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Distinguish between the 2 categories of adjusting entries, and identify the 2 types of adjustments

Question 1 (25 marks)

ABC Ltd began operations on 1 July 2014. Quarterly financial statements are prepared. The trial balance and adjusted trial balance on 30 September are shown below. ABC LTD Trial Balances As at 30 September 2014 Unadjusted Adjusted No. Account name Debit -$ Credit-$ Debit- $ Credit-$ 100 Cash 17420 17420 110 Commission Receivable 1040 2600 120 Prepaid rent 3900 2340 130 Supplies 3120 2600 150 Equipment 39000 39000 151 Accumulated Depreciation – Equipment 910 200 Accounts Payable 3926 3926 210 Salaries Payable 1040 220 Interest Payable 130 230 Rent revenue received in Advanced 2340 1560 250 Bank Loan (Due 31.12.2018) 13000 13000 300 Share Capital 36400 36400 310 Retained Earnings _ _ 311 Dividends 1560 1560 400 Commission Revenue 36400 37960 410 Rent Revenue 1040 1820 500 Salaries Expense 23400 24440 510 Rent Expense 2340 3900 520 Depreciation Expense 910 530 Supplies Expense 520 540 Electricity Expense 1326 1326 550 Interest Expense 130 93106 93106 96746 96746


Required: (11 + 4 + 3 + 5 + 1 + 1 = 25 marks)

(a) Journalise the adjusting entries that were made by ABC Ltd on 30 September (11 marks) (b) Prepare the following:

a. An income statement for the 3 months ending 30 September (4 marks)

b. A statement of changes in equity for the 3 months ending 30 September (3 marks)

c. Prepare a statement of financial position as at 30 September (5 marks) (c) Identify which accounts should be closed on 30 September (1 mark) (d) If the interest rate on the loan is 12%, when did ABC Ltd take out the loan? (1 mark) Show all your working


Question 2 (2 + 2 = 4 marks)

(a) What is a trial balance and what is its main purpose? (2 marks)

(b) Distinguish between the two categories of adjusting entries, and identify the two types of adjustments applicable to each category, giving an example of each. (2 marks) Overall presentation (1 mark)

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