CALCULATIONS AND ACCOUNTING THEORY

QUESTION

ACC200 Accounting Systems – 201230
Assessment Item 1
Assignment 1
Value:  10%
Due Date:  27 March 2012
Submission method options:  Post (Electronic submission via EASTS
is not
permitted)

Question 1  (30 marks)

Word limit: 600 words

Strides for Strides manufactures and sells athletic wear to retail stores, who then
stock the goods and sell them to customers. Its range of products includes warmup
tracksuits,
body
suits,
running
shoes
and
spikes.
The
business
process
followed

by
Strides
for
Strides
in
supplying
retail
stores
is
as
follows:

The
retail
store
will
send
an
order
to
Strides
for
Strides,
where
it
will
be
received

by

the customer service representative. Orders are generated by and originate
from the retail stores and can come at an ad hoc and irregular basis. Retail stores,
while all being long-standing and regular customers, have typically ordered at the
last minute, resulting in irregular demand levels across the year. Two copies of the
order form are made, with one being sent to the warehouse assistant, who checks
that all goods are available for dispatch to the retail store. The second copy goes
to the accounts receivable office.

Once confirmed as available, the goods are packed, manually recorded on the
goods release form (two copies are prepared) and sent to the shipping department
for dispatch. A courier collects goods and a goods release form every morning and
afternoon and delivers these to the retail store. Once delivery details are
confirmed, an invoice is prepared by accounts receivable, based on the details in
the customer order and the goods release form. Paper invoices are sent out at the
end of each week. Retail stores currently have standard payment terms of 2/15,
n/35. Payment is made in the form of a cheque, which is sent back to the customer
service representative who forwards it on to the accounts receivable office. Strides
for Strides has recently noticed that it is having inventory management problems
due to the spasmodic and irregular nature of orders. This has impacted on its own
ability to meet customer demands. It is also concerned that incorrect quantities of
goods may be packed and shipped, and not detected until the goods reach the
retail stores. This introduces extra costs of handling returns and allowances.
Strides for Strides has also noticed that its accounts receivable turnover has
dropped from 11.7 times per year to 9.5 times per year over the last twelve
months.

An independent consultant has suggested that by re-engineering the process these
problems could be addressed.

1

Required

(a) For the business process described above, identify:
(i)  the participants.
(ii)  the inputs.
(iii)  the outputs.

(b) Identify and describe any inefficiencies that are present in the current
system.

(c) Suggest ways that the business process inefficiencies could be corrected
through business process re-engineering.

(d) Describe some of the issues that may be faced by Strides for Strides in re-
engineering processes. Propose some strategies for dealing with these
issues.

(Adapted from Considine, B., Parkes, A., Olesen, K., Speer, D. M. & Lee, M. T.
(2010). Accounting information systems: Understanding business processes (3rd
ed.). Milton, Qld: John Wiley & Sons, p. 98)

2

Question 2  (70 marks)
Presented below are the purchases and cash payments journals for Reynolds
Hardware for its first month of operations.
Purchases Journal                                                 P1
Date Account debited Post ref. Inventory  Dr
Accounts Payable  Cr

Sep 5 Dixon’s Timbers  8160
6 Brabham Pty Ltd  9000
15 J Wakefield  4704
17 K. Hill  18360
20 J. Wakefield  10560
50784

3

Cash Payments Journal CP1
Date Account credited Post
ref.

4

Other
Accounts
Dr
Accounts
Payable
Dr
Discount
Received
Cr
Sep 1 Supplies  720   720
1 Office Equipment  5000   5000
2 Prepaid Rent  7200   7200
10 Brabham Pty Ltd   9000 90 8910
15 Dixon’s Timber   8160  8160
20 P. Reynolds, Drawings  3000   3000
21 K. Hill  _____ 18360 184 18176
15920 35520 274 51166

In addition, the following transactions have not been journalised for September
2011. The cost of all inventory sold was 65% of the sales price.
Sep
3 The owner, P. Reynolds invested $95000 cash.
6 Sold inventory on account to Gilbert Ltd $6480 terms 1/7, n/30.
7 Made cash sales totalling $4800.
8 Sold inventory on account to Mays Ltd $4500, terms 1/7, n/30.
12 Sold inventory on account to L. Lemansky $5800, terms 1/14, n/30.
13 Received payment for sale made on 8
th
September – Mays Ltd.
16 Received payment for sale made on 12
th
September – L. Lemansky.
20 Received payment for sale made 6
th
September – Gilbert Ltd.
25 Sold inventory on account to S. Kane $4800, terms 1/7, n/30.
27 Made cash sales totalling $5740.
28 Sold inventory on account to Gilbert Ltd $3180 terms 1/7, n/30.
30 Interest received $260.

Cash
Cr
Required
a. Open the following accounts in the general ledger. (Note steps a & d can be
combined, you do not have to show ledgers twice.)

111 Cash 306 P. Reynolds, Drawings
112 Accounts Receivable 401 Sales
131 Inventory 405 Discount Received
141 Prepaid Rent 407 Interest Income
171 Store Supplies 505 Cost of Goods Sold
188 Office Equipment 614 Discount Allowed
190 Accumulated Depreciation 631 Supplies Expense
201 Accounts Payable 711 Depreciaiton Expense
301 P. Reynolds, Capital 729 Rent Expense

b. Journalise each transaction that has not been journalised into the sales
journal, or a cash receipts journal.
c. Post to the accounts receivable and accounts payable subsidiary ledgers.
Follow the sequence of transactions as shown in the problem.
d. Post the individual entries and totals to the general ledger.
e. Prepare an unadjusted trial balance as at 30

5

th
September 2011.
f. Determine that the subsidiary ledgers agree with the control accounts in the
general ledger.
g. The following adjustments at the end of September are necessary.
1.  A count of supplies indicates that $168 is still on hand.
2.  Depreciation on equipment for September is $50.
3.  Recognise rent expense of $600 for September.
Prepare the adjusting entries and then post the adjusting entries to the general
ledger.
h. Prepare an adjusted trial balance as at 30
th
September 2011.
All journals should be prepared using Microsoft Excel, or similar spreadsheet
software.

Rationale
This assignment is designed to:
• Develop your ability to critically evaluate and interpret the concepts
discussed in Topic 1;
• Develop your understanding of the differences between traditional and
automated general ledger architecture;
•
Allow you to demonstrate the skills required process special journals;
•
Develop your ability to critically evaluate what effect recent advances in
technology have had on the job role of accountants.
Marking criteria

• Demonstration of an understanding of the concepts.
• Substantiation of statements with arguments, wherever necessary.
• Accuracy of answers to questions involving the preparation of financial
information.
• Competence in the use of an electronic spreadsheet
• Demonstration an understanding of column format, and layout of special
journals in a manual format
•
Clarity and coherence of written expression.
•
Appropriate referencing, including a bibliography.
• Quality of the presentation.

6
SOLUTION

Question 2: :  (a).

(b).

Cash Account

As On September 30, 2011

Account Receivable Account

As On September 30, 2011

Stores Account

As On September 30, 2011

Rent Account

As On September 30, 2011

Supplies Account

As On September 30, 2011

(c)

Cash Flow Statement

As On September 30, 2011

(e)                                                Bank Reconciliation Statement

As On September 30, 2011

(f).                                              Cash Flow Statement

As On September 30, 2011

(g)                                          Trial Balance

As On September 30, 2011

(h).                                          Adjusted Trial Balance

As On September 30, 2011

JE00

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