GREEN CAMPUS ENTERPRISE IV

INTRODUCTION The objective of the Green Campus Enterprise IV practice set is to expose the students to a real-world simulation of maintaining set of books for the accounting information system of a small retail and service business. The practice set emphasizes the activities performed during the accounting cycle. The student will become familiar with:

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Business transaction Analyzing business transactions and recording them in appropriate accounting journals and records. Posting to the general ledger and subsidiary accounts receivable and accounts payable ledgers. Preparing financial statements Closing the accounting books.

This practice set integrates the business events, accounting concepts, procedures, and records covered in the account cycle chapters of Principles of Accounting texts. The student will find that preparation of this practice set will reinforce the concepts and procedures learned in each of these chapters. It provides an excellent way to see how they are all brought together to generate the accounting information that is essential in assessing the financial status and operations of a business firm. BUSINESS BACKGROUND Green Campus Enterprise IV is a retail store selling campus T-shirt and a wide range of campus product. The product line include batik printed T-shirt, campus apparel, and campus souvenirs. It also supply made-to-order articles for its customers. It was started as a sole proprietorship by Mr. Amir three years ago after his graduation from Universiti Utara Malaysia and now has several employees. The shop is located near the campus and university students account for 70% of total customers. The business is open five days a week from 9:30 am to 8:30 p.m., Sunday through Thursday. Green Campus Enterprise IV is a very successful business and enjoys an excellent reputation for quality product and services. Mr. Amir is concerned about competition from other low price shops around the campus. He would like to spend more time identifying marketing strategies and promoting quality product to his customers. While a student at Universiti Utara Malaysia, Mr. Amir took one accounting course. Green Campus Enterprise IV do not have any accounting record, even though the owner has a good understanding of basic accounting principles and knows the importance of maintaining a good accounting records. You have been hired as of 1 February to assist to set up his accounting records and also in maintaining the complete set of accounting records for the business. Mr Amir want the book to be closed at 30 June 2012 and a complete set of financial statements prepared. You will begin keeping records for the months of April through June 2012. Even though Green Campus Enterprise IV never have any accounting record, but Mr Amir keep all related documents concerning the business. Your first duty is to set up the accounts and find the balance of the related accounts as of 1 April 2012 and create a Statement of Financial Position (Balance Sheet) on that date. You are also to prepare a schedule of accounts receivable and accounts payable on 1 April 2012. The following information were extracted from the document kept by Mr Amir. Mr Amir started the business in April 2009 by investing RM100,000. The capital was given to him by his father after he graduated from Universiti Utara Malaysia. During his first year of business he suffered a loss of RM12,000, he decided to continue with the business and have to borrow from the bank to maintain his working capital. The bank approved his application for RM90,000 loan in March 2010 with 6% profit margin per annum. He has to pay back the loanin equal payment in five years, first payment due on 1 April 2010. For the year ending 31 March 2010 the net assets of the company increased by RM48,800, the company made a profit of RM55,544 in 2011 and made a profit of RM69,500 for the year ended 31 March 2012.

On 31 March 2012 the companys bank account showed a balance of RM21,280 and on the same date cash in hand amounted to RM2,000. En. Amir asked his staff to count and check all available items in the store. The following list was given to him which he passed it to you. Merchandise inventories amounted to RM129,540, Office Supplies RM1,935, Sales Supplies was RM4,485. There was a receipt for insurance paid on May 2011 for RM36,000 for three years insurance coverage starting on 1 June 2011. There were seven clients who maintained trading account with the company. Foremost Company still owed RM9,750 from purchased on 24 March 2012 through Invoice No. 1316. Good Start Company has two invoices not yet paid. Invoice No. 1312 dated 16 March totalled RM9,400 and Invoice No. 1320 dated 30 March for RM15,050. Good Choice Company has outstanding Invoice No. 1313 dated 15 March for RM8,550. Jihaty Enterprise has Invoice No. 1316 dated 18 March amounting to RM18,500 yet to be paid. Premier One has a totalled unpaid invoice of RM44,650, Invoice No. 1314 dated 17 March for RM24,550 and Invoice No. 1319 for RM20,100 dated 28 March. Zambian Company and Aisyah Enterprise has no outstanding balance. Green Campus Enterprise IV has outstanding balances with seven suppliers. The company still owed Synergy 2 Company for purchases on 27 March Invoice No. 5242 for RM12,600 and Invoice No. 5254 for RM10,500 dated 30 March. Northern Suppliers Invoice No. 3215 dated 27 March for RM12,600 is still outstanding. White Gold Company has not been paid for Invoice No. 1247 dated 18 March for RM23,400. Top Suppliers Inc. has a balance of RM14,200 from Invoice No. 2153 dated 26 March. Green Campus Enterprise has not paid Kudo Enterprise Invoice No. 7614 for RM6,000 dated 25 March. Blue Lagoon Company Invoice No. 2354 dated 26 March for RM14,700 and Global Partner Company for Invoice No. 1490 dated 22 March for RM7,650. The company as of 31 March has not paid the salaries of two employees for RM2,250. Interest on bank loan has not been paid for RM1,650. Office Equipment was bought in 2010 for RM78,150 has a five year useful life. Delivery Van was bought in early 2011 for RM92,580 with a five year useful live. The company use straight line depreciation method. ACCOUNTING INFORMATION SYSTEM The business employs a manual accounting system. List of business transaction provide the information that are to be recorded in the accounting records. The following accounting records are maintained: Journals

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Ledgers

Sales Journal Purchase Journal Cash Receipts Journal Cash Payments Journal General Journal

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General Ledgers Accounts Receivable Subsidiary Ledger Account Payable Subsidiary Ledger

ACCOUNTING POLICIES AND PROCEDURES You will record transactions daily from list of business transactions given that accompany this practice set. The companys major accounting policies are explained below and should be followed when recording transactions. Date of Entries. All transactions are assumed to have taken place on the date given for the transaction and should be recorded on the date given. Posting. Posting from the journals to the Accounts Payable Subsidiary Ledgers and Accounts Receivable Subsidiary Ledgers are made every week and posting to the General Ledgers are made at the end of the month.

Merchandise Inventory. The company uses the periodic inventory method. Sales. Sales of merchandise are made on credit and for cash. Credit terms are 2/10, n/30 for credit sales only. There are no cash discount on cash sales. Credit sales should be entered in the Sales Journal. Cash sales and receipt of cash should be recorded in the Cash Receipts Journal. All special orders from client if any should be should be charge for deposit and full payment are expected to be made when final delivery are made for the special orders. Deposits received from special orders should be recorded in the Unearned Revenue Account. Special Orders are considered as completed sales when delivered. Cash sales of merchandise should be recorded in the Cash Receipts Journal. Purchases. All Purchases of merchandise are on credit and recorded in the Purchase Journal. Credit terms are different for different suppliers. The terms are mentioned in the given transaction. Cash Receipts. All cash receipts are recorded in the Cash Receipts Journal. Cash payment are made by check are recorded in the Cash Payments Journal. Credit Memoranda. Credit memos issued by Green Campus Enterprise IV should be entered in the General Journal. Credit memos issued by suppliers should be entered in the General journal. NOTE TO STUDENT. This practice set is designed to stimulate a real-world environment as much as possible. But it does depart from accepted practice in certain instances in order to expose the student to as many activities as possible in the accounting cycle within a reasonable time frame. You should keep in mind the important internal control features that are desirable in improving the accuracy and reliability of the accounting system. You are responsible for maintaining all the accounting records for Green Campus Enterprise IV. Normally it is desirable to divide duties among several people for control purposes. However, you will be under direct supervision of Mr. Amir, the owner, who is familiar with the companys operations. It is common to post to the Accounts Receivable and Accounts Payable subsidiary ledgers on a daily basis, but you will post to the subsidiary ledgers once a week. Posting to the general ledgers will be made at the end of the month. Finally, it is not common for business to close their books each month. Green Campus Enterprise IV has a quarterly accounting period in order to give you the opportunity to perform all the activities in the accounting cycle.