Ms Jennie Smiles is the major shareholder and chief executive officer of Celebra

Question

Ms Jennie Smiles is the major shareholder and chief executive officer of Celebrations Pty Ltd, a small business which provides organisation services and supplies for parties, wedding receptions and other happy occasions.

Due to the relatively small size of the business Jennie is unable to justify a computerised accounting system thus all accounting is completed manually by ABC Accounting.

Celebrations Pty Ltd uses a perpetual inventory system, noting the cost of all inventory sold is 65% of the sales (GST exclusive) price.

It is now the end of February 2018 and Jennie requests ABC Accounting to complete all necessary accounting to enable the preparation of a trial balance as at 28 February 2018. As the ABC Accounting accountant assigned to Celebrations Pty Ltd you are requested to complete the following tasks using Excel:

(a) Prepare general journal entries to record the February transactions as identified below. Notations/descriptions are required.

(b) Open general ledger accounts (T-Bar OR Running Balance format) for each account shown on the 31 January 2018 trial balance and
- enter the opening balance (for 1 February 2018) for each account using the balance as shown in the 31 January 2018 Trial Balance.
- Post the entries from the general journal to the general ledger accounts and enter the posting references in the general journal.

(c) Balance off each general ledger account at 28 February and prepare a trial balance as at 28 February 2018.

Ms Smiles has provided a list of the transactions which occurred during the month of February, as well as the business’s trial balance as at 31 January, 2018.

PLEASE NOTE

i) When a discount is received or allowed, you are required to adjust the associated GST Paid or Collected.

ii) Should any GST or discount calculations not result in whole $ values, you can round the result to the nearest whole $.

The transactions for February 2018 were as follows:
   

Note: No end of month adjusting entries are required.

Celebrtaions Pty Ltd

Trial Balance

as at 31 January 2018

Date (2018) Transactions 1 February Sold inventory on credit to Wendy’s Parties $3,300 (GST inclusive). Terms 3/7, n/30. Invoice No 1101. 2 February Received $2,570 commission owing from parties organised in January. Issued Receipt No. 350. 3 February Paid Party Supplies $2,760 (Cheque No. 201), after receiving a discount of $88, the amount owing for the purchase of inventory on credit in January. 4 February Cash purchase of office supplies from Discount Office Supplies $1,320 (GST inclusive). Cheque No. 202. 5 February Issued a $330 (GST inclusive) credit to Wendy’s Parties for unsuitable inventory returned. 6 February Received $1,320 (Cheque No. 1020), after allowing a discount of $33, from V. Weeke as payment for a credit sale of inventory made in January. Issued receipt No. 351. 7 February Paid Party Outfits $965 (Cheque No. 203) owing from a January purchase of inventory. 7 February Received $2,881 from Wendy’s Parties being payment for the February 1 sale of inventory. Issued Receipt No. 352. 8 February Cash sale of inventory $1,210 (GST inclusive). Issued Receipt No. 353. 9 February Paid Prime Real Estate Pty Ltd $825 (GST inclusive) for February rent. Cheque No. 204. 10 February Purchased inventory on credit from Weddings R’US $2,860 (GST inclusive). Terms 2/7, n/30. 11 February Obtained a loan of $15,000 from Aunty Phyllis. Principal and interest of 5% pa is to be paid by August 31, 2018. The proceeds were immediately deposited into the bank. NB: there is no need to make allowance for interest payable. 12 February Returned unsuitable inventory $429 (GST inclusive) to Weddings R’US. 13 February Sold inventory on credit to Australiana Entertainers $1,320 (GST inclusive). Terms 2/7, n/30. Invoice No 1102. 14 February Purchased inventory on credit from Party Outfits $1,870 (GST inclusive). Terms 2/7, n/30. 17 February Paid $2,382 (Cheque No. 205) owing to Weddings R’US for the February 10 purchase of inventory. 19 February Purchased inventory from Nuptial Supplies $1,430 (GST inclusive). Paid $800 by cheque (No. 206) as part payment. The remainder of the purchase was on credit. 20 February Received $1,294 owing from Australiana Entertainers, the amount owing on the February 13 sale of inventory. Issued Receipt No. 354. 22 February Cash purchase on inventory $550 (GST inclusive). Cheque No. 207. 24 February Sold inventory on credit to Blinky Bill $1,430 (GST inclusive). Terms 2/7, n/30. Invoice No. 1103. 26 February Paid monthly electricity account to Origin Power $979 (GST inclusive) by cheque (No. 208). 28 February Issued Cheque No. 209 for $1,980 to pay sales consultant’s salary. 28 February The current month’s interest $144 on the bank loan was paid to BAN bank via a direct debit to the business’s bank account. 28 February The current month’s bank charges of $23 was paid via a direct debit to the business’s bank account

Explanation / Answer

* GST rate has been assumed to be 5%

Celebrations Pty Ltd. Journal Entries for February 2018 Date Particulars Amount (debit) Amount (credit) February 1, 2018 Wendy Parties (Debtor) A/c Dr. $3,300 To Sales A/c $3,143 To GST A/c $157 (Being, goods sold on credit to Wendy's Parties, invoice no. 1101, terms 3/7, n/30.) February 2, 2018 Bank A/c Dr. $2,570 To Commission received A/c $2,570 (Being, commission from parties organised in January, receipt no. 350.) February 3, 2018 Party Supplies (Creditor) A/c Dr. $2,848 To Bank A/c $2,760 To Discount received A/c $88 (Being, creditors paid to the tune of $2,848 & received a discount of $88, cheque no. 201.) February 4, 2018 Purchases A/c Dr. $1,257 GST A/c Dr. $63 To Bank A/c $1,320 (Being, purchases made on cash, cheque no. 202) February 5, 2018 Sales A/c Dr. $314 GST A/c Dr. $16 To Wendy's Parties (Debtor) A/c $330 (Being, credit to Wendy's Parties for unsuitable inventories) February 6, 2018 Bank A/c Dr. $1,320 Discount A/c Dr. $33 To V. Weeke (Debtor) A/c $1,353 (Being, received from debtors. Cheque no 1020, receipt no. 351) February 7, 2018 Party Outfits (Creditor) A/c Dr. $965 To Bank A/c $965 (Being, paid to creditor, cheque no 203) February 7, 2018 Bank A/c Dr. $2,881 Discount allowed A/c Dr. $89 To Wendy's Parties $2,970 (Being, received from debtor & allowed 3% discount as per terms, receipt no 352) February 8, 2018 Bank A/c Dr. $1,210 To Sales A/c $1,152 To GST A/c $58 (Being, inventory sold for cash, receipt no 353) February 9, 2018 Rent A/c Dr. $786 GST A/c Dr. $39 To Bank A/c $825 (Being, rent paid for February, cheque no. 204) February 10, 2018 Purchases A/c Dr. $2,724 GST A/c Dr. $136 To Weddings R'US (Creditor) A/c $2,860 (Being, inventory purchased on credit, terms 2/7, n/30) February 11, 2018 Bank A/c Dr. $15,000 To Loan from Phyllis A/c $15,000 (Being, loan taken at 5% interest per annum, to be repaid by 31st Aug 2018) February 12, 2018 Weddings R'US (Creditor) A/c Dr. $429 To Purchases A/c $409 To GST A/c $20 (Being, unsuitable goods returned) February 13, 2018 Australiana Entertainers (Debtor) A/c Dr. $1,320 To Sales A/c $1,257 To GST A/c $63 (Being, inventory sold, terms 2/7, n/30, invoice no 1102) February 14, 2018 Purchases A/c Dr. $1,781 GST A/c Dr. $89 To Party Outfits (Creditor) A/c $1,870 (Being, inventory purchased on credit, terms 2/7, n/30) February 17, 2018 Weddings R'US (Creditor) A/c Dr. $2,431 To Bank A/c $2,382 To Discount received A/c $49 (Being, creditors paid, and recieved discount of 2% for prompt payment) February 19, 2018 Purchases A/c Dr. $1,362 GST A/c Dr. $68 To Bank A/c $800 To Nuptial Supplies (Creditor) A/c $630 (Being, goods purchased on part credit & part cash) February 20, 2018 Bank A/c Dr. $1,294 Discount A/c Dr. $26 To Australiana Entertainers (Debtor) A/c $1,320 (Being, cash received from debtors, 2% discount allowed) February 22, 2018 Purchases A/c Dr. $524 GST A/c Dr. $26 To Bank A/c $550 (Being, goods purchased on cash) February 24, 2018 Blinky Bill (Debtor) A/c Dr. $1,430 To Sales A/c $1,362 To GST A/c $68 (Being, inventory sold, terms 2/7, n/30, invoice no 1103) February 26, 2018 Electricty Expenses A/c Dr. $932 GST A/c Dr. $47 To Bank A/c $979 (Being, electricity account paid for, cheque no 208) February 28, 2018 Salary to Sales Consultant A/c Dr. $1,980 To Bank A/c $1,980 (Being, sales consultant's salary paid, cheque no 209) February 28, 2018 Interest on bank loan A/c Dr. $144 To Bank A/c $144 (Being, bank interest paid via direct debit) February 28, 2018 Bank charges A/c Dr. $23 To Bank A/c $23 (Being, bank charges paid via direct debit) $49,457 $49,457

* GST rate has been assumed to be 5%

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