PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY Tutorial Exercise Question 2 Tasek Biru Restaurant is a sole proprietorship. The following information was obtained from the book of the business as at 31 December 2021. Trial Balance as at 31 December 2021 RM RM Motor Vehicle 30,000 Machine 8,500 Building 50,000 Opening Inventory 6,000 Debtors 8,000 Creditors 12,000 Provision for depreciation: - Motor vehicle - Machine 3,000 1,500 Provision for doubtful debts 200 Cash in hand 20,000 Cash at bank 5,500 Salary 1,200 Returns 600 900 Discounts 500 800 Utility Bill 400 Rent 700 Sales and Purchases 6,000 10,000 Capital 95,000 43
PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY Additional information: i. Closing inventory at the cost price of RM7,000 and at the market price of RM6,500. ii. The depreciation rate for motor vehicles is 10% on cost and for machine, 5% on cost. iii. The provision for doubtful debts is 3%. iv. Utility bill is RM50. You are required to prepare: (a) Income Statement for the year ended 31 December 2021. (b) Balance Sheet as at 31 December 2021. 44
PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY CHAPTER 7 : ADJUSTMENTS 7.1 Introduction a. Financial statements are prepared based on the account balances in the trial balance. However, this data might have balances that require some adjustments. 7.2 Concepts of accruals and prepayments a. Adjusting entries are divided into several concepts: i. Accrued expenses ii. Prepayment expenses iii. Accrued revenues iv. Prepayment revenues 45
PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY b. Table 7.2.1 Shows Concepts Of Accruals And Prepayments As Summary Nominal accounts Definition SOCI SOFP Current Assets Current Liabilities Accrued Expenses Expenses that are not yet paid even though the goods were received or services were used + √ Prepayment Expenses Expenses that were paid for in the current accounting period but the goods or services will only be used in the following accounting period - √ Accrued Revenues Revenues not yet received, even though the service has been provided to the customer + √ Prepayment Revenues Money received in advance for services to be provided to the customers at a later date - √ Table 7.2.1 Shows Concepts Of Accruals And Prepayments 7.3 Bad debts a. Debts that are unable to collect from customers due to debtors death, mentally incapacitated, cannot be traced and declared bancrupt. b. Bad debts will represent loss to comprehensive income and recording under expenses in statement of comprehensive income (SOCI). 46
PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY c. If in “Additional information” state bad debts is unadjusted or written off, have to add (+) to the amount of bad debts in Trial Balance. 7.4 Bad debts recovered a. Debts repaid by debtors after the debts have been written off as a bad debts. b. Represent unexpected gain in statement of comprehensive income (SOCI). 7.5 Provision for Doubtful Debts (PFDD) a. An estimate of debts that are not expected to be collected. b. If in trial balance have provision for doubtful debt, compare with new PFDD that have been calculated. c. Provision for doubtful debt can be calculate using the following formula : PFDD = % of PFDD x [Debtors(TB figure) – Unadjusted bad debts (Additional info)] Table 7.5.1 Provision for doubtful debt formula 7.6 Depreciation method a. Depreciation is a reduction of the value of non current asset over its useful life. b.depreciation is the cost of assets that are considered as expenses. 47
PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY 7.7 Method of calculating depreciation a. There are two method of calculating depreciation according to the formula below: Straight line method Annual depreciation = Asset cost – scrap value Estimated useful life of an asset or Annual depreciation = % Provision of depreciation x Cost of asset Table 7.7.1 Straight line method formula Reduced balance method • Annual depreciation = % Provision of depreciation x Net book value of asset (beginning of the period) Table 7.7.2 Reduced balance method formula 48
PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY Tutorial Exercise Question 1 The following is the trial balance of Mimpi Kita Trading for the year 2021. Account Debit (RM) Credit (RM) Purchase and sales 132,158 223,345 Returns 5,791 6,759 Bank overdraft 8,999 Capital and drawings 5,340 17,000 Cash in hand 28,465 Discounts 3,730 5,484 Rents 1,847 2,689 Fixtures and fittings At cost 38,750 Accumulated depreciation 9,300 Motor vehicles At cost 67,830 Accumulated depreciation 27,130 Carriage inwards 2,746 Freight inwards 3,546 Trade receivable and payables 10,076 12,345 PFDD 520 Custom duty 673 Inventory 3,245 Insurance and rates 9,374 313,571 313,571 49
PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY Tutorial Exercise Additional information: a. Inventory on 31 December 2021 was valued RM2,252 at cost and 2,800 at market price. b. Rent revenue was accrued by RM153 c. Insurance prepayment by RM1,234 d. Provision for doubtful debts is increased by RM50 e. Motor vehicles depreciated at 15% at book value f. Fixtures and fittings depreciated at 12% at cost You are required to prepare: 1. Statement of Comprehensive Income for the year ended 31 December 2021. 2. Statement of Financial Position as at 31 December 2021. 50
PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY Tutorial Exercise Question 2 The following Trial Balance was extracted from the books of Bustaman café as at 31 December 2021. Trial Balance as at 31 December 2021 Account Debit (RM) Credit (RM) Stock as at 1 January 2021 12,500 Fixtures and fittings 2,700 Vehicle 16,000 Drawing 570 Debtors and creditors 14,500 7,522 Capital 25,000 Bank 4,893 Import duty 292 Return 630 Purchases and sales 50,570 88,673 Travelling expenses 5,600 Wages and salaries 6,400 Maintenance expenses 1,500 Stationary 439 Freight in 150 Insurance 651 Utilities 540 Rental expenses 3,260 121,195 121,195 51
PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY Tutorial Exercise Additional information: i. Stock as at 31 December 2021 is RM10,930 (cost) and RM11,250 (market value) ii. Prepaid utilities is RM135 iii. Accrued rental expenses of RM724 is for the month of December 2021 iv. The depreciation on vehicles is 10% per year using Straight Line Method v. The drawing of goods of RM320 for personal use was not recorded You are required to prepare: 1. Statement of Comprehensive Income statement for the year ended 31 December 2021. 2. Statement of Financial Position as at 31 December 2021. 52
PRINCIPLES ACCOUNTING FOR TOURISM & HOSPITALITY References Baker, J. W. (2017). 20th Century Bookkeeping and Accounting: A Treatise on the Principles of Accounting and Bookkeeping Practice Applied by Modern Bookkeepers and Accountants (Classic Reprint) (Hardback). Forgotten Books. (ISBN-13: 978-0-265-15470-0, ISBN: 0-265-15470-7) Kie, H. S., (2013). Fundamentals of Accounting. Oxford Fajar. (ISBN: 978-983-470351- 6). Misrun, E., and Shafie, S. Z. (2018). Principles of Accounting (1st Edition). Oxford Fajar. (ISBN: 978-983-47-2381-1)