Financial Accounting and Analysis

Topic 4 - Lecture Illustrations - Solution

Lecture Illustration 1
1. Supplies
Journal entry:
Oct 31

Advertising Supplies Expense

Advertising Supplies

505
110

1,500
1,500

To record supplies used

General Ledger entry:
Oct 5

Accounts
Payable

Oct 31 Advertising
Supplies

200

Advertising Supplies
2,500 Oct 31 Advertising
Supplies Expense

No. 110
505 1,500

Advertising Supplies Expense

110
1,500

No. 505

2. Insurance
Journal entry:
Oct 31

Insurance Expense
Prepaid Insurance

515
112

50
50

To record insurance expired

General ledger:
Oct 4

Bank

Oct 31 Prepaid
Insurance

100

Prepaid Insurance
600 Oct 31

Insurance Expense

Insurance Expense
112
50

Financial Accounting and Analysis

Lecture Illustration Solutions Topic 4
Reprinted with permission of John Wiley & Sons, Inc.

No. 112
515
50

No. 515

Page 1 of 5

3. Depreciation
Journal entry:
Oct 31

Depreciation Expense Office Equipment

Accumulated Depreciation Office Equipment

520
131

40
40

To record monthly depreciation

General Ledger:
Oct 2

Cash at Bank

100

Office Equipment
5,000

No. 130

Accumulated Depreciation Office Equipment

Oct 31 Deprec Expense Office Equip

520

Depreciation Expense- Office Equipment

Oct 31 Accum Dep
131
40
Office Equip

No. 131
40

No. 520

Statement of Financial Position:

Office Equipment

$5,000

Less: Accumulated Depreciation Office Equipment

40
$4,960

4. Advertising Services
Journal entry:
Oct 31

Revenue Received in Advance

Service Revenue

213
400

400
400

To record revenue
General Ledger:
Oct 31 Service Revenue

Revenue Received in Advance

400
400 Oct 2
Cash at Bank

Service Revenue
Oct 3
31

Cash at Bank
Revenue Rec in
Advance

100

No. 213
1,200

No. 400
100 10,000
213
400

5. Commission Revenue
Financial Accounting and Analysis
Lecture Illustration Solutions Topic 4
Reprinted with permission of John Wiley & Sons, Inc.

Page 2 of 5

Journal entry:
Oct 31

Commissions Receivable
Commissions Revenue

105
405

200
200

To record commissions revenue earned

General Ledger:
Oct 31 Commissions
Revenue

Commissions Receivable
405
200

No. 105

Commissions Revenue
Oct 31 Commissions
Receivable

105

No. 405
200

6. Accrued interest
Accrued interest owing on loan of $5,000
Interest rate: 12% p.a.
Interest owing: $5,000 x 12% x 1/12 = $50
Journal entry:
Oct 31

Interest Expense
Interest Payable

518
210

50
50

To accrue interest on bank loan

General Ledger:
Oct 31 Interest Payable

210

Interest Expense
50

Interest Payable
Oct 31

No. 518

Interest Expense

Financial Accounting and Analysis

Lecture Illustration Solutions Topic 4
Reprinted with permission of John Wiley & Sons, Inc.

518

No. 210
50

Page 3 of 5

7. Accrued Salaries
Salaries were last paid on 26 October, the next payment of salaries will not occur until 9
November. Salaries outstanding for October: $1,200 (3 days x $400)
Journal entry:
Oct 31

Salaries Expense
Salaries Payable

500
215

1,200
1,200

To record accrued salaries

General Ledger:
Oct 26 Cash at Bank
31 Salaries Payable

100
215

Salaries Expense
4,000
1,200
Salaries Payable
Oct 31

No. 500

Salaries Expense

Financial Accounting and Analysis

Lecture Illustration Solutions Topic 4
Reprinted with permission of John Wiley & Sons, Inc.

500

No. 215
1,200

Page 4 of 5

Lecture Illustration 2
Prepare closing entries for Wong Pty Ltd at 31 October.
General Journal:
Date
2010
Oct

Account titles and explanations

Closing entries
(1)
31 Service Revenue
Commissions Revenue
Income Summary
To close revenue accounts

Post
Ref

Debit
$

400
405
330

10,400
200

(2)
31 Income Summary
Salaries Expense
Advertising Supplies Expense
Rent Expense
Insurance Expense
Interest Expense
Depreciation Expense Off Equip
To close expense accounts

330
500
505
510
515
518
520

7,740

(3)
31 Income Summary
Retained Earnings
To close profit to retained earnings

330
310

2,860

(4)
31 Retained Earnings
Dividends
To close dividends to retained earnings

310
320

500

Financial Accounting and Analysis

Lecture Illustration Solutions Topic 4
Reprinted with permission of John Wiley & Sons, Inc.

Credit
$

10,600

5,200
1,500
900
50
50
40

2,860

500

Page 5 of 5