A sole Trader is A Business Entity - Management Assignment Help

Assignment Task

Question 1
A sole trader is a business entity that is:
a. The simplest form of business organisation and is owned by multiple persons as a separate legal entity, an example is a shoeshop
b. A complex structure that is owned by multiple shareholders as a separate legal entity, an example is WalMart
c. The simplest form of business entity, owned and bound to one person, an example is a cabinet maker contractor
d. Aseparatelegal entityownedbyasingleproprietor,anexampleisacabinetmakercontractor

Question 2
With regard to companies, select a statement that best describes their form:
a. Whereabusinessrequireslargeamountsofcapital,it maycombineownershipandcontrolwithan unrestricted number ofshareholders
b. A company is a separate legal entity from its owners,  and it is required to comply with variousregulations
c. A company is a not separate legal entity, but it  is required to comply with variousregulations
d. Companies are evil; they suck resources out of the greater good ofhumanity

Question 3
The most widely accepted definition of accounting emphasizes:
a. The importance of recording and storing accountingdata.
b. The need to produce General Purpose FinancialStatements.
c. The analysis and communication of economic information to assist users make in-formed decisions regarding the allocation of scarceresources.
d. The objective of becoming a member of a professionalassociation.

Question 4
Accounting is mainly divided into:
a. Fiscal accounting andcontrol
b. Cost accounting and managementaccounting
c. Financial accounting and managementaccounting
d. Environmental accounting and ethicalaccounting
Question 5
Which of the following represents the balance sheet equation:
a. Assets = liabilities +equity
b. Liabilities = equity –assets
c. Assets = liabilities –equity
d. Equity = liabilities –assets

Question 6
From the following select the correct statement:
a. Assets may comprise short-term liabilities and long-termliabilities
b. Assets may comprise current liabilities and non-currentliabilities
c. Assets may comprisecash at bank and inventory
d. Assets may comprise amounts owed tocreditors

Question 7
Choose the best statement on the recording of transactions:
a. Atransactionisarecordofexchangeofvaluebetweentwopartiesanddonotnecessarilyneedtobe recorded
b. A transaction is a record of exchange of value between two parties and ought to be rec-orded by the firm
c. Accounting records, comprising transaction records are never used by thefirm
d. Transactions are first recorded in ledgers and then posted to journal..

Question 8
The second step of accounting process is
a. Communicating.
b. Identifying.
c. Processing.
d. Recording.

Question 9
Inventory is a current asset and can comprise:
a. Raw materials, consumables andstock
b. Raw materials, work-in-progress and finished goods
c. Accountsreceivable
d. Urrentliabilities

Question 10
Which of the following is not a current liability?
a. GST Payable
b. Accounts payable
c. GST Receivable
d. PAYG Withholding Payable
Question 11
The accounting equation:
a. Is also called the Income statementequation
b. Is changed by expenses of theorganisation
c. Holds true the concept ofduality
d. Helps to determine the cash balance of theorganisation

Question 12
The best description of a journal entry is:
a. The details of an accounting manager’s meetings for a dailyperiod
b. An accounting record including the transaction date, the name of the accounts af-fected by the transaction and theamounts
c. Records businesstransactions
d. Is the third step in the accountingprocess

Question 13
Consider the following transactions.
(i) Borrowed from ANZ Bank $250 000
(ii) Received $80 000 from accounts receivable
(iii) Paid $30 000 to accounts payable
(iv) Purchased new equipment for $150 000 on credit

How much did total assets increase by?
a. $220,000
b. $330,000
c. $370,000
d. $480,000

Question  14

What is the best statement regarding Accounting Entities:
a. Monetary transactions of an accounting entity must be kept separate from those of itsowners
b. An accounting entity is automatically considered a reportingentity
c. Accounting entities have external users who require general-purpose financialreports
d. An accounting entity is a Company structure, for which financial transactions occur and ac-counting records aremaintained
Question 15

What is the best statement regarding accounting errors:
a. An accounting error is a fraudulent discrepancy in financialdocumentation
b. Accounting errors will cause the trial balance to beincomplete
c. Common practice is to correct accounting errors within 90 days of identifying theerror
d. The most common error are clerical errors, transposition errors and balancing errors.
Question 16
Under accrual accounting, which of the following is not correct?
a. Expenses are recorded when an invoice ispaid
b. Expenses are matched with the relatedrevenues
c. Income is recorded when cash is received.
d. Adjusting entries are not necessary.

Question 17
What is the best statement regarding Accounting Entities:
e. Monetary transactions of an accounting entity must be kept separate from those of itsowners
f. An accounting entity is automatically considered a reportingentity
g. Accounting entities have external users who require general-purpose financialreports
h. An accounting entity is a Company structure, for which financial transactions occur and ac-counting records aremaintained

Question 18
Choose the best statement concerning balance sheets
a. The balance sheet can be referred to as the statement of financial position and is based on the accounting equation, assets = liabilities +equity
b. Thebalancesheetcanbereferredto asthestatement offinancialperformanceandisbasedonthe accounting equation, assets = liabilities +equity
c. The balance sheet can be referred to as the statement of financial performance and is based on the profit equation, profit = revenue –expenses
d. The balance sheet can be referred to as the statement of financial position and is based on the profit equation, profit = revenue –expenses

Question 19
The income statement:
a. Can be referred to as the statement of financial position and is based on the accounting equation, assets = liabilities +equity
b. Can be referred to as the statement of financial position and is based on the profit equation, profit = revenue –expenses
c. Canbereferredtoasthestatementof financialperformanceandisbasedontheprofitequation,profit= revenue – expenses
d. Can be referred to as the statement of financial performance and is based on the accounting eq-uation, assets = liabilities +equity

Question 20
IASB stands for:
a. International Auditing Standards  Board
b. International Accounting Standards Board
c. International Assurance Standards Board
d. Ireland Accounting Standard Board
Answers To Multiple Choice Questions

Part B  (Marks 42)
Question 1 (Marks: 2 +2 = 4)
Give the accounting definition of an asset. Explain whether the asset should be owned by the business to show in the balance sheet. 

Question 2 (Marks: 2 +3 = 5)
Give the accounting definition of a liability. Show the difference between a current liability and a non-current liability. Also give an example of each type of liability.

Question 3 (Marks: 2 +2 = 4)
What is a business transaction?Explain whether you think the receipt of an order from a customer would be regarded as an accounting transaction. 

Question 4 (Marks: 2 +2 = 4)
Define income. What is the difference between income and revenue? 
Question 5 (Marks: 5)
Explain why income and expenses are recorded net of GST in the income statement.

Question 6(Marks: 2 +3 = 5)
Define a trial balance. Identify three errors that would not be detected by a trial balance.
Question 6 [Marks: 3 + (2 x 3) = 9]
To be judged useful financial information should possess the fundamentals qualitative characteristics of financial reporting. (a) Identify these qualitative characteristics and (b) explain two fundamental characteristics.

Question 6 (Marks: 2 x 3 = 6)

Claire has just graduated with a master degree in accounting and found a job as a financial accountant in ADL Ltd. Claire’s responsibility include preparing monthly income statements and presenting the statements to the board of directors. 
During her first week, Claire noticed that the cashier, Christina secretly taking several $100 notes from the cash till drawer and giving them to Peter, the Finance Director.  When confronted by Claire, Christina said that Peter’s son has been suffering from late stage cancer and Peter’s salary can no longer afford the hospital fees. She also mentioned that she has been helping Peter with the till money for 6 months and that if anyone finds out, then both of them will lose their jobs. Christina begged Claire to record the missing amount as a general office expense so that Peter’s son can continue to receive medical treatments.
Required
Discuss Claire’s appropriate response to the situation above with reference to two fundamental principles of ethical behaviour in the accounting profession. 
Answer
Part C (Marks: 88)
Problem 1 ( Marks: 3 + 3 = 6)
Diana Taylor is a self-employed caterer operating her business from home. She keeps her accounting records for business activities completely separate from her records for personal activities. At 30 June 2019, Sarah had business assets and liabilities worth $62 500 and $41 000 respectively. At 30 June 2020, Sarah had business assets and liabilities worth $66 000 and $49 000 respectively.
Required
A. Assuming Diana did not contribute to or withdraw from the business during the financial year, determine the profit/loss for the year.
Answer  

B. Assuming Diana had withdrawn $15 000 during the year, determine the profit/loss for the year.
Answer

Problem 2 (Marks: 3 +4+2 =9)
Cash versus Accrual Basis of Accounting
At the end of the first year of operations, Jeremy Pereira, owner of Jubilee Designs, engagedyou to prepare yearly financial statements for the year ended 30 June 2020, on both the cash basis and the accrual basis. The following data are a summary of selected transactions thatoccurred during the year. IgnoreGST.
1. Fees of $325,000 were collected for services provided during theyear.
2. There were $8,000 in accounts receivable at 30 June 2019 for services performed during June oncredit.
3. Cash paid for salaries, rent, insurance and other expenses $195,000 during the year.
4. Salaries accrued for last fortnight of June $10,000, but not yet paid.
5. On25June2020,aclientpaid$3,000inadvanceforservicestoberenderedduringJuly 2020.
6. Expenses of $9,000 were paid in advance for next financial year (not included in the above $195,000) at 30June.

Required
A. Calculate profit under the cash basis accounting.  
Jubilee  Design 
Income Statement 
For the year ended 30 June 2020          

B. Calculate profit under the accrual accounting. 

Jubilee Design 
Income Statement 
For the year ended 30 June 2020 

C. Explain how the following items would be reported in the business’s balance sheet (either current assets or current liabilities) under the accrualbasis:
1. The $8,000 accounts receivable
2. The unpaid salaries of $10,000
3. The $3,000 advance received on 25June 2020.
4. The cash payment of $9,000 for prepaidexpenses.

Answer:

Problem  3 (Marks: 14.5 + 16.5 = 30)  
The following transactions were undertaken by Mia’s Cleaning Services during the month of Aug 2020. The business is registered for GST.
Aug 1 Invoiced a client $1,000 plus GST for the service provided, the client is expected to pay within 10 days.
Aug 5 The business owner Mia further invested $8,?000 capital into the business to ensure it has sufficient cash for operations.
Aug 10 Purchased office supplies for $220 (including GST) on credit.
Aug 10 Received the payment from the client invoiced on August 1
Aug 30 Paid employee salary for the month, $1,500.
Required
A. Journalize the transactions above. Narrations are required.
B. Post the journal entries in A to the provided ledger accounts.

Adjusting Entries and Justifications
Miranda’s Motor Mechanics analyzed the accounting records and other data for the business. The following information is made available for the year ended 30 June 2020. 
Prepare the end-of-period adjusting entries required on 30 June 2020. Ignore GST. Also mention what effects will be on assets or liabilities and Equity if adjusting entries were not recorded.
1. Salariesandwagesowingtoemployeesattheendofthefinancialyearamountedto$2,480.
2. Included in the Prepaid Rent account is an amount of $1,600 paid in June for the month of July 2020. The Prepaid Rent account has a debit balance of $4,800.
3. A business hold a 90 day note receivable of $10,000 from a customer. The note bears an interest rate of 12% p. a. and was issued on  May 1 2020
4. The balance of Unearned Revenue Account $8400 on 30th June 2020. Included in unearned revenue$1,650 for which services was performed on during the last of June.

5. Depreciation expense on equipment $4,200.
Problem 4  (Marks: 13 +4 +10 +1 = 28)
The adjusted trial balance of Raymond Ray – Financial Consultant is shown below:
Raymond Ray - Financial Consultant Adjusted Trial Balance As at 30 June 2020

Required
A. Prepare the income statement for the business for the year ended 30 June2020.
B. Prepare a statement of changes in equity for the year ended 30 June2020.
C. Prepare a balance sheet as at 30 June2020.
Answer
Requirement A: Income Statement

Requirement B: Statement of Changes in Equity

Requirement C: Balance Sheet

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