Accounting Practice Set: Company Background and Trial Balances

Assignment Task

Introduction

The objective of this Accounting practice set is to provide students with an insight into the process of recording transactions, completing adjusting and closing entries, and preparing financial statements for a retail business.

Company Background

Carringbush Confectionery Pty Ltd has been in business in Abbotsford, Victoria since July, 2019. The company was started by C.B. Andrews and operates a large warehouse/showroom which sells a variety of boxed chocolates, lollies, chewing gum and candy sweets to several large boutique confectionery outlets. The business sells on both credit and cash terms to these retail outlets who operate in different geographical parts of Melbourne. The company's Share Capital consists of 2,721,600 Ordinary Shares, that were originally issued at $2.50 each and which are owned by various members of the Andrews Family. From an operating perspective, the financial performance of the company has been solid and the financial position is considered to be sound. The outstanding long-term debt is deemed to be at a manageable level and the liquidity of the firm is considered to be favourable.

Accounting System Information & Procedures

The company has a financial year end of 30 June and prepares adjusting entries at the end of the financial year. To ensure efficiency of its accounting procedures, the company uses the following Special Journals to maintain its accounting records:

1. Sales Journal (SJ): to record all sales of Inventory on credit
2. Purchases Journal (PJ): to record all Purchases of Inventory on credit
3. Cash Receipts Journal (CRJ): to record all Cash Receipts
4. Cash Payments Journal (CPJ): to record all Cash Payments
5. General Journal (GJ): to record all transactions other than the above.

Business transactions are recorded for Carringbush Confectionery Pty Ltd on a daily basis in one of these five journals in the accounts.

Additionally, the company maintains a general ledger to record postings from the journals. Subsidiary Ledgers are used to record the separate details of Accounts Receivable and Accounts Payable. Transactions are posted immediately to the relevant ledger account if they are entered into the general journal, the “other” column of the Cash Receipts Journal or Cash Payments Journal, or if they affect any of the Accounts Receivable or Accounts Payable subsidiary ledger accounts. Apart from these transactions, totals of the special journals are taken at the end of the month and then posted to the appropriate accounts. The company uses a periodic inventory system.

In practice, the company would be required to collect and pay Goods and Services Tax (GST) on its sales and purchases. However, for the purposes of this exercise, GST has been excluded.

Instruction

1. Enter the transactions for Weeks 1 – 5 into the appropriate Journal for the month of June 2025. Next, post all the Journal transactions to the ledger accounts as specified in the “Account System Information” section of the introduction.
2. Total all Special Journal columns and post to the appropriate ledger account at the end of the month.
3. Prepare the unadjusted Trial Balance as at 30 June 2025 on the Worksheet provided.
4. Prepare the adjusting entries shown on page 10 in the General Journal and post to the relevant ledger accounts. Now enter the adjustments in the relevant worksheet columns and prepare an adjusted Trial Balance.
5. A Stocktake on 30 June 2025 indicates that the balance of Closing Inventory is $8,498,952. Use this information to complete the remaining columns of the worksheet.
6. Use the worksheet to prepare the Income Statement and Balance Sheet.
7. Complete the Schedule of Accounts Receivable and Schedule of Accounts Payable. Ensure the balances agree with the totals in the control accounts.
8. Prepare closing entries and post to the relevant general ledger accounts.

Adjust Intries

• The Showroom Fittings were installed on 1 July, 2024. They have a useful life of 9 years and no salvage value. The Straight-Line method is used to depreciate the Showroom Fittings.
• The Machinery was installed on 1 July, 2019. They have a useful life of 10 years and estimated salvage value of $18,900. The Straight-Line method is used to depreciate the Machinery.
• Twelve months of Showroom Warehouse Rent was prepaid on 1 March, 2025. Of the original prepaid amount, $1,479,240 worth of Rent has now expired.
• A count of Office Supplies indicates that $512,190 still remain on hand at year end.
• A one-year Insurance policy was purchased on 1 November 2024 for $68,040.
• Interest on the ANZ Bank Mortgage Loan is charged at 7% per annum and is paid annually on 1August (the interest expense should be rounded up to the nearest dollar). The ANZ Bank Mortgage Loan was originally taken out on the 1 August, 2024.
• The company has been informed that Langridge Lollies & Liquorices has been put into Receivership and now declared Bankrupt and Carringbush Confectionery Pty Ltd has agreed to write off the amount owing as a Bad Debt. The company uses the direct write-off method to account for any Bad Debts in the books.
• A Telephone bill for $38,556 for June was received after balance date on 1 July, 2025. The amount has not yet been recorded. The company records them as a Utilities Expense.
• Office Staff are paid once per month, $440,748. The Office Staff were last paid on the 15 June, 2025. Exactly half of one month Office Staff wages are still owing.
• Sales Staff are paid fortnightly and work 7 days per week. The sales staff were last paid on the 29 June, 2025. One day of the wages bill amounting to $26,724 is still owed to the Sales Staff.
• The Accountant of the company has estimated that Tax Payable following the inclusion of certain tax adjustments, for the year ended 30 June, 2025 will only be $518,406. This amount is to be paid on 31 October, 2025.

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