Question

Skate ‘n’ Surf began operations on 1 June, buying and selling surfboards, skateboards, wetsuits and the protective gear for skateboarding. The structure of the business is that of a sole trader.

The business employed a sales assistant during the month who is to be paid fortnightly. Tax is deducted from the employee’s wages (PAYG withholding tax) and remitted to the Australian Taxation Office (ATO) on a quarterly basis.

The business has not registered with the ATO for the goods and services tax (GST) and has elected to use the accrual basis of accounting.

Accounting records
The business records all transactions in the general journal. These transactions are then posted to the appropriate account(s) in the general ledger. The accounts receivable and accounts payable subsidiary ledgers are provided for information only, you are not required to post to these ledgers.

Chart of accounts
The chart of accounts for Skate ‘n’ Surf contains the accounts and account numbers below.

100		Cash at bank
110		Accounts receivable
120		Inventory
130		Prepaid insurance
171		Shop equipment (cost)
172		Accumulated depreciation - shop equipment
200		Accounts payable
210		PAYG withholding payable
220		Superannuation payable
230		Bank loan
300		Capital
310		Drawings
320		Profit or loss summary
400		Sales revenue
410		Sales returns and allowances
420		Discount received
500		Cost of sales
600		Advertising expense
610		Depreciation expense
620		Discount allowed
630		Electricity expense
640		Insurance expense
650		Interest expense
660		Stationery
670		Superannuation expense
680		Telephone expense
690		Wages expense

Transactions
June	1		The owner opened a bank account for the business with a deposit of $24,600. This is capital provided by him.
	1		Purchased display stands, shelving etc. (shop equipment) from Shop Displays Pty Ltd for $32,400 and computer equipment for the shop from Computer Wizards for $4,400. These were paid for with a loan of $29,300 from the bank and cheque for $7,500 from the business bank account. The bank loan is repayable over 3 years.
	1		Paid $4,540 for a 1-year insurance policy covering fire, theft, and public liability.
	2		Purchased inventory (skateboards and protective gear) from Excitement Plus for $17,700 on terms on net 30.
	5		Paid $1,200 to Local Newspapers for advertising for the shop for the month.
	6		Cash sale of a skateboard and protective gear for $420 (cost of sales $185).
	7		Purchased surfboards and wetsuits from Surf Imports for $17,000 on terms of 10/10, n/30.
	8		Returned some protective gear to Excitement Plus that was faulty and received an adjustment note (credit note) from them for $180.
	9		Credit sale to Serious Fun of skateboards and protective gear for $4,200 (cost of sales $1,720). This customer was given terms of 5/10, n/30.
	11		Paid Surf Imports the amount owing to them less the prompt payment discount.
	12		Credit sale to Surfing World of various inventory items for $6,760 (cost of sales $3,240). Terms net 30.
	13		Cash purchase of stationery from Officeworks for $270.
	14		Credit sale to Academy Diving School of 15 wetsuits at a discounted price of $230 each on terms of net 15. Cost of sales $2,300.
	18		Received a cheque from Serious Fun for the amount owing by them after deducting the prompt payment discount.
	19		Cash sale of inventory to the value of $800 (cost of sales $340).
	20		Issued an adjustment note (credit note) to Academy Diving School for 1 wetsuit at $230 each that was not the size they required. The cost of the wetsuit to us was $180 and it was put back into inventory.
	24		Paid Excitement Plus $5,100 of the amount owing to them.
	25		Credit sale to Serious Fun of skateboards for $6,300 (cost of sales $2,700). Terms 5/10, n/30.
	26		Purchased wetsuits from Surf Imports for $5,800 on terms of 10/10, n/30.
	27		Received and banked a cheque from Academy Diving School for the amount owing by them.
	30		The owner cashed a cheque for $1,820 to pay wages to Scott Walker the sales assistant of $900 less PAYG Withholding of $40, and $960 drawings for himself.

Journalise the June transactions.

(Note: Enter debit entries first, followed by credit entries in the general journal. Credit account titles are automatically indented when the amount is entered - do not indent manually. Leave blank any answer fields that do not require an answer. Enter accounts on the same date in descending amount order. If there is more than one account on either the debit or credit side related to the same transaction, record these in descending amount order.)

Answer 1

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Skate ‘n’ Surf	Journal Entries
Date	Account	Debit ($)	Credit ($)
1-Jun	Bank	24,600.00
	Capital		24,600.00
	(Being business started with cash.)
1-Jun	Shop Equipment	32,400.00
	Computer Equipment	4,400.00
	Bank		7,500.00
	Bank Loan		29,300.00
	(Being equipments purchased in cash and on loan.)
1-Jun	Insurance Expense	4,540.00
	Bank		4,540.00
	(Being Insurance Expense paid.)
2-Jun	Inventory	17,700.00
	Excitement Plus		17,700.00
	(being inventory purchased (skateboards and protective gear) from Excitement Plus for $17,700 on terms on net 30).
5-Jun	Advertising Expense	1,200.00
	Bank		1,200.00
	(Being Advertising Expense paid.)
6-Jun	Cash	420.00
	Sales		420.00
	(Being cash sale of a skateboard and protective gear.)
6-Jun	Cost of goods sold	185.00
	Inventory		185.00
	(Being Cost of goods sold adjusted from inventory)
7-Jun	Inventory	17,000.00
	Surf Imports		17,000.00
	(Being surfboards and wetsuits purchased from Surf Imports for $17,000 on terms of 10/10, n/30).
8-Jun	Excitement Plus	180.00
	Inventory		180.00
	(being some protective gear that was faulty was returned to Excitement Plus and received an adjustment note (credit note) of $180.)
9-Jun	Serious Fun	4,200.00
	Sales		4,200.00
	(Being credit sale to Serious Fun of skateboards and protective gear on terms of 5/10, n/30.)
9-Jun	Cost of goods sold	1,720.00
	Inventory		1,720.00
	(Being Cost of goods sold adjusted from inventory)
11-Jun	Surf Imports	17,000.00
	Bank		15,300.00	This is 90% of $ 17,000.
	Discount Received		1,700.00	This is 10% of $ 17,000.
	(Being Surf Imports were paid and discount received.)
12-Jun	Surfing World	6,760.00
	Sales		6,760.00
	(Being credit sale to Surfing World of various inventory items on Terms net 30.)
12-Jun	Cost of goods sold	3,240.00
	Inventory		3,240.00
	(Being Cost of goods sold adjusted from inventory)
13-Jun	Office Stationary	270.00
	Cash		270.00
	(Being Office Stationary purchased in cash.)
12-Jun	Academy Diving School	3,450.00
	Sales		3,450.00
	(Being credit sale to Academy Diving School of wetsuits on terms of net 15.)
12-Jun	Cost of goods sold	2,300.00
	Inventory		2,300.00
	(Being Cost of goods sold adjusted from inventory)
18-Jun	Bank	3,990.00		This is 95% of $ 4,200.
	Discount Allowed	210.00		This is 5% of $ 4,200.
	Serious Fan		4,200.00
	(Being payment received from Serious Fun and discount allowed.)
19-Jun	Cash	800.00
	Sales		800.00
	(Being inventory sold in cash.)
19-Jun	Cost of goods sold	340.00
	Inventory		340.00
	(Being Cost of goods sold adjusted from inventory)
20-Jun	Sales	230.00
	Academy Diving School		230.00
	(Being credit noted issued to Academy Diving School for 1 wetsuit.)
20-Jun	Inventory	180.00
	Cost of goods sold		180.00
	(Being Cost of goods sold adjusted from inventory)
24-Jun	Excitement Plus	5,100.00
	Bank		5,100.00
	(Being amount was paid to Excitement Plus on account.)
25-Jun	Serious Fun	6,300.00
	Sales		6,300.00
	(Being credit sale to Serious Fun of on Terms of 5/10, n/30.)
25-Jun	Cost of goods sold	2,700.00
	Inventory		2,700.00
	(Being Cost of goods sold adjusted from inventory)
26-Jun	Inventory	5,800.00
	Surf Imports		5,800.00
	(Being wetsuits purchased from Surf Imports on terms of 10/10, n/30.)
30-Jun	Cash	1,820.00
	Bank		1,820.00
	(Being cash withdrawn from bank.)
30-Jun	Wages	900.00
	PAYG Withholding		40.00
	Cash		860.00
	(Being wages paid in cash and withholding tax deducted.)
30-Jun	Drawings	960.00
	Cash		960.00
	(Being drawings made.)