B. Dusty is the sole proprietor of Chalkboard Supplies – a GST-registered independent
office furniture supplies business that began operations on 1 July 2017. The business
focuses mostly on supplying office and study desks to small businesses. It performs some
additional services including deliveries.
Dusty is an astute business owner who prides herself on delivering an excellent service
whilst aiming to grow a profitable and successful business. Towards the end of the
financial year, Dusty employed some staff including a sales assistant and bookkeeper.
Dusty is continuing with the MS Excel spreadsheet system that she has been using to
record the accounting transactions and manage her accounts and financial reports.
1.2 Accounting policies and other details
Like all Australian businesses, Chalkboard Supplies uses the financial year: 1 July to 30
June, withholds PAYG for its employees, and pays GST on sales to the Australian
Government. The business uses a GST paid (Asset account) and GST collected (Liability
account) to record its GST. Unless otherwise stated, assume all transaction amounts are
inclusive of GST (10%).
Dusty makes an annual withdrawal of funds from the business for private purposes.
Chalkboard Supplies uses the Accounts listed in the Chart of Accounts.
Chalkboard Supplies uses the accrual accounting method.
Chalkboard Supplies uses a perpetual inventory system with weighted average.
Chalkboard Supplies depreciates computer equipment using reducing balance method at
the rate of 25%.
Chalkboard Supplies depreciates vehicles using straight line method, with a residual
value of $7000 and the end of its effective life of 7 years.
Fortnightly wages, from June 2018, are paid on the Wednesday for the previous fortnight.
Employees work Monday to Friday. (Eg wages paid on 20/6/18, are full fortnight’s pay
for work 4/6/18 to 15/6/18.)
Doubtful debts are adjusted at 30 June each year, such that the provision equates to 5%
of Accounts Receivable balance at the end of the year.
1.8 Adjustments (to be completed at the end of the accounting cycle):
Chalkboard Supplies must record the following end of year adjustments:
a. Physical stocktake of supplies revealed Supplies used for the period: $180
b. Record accrued wages expense given wages earned by A Marker and B Staples for the
fortnight 18/6/18 to 29/6/18 will be paid on 4/7/18. (The fortnightly earnings are: Marker –
$634 gross and Staples – $520 gross. Use accounts: Wages Expense and Wages Payable
c. Insurance paid on Sept 1 covers period 1 Sept 2017-31 Aug 2018. Adjust for the prepaid
portion. (Note, insurance invoice total previously recorded as expense.)
d. Calculate the Provision for Doubtful Debts at the rate of 5% of Accounts Receivable
e. Calculate and record the depreciation expense for: computers using the 25% reducing
balance method and vehicles using straight line method (see 1.2 above).
f. End of year stocktake reveals $1200 worth of damaged stock. Record the adjustment to
inventory (use the inventory loss account).
g. Record interest payable on the loan for the month of June given the business loan is 6%
interest per annum.
2.Task 2 Requirements
(Use the Task 2 template. Make adjustments as required including using formulas and
2.1 Prepare the General Journal entries for the Transactions that occurred July 2017-
June 2018. Transactions are listed above at 1.3. Use the accounts listed in the Chart
of Accounts at 1.4. For inventory, all sales and purchases must be entered into
Inventory Record as they occur. Use EXCEL formulas for calculations (eg GST) and
linking as required. Check the journal is in balance.
2.2 Post the GJ entries to the General Ledger. Enter names for the ledger accounts and
add accounts to the template as necessary. Use linking function in EXCEL to Link the
transaction amounts from the to the GJ to the relevant GL account. (Please note, the
template uses a running balance method. Create the formulas and links for these.)
2.3 Prepare a Trial Balance as at 30 June 2018 by linking from the ledger accounts to the
trial balance. It will be a live Trial Balance but at this point it is unadjusted as it does
not include the Adjustments which will be recorded in step 2.5 below. Check it is in
balance before moving on. (If it is not in balance, try using sort & filter function to
find errors in posting. Ask your tutor if you need assistance.)
2.4 Prepare the Worksheet by copying your Trial Balance figures into columns B and C.
VERY IMPORTANT – copy these as VALUES (using Paste Special function in EXCEL).
2.5 Record the Adjustments in the General Journal. Adjustments are listed above at 1.8
(a. to g.). Enter these into both the Worksheet (in columns E and F) and the General
Journal. Check the journal is in balance.
2.6 Post the adjustment journal entries (from the General Journal) to the General
Ledger using new accounts as necessary. (This will change the figures in your Trial
Balance but not your Unadjusted Trial Balance in your Worksheet. Check this.)
2.7 Finalise the Worksheet – return to the Worksheet to calculate balances in the
Adjusted Trial Balance (columns H and I), using EXCEL functions for additions and
subtractions. (Check the Adj Trial Balance figures in these columns match the
account balances in the Trial Balance – they should be the same.)
2.8 Prepare the Financial Statements – still in the Worksheet, copy or link the
appropriate figures to the Income Statement columns and to the Balance Sheet
columns. Then take these figures across to the Financial Statements sheet and
create Financial Statements according to a standard format (refer to the textbook
page 240). Identify Assets and Liabilities as ‘current’ or ‘non-current’ for the Balance
Sheet (this was to be done in the Chart of Accounts).
2.9 Prepare the Closing General Journal entries but DO NOT post to the Ledger. Closing:
• debit revenue accounts and credit P& L Closing Account;
• credit all expense accounts and debit P& L Closing Account;
• debit P & L Closing Account (if a profit) and credit Capital account;
• credit Drawings and debit Capital account
2.10 EXCEL functions and Number formats – Basic EXCEL functions and formulas should
be used as described in the instructions above. All amounts to be displayed to two
decimal places but should not be rounded. Use $ only in Financial Statements.
Chalkboard Supplies – Task 2 Instructions 6
Financial Report (900 words; Word document; structure below)
Requirement – Prepare a brief report that summarises the financial position of
Chalkboard Supplies, addressing the following considerations:
a. Financial Statements – include and summarise the Financial Statements from the Excel
document (Income Statement, Balance Sheet, Statement of Changes in Equity)
b. Comment on the financial performance AND financial position of the business after its
first year of operations. Refer to your included Financial Statements. Did the business
make a profit or loss? What policies or strategies might the business consider changing or
adopting to increase its future profits?
c. Chalkboard Supplies expects to invest in further assets in the coming year. Briefly
describe the depreciation methods available and the main differences and benefits of
each. Do you recommend they continue with their current depreciation methods?
Explain why or why not.
d. The business used the weighted average Perpetual inventory method for FY 2018. What
other methods could be used and how might they impact on the financial position of the
business at the end of the period?
e. What internal control mechanisms do you recommend (eg Bank Reconciliation; cash