stephanie alarico is the owner of divino coffee a specialty coffee machine business 357487

Aug 29, 2021 | Uncategorized

Divino Coffee

Background and Facts

Stephanie Alarico is the owner of Divino Coffee, a specialty coffee machine business she started two years ago. The business is registered for GST.

Stephanie sells 3 types of coffee machines that she purchases from manufacturers. She operates the business herself and employs one person full time to assist her. Stephanie also provides specialty barista training services to private clients on how to make perfect coffee. Divino Coffee uses a perpetual inventory system and uses FIFO (First In First Out).

Divino Coffee is operated from a rented premises and the business pays rent quarterly in advance.

Stephanie has a variety of clients with whom she has built up a strong relationship. She offers them terms of 2/10, net/30. Stephanie submits her Business Activity Statements (BAS) for GST monthly to the Australia Taxation Office on an accrual basis.

Currently, the business uses a manual accounting system but plans to test a MYOB accounting system in September.

Accounting Information

Divino Coffee uses the following specialised and general journals to record business transactions.

  • Sales Journal to record all invoices issued for sales of inventory
  • Sales Returns Journal to record all credit notes issued for returned inventory
  • Purchases Journal to record all credit purchases
  • Cash Receipts Journal to record all cash received
  • Cash Payments Journal to record all cash payments
  • General Journal to record all other transactions

Divino Coffee uses a general ledger in the form of a 4 column running balance (as described on page 78 79 of Horngren
7th edition). An Accounts Receivable and Accounts Payable subsidiary ledger is also used in this format.

Financial Statements are prepared at the end of each month, and the accounts are closed off at the end of each month.

All necessary pro formas are included and are to be used to complete the manual practice set for August. The assignment must be completed manually using the templates provided.

Chart of Accounts

Account Number Account Name Opening Balance
110 Cash at Bank 13,346
120 Accounts receivable 15,640
121 Allowance for Doubtful Debts 782
130 Prepaid Insurance
140 Prepaid Rent 3000
150 Office Supplies 950
160 Inventory 31,300
170 Office Equipment 14,340
171 Accumulated Depreciation – Office Equipment 9,170
180 Vehicle
181 Accumulated Depreciation – Vehicle
200 Accounts Payable 22,308
210 Unearned Revenue
220 Wages Payable 377
230 GST Clearing 1,045
240 PAYG Payable 880
250 Superannuation Payable 756
280 Bank Loan – Non current
300 Capital 43,258
310 Drawings
350 Income Summary
410 Sales Revenue
411 Sales Returns and Allowances
412 Sales Discounts
415 Services Revenue
420 Interest Revenue
500 Cost of Goods Sold
510 Advertising Expense
512 Bad and doubtful debts expense
515 Bank Charges
520 Depreciation Expense – Office Equipment
521 Depreciation expense – Delivery Van
530 Electricity and Gas Expense
540 Insurance Expense
550 Interest Expense
560 Office Supplies Expense
565 Rent Expense
570 Superannuation expense
580 Telephone and Internet Expense
590 Wages Expense

All account balances at 30th July are normal in