Accounting Assignment: Journal Entries & Trial Balance
Uploaded by
natnael337Accounting Assignment: Journal Entries & Trial Balance
Uploaded by
natnael337Common questions
Powered by AIArada Barberry Shop was established on Miyazya 1, 2016, by Ato Hayletsion with a cash investment of birr 100,000, receivables of birr 14,500, supplies worth birr 3,500, and equipment costing birr 45,500. Additionally, a payable amount of birr 7,500 belonging to the owner was transferred to Arada. During its first month, Arada engaged in various transactions such as paying rent (birr 3,000), purchasing additional equipment on account (birr 15,000), collecting receivables, paying employees, and acquiring supplies .
Arada Barberry Shop followed steps including journalizing transactions, summarizing them into T-accounts, and preparing an unadjusted trial balance for its first month. It made necessary adjusting entries for items like depreciation and unpaid salaries. These actions were crucial for the preparation of accurate financial statements, ensuring the reflection of all financial activities and adjustments for accurate reporting .
Discrepancies such as check and deposit recording errors affected Expert Company's financial integrity by potentially leading to misstated financial positions. Resolving these issues required precise reconciliation of bank records with company books, underscoring the importance of robust internal controls and regular reconciliations to prevent and address such issues. The experience highlights the need for diligent financial monitoring and accurate transaction reporting to safeguard financial integrity .
Be’mnet Business maintained operational cash flow by strategically managing both cash and credit transactions. This involved negotiating favorable payment terms for purchases, ensuring timely collection of receivables, and handling returns effectively. The use of the perpetual inventory system and detailed financial record-keeping helped maintain a healthy cash position, supporting the business’s ongoing operations and mitigating financial risks .
Arada Barberry Shop demonstrated effective financial management by promptly collecting receivables (e.g., birr 10,000 collected from customers) and judiciously paying payables, such as transferring the owner's account payable of birr 7,500 and settling equipment payables. This approach contributed positively to its financial health by maintaining liquidity and ensuring a balanced cash flow, supporting stable operations within its first month .
The four-column proof of cash for Expert Company revealed discrepancies such as a check recorded by the bank at birr 4750 instead of birr 5470, unrecorded notes and interest collected by the bank, a non-sufficient funds check returned by the bank, and errors in recording deposits. Adjustments included reconciling bank and book balances by accounting for these discrepancies, leading to an adjusted balance of birr 4848 .
Be’mnet Business employed mechanisms like negotiating payment terms (e.g., 2/10, n/30) and using the perpetual inventory system to track inventory purchases and sales. These transactions, including merchandize sales, customer returns, and inventory acquisitions, were reflected in detailed journal entries and adjusted trial balances. The business also accounted for payment liabilities, inventory returns, and cash collections, ensuring accurate financial records and efficient inventory management .
The error, where the bank recorded a payment at birr 4750 instead of birr 5470, affected Expert Company's financial reconciliation by creating a mismatch between recorded and actual transactions. To correct this, adjustments had to be made to the recorded check amounts, aligning bank and book totals. This required reconciling account discrepancies and recalculating the adjusted bank balance to ensure accuracy in financial reporting .
During its first month, Arada Barberry Shop purchased additional equipment for birr 15,000 on account. To manage its financials, Arada paid the entire payable from this purchase within the same month. The shop recorded these transactions through journal entries, summarized them in T-accounts, and prepared an unadjusted trial balance to reflect these activities .
In its establishment month (Megabit), Be’mnet Business made several transactions such as investing birr 850,000 in cash, purchasing soap on account for birr 129,000, and incurring transportation costs. Key inventory transactions included buying merchandise for birr 150,000 in cash and additional inventory purchases on credit with terms like 2/10, n/30. Be’mnet also faced returns from customers and suppliers, received cash collections, and made salary and utility payments, affecting cash outflows and inflows. These actions had a direct impact on cash flow, with adjustments for accounts payable and receivable maintaining balance .