Case Study: Real Life Application

Question One

Cash Account

Date	Explanation	PR	Debit $	Credit $	Balance Debit $ Credit $
July 3, 2012	Balance	√	63600		63600
July 1, 2012	Rent			4000	59600
July 4, 2012	Freight on purchase			1000	58600
July 7, 2012	Debtors		18000		76600
July 10, 2012	Sales		90000		166600
July 13, 2012	Creditors			24000	142600
July 15, 2012	Advertising			9000	133600
July 16, 2012	Debtors		33000		166600
July 19, 2012	Purchases			22000	144600
July 21, 2012	Freight on sale			1100	143500
July 21, 2012	Debtors		17600		162200
July 26, 2012	Refunded cash on sales			12000	174200
July 28, 2012	Sales Salaries			22800	151400
July 28, 2012	Office Salary			15200	136200
July 29, 2012	Stores supply			2400	133800
July 30, 2012	Debtors		38000		171800
July 31, 2012	Creditors			30000	141800

Purchases account

Date	Explanation	Debit $	Date	Explanation	Credit $
July 1, 2012	Balance	602400	July 24, 2012	Purchases return	5000
July 3, 2012	Creditors	25000
July 19, 2012	Cash	22000
July 21, 2012	Creditors	32000	July 31	Balance	565000
		681400			681400

Sales

Date	Explanation	Debit $	Date	Explanation	Credit $
July 14, 2012	Sales return	7000	July 1, 2012	Balance	3221100
			July 6, 2012	Debtors	40000
			July 10, 2012	Cash	90000
			July 20, 2012	Debtors	40000
	Balance	3402850	July 30, 2012	Debtors	18750
		3409850			3409850

Debtors

Date	Explanation	Debit $	Date	Explanation	Credit $
July 1, 2012	Balance	153900	July 13, 2012	Cash	18000
July 6, 2012	Sales	40000	July 16, 2012	Cash	33000
July 20, 2012	Sales	40000	July 21, 2012	Cash	17600
July 30, 2012	Sales	18750	July 30, 2012	Cash	38000
			July 31	Balance	146050
		252650			252650

Creditors

Date	Explanation	Debit $	Date	Explanation	Credit $
July 19, 2012	Cash	23100	July 1, 2012	Balance	96600
July 30, 2012	Cash	28000	July 3, 2012	Creditors	25000
July 31, 2012	Balance	102500	July 21, 2012	Creditors	32000
		153600			153600

Sales Return

Date	Explanation	Debit $	Date	Explanation	Credit $
July 31, 2012	Balance	99700	July 1, 2012	Balance	92700
			July 14, 2012	Sales	7000
		99700			99700

Purchases return

Date	Explanation	Debit $	Date	Explanation	Credit $
July 24, 2012	Purchases	5000	July 31, 2012	Balance	5000
		5000			5000

Stores supplies

Date	Explanation	Debit $	Date	Explanation	Credit $
July 1, 2012	Balance	11400	July 31, 2012	Balance	13800
July 29, 2012	Stores supply	2400
		13800			13800

Rent

Date	Explanation	Debit $	Date	Explanation	Credit $
July 1, 2012	Balance	83700	July 1, 2012	Cash	4000
					79700
		83700			83700

Question Two

Journal entries

Date Explanation Debit $ Credit $

July 1, 2012 Rent 4000

Cash 4000

To record rent payments

July 3 Purchases 25000

Creditors 25000

To show credit purchases

July 4 Freight on purchases 1000

Cash 1000

To record freight charges

July 6 Debtors 40000

Sales 40000

To show debit sales

July 7 Cash 18000

Debtors 18000

To show debit payments

July 10 Cash 50000

` Sales 50000

To show cash sale transaction

July 13 Creditors 24000

Cash 24000

To show credit payments

July 14 Sales 7000

Sales return 7000

To show the sales return

July 15 Advertising 9000

Cash 9000

To show advertising expenses paid

July 16 Cash 33000

Debtors 33000

To show debit payments

July 19 Purchases 22000

Cash 22000

To show purchases

July 19 Creditor 23100

Cash 23100

To show credit payments made

Records made on page 21 of the journal

July 20 Debtor 40000

Sales 40000

To show sales made

July 21 Freight on sales 1100

Cash 1100

To show freight charges paid on sales made

July 21 Cash 17600

Debtors 17600

To show debit payments made

July 21 Purchases 32000

Creditors 32000

To show credit purchase made

July 24 Purchases returns 5000

Purchases 5000

To show purchases returns made

July 26 Refunds on sales 12000

Cash 12000

Shows refunds made to customers on sales returns

July 28 Salaries: Sales 22800

Office 15200

Cash: Sales 22800

Office 15200

Show the payments of staff

July 29 Stores supplies 2400

Cash 2400

Shows the purchase of stores supply

July 30 Debtors 18750

Sales 18750

To show debit sales

July 30 Cash 38000

Debtors 38000

To show debit payments

July 31 Creditors 27000

Cash 27000

Shows credit payments made

Question Three

Unadjusted Trial Balances

31^st July 2012

Details Debit $ Credit $

Cash 63600

Accounts receivable 153900

Merchandise 602400

Stores Supply 11400

Stores equipment 469500

Purchases 1623000

Prepaid Insurance 16800

Accumulated depreciation – Stores equipment 56700

Accounts Payable 96000

Capital 555300

Drawings 135000

Sales 3221100

Sales Returns and allowances 92700

Sales discount 59400

Sales salary expenses 334800

Advertising expenses 81000

Miscellaneous selling expenses 12600

Office salary expenses 182100

Rent Expenses 83700

Miscellaneous administrative expenses 7800

Total 2923800 4935000

Question Four

Journal entries

Details Debit $ Credit $

Insurance 13400

Cash 13400

To show insurance payments

Depreciation 11500

Equipments 11500

To show depreciation

Sales Salaries 3200

Accrued Sales Salaries 3200

To show additional accruals on sales salaries

Offices salaries 1300

Accrued Office salaries 1300

To show additional accruals on office salaries

Question Five

Adjusted Trial Balances

July 31, 2012

Details Debit $ Credit $

Cash 141800

Accounts receivable 146050

Merchandise 565000

Stores Supply 13800

Stores equipment 469500

Prepaid Insurance 16800

Accumulated depreciation – Stores equipment 56700

Accounts Payable 102500

Capital 555300

Drawings 135000

Sales 3402850

Sales Returns and allowances 99700

Sales discount 59400

Sales salary expenses 334800

Advertising expenses 81000

Miscellaneous selling expenses 12600

Office salary expenses 182100

Rent Expenses 79700

Miscellaneous administrative expenses 7800

Question Six

Income statement

For the year ended July 31, 2012

Details $ $ $

Sales 3402850

Sales Returns (99700)

Total sales 3303150

Opening stock 602400

Add purchases 565000

Less purchases returns (5000) (862400)

Gross profit 2440750

Prepaid Insurance 16800

Sales discount 59400

Sales salary expenses 334800

Advertising expenses 81000

Miscellaneous selling expenses 12600

Office salary expenses 182100

Rent Expenses 79700

Miscellaneous administrative expenses 7800

Drawings 135000 (879800)

Net Profit 1577750

Question Seven

Statement of owner’s equity

Capital 555300

Net Profit 1577750

Drawings (135000)

Balance at the end of the period 1998050

Question Eight

Balance Sheet

As at July 31 2012

Assets $ $ $

Stores equipment 469500

Merchandise 565000

Stores Supplies 13800

Prepaid Insurance 16800

Accounts Receivable 146050

Cash 141800

1352950

Liabilities

Accounts Payable 96000

Accruals 4500

Financed by:

Statement of owners equity balance 1998050

Question Nine

Journal entries

Details Debtors $ Creditors $

Capital 555300

Net Profit 1577750

Drawings 135000

Balance 1998050

This is to show the owners of statement equity

Question Ten

Post Trial Balances

July 31, 2012

Details Debit $ Credit $

Cash 141800

Accounts receivable 146050

Merchandise 565000

Stores Supply 13800

Stores equipment 469500

Prepaid Insurance 16800

Accumulated depreciation – Stores equipment 56700

Accounts Payable 102500

Statement of owners equity 1998050

Sales 3402850

Sales Returns and allowances 99700

Sales discount 59400

Sales salary expenses 334800

Advertising expenses 81000

Miscellaneous selling expenses 12600

Office salary expenses 182100

Rent Expenses 79700

Miscellaneous administrative expenses 7800

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