Essay: Accounting Transactions For Classic Clocks In Nov. 2017.

Part A

1.Part A

Record the General Journal entries in the proforma provided on the following page to record each of the following transactions where required. Remember to format the journals correctly and include narration (explanation) for each journal entry.

Claude Cogsworth is the sole proprietor of Classic Clocks. He has been operating Classic Clocks successfully and has now decided to expand his business to include a watchmaking school. The following is a list of transactions that took place during the month of November 2017.

Nov 1 Classic Clocks received $1,540 from a new student who has enrolled in the watchmaking school.

Nov 2 Claude Cogsworth visited a physiotherapist for a sore back as a result of an injury sustained while coaching the local soccer team. He paid $183 for the appointment using the business bank account.

Nov 4 Classic Clocks sold and delivered 4 new silver framed wall clocks to the Hilton Hotel for their foyer for $2 520 each. The Hilton Hotel paid 20% in cash and would pay the remaining amount within 30 days.

Nov 13 Classic Clocks purchased a new laptop for $2,760 cash.

Nov 14 Busy Bee Cleaners Ltd cleaned the shop and left invoice #6435 for $120 with payment terms of 30 days.

Nov 17 Classic Clocks purchased 7 new adjustable tables for the watchmaking school. The adjustable tables cost $896 each, 50% of the purchase was paid for in cash, with the balance payable in 30 days.

Nov 29 Classic Clocks paid the business electricity bill for the quarter which amounted to $1376.

Nov 30 Classic Clocks received the outstanding amount from the Hilton Hotel from the sale of the silver framed wall clocks on November 4th.

Part B

Post the General Journals recorded below to the General Ledger provided on the following page. Remember to foot each ledger to determine the ledger balance.

Part C 

Required:

Post the General Ledger balances from Part B to the Trial Balance below.

Complete the Unadjusted Trial Balance provided below. Please total both the debit and credit column on completion.

2.Element: Asset, Liability, Revenue, Expense, Equity)

Claude Cogsworth has written to the managing partner of the accounting firm you work at because he is confused about some of the transactions you have recorded in question 1 Part A.

Required

Please write a letter in your own words to the managing partner of your accounting firm explaining the following with reference to your journal entries in question 1 Part A:
Explain with reference to the appropriate accounting definition the accounting element** that was credited on the 14th of November. (4 marks)

Identify which accounting assumption is relevant to the transaction which occurred on November 2nd and explain in your own words how this assumption is relevant to recording the transaction. 

Cash at Bank (CAB)

Accounts Receivable (A/R)

Shop Fittings

Computer

Advertising Payable

Loan

Drawings

Capital

Sales

Advertising

Classic Clocks - Trial Balance-31-Dec-18

2.Dan Stevens

Managing Director

Mandeville Accounting Solutions Pty Ltd

1800 Adelaide Terrace

Adelaide, SA 5000

3^rd December 2017

Dear Mr Stevens,

With respect to the journal entries passed in the books on 2^nd of November and on 14^th of November the following explanation is being provided:

• 2^ndNovember 2017:  the accounting assumption used for this transaction is business entity assumption, also popularly known as separate entity assumption. Under this assumption it has been explained that the entity has a separate financial status and that it is separate from its owners. To further explain this, we can say that the business entity is to be treated as a separate person from its owners. Under this transaction, since the expense is a personal expense of the proprietor, it has been charged to the drawings account. It is not a business expense and has been deducted from the capital of the proprietor. (Piper, 2015)
• 14^thNovember 2017: the account credited in this journal is Creditors for expense- Busy bee Cleaners account which is in the element of liability. The company has used the services of Busy Bee Cleaners and is entitled to pay for the same. A liability is a sacrifice of the economic benefits of the entity as a result of any past event which will be settled by outflow of resources. Therefore, in the given case the past event is using the services of Busy Bee Cleaners and sacrifice will be made by outflow of cash. (Siciliano, 2015)

I hope that the above helps to clear the confusion regarding the transactions recorded. Kindly let me know in case any future explanation is required.

Yours Sincerely

Claude Cogsworth

Classic Clocks

References:

Piper, M. (2015). Accounting made simple. United States: CreateSpace Pub.

Siciliano, G. (2015). Finance for Nonfinancial Managers. New York: McGraw-Hill.