recorded on the one invoice.
Seaside Motel
9-Jan Breakfast sales 1124 1124 Dr
10-Jan Bank 1124 0 Dr
16-Jan Breakfast sales 1123 1123 Dr
Breakfast sales discounted 57 1180 Dr
Oceanview Motel
9-Jan Breakfast sales 1932 1932 Dr
10-Jan Bank 1932 0
16-Jan Breakfast sales 1404 1404 Dr
Beach Motel
9-Jan Breakfast sales 710 710 Dr
10-Jan Bank 710 0
16-Jan Breakfast sales 735 735 Dr
Sandbar Motel
9-Jan Breakfast sales 1546 1546 Dr
10-Jan Breakfast returns 82 1464
11-Jan Bank 1464 0
16-Jan Breakfast sales 1562 1562 Dr
NCEA Level 2 Accounting Inventory Processing Solutions page 13
Example – page 21
Starting point
600 pairs of gumboots on hand at $12.00 excluding GST
General Ledger
Inventory-Gumboots
01/04/12 Balance 7,200 Dr
Transaction One – a credit purchase of inventory – page 21
2/04/12 Purchased 100 gumboots at $13.80 including GST each on credit.
General Journal
02/04/12 Inventory-Gumboots 1,200
GST 180
Accounts Payable 1,380
Credit purchase of inventory
Explanation
We debit inventory (not purchases) as it is increasing, we debit GST (liability) because it is decreasing.
Accounts Payable or the suppliers name is credited with the GST inclusive amount. This liability is
increasing .
General Ledger
Inventory-Gumboots
01/04/12 Balance 7,200 Dr
02/04/12 Accounts Payable 1,200 8,400 Dr
Accounts Payable
01/04/12 Balance 4,000 Cr
02/04/12 Inventory-Gumboots plus GST 1,380 5,380 Cr
GST
01/04/12 Balance 3,000 Cr
02/04/12 Accounts Payable 180 2,820 Cr
NCEA Level 2 Accounting Inventory Processing Solutions page 14
Transaction Two – a credit sale of inventory – page 22
4/04/12 Sold 200 gumboots for $23 including GST each on credit.
The gumboots cost the business $12 excluding GST each
General Journal
04/04/12 Cost of Goods Sold-Gumboots 2,400
Inventory-Gumboots 2,400
Transfer of cost of goods sold
04/04/12 Accounts Receivable 4,600
GST 600
Sales-Gumboots 4,000
Credit sale recorded
Explanation
In the first entry we credit inventory as it is decreasing and as this is an internal transfer there is NO GST to
record – the amount recorded is thus GST exclusive. Cost of goods sold is debited as it is an expense
increasing.
In the second entry we debit Accounts Receivable (credit sale) or bank (cash sale) with the GST inclusive
amount. We then credit GST as the liability is increasing and credit sales with the GST exclusive amount
as the income is increasing.
General Ledger
Inventory-Gumboots
01/04/12 Balance 7,200 Dr
02/04/12 Accounts Payable 1,200 8,400 Dr
04/04/12 Cost of goods sold-Gumboots 2,400 6,000 Dr
Cost of Goods Sold-Gumboots
04/04/12 Inventory 2,400 2,400 Dr
Accounts Receivable
01/04/12 Balance 5,400 Dr
04/04/12 Sales-Gumboots plus GST 4,600 10,000 Dr
Sales-Gumboots
04/04/12 Accounts Receivable 4,000 4,000 Cr
GST
01/04/12 Balance 3,000 Cr
02/04/12 Accounts Payable 180 2,820 Cr
04/04/12 Accounts Receivable 600 3,420 Cr
NCEA Level 2 Accounting Inventory Processing Solutions page 15
Transaction Three – a purchase return to a supplier – page 23
Purchase return 5 pairs of gumboots at $13.80 including GST
General Journal
05/04/12 Accounts Payable 69
GST 9
Inventory-Gumboots 60
Purchase returns recorded
Explanation
As this is a purchase return it is the reverse of the purchase entry above. In the General Ledger we will now
have you complete the accounts to show the return:
General Ledger
Inventory-Gumboots
01/04/12 Balance 7,200 Dr
02/04/12 Accounts Payable 1,200 8,400 Dr
04/04/12 Cost of goods sold-Gumboots 2,400 6,000 Dr
05/04/12 Accounts Payable 60 5,940 Dr
Accounts Payable
01/04/12 Balance 4,000 Cr
02/04/12 Inventory-Gumboots plus GST 1,380 5,380 Cr
05/04/12 Inventory-Gumboots plus GST 69 5,311 Cr
GST
01/04/12 Balance 3,000 Cr
02/04/12 Accounts Payable 180 2,820 Cr
04/04/12 Accounts Receivable 600 3,420 Cr
05/04/12 Accounts Payable 9 3,429 Cr
NCEA Level 2 Accounting Inventory Processing Solutions page 16
Transaction Four – a sales return from a credit customer – page 24
9/04/06 – Wrote a credit note for a customer for 15 gumboots sold on 4/04/06.
Look back – These goods cost us $12 each excluding GST. The total amount to remove from cost of goods
sold is $180. We sold these units at $23 including GST each. The total amount of the return including GST
is $345. As with a sale, a sales return requires two entries – one for the cost of the goods excluding GST,
one for the selling price of the goods including GST with the GST being reversed.
General Journal
09/04/12 Inventory 180
Cost of goods sold-Gumboots 180
To record cost of the goods returned to the business
09/04/12 Sales Returns-Gumboots 300
GST 45
Accounts Receivable 345
sales returns recorded at selling price
General Ledger
Inventory-Gumboots
01/04/12 Balance 7,200 Dr
02/04/12 Accounts Payable 1,200 8,400 Dr
04/04/12 Cost of goods sold-Gumboots 2,400 6,000 Dr
05/04/12 Accounts Payable 60 5,940 Dr
09/04/12 Cost of goods sold-Gumboots 180 6,120 Dr
Cost of Goods Sold-Gumboots
04/04/12 Inventory-Gumboots 2,400 2,400 Dr
09/04/12 Inventory-Gumboots 180 2,220 Dr
Accounts Receivable
01/04/12 Balance 5,400 Dr
04/04/12 Sales-Gumboots plus GST 4,600 10,000 Dr
09/04/12 Sales returns-Gumboots plus GST 345 9,655 Dr
Sales Returns-Gumboots
09/04/12 Accounts Receivable 300 300 Dr
GST
01/04/12 Balance 3,000 Cr
02/04/12 Accounts Payable 180 2,820 Cr
04/04/12 Accounts Receivable 600 3,420 Cr
05/04/12 Accounts Payable 9 3,429 Cr
09/04/12 Accounts Receivable 45 3,384 Cr
NCEA Level 2 Accounting Inventory Processing Solutions page 17
Ending point – a stock shortage – page 26
General Journal
12/04/12 Inventory Shortage 24
Inventory 24
To record a shortage of inventory after stock-take
General Ledger
Inventory-Gumboots
01/04/06 Balance 7,200 Dr
02/04/12 Accounts Payable 1,200 8,400 Dr
04/04/12 Cost of goods sold-Gumboots 2,400 6,000 Dr
05/04/12 Accounts Payable 60 5,940 Dr
09/04/12 Cost of goods sold-Gumboots 180 6,120 Dr
12/04/12 Inventory shortage 24 6,096 Dr
Inventory Shortage
12/04/12 Inventory-Gumboots 24 24 Dr
In the general journal we have this entry – GST could be rounded
General Journal
Drawings 41.40
Inventory-Gumboots 36.00
GST 5.40
Took home 15 gumboots for personal use
Inventory-Gumboots
01/05/12 Balance 6,096 Dr
03/05/12 Drawings 36 6,060 Dr
Drawings
03/05/12 Inventory-Gumboots 36.00 36.00 Dr
GST 5.40 41.40 Dr
Note the inventory and GST could be shown as one total in the drawings account. GST could be rounded
for convenience.
NCEA Level 2 Accounting Inventory Processing Solutions page 18
Exercise Five – Drawings – page 27
General Journal
06/10/12 Drawings 184
Inventory 160
GST 24
Took a bat for personal use
Inventory
01/10/12 Balance 5,600 Dr
06/10/12 Drawings 160 5,440 Dr
Drawings
06/10/12 Inventory 160 160 Dr
GST 24 184 Dr
Revaluation Example – page 28
General Journal
31/03/12 Write down of inventory 11,000
Inventory 11,000
Revalue dated tops from $15,000 to their net realisable value of $4,000
Inventory
31/03/12 Balance 62,000 Dr
Write down of inventory 11,000 51,000 Dr
Write down of Inventory
31/03/12 Inventory 11,000 11,000 Dr
Exercise Six – page 29
General Journal
31/03/12 Write down of inventory 3,000
Inventory 3,000
Revalue jewellery to its net realisable value below cost
Inventory
31/03/12 Balance 47,000 Dr
Write down of inventory 3000 44,000 Dr
Write down of Inventory
31/03/12 Inventory 3,000 3,000 Dr
NCEA Level 2 Accounting Inventory Processing Solutions page 19
Exercise Seven – page 29
a) Complete the general journal and general ledger accounts below. You will need to enter the
opening balances.
General Journal
31/03/12 Cost of goods sold 1,300
Inventory 1,300
Revalue calendars to net realisable value below cost
Inventory
31/03/12 Balance 17,000 Dr
Cost of goods sold 1,300 15,700 Dr
Cost of goods sold
31/03/12 Balance 194,600 Dr
Inventory 1,300 195,900 Dr
A little bit of Theory:
b) State the amount that will be reported in the income statement for cost of goods sold.
$195,600
c) State the amount that will be reported in the statement of financial position for inventory.
$15,700
d) Explain in terms of the recognition criteria of an asset why the diaries and calendars need to
be reported at $700 instead of $2,000.
The recognition criteria require assets to be reported at their probable future economic benefit that has
a reliable measure. The probable cash from the diaries and calendars is now below their cost as they
are out of date so the $700 needs to be the amount at which they are reported. It faithfully represents
(reliable) the diaries and calendars, as the business knows dated diaries and calendars cannot be sold
above cost after 3 months into the year.
NCEA Level 2 Accounting Inventory Processing Solutions page 20
Calculation of the Cost of Inventory
Example One – Weighted Average – page 31
Taku Teddies Inventory Card - weighted average
Date Particulars IN OUT BALANCE
No. @ $ No. @ $ No. @ $
Jun-01 Balance 2,000 $12.00 24,000
Jun-07 Sale/K Mar 1,800 $12.00 21,600 200 $12.00 2,400
Jun-18 Purchase/Kidz Supply 3,000 $8.00 24,000 3,200 $8.25 26,400
Jun-20 Sale/Toytime 2,500 $8.25 20,625 700 $8.25 5,775
Jun-26 Purchase Return 75 $8.00 600 625 $8.28 5,175
Jun-28 Purchase/Kidz Supply 2,375 $9.00 $21,375 3,000 $8.85 26,550
Jun-29 Sale Bearhug 1,400 $8.85 12,390 1,600 $8.85 14,160
Drawings 20 $8.85 177 1,580 $8.85 13,983
Jun-30 Shortage 4 $8.85 35 1576 $8.85 13,948
Example Two – First-In First-Out – page 32
Taku Teddies Inventory Card - FIFO
Date Particulars IN OUT BALANCE
No. @ $ No. @ $ No. @ $
Jun-01 Balance 2,000 $12.00 24,000
Jun-07 Sale 1,800 $12.00 21,600 200 $12.00 2,400
Jun-18 Purchase/Kidz Supply 3,000 $8.00 24,000 200 $12.00 2,400
3,000 $8.00 24,000
Jun-20 Sale/Toytime 200 $12.00 2,400
2,300 $8.00 18,400 700 $8.00 5,600
Jun-26 Purchase Return 75 $8.00 600 625 $8.00 5,000
Jun-28 Purchase/Kidz Supply 2,375 $9.00 21,375 625 $8.00 5,000
2,375 $9.00 21,375
Jun-28 Sale/Bearhug 625 $8.00 5,000
775 $9.00 6,975 1,600 $9.00 14,400
Drawing 20 $9.00 180 1,580 $9.00 14,220
Jun-30 Shortage 4 $9.00 36 1,576 $9.00 14,184
From the FIFO card
Purchase of Taku Teddies General Journal entry
Inventory 45,375
GST 6,806
Accounts Payable 52,181
NCEA Level 2 Accounting Inventory Processing Solutions page 21
Example Two (continued) – Journals – page 33
Sale of Taku Teddies General Journal entries (remember two entries!)
Cost of goods sold 54,375
Inventory 54,375
Accounts Receivable 131,100
Sales 114,000
GST 17,100
Return of Taku Teddies to supplier General Journal entry
Accounts Payable 690
Inventory 600
GST 90
Drawings of Taku Teddies General Journal entry
Drawings 207
Inventory 180
GST 27
Inventory Shortage General Journal entry
Inventory Shortage 36
Inventory 36
Exercise Eight – (written answers required) – page 33
a) Explain how the perpetual inventory system allows Teddy Treasures to identify inventory
shortages or stolen inventory.
The perpetual inventory system keeps a record of all movements of inventory on an inventory card or
file for each item of inventory stocked by the business. This means that there is a record at any time of
the quantity of an item of inventory that should be on the shelves. When a stock take (count of the
inventory item) is done, this can be compared to the records of what should be on hand and if the stock
take count is less than the records show there is a shortage or missing or stolen inventory.
b) Explain how re-order points and quantities can be established and how they benefit Teddy
Treasures.
Re-order points can be established as a quantity on hand that the inventory item should not fall below –
such as 5 teddies, so when the records show this point is reached more of that item can be ordered. The
re-order quantity – the best quantity to re-order can also be established and in a computer system a
purchase order can be automatically generated for the re-order quantity when then re-order point is
reached. This means Teddy Treasures will always have sufficient quantities of each item of inventory on
hand – it will not run short of demand from customers.
NCEA Level 2 Accounting Inventory Processing Solutions page 22
c) Explain why Teddy Treasures can complete an Income Statement at any time. What
advantage does this offer Teddy Treasures.
An income statement can be completed at any time with a perpetual inventory system as the cost of
goods sold is available – cost of goods sold is recorded with each sale – and therefore gross profit can be
determined without the need for a stock take. The advantage of this is that trends in gross profit (and
profit) can be determined on a regular basis – such as monthly so that any problems may be highlighted
before the end of the year or decisions made regarding inventory purchases and sales on a monthly basis.
d) Explain why most businesses use a computer and accounting software package when they
have a perpetual inventory system in place.
Inventory files require a lot of information to be held and up-dated with each purchase and sale of
inventory and each item of inventory requires its own file – this is much easier to manage with a
software package designed to keep control accounts automatically up-to-date as well as all the inventory
files with each sale and purchase of each item of inventory. Also if cost is determined using weighted
average the computer can hold the actual weighted average price (doesn’t need to round it) as you do
with a manual system.
e) State what items of information Teddy Treasures should include on its inventory cards to
ensure it makes the most of its perpetual inventory system.
It should include inventory codes, usual supplier, buying price, selling price, re-order points and re-order
quantities. These all make the perpetual inventory system work smoothly and take advantage of the
ability to re-order when quantities dictate.
f) Explain the main disadvantage of a perpetual inventory system using manual recording.
If the business has a large number of items of inventory there is a lot of recording to do and this is time
consuming and costly in terms of administrative staff time / salary and if weighted average is used to
determine costs the weighted average prices quickly become complex numbers or require rounding.
Exercise Nine – Taku Teddies Weighted Average Card – page 34
General Journal
(from weighted average card)
Jun-26 Accounts Payable 690
Inventory 600
GST 90
purchase return
Jun-28 Inventory 21,375
GST 3,206
Accounts Payable 24,581
purchase of inventory
Jun-29 Cost of goods sold 12,390
Inventory 12,390
Cost of goods sold
Accounts Receivable - Bearhug 32,200
Sales 28,000
GST 4,200
sale on credit
Drawings 199
GST 22
Inventory 177
Drawings of inventory
NCEA Level 2 Accounting Inventory Processing Solutions page 23
Exercise Ten – 90223 exam question 2005 – page 35
a) Record on the inventory card the following transactions for Accounting Revision Books in
July.
July 5 – Sold 25 Accounting Revision Books to Hukanui College on credit for $18.40
each including GST.
July 8 – Purchased 200 Accounting Revision Books for $8.74 each excluding GST.
July 9 – Jamie returned 10 Accounting Revision Books purchased on 8 July.
Bookworks Inventory Card
Product: Accounting Revision Books
Date Particulars In Out Balance
2011
No @ $ No @ $ No @ $
July 4 Balance 15 8 120
50 8.40 420
15 8 120
10 8.40 84 40 8.40 336
July 8 Purchase 200 8.74 1748 40 8.40 336
200 7.60 1520
July 9 Purchase Returns 10 8.74 87.74 40 8.40 336
190 8.74 1,661
b) Show the General Journal entries to record the sale of the Accounting Revision Books on
July 5.
05/07/11 Cost of goods sold 204
Inventory 204
Accounts Receivable 460
Sales 400
GST 60
c) Show the General Journal entry to record, as Drawings, the puzzles taken home by Jamie for
family birthday presents. Narrations are not required.
22/07/11 Drawings 92
Inventory 80
GST 12
Took puzzles home
NCEA Level 2 Accounting Inventory Processing Solutions page 24
d) Show the General Journal entry to record the re-measurement of the cook books to their net
realisable value. Narrations are not required.
22/07/11 Write down of inventory 320
Inventory 320
e) Explain WHY Jamie can prepare an Income Statement for Bookworks without having to
perform a stock take.
Jamie has the cost of goods sold available on the stock cards so he can calculate gross profit without
having to physically count his stock. This means he can complete his income statement.
NCEA Level 2 Accounting Inventory Processing Solutions page 25
Additional Exercises
Exercise Eleven – Includes Returns and Shortages – page 37
1. Unique Bats
General Journal
02/09/12 Cost of goods sold 40,000
Inventory 40,000
Cost of bats sold
Sportsworld (Accounts Receivable) 92,000
Sales 80,000
GST 12,000
Sale of bats on credit
04/09/12 Inventory 96,000
GST 14,400
Accounts Payable 110,400
Purchase of bats on credit
05/09/12 Accounts Payable 18,400
Inventory 16,000
GST 2,400
Return of bats to supplier
06/09/12 Inventory 8,000
Cost of goods sold 8,000
Cost of bats returned to the business
Sales returns 16,000
GST 2,400
Sportsworld (Accounts Receivable) 18,400
Sales return recorded at selling price
09/09/12 Cost of goods sold 28,800
Inventory 28,800
Cost of bats sold
Bank 66,240
Sales 57,600
GST 8,640
Sale of bats for cash at selling price
12/09/12 Inventory shortage 320
Inventory 320
Inventory shortage recorded
30/09/12 Cost of goods sold 320
Inventory shortage 320
Transfer inventory shortage on balance day
NCEA Level 2 Accounting Inventory Processing Solutions page 26
2.
General Ledger
Inventory
01/09/12 Balance 64,000 Dr
02/09/12 Cost of goods sold 40,000 14,000 Dr
04/09/12 Accounts Payable 96,000 110,000 Dr
05/09/12 Accounts Payable 16,000 94,000 Dr
06/09/12 Cost of goods sold 8,000 102,000 Dr
09/09/12 Cost of goods sold 28,800 73,200 Dr
12/09/12 Inventory shortage 320 72,880 Dr
Cost of Goods Sold
06/09/12 Inventory 40,000 40,000 Dr
09/09/12 Inventory 8,000 32,000 Dr
30/09/12 Inventory shortage 320 32,320 Dr
Inventory shortage
09/09/12 Inventory 320 320 Dr
30/09/12 Cost of goods sold 320 0
NCEA Level 2 Accounting Inventory Processing Solutions page 27
Exercise Twelve – Anita’s Allsorts – page 39
Anita’s Allsorts General Journal
31/03/12 Inventory 16,000
GST 2,400
Accounts Payable 18,400
Purchase of inventory on credit
Accounts Payable 1,150
Inventory 1,000
GST 150
Returns of inventory to supplier
Accounts Receivable 38,640
Sales 33,600
GST 5,040
Credit sale of inventory
Cost of goods sold 14,000
Inventory 14,000
Cost of goods sold (on credit)
Sales Returns 2,880
GST 432
Accounts Receivable 3,312
Sales returns of inventory
Inventory 1,200
Cost of Goods Sold 1,200
Cost of goods returned by credit customers
Drawings 230
GST 30
Inventory 200
Drawings of inventory
Cost of Goods Sold 360
Inventory 360
Write down of inventory to net realisable value
NCEA Level 2 Accounting Inventory Processing Solutions page 28
Anita’s Allsorts General Ledger
Inventory
01/03/12 Balance 8,000 Dr
31/03/12 Accounts Payable 16,000 24,000 Dr
Accounts Payable 1,000 23,000 Dr
Cost of Goods Sold 14,000 9,000 Dr
Cost of Goods Sold 1,200 10,200 Dr
Drawings 200 10,000 Dr
Cost of Goods Sold (write down) 360 9,640 Dr
Cost of Goods Sold
31/03/12 Inventory 14,000 14,000 Dr
Inventory 1,200 12,800 Dr
Inventory (write down) 360 13,160 Dr
Sales
31/03/12 Accounts Receivable 33,600 33,600 Cr
Sales Returns
31/03/12 Accounts Receivable 2,880 2,880 Dr
Accounts Receivable
01/03/12 Balance 27,000 Dr
31/03/12 Sales and GST 38,640 65,640 Dr
Sales returns and GST 3,312 62,328 Dr
Drawings
31/03/12 Inventory plus GST 230 230 Dr
NCEA Level 2 Accounting Inventory Processing Solutions page 29
Exercise Thirteen – Includes drawings, write down of inventory, shortage – page 41
General Journal
Cost of goods sold 20,000
Inventory 20,000
Cost of goods sold
Powerplus (Accounts Receivable) 40,250
Sales 35,000
GST 5,250
Sale of goods on credit
Inventory 16,000
GST 2,400
XYZ Ltd (Accounts Payable) 18,400
Purchase of goods on credit
Drawings 322
Inventory 280
GST 42
Inventory taken home for personal use
XYZ Ltd (Accounts Payable) 1,380
Inventory 1,200
GST 180
Goods returned to the supplier
Inventory 800
Cost of goods sold 800
Cost goods returned
Sales returns 1,400
GST 210
Powerplus (Accounts Receivable) 1,610
Sales return recorded at selling price
Cost of Goods Sold 2,800
Inventory 2,800
Write down of inventory to net realisable value
Inventory shortage 200
Inventory 200
Inventory shortage recorded
NCEA Level 2 Accounting Inventory Processing Solutions page 30
General Ledger
Inventory
Balance 120,000 Dr
Cost of goods sold 20,000 100,000 Dr
XYZ Ltd (Accounts Payable) 16,000 116,000 Dr
Drawings 280 115,720 Dr
XYZ Ltd (Accounts Payable) 1,200 114,520 Dr
Cost of goods sold 800 115,320 Dr
Cost of goods sold (write down) 2,800 112,520 Dr
Inventory shortage 200 112,320 Dr
Cost of Goods Sold
Inventory 20,000 20,000 Dr
Inventory 800 19,200 Dr
Inventory (write down) 2,800 22,000 Dr
Drawings
Inventory 280 280 Dr
GST 42 322 Dr
Inventory Shortage
Inventory 200 200 Dr
NCEA Level 2 Accounting Inventory Processing Solutions page 31
Exercise Fourteen – Perpetual Inventory Card – page 43
Toy Trains inventory card - weighted average
Date Particulars IN OUT BALANCE
No. @ $ No. @ $ No. @ $
Jun-1 Balance 1,000 $6.00 6,000
5 Sale/Toy Land 750 $6.00 4,500 250 $6.00 1,500
7 Toy Land return 50 $6.00 300 300 $6.00 1,800
11 Purchase/Toy Depot 2,700 $5.00 13,500 3,000 $5.10 15,300
15 Sale/Bank 1,800 $5.10 9,180 1,200 $5.10 6,120
22 Purchase/Toy Depot 800 $6.00 4,800 2,000 $5.46 10,920
27 Sale/Toy Town 1,450 $5.46 7,917 550 $5.46 3,003
29 Drawings 3 $5.46 16 547 $5.46 2,987
30 Sales error 50 $5.46 273 597 $5.46 3,260
Model Planes Inventory Card - Weighted average
Date Particulars IN OUT BALANCE
No. @ $ No. @ $ No. @ $
Jun-1 Balance 1,200 24.00 28,800
5 Sale 800 24.00 19,200 400 24.00 9,600
11 Purchase 2,000 26.00 52,000 2,400 25.67 61,600
13 Purchase Returns 150 26.00 3,900 2,250 25.64 57,700
15 Sale 1,200 25.64 30,773 1,050 25.64 26,927
19 Sales Returns 100 25.64 2,564 1,150 25.64 29,491
22 Purchase 1,300 25.00 32,500 2,450 25.30 61,991
27 Sales 1,600 25.30 40,484 850 25.30 21,507
29 Drawings 5 25.30 127 845 25.30 21,381
30 Sales errror 50 25.30 1,265 795 25.30 20,115
NCEA Level 2 Accounting Inventory Processing Solutions page 32
Exercise Fifteen – page 44
Kiwi Soft Toy
Date Particulars IN OUT BALANCE
Jun No. @ $ No. @ $ No. @ $
1 Balance 600 10.00 6,000
2 Sales 300 10.00 3,000 300 10.00 3,000
4 Purchase 800 10.40 8,320 300 10 3,000
800 10.40 8,320
12 Sales 300 10.00 3,000
450 10.40 4,680 350 10.40 3,640
13 Sales return 2 10.40 21 352 10.40 3,661
17 Purchase 1,000 10.20 10,200 352 10.40 3,661
1,000 10.20 10,200
21 Sale 352 10.40 3,661
248 10.20 2,530 752 10.20 7,670
27 Sale error 10 10.20 102 742 10.20 7,568
30 Shortage 1 10.20 10 741 10.20 7,558
General Journal
13/6 Inventory 21
Cost of Goods Sold 21
Reverse cost of goods sold for 2 kiwi returned
Sales Returns 40
GST 6
Bank 46
Cash refund for 2 kiwi returned
30/6 Inventory shortage 10
Inventory 10
Record 1 kiwi missing
NCEA Level 2 Accounting Inventory Processing Solutions page 33
Pukeko Soft Toy
Date Particulars IN OUT BALANCE
Jun No. @ $ No. @ $ No. @ $
1 Balance 500 8.00 4,000
2 Sales 350 8.00 2,800 150 8.00 1,200
4 Purchase 900 7.50 6,750 150 8.00 1,200
900 7.50 6,750
12 Sales 150 8.00 1,200
450 7.50 3,375 450 7.50 3,375
17 Purchase 800 8.00 6,400 450 7.50 3,375
800 8.00 6,400
18
Purchase
return 45 8.00 360 450 7.50 3,375
755 8.00 6,040
21 Sale 450 7.50 3,375
40 8.00 320 715 8.00 5,720
24 Drawings 3 8.00 24 712 8.00 5,696
27 Sale error 10 8.00 80 722 8.00 5,776
General Journal
2/6 Cost of Goods Sold 2,800
Inventory 2,800
Transfer cost of 350 pukeko to cost of goods sold
Bank 6,440
Sales 5,600
GST 840
Cash sale of 350 pukeko
30/6 Drawings 28
GST 4
Inventory 24
Took 3 pukeko home for family
Note: GST rounded for drawings. If not drawings $27.60, GST $3.60.