Question

Big Tree retailer operates in DownTown Kingston. The store was opened on 1st June 2020. The following information relates to the transactions for the first month of doing business.

June 1 Started business with $50,000 cash and a motor vehicle valuing $80,000.2 Received a cheque representing a loan from City Bank for $125,000.

3 Bought equipment by cheque $25,000.

3 Paid a cheque for $75,000 to cover the costs of goods bought for resale. 5 Received cash of $57,500 for goods bought from us.

5 We purchased an office desk on credit from S&L Office Supplies $82,500. 6 Sold merchandise on credit to Pearly Dress Shop $62,500.

8 Bought goods on credit from Maxwell Designers $46,000. 9 Sold goods on credit to Maxine’s Dress Shop for $37,500.

11 Paid cash of $7,500 for office stationery.

12 Returned defective goods to Maxwell Designers which cost $3,000. 14 Bought goods on credit from Star Creations $16,250.

14 Sold goods to Dreams Department Store receiving a cheque for $62,500. 16 Pearly’s Dress Shop settled their account with cash receiving a discount of 5%. 17 Deposited cash of $36,000 in the business bank account.

18 Maxine’s Dress shop returned merchandise bought on June 9; valuing $2,700. 19 Paid Maxwell Designers $40,000 in full settlement of the balance outstanding by Cheque; having received a discount of $3,000.

20 Paid S&L Office Supplies $42,500 from personal funds.

22 The owner of Belles Retail Store took merchandise for his personal use valuing

$12,000.

25 Interest income of $7,500 was received in cash. 25 Paid wages by cash $52,000.

27 Paid rent $22,000 by cheque.

27 Paid water rates $15,000 by cash. 27 Paid electricity $30,000 by cheque.

REQUIRED

Enter the transactions in the following books of original entry:
Sales Journal (4 marks) ii. Purchases Journal (4 marks) iii. Returns Inwards Journal (2 marks) iv. Returns Outwards Journal (2 marks) v. General Journal (6 marks) vi. Cash Book (10 marks)
NB: Include appropriate folios.

Post from the books of original entry to:
Sales Ledger (6 marks) ii. Purchases Ledger (6 marks) iii. General Ledger (64 marks)
Balance off all accounts in the ledgers and extract a trial balance. (12 marks)
Prepare the following Source Documents from the above transactions
Sales invoice
Purchase invoice
Debit note
Credit note (4 marks)

Answer 1

The question involves accounting tasks such as recording transactions in journals and ledgers, preparing financial documents, and extracting a trial balance for a retail business.

Step-by-step explanation:

The question pertains to practical accounting tasks for a retail business, specifically the recording and posting of transactions within various accounting journals and ledgers. We are also tasked with preparing financial documents such as invoices and notes, and finally, extracting a trial balance. This requires an understanding of double-entry bookkeeping, the different types of accounting books, and how transactions affect the financial statements of a business.

Answer 2

The student is required to record business transactions for Big Tree retailer in specific journals, then post them to ledgers, prepare a trial balance, and generate source documents such as invoices and credit/debit notes. Sales and purchases on credit, as well as cash transactions and returns, will be accounted for in their respective journals and ledgers.

Step-by-step explanation:

The subject in question pertains to the recording of financial transactions for a retail business in Kingston known as Big Tree Retailer. Transactions include various cash and credit operations which should be recorded in specific journals and then posted to the respective ledgers - Sales Ledger, Purchases Ledger, and General Ledger. From these ledgers, a trial balance will be prepared, and the creation of source documents like invoices and credit notes is also required.

Books of Original Entry

Sales Journal: Transactions on June 5th, 6th, 9th, and 14th will be entered here.

Purchases Journal: Transactions on June 3rd, 5th, 8th, 14th will be entered here.

Returns Inwards Journal: Transactions on June 18th should be entered here.

Returns Outwards Journal: Transactions on June 12th should be entered here.

General Journal: Non-standard transactions, such as the purchase of a motor vehicle, receipt of a loan, payment of interest, owner's withdrawal, and others will be recorded here.

Cash Book: All the cash transactions such as sales in cash, cash expenses on stationery, wages, rent, and others will be recorded here.

Posting to Ledgers

Sales Ledger: Transactions from the Sales Journal are posted here.

Purchases Ledger: Transactions from the Purchases Journal are posted here.

General Ledger: It includes a wide array of accounts affected by all the transactions listed, going beyond just sales and purchases.

Source Documents

Sales invoice: Issued when a sale is made on credit.

Purchase invoice: Issued when a purchase is made on credit.

Debit note: Issued when goods are returned by the retailer to the supplier (Returns Outwards).

Credit note: Issued when goods are returned by the customer to the retailer (Returns Inwards).

Finally, all accounts must be balanced off and a trial balance extracted as part of the accounting cycle.