QCAA Accounting Complete accounting process for a sole trader business

This describes closing entries, which transfer temporary account balances to permanent accounts at the end of a period, rather than reversing entries.

Reversing entries do not create new accounts; instead, they reverse the effects of specific adjusting entries made at the end of the previous period.

Matching revenues and expenses to the correct period is the primary purpose of adjusting entries, whereas reversing entries are an optional step for bookkeeping convenience.

This answer incorrectly treats 'Accumulated depreciation' (＄6,800) as an expense. Accumulated depreciation is a contra-asset account on the balance sheet, whereas only the current period's 'Depreciation' (＄3,400) should be deducted as an expense.

This result likely stems from calculating profit without the depreciation expense (＄46,000) and then incorrectly subtracting the accumulated depreciation balance (＄6,800) instead of drawings.

This figure represents the Net Profit (＄42,600) but fails to account for Drawings. Drawings (＄4,500) represent a withdrawal of capital by the owner and must be subtracted from Net Profit to find the final increase in owner's equity.

An inventory shortage represents a loss of assets, which is recorded as an expense. Expenses decrease net profit rather than increasing it.

Inventory shortages are expenses that decrease net profit. Additionally, the profit and loss statement records amounts exclusive of GST.

While the shortage decreases profit, the expense must be recorded exclusive of GST. The $＄600$ GST component is adjusted in the GST Clearing account (Balance Sheet), leaving only a $＄6,000$ reduction in net profit.

This amount is incorrect. It likely results from miscalculating the difference between the bad debts written off and the opening provision (＄8,000 - ＄5,000), rather than calculating the total adjustment required to reach the target balance.

This option incorrectly calculates the adjustment as simply the difference between the target provision (＄9,000) and the opening balance (＄5,000). It fails to account for the ＄8,000 in bad debts that must be covered by the provision.

This is the target closing balance for the provision ($20\% \times ＄45,000 = ＄9,000$), not the journal entry amount required to achieve that balance.

Drawings represent a withdrawal of equity and are closed directly to the Capital account (or Retained Earnings), not the Profit or Loss Summary.

Asset accounts are permanent (real) accounts; their balances carry forward to the next accounting period and are not closed.

The Profit or Loss Summary account represents net income or loss and is closed to the Capital account (or Retained Earnings) to update equity, not to the Cash account.

This option incorrectly records the GST-inclusive amount in the Inventories account and credits the GST Clearing account. Inventory should be recorded at the exclusive cost (＄13,000), and GST on purchases is a debit (input tax credit).

This option reverses the correct entries for assets and liabilities. Purchasing inventory increases assets (Debit Inventories) and increases liabilities (Credit Accounts Payable), whereas this option credits Inventories and debits Accounts Payable.

This option incorrectly credits the asset account and debits the liability account. An inventory purchase requires a debit to Inventories to reflect the asset increase and a credit to Accounts Payable to reflect the debt.

If an adjustment note is issued for damaged goods upon arrival, it typically implies a return to the supplier, which would debit Accounts Payable rather than an internal Inventory Adjustment expense account.

Receiving inventory increases the asset balance, which would require a Debit to the Inventories account, whereas the provided journal entry shows a Credit.

Recording a sales return involves returning goods to stock, which increases the inventory balance and requires a Debit to the Inventories account, not a Credit.

This option incorrectly records the withdrawal as an Operating expense; personal use of assets is a reduction of equity, not a business expense. Furthermore, it credits Drawings, which should be debited to reflect the owner taking value out of the business.

This option incorrectly credits Operating expenses. Since the paint was taken from the business's existing stock, the credit must be to the Inventories account to reduce the asset balance, rather than reducing an expense account.

This option reverses the correct logic. It debits Inventories, which increases the asset account, but the inventory is actually leaving the business. It also incorrectly credits Drawings, which should be debited.

Reversing entries are non-cash journal entries that adjust accrual and nominal accounts; they do not directly affect the Bank account balance.

The reversal of accrued commission involves debiting the revenue account (Dr Commission Revenue), which decreases the revenue recognized in the current period to prevent double counting when cash is received.

Reversing entries are accounting adjustments made at the start of the period and do not involve actual cash transactions, so they do not impact operating cash outflows.

This entry incorrectly reverses the accounting treatment. To record accrued interest, the asset (Accounts Receivable) must be debited to increase the balance, and Interest Revenue must be credited.

This option calculates the interest for a full year ($＄56,000 \times 0.04 = ＄2,240$). The amount must be prorated for the 3-month period by multiplying by $\frac{3}{12}$.

This option incorrectly calculates the interest for a full year instead of three months and reverses the debit and credit entries.

While the calculated amount (＄594.25) is correct, the journal entry is reversed. Revenue accounts have a credit balance, so they must be debited to close them, not credited.

This option presents an incorrect total amount. The correct figure is ＄594.25, calculated by adding the ＄34.25 commission earned in the current quarter to the existing ＄560 balance.

This option incorrectly adds the full sales value (＄137) to the balance instead of the 25% commission portion, and the journal entry direction is reversed.

This entry incorrectly reverses the debit and credit. Paying a bill decreases the asset Cash at bank (requiring a Credit) and increases Drawings (requiring a Debit).

This option incorrectly separates GST. A business cannot claim GST credits (input tax credits) for private expenses; therefore, the GST component must be included in the total Drawings figure, and the Cash at bank credit should reflect the full payment of ＄1,100.

This option violates the accounting entity assumption by recording a private cost as a business expense (Electricity). Additionally, GST credits cannot be claimed on private expenses.

This calculation incorrectly subtracts the sales value of the return (＄1,200) instead of adding the cost price. The calculation performed was likely $8,700 + 3,500 - 1,200 - 250 = 10,750$.

This result incorrectly subtracts the sales value of the return (＄1,200) and adds the inventory shortage (＄250). Inventory shortages must be subtracted as they represent a loss of assets.

This calculation incorrectly subtracts the cost of the returned goods (＄400) and adds the inventory shortage (＄250). A sales return increases inventory (add cost), while a shortage decreases it (subtract).