Accrual Accounting

“Great Explorations” is a shop which sells hiking gear, including backpacks, hiking shoes and tents. It is owned and run by Nellie Bly. The following trial balance has been prepared at year end:


Debit ($) Credit ($)
Cash on Hand 12,500
Accounts Receivable 16,000
Inventory (30 June 2020) 32,500
Prepaid Shop Rent 24,000
Shop Shelving 120,000
Accum. Depreciation Shop Shelving 40,000
Bank Overdraft 6,000
Accounts Payable 9,300
N. Bly, Capital (1 July 2019) 141,700
N. Bly, Drawings 12,500
Sales 256,800
Sales Returns & Allowances 1,200
Discount Received 1,800
Cost of Sales 128,000
Sales Staff Salaries Expense 42,000
Advertising Expense 1,800
Discount Allowed 240
Freight Outwards 360
Interest Expense 1,400
Council Rates Expense 1,300
Administrative Salaries Expense 28,000
Rent Expense 32,000
Sundry Administration Expense 1,800
455,600 455,600


The following additional information is also provided for the year ended 30 June 2020:

  1. A physical stocktake of inventory as at 30 June 2020 revealed $31,000 on hand.
  2. Nellie has estimated that 6% of the 30 June 2020 balance of Accounts Receivable will never be collected from the customers.
  3. Sales staff salaries of $6,200 are still owed and have not been paid as at balance date.
  4. A tent with a sale price of $793 was delivered to a customer on 28 July 2020. The sale of this tent was recorded in the Sales account on the 28th June.
  5. The Shop Shelving is expected to have a useful life of five years and will then be sold for an estimated amount of $10 000.
  6. The Prepaid shop rent has been paid four months in advance and covers the rent until 31 July 2020.
  7. Nellie bought herself a pair of awesome Doc Marten boots from a local Op Shop for $45. She paid for the purchase using her personal bank account.
  8. $250 of the recorded sales represents cash received in advance from a customer on 16 June 2020 for a large pack of dehydrated meals for a 3 week hiking trip. The food pack will not be delivered to the customer until 10 July 2020.
  9. The council rates bill of $1 850 for the quarter ending the 30 June 2020 was received in the mail on 27 June 2020. The bill has not yet been recorded or paid.


  • Based on the information provided above, record any necessary adjusting journal entries.
  • Complete the Sales Staff Salaries Expense ledger provided below only.

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