Explain the purposes of the Purchases Journal and the Purchases Account. Your answer should include explanations...

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Explain the purposes of the Purchases Journal and the Purchases Account. Your answer should include explanations of the following points: (i) (ii) Are all purchase transactions entered into the Purchases Journal? Why are purchases of inventory entered into the Purchases Account and not in the Inventory account? (10 marks) In preparing his statement of profit or loss for his business for the month of April 2022, Daniel Chong decided to exclude credit sales during the month where he has not yet collected payment. He has decided to include these sales in the statement of profit or loss only when he receives payment from the customers. Required: Advise Daniel Chong as to whether his accounting treatment of credit sales in April 2022 is correct. State the relevant accounting concept that applies and explain how Daniel Chong should account for the sales. (10 marks) From his experience in past years, Misbun found that a small percentage of credit customers each year would default on their debts. This being the case, his accountant proposed that he provides an allowance for doubtful debts of 3% of total trade receivables on balance sheet date. However, Misbun disagrees and insists on showing the gross amount of trade receivables outstanding on the statement of financial position. He argues that he already reports bad debts in the statement of profit or loss. Required: Advise Misbun on the correct accounting treatment for his trade receivables. Explain clearly which accounting concept is relevant in this case and the reason for applying this concept. Explain the purposes of the Purchases Journal and the Purchases Account. Your answer should include explanations of the following points: (i) (ii) Are all purchase transactions entered into the Purchases Journal? Why are purchases of inventory entered into the Purchases Account and not in the Inventory account? (10 marks) In preparing his statement of profit or loss for his business for the month of April 2022, Daniel Chong decided to exclude credit sales during the month where he has not yet collected payment. He has decided to include these sales in the statement of profit or loss only when he receives payment from the customers. Required: Advise Daniel Chong as to whether his accounting treatment of credit sales in April 2022 is correct. State the relevant accounting concept that applies and explain how Daniel Chong should account for the sales. (10 marks) From his experience in past years, Misbun found that a small percentage of credit customers each year would default on their debts. This being the case, his accountant proposed that he provides an allowance for doubtful debts of 3% of total trade receivables on balance sheet date. However, Misbun disagrees and insists on showing the gross amount of trade receivables outstanding on the statement of financial position. He argues that he already reports bad debts in the statement of profit or loss. Required: Advise Misbun on the correct accounting treatment for his trade receivables. Explain clearly which accounting concept is relevant in this case and the reason for applying this concept.

Answer rating: 100% (QA)

1 The Purchases Journal and the Purchases Account are important tools in accounting for a companys purchases of goods or services The Purchases Journal is a subsidiary ledger that records all purchases made on credit typically from suppliers or vendors It is used to track purchases made by the business and helps in the timely recording of these transactions which reduces the chances of errors and omissions in financial statements The purpose of the Purchases Journal is to record all purchases on credit in a centralized place including information such as the date of purchase the name of the supplier the quantity and cost of items purchased and any applicable taxes Not all purchase ... View the full answer