Accounting Systems And Processes

Journal Entries

Accounting and spreadsheet

Journal Entries

Journal Entries
in the books of Andrew Brown
Date Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Particulars	Debit	Credit
02-Oct	Cash Account	$  50,000.00
	Capital Account		$         50,000.00
03-Oct	Cash Account	$  30,000.00
	Bank Loan Account		$         30,000.00
04-Oct	Equipment Account	$  51,000.00
	Cash Account		$         51,000.00
05-Oct	Supplies account	$    6,500.00
	Cash Account		$            6,500.00
08-Oct	Rent Expenses Account	$    7,200.00
	Cash Account		$            7,200.00
10-Oct	Drawings Account	$    2,000.00
	Cash Account		$            2,000.00
17-Oct	Advertising Expenses	$    4,500.00
	Cash Account		$            4,500.00
25-Oct	Insurance Expenses	$    5,600.00
	Cash Account		$            5,600.00

2: Ledger Accounts

Cash Account
Particulars	Amount	Particulars	Amount
Equipment	$   51,000.00	Capital	$  50,000.00
Supplies	$      6,500.00	Bank Loan	$  30,000.00
Rent Expenses Account	$      7,200.00
Drawings	$      2,000.00
Advertising Expenses	$      4,500.00
Insurance Expenses	$      5,600.00
Balance C/d	$      3,200.00
	$   80,000.00		$  80,000.00

Capital Account
Particulars	Amount	Particulars	Amount
Cash	$   50,000.00	Balance C/d	$  50,000.00

Bank Loan Account
Particulars	Amount	Particulars	Amount
Cash	$   30,000.00	Balance C/d	$  30,000.00

Equipment Account
Particulars	Amount	Particulars	Amount
Balance C/d	$   51,000.00	Cash	$  51,000.00

Supplies account
Particulars	Amount	Particulars	Amount
Balance C/d	$      6,500.00	Cash	$    6,500.00

Rent Expenses Account
Particulars	Amount	Particulars	Amount
Balance C/d	$      7,200.00	Cash	$    7,200.00

Drawings Account
Particulars	Amount	Particulars	Amount
Balance C/d	$      2,000.00	Cash	$    2,000.00

Advertising Expenses
Particulars	Amount	Particulars	Amount
Balance C/d	$      4,500.00	Cash	$    4,500.00

Insurance Expenses
Particulars	Amount	Particulars	Amount
Balance C/d	$      5,600.00	Cash	$    5,600.00

3: Trial Balance

Journal Entries
in the books of Andrew Brown
Accounts	Debit	Credit
Cash Account	$              3,200.00
Capital Account		$          50,000.00
Bank Loan Account		$          30,000.00
Equipment Account	$           51,000.00
Supplies account	$              6,500.00
Rent Expenses Account	$              7,200.00
Drawings Account	$              2,000.00
Advertising Expenses	$              4,500.00
Insurance Expenses	$              5,600.00
	$           80,000.00	$          80,000.00

4: Temporary and permanent accounts

Temporary accounts are classified as revenue accounts, expenses account and drawings account.

Permanent accounts are classified as asset, liability and owner’s equity in the balance sheet.

Cash Account	Permanent Account
Capital Account	Permanent Account
Bank Loan Account	Permanent Account
Equipment Account	Permanent Account
Supplies account	Permanent Account
Rent Expenses Account	Temporary Account
Drawings Account	Temporary Account
Advertising Expenses	Temporary Account
Insurance Expenses	Temporary Account

(Davies & Crawford, 2011)

5: Credit and Debit Balances

Cash Account	Debit Balance
Capital Account	Credit Balance
Bank Loan Account	Credit Balance
Equipment Account	Debit Balance

(Damodaran, 2011) 

6: Adjusting Entries

Adjusting entries refers to those journal entries, with the help of those company accounting records can be converted into accrual basis of accounting. They have been done just before the financial statements are prepared. Adjusting entries are required because single transaction can affect the revenue and expenses that falls in one accounting period. So to manage the revenues and expenses of one accounting period there is requirement to make adjustment entries (Brigham & Michael, 2013).

Adjusting Entries
in the books of Andrew Brown
Date	Particulars	Debit	Credit
31-Oct	Supplies Expenses Account	$    3,400.00
	Supplies Account		$            3,400.00
31-Oct	Accrued  Revenue account	$  22,500.00
	Revenue account		$         22,500.00
31-Oct	Payroll Expenses Account	$  11,500.00
	Outstanding Payroll Expenses Account		$         11,500.00
31-Oct	Cash	$  10,500.00
	Unearned Revenue account		$         10,500.00

Statement of Balance Sheet
Assets	Amount
Current Assets
Cash Account	$  13,700.00
Accrued  Revenue account	$  22,500.00
Total current assets	$  36,200.00
Non Current Assets
Supplies account	$    3,100.00
Equipment Account	$  51,000.00
Total noncurrent assets	$  54,100.00
Total Assets	$  90,300.00
Liabilities and Equity
Current Liabilities
Outstanding Payroll Expenses Account	$  11,500.00
Unearned revenue account	$  10,500.00
Total Current Liabilities	$  22,000.00
Non Current Liabilities
Bank Loan Account	$  30,000.00
Total Non Current Liabilities	$  30,000.00
Total Liabilities	$  52,000.00
Equity
Capital Account	$  38,300.00
Total Liabilities and Equity	$  90,300.00

Statement of Balance Sheet
Assets	Amount
Current Assets
=Worksheet!B4	=Worksheet!K4
=Worksheet!B15	=Worksheet!K15
Total current assets	=SUM(E5:E6)
Non Current Assets
=Worksheet!B8	=Worksheet!K8
=Worksheet!B7	=Worksheet!K7
Total noncurrent assets	=SUM(E10:E11)
Total Assets	=E7+E12
Liabilities and Equity
Current Liabilities
=Worksheet!B17	=Worksheet!L17
=Worksheet!B18	=Worksheet!L18
Total Current Liabilities	=SUM(E18:E19)
Non Current Liabilities
=Worksheet!B6	=Worksheet!L6
Total Non Current Liabilities	=E23
Total Liabilities	=E24+E20
Equity
=Worksheet!B5	=’Statement of change in capital’!E8
Total Liabilities and Equity	=E25+E28

9: Financial Ratios

Ratio	Formula	Solution
Current Ratio	Current Assets/Current Liabilities	1.65
Debt Ratio	Total Liabilities/Total Assets	0.58

References

Brigham, F., & Michael C. (2013). Financial management: Theory & practice. Cengage Learning.

Damodaran, A, (2011). Applied corporate finance. John Wiley & sons.

Davies, T. & Crawford, I., (2011). Business accounting and finance. Pearson. 

Part B – History of accounting 

The emergence of the double entry bookkeeping system has marked the evolution of the accounting profession and was intended to reduce the mistakes associated with bookkeeping of the daily accounting transactions. The origin of the double entry-bookkeeping is attributable to Luca Pacioli, the author of the world’s fist printed book on the subject. In this context, this essay has presented a discussion related to the development of accounting and their role of double entry bookkeeping system on its evolution.

Accounting Development and the role of Double-Entry Booking System on its Evolution

The development of modern day accounting practices has been influenced significantly by various factors to the present date. The development of accounting can be traced back to the ancient civilizations where it was used mainly to provide description about rents, fines and taxes collected. Thus, accounting is mainly used as a process for maintaining records and as a system merely used for keeping a track of the money paid and received. The major evolution that has largely contributed to the developing of modern accounting profession is double entry book-keeping system. The major factors that have lead to the origination of such a system of account keeping are techniques in math, coins invention, introduction of paper, development of banking system and many others that has caused the need of developing proper records (Sangster, 2016).

The development of this system is largely being attributable to the publishing of a book by a mathematician named Luca Pacioli that contains a description of double-entry bookkeeping. The book became world-famous that significantly leads to its increasing use by the merchants for maintaining an accurate record of their financial transactions (Pacioli, 1994). This is because this system enables the accountants to report a business transaction twice that is first as a debit and a credit. The wonderful book of Pacioli is regarded as the most important contribution for the origination of the concept of bookkeeping that all creditors must appear in the right-hand side while debtors on the left during the preparation of ledger. The book has included important topics related to the accounting system of bookkeeping that are importance of developing journal and ledger (Angus, 2014).

Ledger Accounts

Luca Pacioli cannot be given credit to invention of double-entry booking system but only placed emphasis on the importance that all accounting entire recorded must be double so that whenever credit is created there must be a debtor. The most significant advantage of such a system of recording entry is that it has provided a sound base for recoding the financial translations by equalizing the debit and credit entries. Thus, it helps the business manager to identify easily the error in recording of accounting transactions (Pacioli, 1994). As such, the origination of such an accounting system provides the befit that it leads in development of accurate financial records over single-entry methods. This system of accounting has proven to be highly beneficial for the companies till date to determine the actual financial position that helps the management in carrying out future planning related to business growth and development. However, this system has also received various criticisms from the accounting experts that it is time consuming and requires high level of skills and expertise of the accountants to maintain accounting records with the use of such system in an adequate manner. The use of this system of developing the accounting records can lead to increasing complexity within the accounting system (Ovunda, 2015).

Luca Pacioli’s double entry system of accounting has proved very useful for increasing the ability of potential accountants to develop and maintain accounting records. The increase in the skills and capabilities of accountants to make border and informed decisions has improved the accuracy of financial information disclosed to the end-users. The reduction in the possibility of occurrence of error in developing the financial records has proved to be extremely useful for the business managers to maintain trust and confidence of the stakeholders. It has facilitated in developing the confidence of the investors on the equity owners and also promoted better decision-making of the management (Pacioli, 1994). The better decisions taken by business managers in regard to resource allocation have fostered growth and development of business entities. Thus, it can be said that accounting practices that are followed by business organizations today are largely attributed to the work of Luca Pacioli. The method though has laid to the foundation of double entry bookkeeping system but the development of modern accounting theories and concepts has further lead to its significant evolution (Richardson, 2008).

Conclusion

It can be said from the discussion held in the context of the development of accounting that it has experience significant changes, modifications, updates and improvement in the recent years. The most significant contribution in relation to this is the development of double-entry bookkeeping system that can be regarded as a solid base that lead to the creation of modern day accounting profession. 

References 

Angus O.  U. (2014):  Theories of Accounting:  Evolution & Developments,  Income-Determination and  Diversities  in Use.

Angus O. U. (2014). Theories of Accounting:  Evolution & Developments, Income-Determination and Diversities in Use. Research Journal of Finance and Accounting 5(19), pp.132-138.

Ovunda, A. (2015). Luca Pacioli’s Double-Entry System of Accounting: A Critique. Research Journal of Finance and Accounting 6(18), pp. 132-138.

Adjusting Entries

Pacioli, L. (1994). Exposition of Double Entry Bookkeeping: Venice 1494. Albrizzi.

Research Journal of Finance and Accounting, Vol. 5(19), 2014 

Richardson A. J. (2008). Strategies in the development of accounting history as an academic discipline. Accounting History 13 (3).

Richardson A. J. (2008): Strategies in the  development of accounting history as  an academic discipline.  Accounting History

Sangster, A. (2016). The Genesis of Double Entry Bookkeeping. The Accounting Review 91(1), pp. 1-24. 

Part C: Ethics

The present report is developed mainly to illustrate the importance of ethics in accounting for the long-term growth and development of business. This has been carried out by presenting a discussion of the accounting sandal of Target Corporation, one of the largest department store retailers within Australia.

The givens scenario has discussed about the accounting scandal occurred within the Target Corporation that resulted in resignation given by its former CEO Stuart Machin and the finance director Graeme Jenkins. The accounting scandal relates to inflation of the earnings by the management of the company. The company was recognized as a major operating unit of Wesfarmers who has found that it has inflated the earnings by $21 million with the funds flowed from rebate deals. The main cause of the scandal is attributed to be poor management decisions as well as lack of effective leadership that has resulted in the occurrence of such unethical business practices (Chung, 2016).

Part 2: Five fundamental principles of ethics in accounting

• Integrity: This principle of ethics provides that one should be straight forward and honest while maintaining the professional and business relationship.
• Objectivity:It means one should not allow conflict of interest, bias or undue influence of others to dominate the judgments made under business and professional capacity.
• Professional Competence and Due Care: As per this principle one should maintain required level of professional knowledge and skills that helps in ensuring that clients receive competent services.
• Confidentiality: This ethic principle provides that there should not any disclosure of information that is acquired as a result of professional and business relationship to third parties without the permission of specific authority.
• Professional Behaviour: One should follow the relevant laws and regulations and avoid such actions that discredit the profession (ICAS, 2016)

Part 3: Examples of Each of Five Ethical Principles of Accounting

Integrity

The company has violated the ethical principle of integrity as its accountants has adopted the use of fraudulent accounting practices for reporting higher revenue and thus has not carried out their job duties with honesty.

It can be stated from the case analysis that undue influence of the senior management of the company has resulted in the use of fraudulent accounting practices by the accountants to meet the determined goals and objectives (Mitchell, 2016).

The inflation of earnings by the use of supplier’s rebate has inferred that accountants have not acted with utmost care in carrying out their job responsibilities. This is because they had not applied their professional knowledge in an adequate manner that has stated to them ethically and has unethically inflated earnings of the company (Parker, 2016).

The information acquired by the accountants has been used by them to mislead the investors as directed to them by the senior management people. Thus, they have acted against the interest of third parties that are mainly the investors, creditors and lenders.

The accountants have not complied with the standard accounting policies that regulates the working of their profession (Sheedy, 2016).

Part 4: Principles of ethics violated in the case of Target

Although management at Target, has violated almost all the professional ethics principle but among them ethics such as integrity, objectivity and professional behaviour has been affected a lot. It is duty of management at target and also at Wesfarmers to disclose all the required information to the shareholders and other relevant body regarding accounting issues of treatment of suppliers rebate in the books of accounts. There is need to provide proper information on how such thing happen and ways to sort this accounting issue so that company can improve its fundamental ethics values. Ethics of objectivity has been violated as accounting issue related to treatment of rebates has been happed under the supervision of senior management which was very serious ethical issue.

Conclusion

It can be stated from the overall discussion conducted that it is highly necessary for the accounting professionals to act as per the principle of ethics developed for them by the standard accounting bodies for protecting the interest of business stakeholders. 

References

Chung, F. (2016). Scandal-plagued Target facing three-year turnaround, expert warns. Retrieved 13 December, 2018, from https://www.news.com.au/finance/business/retail/scandalplagued-target-facing-threeyear-turnaround-expert-warns/news-story/3eafbd566e379096401d853720cc96ef

ICAS. (2016). The Five Fundamental Ethics Principles: Time for Evaluation. Retrieved 13 December, 2018, from https://www.ethicsboard.org/system/files/meetings/files/Agenda-Item-8-B-ICAS-Discussion-Paper-The-Five-Fundamental-Principles-Time-for-Evaluation.pdf 

Mitchell, S. (2016). Wesfarmers takes action against staff over Target rebates. Retrieved 13 December, 2018, from https://www.smh.com.au/business/companies/wesfarmers-takes-action-against-staff-over-target-rebates-20160411-go3il5.html

Parker, J. (2016). Target accounting scandal: Wesfarmers taking action against staff. Retrieved 13 December, 2018, from https://www.abc.net.au/news/2016-04-11/wesfarmers-taking-action-over-target-accounting-scandal/7317178

Sheedy, C. (2016). The Target accounting scandal and its wider implications. Retrieved 13 December, 2018, from https://www.icas.com/ca-today-news/target-accounting-scandal