ACCT7101 Lecture 2: Double entry accounting Semester 2, 2023
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ACCT7101
Lecture Exercise
Semester 2, 2023
Lecture 2: Double entry accounting
Exercise 1
Which of the following events result in an accounting transaction for Clothing Ltd?
1. Clothing Ltd hired a new store manager. The manager will start work next month.
2. The founder of Clothing Ltd, who is also a major shareholder, purchased additional stock (shares) in another company.
3. Clothing Ltd borrowed $230,000 from a local bank.
4. Clothing Ltd purchased a sewing machine, which is paid for by signing a note payable.
5. Clothing Ltd issued 10,000 shares to a private investor, which is also a car business owner, in return for a new delivery truck.
6. Two investors in Clothing ltd sold their stock (shares) to another investor.
7. Clothing ltd ordered some fabric to be delivered next week.
8. Clothing Ltd lent $250,000 to a member of the Board of Directors.
Exercise 2
Classify each of the above accounts as either Asset (A), Liability (L), Revenue (R), Expense (E) or Equity (Eq)?
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Accounts payable |
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Expenses payable |
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Retained profits |
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Accounts receivable |
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Insurance Expense |
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Salaries payable |
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Advertising |
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Interest expense |
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Salary expense |
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Appraisal fee revenue |
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Interest payable |
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Service fee revenue |
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Building |
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Land |
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Share capital |
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Cash at bank |
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Mortgage payable |
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Commission expense |
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Commission revenue |
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Office Equipment |
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Telephone expense |
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Commissions payable |
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Office supplies expense |
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Unearned Appraisal Fee |
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Depreciation - office equipment |
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Office supplies inventory |
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Sales |
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Electricity expense |
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Prepayments |
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Cost of Goods Sold |
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Exercise 3
What would be the normal balance for each of the following items (nature of the a/c):
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Accounts Receivable |
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Share Capital |
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Accounts Payable |
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Investments |
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Inventory |
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Depreciation Expense |
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Provision for Employee Entitlements |
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Accrued Expenses |
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Tax Payable |
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Prepayments |
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Retained Profits |
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Cost of Goods Sold |
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Interest Revenue |
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Unearned Revenue |
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Exercise 4
Selected transactions for Ranch Ltd during its first month in business arepresented below:
Sept. 01 Issued shares in exchange for $45 000 cash received from investors.
05 Purchased equipment for $25 000, paying $10 000 in cash and the balance on account.
25 Paid $7500 cash on balance owed for equipment.
30 Paid $1000 cash dividend.
Ranch Ltd’s chart of accounts shows: Cash (no. 100), Equipment (no. 120), Accounts payable (no. 200), Share capital (no. 300), and Dividends (no. 320).
(a) Journalise the transactions. Narrations are required.
(b) Post the transactions to T accounts.
2023-08-26