Accounting procedures
Moondollars adopts a manual accounting system and uses the general journal and special journals for the recording of individual transactions. Adrian Bartos has tailored the design of those journals to meet the specific needs of the business so the format of those journals may be slightly different to those you have seen before. However, he advises you that the general principles of how to use special journals are followed in his business.
The table below shows the journals used by the business and the types of transactions that can be recorded in each of these journals:
Journal Code Transaction type
General journal GJ All transactions that are not able to be recorded in the
special journals below.
Sales journal SJ Credit sales of inventory
Purchases journal PJ Credit purchases of inventory
Cash receipts journal CRJ Cash inflows to the business
Cash payments journal CPJ Cash outflows from the business
To summarize the effects of transactions recorded in those journals, Adrian maintains the general ledger and the following subsidiary ledgers:
▪ accounts receivable subsidiary ledger, and
▪ accounts payable subsidiary ledger.
Adrian then indicates that he is aware other businesses using a manual accounting system may post transactions from journals to ledgers at different times (i.e. daily or monthly). Although the posting procedures used in his business may
be different to what you have seen before, he asks that you specifically follow his company's accounting policies and procedures.
The information below explains when transactions are required to be posted from the journals to the appropriate ledger accounts:
Posting of entries recorded in the general journal
All transactions that are entered in the general journal are posted on a daily basis. Note that if a transaction recorded in the general journal involves both a control account and a subsidiary ledger account, that journal entry will need to be posted to both ledgers.
Posting of entries recorded in the special journals
When a transaction is recorded in a special journal, part of the journal entry may need to be posted daily and part of that entry is to be posted monthly.
Daily
▪ If a transaction affects a subsidiary ledger account, then the entry that involves a subsidiary ledger account is to be posted to that subsidiary ledger on a daily basis. However, the same amount posted to the subsidiary ledger account is not posted to the related control ledger account immediately. This procedure allows the business to keep track of supplier and customer balances on a daily basis.
▪ In the cash receipts journal or the cash payments journal, if a transaction is recorded in the Other Accounts
column, then the amount recorded in the Other Accounts column is to be posted to the appropriate general ledger account daily.
Monthly
▪ At the end of the month, the totals of each column in the special journals are manually calculated. Those totals, with the exception of the totals of the Other Accounts columns in the cash journals, are posted to the appropriate general ledger accounts at the end of the month.
Instructions
Now that you have reviewed information about Moondollars, you are ready to complete the accounting cycle for Moondollars for the month of June. To start with, Adrian gives you the transaction list for the month of June and all
the journals, ledgers and final statements you will need to complete this task. He also mentions that you will be required to record reversing entries at the beginning of July.
Adrian provides the following list of tasks you are required to perform for June and the beginning of July:
1. Transactions
Record all transactions in the relevant journals. Note that special journals must be used where applicable. Any transaction that cannot be recorded in a special journal should be recorded in the general journal.
Post entries recorded in the journals to the appropriate ledger accounts according to the company's accounting policies and procedures.
Remember to enter all answers to the nearest whole dollar. When calculating a discount, if a discount is not a whole number, round the discount to the nearest whole dollar. Then, to calculate the Cash amount, subtract the discount
from the original amount.
2. End of month posting
Total the columns in the special journals
Post the totals of the columns in the special journals to their corresponding ledger accounts. To confirm that theb.
posting has been performed, a posting reference is recorded in the last row of the special journals. If the total of a
column is not required to be posted (because the entries in that column have already been posted on a daily basis)
you need to record an X in the post reference field for that column.
3. Bank reconciliation
Prepare the bank reconciliation statement as at June 30.a.
Identify and record the relevant reconciling items in the general journal, and post them to the relevant accounts
4. Unadjusted trial balance
Complete the unadjusted trial balance as at June 30 on the worksheet provided.
5. Worksheet
Use the following information to record adjustments in the Adjustments column of the worksheet
▪ furniture: Depreciation on the furniture owned by the business for the month of June is $156.
▪ equipment: Depreciation on the equipment owned by the business for the month of June is $366.
▪ Electricity expense for the month of June is estimated to be $874.
▪ The water usage for the month of June is estimated to be $235.
▪ The amount of wages incurred during the month of June but not yet paid to sales staff is $1,320.
▪ Interest expense incurred during the month of June but not yet paid to MRMC Bank for the bank loan is $275.
▪ Interest earned from short-term investments in BitiBank for the month of June is $100.
▪ The value of office supplies used during the month of June is $4,037.
▪ $3,000 worth of prepaid rent expired during the month of June.
▪ $3,000 worth of prepaid advertising was used up in June.
▪ $590 worth of prepaid insurance expired during the month of June.
Complete the remaining columns of the worksheet. After taking a physical count of inventory, the balance of b. inventory on hand as at June 30 is $60,857. You will need to use this information to complete both the Income Statement and the Balance Sheet columns of the worksheet. Note that Merchandise Inventory is recorded in the Income Statement columns. Hint: This information will assist you in calculating cost of goods sold under the periodic inventory system.
6. Adjusting entries
Use the worksheet to help journalize adjustments for June.
Record adjusting entries in the general journal.
Post the adjusting entries from the general journal to the relevant ledgers.
7. Schedules of accounts
Create a schedule of accounts receivable balances as at the end of June.
Create a schedule of accounts payable balances as at the end of June.
8. Financial statements
Prepare an income statement for the month of June.
Prepare a statement of stockholders' equity for the month of June.
Prepare a balance sheet as at the end of June.
9. Closing entries
Journalise closing entries in the general journal.
Post the closing entries from the general journal to the relevant ledger accounts.
10. Post-closing trial balance
Prepare a post-closing trial balance as at the end of June.
11. Reversing entries
On the first day of July, record in the general journal any entries that are required to reverse the following adjusting entries from the month of June:
▪ Water expense incurred but not paid
▪ Electricity expense incurred but not paid
▪ Wages owed to the employees but have not yet been paid in cash
▪ Interest expense incurred but not paid to the lender
▪ Interest earned but not received in cash
Post the reversing entries from the general journal to the relevant general ledger accounts.
