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The objective of this Accounting practice set is to provide students with an insight into the process of recording transactions, completing adjusting and closing entries, and preparing financial statements for a retail business.

Company Background

Salzbruck Musical Instruments Pty Ltd has been in business in Sydney since July, 2012. The company was started by William Jacques and operates a shop which sells musical instruments on a wholesale basis to other businesses on credit and cash terms. The company’s share capital consists of 1,134,000 ordinary shares, issued at $1 each, that are owned by various members of the Jacques family. The company employs a combination of both sales and administration staff to operate the business.

Accounting System Information & Procedures

The company has a financial year end of 30 June and prepares adjusting entries at the end of the financial year.   To ensure efficiency of its accounting procedures, the company uses the following Special Journals to maintain its accounting records:

  1. Sales Journal (SJ): to record all sales of inventory on credit
  1. Purchases Journal (PJ): to record all purchases of inventory on credit
  1. Cash Receipts Journal (CRJ): to record all cash receipts
  1. Cash Payments Journal (CPJ): to record all cash payments
  1. General Journal (GJ): to record all transactions other than the


Business transactions are recorded for Salzbruck Musical Instruments on a daily basis in one of these five journals in the accounts.

Additionally, the company maintains a general ledger to record postings from the journals.  Subsidiary Ledgers are used to record the separate details of Accounts Receivable and Accounts Payable.  Transactions are posted immediately to the relevant ledger account if they are entered  into the general journal, the “other” column of the Cash Receipts Journal or Cash Payments Journal, or if they affect any of the Accounts Receivable or Accounts Payable subsidiary ledger accounts.  Apart from these transactions, totals of the special journals are taken at the end of the month and then posted to the appropriate accounts. The company uses a periodic inventory system.

In practice, the company would be required to collect and pay Goods and Services Tax (GST) on its sales and purchases. However, for the purposes of this exercise, GST has been excluded.

Please Note: All amounts in this practice set should be rounded to the nearest dollar.



            As at 31 May 2018

Acc. No. Account Debit ($) Credit ($)
100 Cash at Bank 614,628
101 Accounts Receivable Control 238,140
102 Store Supplies 151,011
103 Inventory 781,200
104 Prepaid Store Rent (paid 1 March 2018) 739,620
105 Prepaid Insurance (paid 1 Nov. 2017) 11,340
150 Showroom Fittings 510,300
151 Accumulated Depreciation-Showroom Fittings
160 Equipment 173,250
161 Accumulated Depreciation – Equipment 85,050
200 Accounts Payable Control 153,594
201 Interest Payable
202 Utilities Payable
203 Wages Payable
204 Salaries Payable
205 Tax Payable
206 Dividend Payable
250 Mortgage Loan (due 31 July 2042) 606,942
300 Share Capital 1,134,000
301 Retained Profits (1 July 2017) 963,522
302 Dividends Declared
303 Profit and Loss Summary
400 Sales Revenue 4,045,734
401 Sales Discounts (Discount Allowed) 31,059
402 Sales Returns and Allowances 8,757
500 Purchases 1,926,855
501 Purchase Discounts (Discount Received) 24,192
502 Purchase Returns and Allowances 10,143
600 Freight-Out 2,898
601 Wages Expense – Sales Staff 968,121
602 Depreciation Expense – Showroom Fittings
603 Depreciation Expense – Equipment
604 Supplies Expense
605 Rent Expense
606 Insurance Expense
607 Advertising Expense 43,848
608 Interest Expense
609 Utilities expense 58,464
610 Tax Expense
611 Sundry Expenses 3,024
612 Salaries Expense – Office Staff 760,662
613 Bad Debts Expense
7,023,177 7,023,177




Schedule of Accounts Receivable

As at 31 May 2018

Note: Salzbruck Musical Instruments offers all customers Credit Terms 2/10, n/30, unless otherwise stated


Acc. No. Account Invoice date Amount ($)
101-1 Amadeus Cellos 27 May 95,256
101-2 Bach Guitars 16 May 48,132
101-3 Chopin Pianos 23 April 65,142
101-4 Ludwig Trumpets 11 May 29,610



Schedule of Accounts Payable

As at 31 May 2018



Acc. No. Account Invoice date Credit terms Amount ($)
200-1 Schubert Synthesisers 29 May 2/10, n/60 43,470
200-2 Wagner Violins 22 May 1/10, n/45 110,124



For June 2018


Date Transaction
Week 1
June 1 Amadeus Cellos paid the entire balance of its account that was still outstanding.
Delivered goods to Bach Guitars for $68,292 and issued invoice #910. Issued cheque #153 to pay $7,560 for delivery costs of inventory to their premises.
June 3 Paid the amount owing to Schubert Synthesisers. Cheque #154 was sent.
June 4 Total Cash Sales for the week were $19,278.
Week 2
June 8 Chopin Pianos Store paid $27,342 toward the amount it owes us.
June 9 Made a purchase from Wagner Violins for $58,590 for boutique lighting: Terms are 1/10, n/45 and date of invoice was 8 June.
The firm issued cheque #155 for the purchase of store supplies amounting to  $5,544.
June 10 Amadeus Cellos purchased inventory of $68,796. Invoice #911 was issued.
June 11 Some of the boutique light fittings purchased on 7 June from Wagner Violins were the wrong design. Returned inventory in exchange for a Credit Note of $18,900.
June 12 Total Cash Sales for the week were $26,334.
Week 3
June 15 Purchased inventory from Schubert Synthesisers for $96,390. The invoice was dated 14 June. Credit terms are 2/10, n/30.
June 16 Sold inventory to Chopin Pianos for $124,362 on invoice #912. Issued cheque #156 to pay for delivery costs of $9,450.
June 16 Paid office staff salaries of $73,458. Cheque #157 was issued for payment.
Cheque #158 was issued to pay sales staff wages, $62,370.
June 18 The company issued cheque #159 to pay the amount still owing to Wagner Violins.
June 19 Total Cash Sales for the week were $25,011.
                                                          Week 4
June 22 Chopin Pianos returned $23,562 of inventory purchased on 14 June. Issued a Credit Note for the transaction.
June 23 Issued cheque #160 for $12,600 to pay for the annual gift the company donates to the Smith Family Charity Fund. The gift is to be recorded as a sundry expense in the accounts.
June 24 Purchased inventory from Wagner Violins, worth $93,870. The terms were 1/10, n/45. Date of the invoice was 22 June.
June 25 Received the total amount owing from Chopin Pianos.
June 26 Total Cash Sales for the week were $39,312.
Week 5
June 28 Bach Guitars paid the entire balance of its still outstanding account.
June 29 Reduced $75,600 of the amount owing to Wagner Violins and Cheque #161 was issued.
June 29 A dividend of $177,100 was declared to the company shareholders. However, the dividend will not be paid until September 30, 2018.
Paid sales staff wages, $62,370 and Cheque #162 was issued to meet the payment.
June 30 Issued additional shares to the owners of the Company for cash, and $126,000 was received and banked.
Total Cash Sales for the week were $23,436.


  • Enter the transactions on pages 8-9 into the appropriate Journal for the month of June 2018, Remember to post Journal transactions to the ledger accounts as specified in the “Account System Information” section of the introduction.
  • Total all Special Journal columns and post to the appropriate ledger account at the end of the month.
  • Prepare the unadjusted Trial Balance as at 30 June on the worksheet provided.
  • Prepare the adjusting entries shown on page10 in the General Journal and post to the relevant ledger accounts. The enter the adjustments in the relevant worksheet columns and prepare an adjusted Trial Balance.
  • A stocktake on 30 June 2018 indicates that the balance of closing inventory is $1,416,492. Use this information to complete the remaining columns of the worksheet.
  • Use the worksheet to prepare the Income Statement and Balance Sheet.
  • Complete the Schedule of Accounts Receivable and Schedule of Accounts Payable. Ensure the balances agree with the totals in the control accounts.
  • Prepare closing entries and post to the relevant general ledger accounts.
  • Complete the post-closing Trial Balance as at June 2018.



a) The Showroom Fittings were installed on 1 July, 2017. They have a useful life of 9 years and no salvage value.

b) The Equipment was installed on 1 July, 2012. They have a useful life of 10 years and estimated salvage value of $3150.

c) Twelve months of store rent was prepaid on 1 March, Of the original prepaid amount, $246,537 worth of store rent has now expired.

d) A count of store supplies indicates that $85,365 remain on hand at year

e) A one-year insurance policy was purchased on 1 November 2017 for $11,340.

f) Interest on the ANZ Bank Loan is charged at 7% per annum and is paid annually on 1 August (the interest expense should be rounded off to the nearest dollar). The ANZ Bank Loan was originally taken out on the 1 August, 2017.

g) The company has been informed that Ludwig Trumpets has been declared bankrupt and Salzbruck Musical Instruments Pty Ltd has agreed to write off the amount owing as a bad The company uses the direct write-of method to account for any bad debts in the books.

h) A telephone bill for $6,426 for June was received on 4 July, 2018. The amount has not yet been recorded. The company records them as a utilities

i) Office Staff are paid once per month, $73,458. The Office Staff were last paid on the 15 June, Exactly half of one month Office Staff wages are still owing.

j) Sales Staff are paid fortnightly and work 7 days per week. The sales staff were last paid on the 29 June, One day of the wages bill is still owed to the Sales Staff.

k) The estimated Tax Payable for the year ended 30 June, 2018 is $86,400. This amount is to be paid on 31 October, 2018.



Complete the Salzbruck Musical Instruments Pty Ltd Accounting Practice Set.


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