BU6005 Introduction to Accounting - The Complete Academic Support Hub

Semester 1, 2020/2021
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Semester 1, 2020/2021
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Luxury line sells luxury bags, wallets, shoes and much more. It has been established on
1 January 2019. Luxury line adopts the calendar year as its fiscal year. Below is the
statement of financial position as at 30 November 2019:
Luxury line
Statement of Financial Position
30 November 2019

BHD	BHD
ASSETS
Non-current assets:
Building, net	295,417
Furniture, net	24,500
Machines, net	3,167
Total non-current assets	323,084
Current assets:
Inventory	17,050
Prepaid Insurance	166,500
Supplies	2,000
Trade receivables	5,116
Cash	20,000
Total current assets	210,666
Total Assets	533,750
Equity:
Capital	338,612
Non-current liabilities:
Long term borrowing	161,000
Total non-current liabilities
Current liabilities:
Salary payable	12,000
Trade payables	22,018
VAT Due	120
Total current liabilities	34,138
Total liabilities	195,138
Total Equity & Liabilities	533,750

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The following is the most recent chart of accounts for Luxury line Company:

101	Cash
102	Trade receivables
103	Account receivable
104	Prepaid rent
105	Prepaid insurance
106	Supplies
107	Short-term investments
108	Long-term investments
109	Furniture
110	Machines
111	Buildings
112	Land
113	Accumulated depreciation –Buildings
114	Accumulated depreciation – Machines
115	Accumulated depreciation – furniture
201	Loans
202	Long term borrowing
203	Salary payable
204	Trade payable
205	Account payable
206	Accrued interest payable
300	Capital
400	Sales
401	Sales return & allowance
402	Sales discount
500	Purchases
501	Purchases returns & allowance
502	Purchases discount
600	Fright in
601	Withdrawal
602	Rent expense
603	Salary expense
604	Depreciation expense
605	Travel expense
606	Advertising expense
607	Interest expense
608	Insurance expense

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Significant accounting policies
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is
provided on a straight-line/double declining basis over the estimated useful lives of the assets other
than freehold land which is deemed to have an indefinite life.

Depreciation Schedule
At 30 November 2019
Description of Assets	Estimated Useful Life	Depreciation Method	Residual value	Cost	Accumulated Depreciation	Book Value
Buildings	50 years	Straight Line	BHD 50,000	BHD 300,000	BHD 4,583	BHD 295,417
Furniture	5 years	Straight Line	–	BHD 30,000	BHD 5,500	BHD 24,500
Machines	5 years	Double Declining	–	BHD 5,000	BHD 1,833	BHD 3,167

Note: All non-current assets recorded in the Statement of Financial Position as at 30 November 2019 have
been acquired on 1 January 2019.
All amounts rounded to the nearest BHD.
VAT Accounting
The company was VAT registered in January 2019. The company charges VAT on their sales, recovers tax
on the purchases and expenses and settle the difference with the National Bureau for Revenue (NBR). The
company submits a tax return quarterly using the NBR’s online portal and makes the payment of the any
tax due by the last day of the month following the end of each tax period (quarter). The VAT due was fully
paid for the previous tax periods (from January to September 2019). The VAT due for the 4th quarter (from
October to December 2019) will be paid during January 2020. In case of excess of recoverable input tax,
the company can ask the NBR for a refund of this excess or carry forward this excess to its subsequent tax
periods.
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Additional Information related to Luxury line:
• On 1 December, Luxury line paid all the salaries due from last month
• On 1 December, Luxury line purchased furniture for cash with purchase price BHD 800, discount
BHD 50, transportation cost BHD 10. The furniture has 3 years life with no salvage value. It is being
deprecation at BHD 21 per month.
• On 4 December, Luxury line incurred BHD 700 of advertising cost on account.
• On December 5, Luxury line collected trade receivable from a customer BHD 350, the
accountant recorded it at BHD 250 instead of BHD 350.
• On December 16, the customer returned one Men’s leather wallet-Black sold on 13 December
Receipt no 1004.
• On 20 December, the owner of Luxury line withdrew cash worth BHD 2,500 from an official bank
account to purchase graduation gift for his son.
• On 24 December, the owner of Luxury line invested additional cash BHD 25,000.
• On 31 December, Luxury line obtained BHD 25,000 bank loan that must be repaid within 11
months.
• On 31 December, Luxury line purchased land for BHD 120,000 with BHD 20,000 as a down
payment and a 15-year mortgage for BHD 100,000.
• For the month of December 2019, Luxury line consumes a total of BHD 750 of electricity. Luxury
line received the bill on January 24, 2020.
• 31 December Accrued interest on long term borrowing BHD 4,830.
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Inventory ID	Description	Cost Per Unit	Quantity	Inventory Value
IN0001	Leather handbag – Black	300	15	4,500
IN0002	Leather handbag – Brown	300	15	4,500
IN0003	Men’s Leather wallet – Black	100	8	800
IN0004	Men’s Fabric wallet – Brown	50	10	500
IN0005	Women’s Leather wallet – Black	100	8	800
IN0006	Men’s Fabric wallet – Black	50	10	500
IN0007	Loafers shoes – Brown	170	10	1,700
IN0008	Sneakers shoes – Blue	80	15	1,200
IN0009	Sneakers shoes – Red	80	15	1,200
IN0010	Leather belt – Black	150	9	1,350
Luxury Line Inventory Count Sheet as at 30 November 2019

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INVOICE
AXA Insurance	Invoice No.: 1001
Invoice Date: 1 September 2019
Bill to:
Luxury Line
Manama
Kingdom of Bahrain
DESCRIPTION	AMOUNT
Insurance coverage for Luxury Line Building Coverage period: 1 September 2019 to 31 August 2020	BHD 222,000
Total	BHD 222,000
*Invoice was paid in full on 2 September 2019. Thank you for your business!

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Luxury Line Invoice Tracker
Invoice #	Invoice issue Date	Item	Q	Customer Name	Gross sale (Before tax and discount)	Trade Discount (5%)	Payment Due
1001	15-Dec-19	Men’s Leather wallet – Black	1	Ahmed	BHD 120	BHD 6	14-Jan-20
1002	25-Dec-19	Men’s Fabric wallet – Brown	1	Isa	BHD 220	BHD 11	25-Dec-19
1003	30-Dec-19	Women’s Leather wallet – Black	1	Sarah	BHD 320	BHD 16	29-Jan-20
Total	BHD 660	BHD 33
Note: Luxury Line charges 5% value added tax (VAT) on their net sales (sales after discount).

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BILL TO	Luxury line Company Manama Kingdom of Bahrain	SHIP TO	Luxury line Company Manama Kingdom of Bahrain	Invoice # 333
Invoice Date: 1 December 2019
Customer ID: 1122
Qty	Item	Units	Description	Discount %	Unit Price	Total
10	Desk, brown stained ash veneer 140×65 cm	BHD 50	BHD 500
Subtotal	BHD 500
VAT	BHD 25
Shipping	BHD 10
Balance Due	BHD 535

Homecentre
Tax Invoice
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R.R Stationers Manama Kingdom of Bahrain RECEIPT # 555 Date: 2-Dec-2019 THANK YOU FOR YOUR BUSINESS!	SALES RECEIPT
SOLD TO: Luxury line Manama Kingdom of Bahrain
QTY ITEM # DESCRIPTIONUNIT PRICELINE TOTAL1 Supplies BHD 100 BHD 100SUBTOTAL BHD 100SALES TAX BHD 5TOTAL BHD 105

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SALES RECEIPT
Luxury Line Manama Kingdom of Bahrain	Date:	13-Dec-19
Receipt #:	1004
Bill To:
Mr. Ali Adel
Manama
Kingdom of Bahrain
Quantity	Description	Unit price	Amount
2	Men’s Leather wallet – Black	BHD 120	BHD 240
Subtotal	BHD 240
Thank you for your business!	Subtotal	BHD 240
VAT	BHD 12
Total	BHD 252

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SALES RECEIPT
Luxury Line Manama Kingdom of Bahrain	Date:	23-Dec-19
Receipt #:	1005
Bill To:
Mr. Yousif
Manama
Kingdom of Bahrain
Quantity	Description	Unit price	Amount	Discount applied
1	Sneakers shoes – Blue	BHD 100	BHD 100	BHD 10
Subtotal	BHD 100	BHD 10
Thank you for your business!	Subtotal	BHD 90
VAT	BHD 4.5
Total	BHD 94.5

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Invoice
Luxury Line Manama Kingdom of Bahrain	Date:	20-Dec-19
Invoice #:	1006
Bill To:
Ms. Basma
Manama
Kingdom of Bahrain
Quantity	Description	Unit price	Amount	Discount applied
1	Sneakers shoes – Red	BHD 100	BHD 100	BHD 10
Subtotal	BHD 100	BHD 10
Thank you for your business!	Subtotal	BHD 90
VAT	BHD 4.5
Total	BHD 94.5

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Purchases tracker
Item	Seller	Tracking #	Q	Price	Freight In	VAT	Date ordered	Status	Payment Date
Leather handbag – Black	Fashion corner	P-100	1	BHD 300	BHD 10	BHD 15	1-Dec-19	Paid	1-Dec-19
Leather handbag – Brown	House of Fashion	P-303	1	BHD 300	BHD 10	BHD 15	3-Dec-19	Outstanding	3-Feb-20
Men’s Leather wallet – Black	Fashion corner	P-101	1	BHD 100	BHD 10	BHD 5	7-Dec-19	Paid	7-Dec-19
Men’s Fabric wallet – Brown	House of Fashion	P-304	1	BHD 50	BHD 10	BHD 2.5	10-Dec-19	Outstanding	10-Feb-20
Women’s Leather wallet – Black	Fashion corner	P-102	1	BHD 100	BHD 10	BHD 5	12-Dec-19	Paid	12-Dec-19
Men’s Fabric wallet – Black	House of Fashion	P-305	1	BHD 50	BHD 10	BHD 2.5	18-Dec-19	Outstanding	18-Feb-20
Loafers shoes – Brown	Fashion corner	P-103	1	BHD 170	BHD 10	BHD 8.5	20-Dec-19	Paid	20-Dec-19
Sneakers shoes – Blue	House of Fashion	P-306	1	BHD 80	BHD 10	BHD 4	22-Dec-19	Outstanding	22-Feb-20
Sneakers shoes – Red	House of Fashion	P-307	1	BHD 80	BHD 10	BHD 4	28-Dec-19	Outstanding	28-Feb-20
Leather belt – Black	House of Fashion	P-308	1	BHD 150	BHD 10	BHD 7.5	30-Dec-19	Outstanding	1-March-20

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Email Date 31 December 2019
Dear Accounting officer,
We have been informed by our store staff that the inventory count held today has revealed that we
have the following inventory on hand:
Please ensure that the preceding information is reflected correctly on the financial statements.
Best regards,
Financial Manager

• Leather handbag – Black 16 units

• Leather handbag – Brown 16 units

• Men’s Leather wallet – Black 7 units

• Men’s Fabric wallet – Brown 10 units

• Women’s Leather wallet – Black 8 units

• Men’s Fabric wallet – Black 11 units

• Loafers shoes – Brown 11 units

• Sneakers shoes – Blue 15 units

• Sneakers shoes – Red 15 units

• Leather belt – Black 10 units

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Required:
Task One: (LO 2, 3) (68 Marks)
Assuming the role of Luxury line accountants, refer to the preceding business documents and the
additional information to complete the accounting cycle to prepare the following end of 31 December
2019 financial statements:
– Statement of Profit or Loss
– Statement of Changes in Owner’s Equity
– Classified Statement of Financial Position
Note: show ALL required steps of the accounting cycle & round all your workings to the nearest BHD.
Task Two: (LOs 1, 2) (12 Marks)
Recently, two trainees joined Luxury line to assist in the accounting functions of the company. The
accounting manager requested you to describe to the new trainees the relevant elements of the
conceptual framework for financial reporting, including the qualitative characteristics of financial
information, underlying assumptions and recognition concepts.
Your manger requested you to prepare an email that links your theoretical explanation of the conceptual
framework for financial reporting to five accounting related examples you encountered during the
preparation of the financial statements in Task One. Word count: (1,000 words +/-10%).
Task Three: (LO 4, 5) (10 Marks)
The financial controller of Luxury line advised your accounting team to rely on the cash balance per books
for the purpose of preparing the financial statements. The financial controller is of the view that the
accounting system of the company is effective, and therefore it is not pivotal to carry out a monthly bank
reconciliation procedure. The financial controller stated that bank reconciliations may be performed every
year by the accounting employee who maintains cash balances or the assistant cashier because they are
more acquainted with cash related transactions.
You are required to evaluate the financial controller claims and assess whether his viewpoints are
reasonable. Your evaluation should include illustrative accounting examples and secondary references,
where appropriate. Word count: (800 words +/-10%)
Task Four: (LO 5) (10 Marks)
Teamwork is an essential employability skill in Luxury line. You are required to reflect on the whole team’s
performance throughout the preparation of financial statements, as part of the performance appraisal
system. The reflection should highlight the, accounting challenges, group dynamics and areas of
improvements for the team in the future. This reflection is requested by your line manager. Word count:
(700 words +/-10%).
End of Assessment

Couse Code & Title	BU6005 Introduction to Accounting
Assessment title	Assessment two
Assessment Type	Group Assignment: Case Study
Due Date	Thursday 24 December @11:59 PM
Weighting	35%
Learning Outcomes	1. Demonstrate a detailed knowledge of the foundational theoretical framework for accounting 2. Apply financial accounting principles in the accounting process and interpret outcomes for a business client 3. Prepare financial statements for a sole trader 4. Prepare cash book and bank reconciliation statements for a given business organization 5. Demonstrate appropriate use of workplace skills and technology
Submission Requirements	All parts are obligatory. Show all your workings and calculations. You are NOT permitted to use screenshots. All the answers should be typed using Word document format with the use of excel sheets to show your calculations. Use the standard cover page. Name your file as follow before submission: assessment 2 group leader first name _ ID for example Assessment 2 Moses_201805552. Submit assignment electronically via Moodle. Submissions should only be in Word doc with the use of tables. Dysfunctional groups: The purpose of the group work is to develop collaborative skills, a student who is unable to perform well in the group is not displaying these skills so, he /she will get a fail grade. The penalty for late submission will be decided by the head of school. Use APA 7th edition & abide by the assessment policies including academic honesty. Behave ethically and responsibly while conducting assessment tasks and avoid any action that would unfairly disadvantage another student. Notify your tutor as soon as possible if difficulties arise with timing, online access, availability of resources or other requirements of the task. Notify your tutor as soon as possible if difficulties arise in terms of substantial absences and apply for Special Assessment Consideration with the appropriate medical and/or other certificates.