ACC106 ATMC Task 2 Assignment S1 2019 1 ACC106 ATMC Task 2 Assignment Business Scenario and Instructions 1 Stitches - Business Background 1.1 Introduction At 1 st June 2018, A Hepburn established a new proprietorship, Stitches, a GST-registered business that sells sewing machines to the general public. As well, the business provides a machine maintenance service. A Hepburn, sole proprietor, has quickly established a reputable business and has employed two staff members. A Hepburn is using Microsoft EXCEL software to maintain the accounting records of the business transactions during the month of June 2018, the last month of the Australian financial year. The business sources its stock from a number of suppliers. It currently sells three sewing machines: SWINGER Portable, TAILOR Deluxe, AUDREY Vintage
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ACC106 ATMC Task 2 Assignment S1 2019
1
ACC106 ATMC Task 2 Assignment Business Scenario and Instructions
1 Stitches - Business Background
1.1 Introduction
At 1st June 2018, A Hepburn established a new
proprietorship, Stitches, a GST-registered
business that sells sewing machines to the
general public. As well, the business provides a
machine maintenance service.
A Hepburn, sole proprietor, has quickly
established a reputable business and has
employed two staff members. A Hepburn is
using Microsoft EXCEL software to maintain the
accounting records of the business transactions
during the month of June 2018, the last month
of the Australian financial year.
The business sources its stock from a
number of suppliers.
It currently sells three sewing machines:
SWINGER Portable, TAILOR Deluxe,
AUDREY Vintage
ACC106 ATMC Task 2 Assignment S1 2019
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1.2 Accounting Policies
1.2.1 Stitches uses accrual accounting for recording transactions and adjustments.
1.2.2 Stitches uses a perpetual inventory system with weighted average.
1.2.3 Stitches prepares quarterly Business Activity Statements (BAS) and remits the net
GST liability due to the ATO in the month following the end of each quarter. (Note: as
this is a new business, A Hepburn has not yet prepared a BAS and has no liability at the
start of June.)
1.2.4 Stitches has the following depreciation policies:
• Furniture: depreciated over 8 years using straight line method (residual value
of $9 000)
• Technology Systems: depreciated using reducing balance method at the rate of
41.82% over 5 years ($2 000 residual value)
1.2.5 Stitches pays employee salaries on a weekly basis. Salaries are paid on the
Thursday for the previous week. They both work Monday to Friday. The manager
works on full time basis and the sales assistant is paid an hourly rate. PAYG tax is
withheld from their gross pay, and A Suit also contributes a regular amount from her
gross pay to a private health fund. Both employees receive employer superannuation
contribution at the rate of 9.5% of gross salary (before deductions), on top of their pay.
[The employees are being paid into the same superannuation fund through an online
portal (this means you can account for all superannuation together).]
1.2.6 Stitches records an allowance for doubtful debts that equates to 3% of Accounts
Receivable balance at the end of the year.
1.2.7 Stitches records all prepaid expenses as assets (prepayments), and then expenses
the portion used as end of year adjustments.
ACC106 ATMC Task 2 Assignment S1 2019
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2 Accounting System
2.1 Journal and Ledgers
Stitches uses the following journals, ledgers & records:
Cash Receipts Journal - to record all cash receipts of the business including cash
sales and cash received from debtors
Cash Payments Journal - to record all cash payments of the business including cash
purchases, cash payments to creditors
Sales Journal - to record all credit sales of Inventory
Purchases Journal - to record all credit purchases of Inventory & other items
General Journal - to record all other transactions not recorded in other
journals (eg adjusting entries & closing entries)
General Ledger - separate ledger accounts are maintained for each asset,
liability, equity, revenue and expense account
Inventory Record - used for tracking purchases, sales, on hand stock of
inventory
Subsidiary Ledgers - maintained for accounts receivable and accounts payable,
then reconciled against relevant general ledger accounts
2.2 The business prepares the following Financial Statements: