What is the answer
BKAN1013 BASIC ACCOUNTING
PART B
QUESTION 1 (50 MARKS: 3 HOURS)
On 1 January 2020, Mr Jovid had invested RM150,000 in cash to start a business of Sport & recreation. The nature of the business is a wholesaler of sport and recreations equipment. The company begin the operation as a supplier in Klang Valley area. The business was registered as USAHAM Sport & Recreation Sdn Bhd.
Mr Jovid closes the company’s accounts every month and applies perpetual inventory system in maintaining its inventories. The balances of the company’s accounts as at 31 October 2020 are as follows:
| ACCOUNTS | RM |
| Cash | 66,500 |
| Accounts receivable | 15,700 |
| Merchandise inventory | 24,000 |
| Store supplies | 3,200 |
| Prepaid insurance | 3,600 |
| Store equipment | 45,000 |
| Vehicle | 75,000 |
| Notes payable | 25,000 |
| Accounts payable | 58,000 |
The following transactions were completed in November 2020:
| Date | Transactions |
| Nov 1 | Purchased merchandise from Ali BB Company, RM15,000, FOB shipping point, terms 3/10, n/30. The transportation cost of RM200 was paid to the transportation company. |
| Sold merchandise to Moo Yee Enterprise, RM20,400, term 3/10, n/30, FOB shipping point. The cost of the merchandise, RM12,300. The transportation cost incurred was RM150. | |
| Received credit memo from Ali BB Company for the merchandise returned, RM500. | |
| Paid advertising expense, RM690. | |
| Paid Ali BB Company in full. | |
| 10 | Sold merchandise to Union Club & Recreation on credit, listed price, RM35,000, trade discount 10%, credit term 2/10, n/eom and FOB destination. The cost of the merchandise, RM22,000. |
| 12 | Purchased merchandise from Mee Loo, RM5,000, term 2/10, n/30 and FOB destination. The transportation cost was RM200. |
| 14 | Paid transportation cost for sales on 10 Nov, RM250. |
| 17 | Allowed credit to Union Club & Recreation for the merchandise returned, RM500. The merchandise cost was RM240. |
| 20 | Received full payment from Moo Yee Enterprise. |
| 23 | Sold merchandise for cash RM5,000 which had a cost of RM2,300. |
| 28 | Paid utility expense, RM300, salary expense, RM2,500 and miscellaneous expenses, RM650. |
| 29 | Paid RM5,000 cash for notes payable due. |
The following adjustments are to be made at the end of the month:
1. Store equipment and vehicle were bought on 1 February 2020 and no depreciations have been recorded. The annual depreciation rate for both assets is 10%.
2. A check on store supplies showed a balance of RM1,500 at the end of the month.
3. Utility expense accrued RM700.
4. On 1 January 2020, the company paid in advance, RM3,600 for insurance covering 3 years from January to December 2022.
REQUIRED
(a) Journalize all the transactions occurred in Nov 2020 by using net method.
(10 Marks)
(b) Post all cash transactions to Cash Account at 30 Nov 2020.
(4 Marks)
(c) Prepare the unadjusted trial balance as at 30 Nov 2020.
(5 Marks)
(d) Prepare the adjusting entries for the month of Nov 2020.
(10 Marks)
(e) Prepare the adjusted trial balance as at 30 Nov 2020.
(7 Marks)
(f) Prepare the Statement of Profit or Loss for the month ended 30 Nov 2020.
(4 Marks)
(g) Prepare the Statement of Financial Position as at 30 Nov 2020.
(5 Marks)
(h) Explain 5 (FIVE) benefits of Perpetual Inventory system
(5 Marks)
END OF QUESTION
1. Quick valuation of closing stock:
On account of continuous stock taking, the value of closing stock can be known at any time during the year.It greatly facilitates the preparation of profit and loss account and balance sheet at the end of the financial period.
2. Lesser investment in materials:
By introducing a system of perpetual inventory control, a regular check on the receipt and issue of materials and stores is undertaken. This considerably reduces the investment in materials and storages expenses are also minimised.
3. Helpful in formulating proper purchase policies:
A storekeeper can easily know the time when the quantity of materials will be required by each department of the factory (as various levels of each type of material are clearly determined). All this information is very useful in formulating proper purchase policies.
4. Immediate detection of theft and leakages etc:
With the help of a properly planned system of perpetual inventory control, wastages, leakages and thefts of materials are at once brought to light and causes for such discrepencies can be known without delay,
5. Adequacy of working capital:
The system ensures an effective control over the storing, issuing and using of materials. This leads to avoidance of unnecessary locking up of capital in stock. This makes available adequate supply of working capital which can be applied in other profitable spheres of the concern.
6. Beneficial in ascertaining efficiency of stores organisation:
Perpetual inventory control system acts as an important instrument to ascertain efficiency and working of stores in a production undertaking as it ensures continuous check on the working and operations of stores. Besides the above mentioned advantages, a proper system of perpetual inventory control ensures many other advantages viz., ensuring timely replenishment of fresh stock (materials), stores records are maintained up-to-date, fixing percentage of normal loss by exercising strict control over wastages and losses. Moreover, business operations need not be closed on account of yearly stock taking.
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