How to Master the Keys In Kashato Shirts Practice Set: A Step-by-Step Guide
If you are a student of accounting, you may have heard of the Keys In Kashato Shirts Practice Set, a popular and comprehensive exercise that helps you learn the basics of accounting in a practical and realistic way. The practice set is designed by Win Ballada and Susan Ballada, authors of several accounting textbooks and reviewers. It simulates the operations of a shirt manufacturing and retailing business called Kashato Shirts, and requires you to record transactions, prepare financial statements, and analyze the results.
Keys In Kashato Shirts Practice Set
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But how do you master the Keys In Kashato Shirts Practice Set? How do you make sure that you complete it correctly and efficiently? How do you avoid common mistakes and pitfalls? And how do you use it to improve your accounting skills and knowledge? In this article, we will answer these questions and more. We will provide you with a step-by-step guide on how to tackle the practice set, from setting up your accounts to closing your books. We will also give you some tips and tricks on how to ace the practice set and impress your instructor.
What is the Keys In Kashato Shirts Practice Set?
The Keys In Kashato Shirts Practice Set is a manual accounting exercise that covers the entire accounting cycle for a merchandising business. It consists of 12 chapters, each representing a month of operations for Kashato Shirts. Each chapter contains a set of transactions that you need to journalize, post, adjust, and report. You also need to prepare a worksheet, a trial balance, an income statement, a statement of owner's equity, a balance sheet, and a statement of cash flows for each month. At the end of the year, you need to close your accounts and prepare a post-closing trial balance.
The practice set is designed to help you apply the accounting concepts and principles that you have learned in your FABM-1 and FABM-2 courses. It also helps you develop your analytical and problem-solving skills, as well as your attention to detail and accuracy. The practice set is graded based on your completeness, correctness, neatness, and timeliness.
How to Set Up Your Accounts
Before you start recording transactions for Kashato Shirts, you need to set up your accounts. This means that you need to prepare a chart of accounts, a general journal, a general ledger, and subsidiary ledgers for accounts receivable and accounts payable. You also need to label your worksheets and financial statements with the appropriate headings.
A chart of accounts is a list of all the accounts that are used by Kashato Shirts. It shows the account number, account name, account type (asset, liability, owner's equity, revenue, or expense), and normal balance (debit or credit) for each account. You can find the chart of accounts for Kashato Shirts in Chapter 1 of the practice set. You need to copy this chart of accounts on a separate sheet of paper or spreadsheet.
A general journal is a book where you record all the transactions for Kashato Shirts in chronological order. It shows the date, account names, account numbers, debit amounts, credit amounts, and explanations for each transaction. You can use a columnar journal or a narrative journal format for your general journal. A columnar journal has separate columns for date, account names and numbers, debit amounts, credit amounts, and explanations. A narrative journal has only one column for date and explanations, and uses indentation to show debit and credit amounts.
A general ledger is a book where you keep track of the balances of all the accounts for Kashato Shirts. It shows the account number, account name, date, transaction reference (journal page number), debit amount,
credit amount,
and balance for each account.
You can use a T-account or a four-column ledger format for your general ledger.
A T-account has two sides: the left side for debits
and the right side for credits.
A four-column ledger has separate columns for date,
transaction reference,
debit amount,
credit amount,
and balance.
A subsidiary ledger is a book where you keep track of the details
of individual customers or suppliers
for accounts receivable or accounts payable.
It shows the customer or supplier name,
date,
transaction reference,
debit amount,
credit amount,
and balance for each account.
You can use a T-account or a four-column ledger format
for your subsidiary ledger as well.
You need to prepare one general journal,
one general ledger,
one subsidiary ledger for accounts receivable,
and one subsidiary ledger for accounts payable
for Kashato Shirts.
You can use any format that you prefer,
as long as it is clear
and consistent.
You can use loose sheets of paper
or notebooks
for your journals
and ledgers.
You can also use spreadsheets
or accounting software
if allowed by your instructor.
You also need to label your worksheets
and financial statements with the appropriate headings.
A worksheet is a tool that helps you prepare adjusting entries
and financial statements.
It shows the trial balance,
adjustments,
adjusted trial balance,
income statement,
statement of owner's equity,
and balance sheet columns
for each month.
You need to write \"Kashato Shirts\",
\"Worksheet\",
and \"For the Month Ended (Date)\"
on top of your worksheet.
A financial statement is a report that summarizes
the financial performance
and position
of Kashato Shirts.
It includes an income statement,
a statement of owner's equity,
a balance sheet,
and a statement of cash flows.
You need to write \"Kashato Shirts\",
the name of the financial statement,
and \"For the Month Ended (Date)\"
or \"For the Year Ended December 31\"
on top of each financial statement.
How to Record Transactions
After you have set up your accounts,
you are ready to record transactions
for Kashato Shirts.
You need to follow these steps
for each transaction:
Identify the accounts affected by the transaction.
Determine whether each account is increased or decreased by the transaction.
Apply the rules of debit and credit to record the changes in each account.
Write the journal entry in the general journal using proper format.
Post the journal entry to the general ledger and subsidiary ledgers using proper format.
Let's look at some examples
of how to record transactions
for Kashato Shirts.
Example 1: Cash Sale
On October 8,
Kashato Shirts sold shirts worth P418,432 cash.
To record this transaction,
we need to follow these steps:
The accounts affected by this transaction are Cash
and Sales.
Cash is increased by P418,432
and Sales is increased by P418,432.
To increase an asset account like Cash,
we debit it.
To increase a revenue account like Sales,
we credit it.
The journal entry in the general journal is:
Date Account Names & Numbers Debit Credit
Oct 8 Cash (100) 418432
Sales (400) 418432
To record cash sale
The posting in the general ledger is:
Cash (100)
Date Ref Debit Credit Balance
Oct 8 J1 418432 418432
Sales (400)
Date Ref Debit Credit Balance
Oct 8 J1 418432 418432
How to Prepare Adjusting Entries
At the end of each month,
you need to prepare adjusting entries
for Kashato Shirts.
Adjusting entries are journal entries
that update the balances of some accounts
to reflect their correct values
as of the end of the accounting period.
They are necessary to ensure that
the revenue recognition principle
and the matching principle
are followed.
The revenue recognition principle states that
revenue should be recorded
when it is earned,
not when cash is received.
The matching principle states that
expenses should be recorded
when they are incurred,
not when cash is paid.
These principles ensure that
the income statement
shows the true net income or loss
for the period.
There are four types of adjusting entries
that you need to prepare for Kashato Shirts:
Accruals: These are entries that record revenues or expenses that have been earned or incurred but not yet recorded or paid.
Deferrals: These are entries that record revenues or expenses that have been received or paid in advance but not yet earned or incurred.
Depreciation: This is an entry that allocates the cost of a long-term asset over its useful life as an expense.
Bad debts: This is an entry that estimates the amount of uncollectible accounts receivable and records it as an expense.
You can find the information needed to prepare the adjusting entries for Kashato Shirts in Chapter 1 and in each subsequent chapter of the practice set. You need to follow these steps for each adjusting entry:
Identify the accounts affected by the adjustment.
Determine whether each account is increased or decreased by the adjustment.
Apply the rules of debit and credit to record the changes in each account.
Write the adjusting entry in the general journal using proper format.
Post the adjusting entry to the general ledger and subsidiary ledgers using proper format.
Let's look at some examples of how to prepare adjusting entries for Kashato Shirts.
Example 2: Accrued Interest
On September 1,
Kashato Shirts accepted a 90-day,
12% note receivable from Cardenas,
a customer,
for P240,000.
To record this transaction,
we made this journal entry on September 1:
Date Account Names & Numbers Debit Credit
Sep 1 Notes Receivable (110) 240000
Accounts Receivable - Cardenas (112) 240000
To record note receivable from Cardenas
At the end of September,
we need to record the interest earned on the note receivable,
even though it has not been received yet.
The interest for one month is calculated as follows:
Interest = Principal x Rate x Time
Interest = 240000 x 0.12 x 1/12
Interest = 2400
To record this adjustment,
we need to follow these steps:
The accounts affected by this adjustment are Interest Receivable and Interest Revenue.
Interest Receivable is increased by P2,400 and Interest Revenue is increased by P2,400.
To increase an asset account like Interest Receivable, we debit it. To increase a revenue account like Interest Revenue, we credit it.
The adjusting entry in the general journal is:
Date Account Names & Numbers Debit Credit
Sep 30 Interest Receivable (111) 2400
Interest Revenue (410) 2400
To record accrued interest on note receivable
The posting in the general ledger is:
Interest Receivable (111)
Date Ref Debit Credit Balance
Sep 30 J1 2400 2400
Interest Revenue (410)
Date Ref Debit Credit Balance
Sep 30 J1 2400 2400
Example 3: Prepaid b99f773239
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