0% found this document useful (0 votes)
2K views56 pagesFa Problem 2-4 Chapters
Financial Accounting a Managerial Perspective 6 e Compressed (1)
Uploaded by
ManuCopyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
0% found this document useful (0 votes)
2K views56 pagesFa Problem 2-4 Chapters
Financial Accounting a Managerial Perspective 6 e Compressed (1)
Uploaded by
ManuCopyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
/ 56
Audit commitice chair or independent director resignation: “he audit committee chair or
an independent director usually resigns only when they fundamentally disagree with the
management on a vital matte.
CEO resignation: CFOs may leave for justifiable reasons, such as better career health problems,
spouse's job, children’s education, less polluted city and so on. Sometimes they resign because
of a difference of opinion with the management over business decisions and financial reporting
matters
Conmravention of the law: Good citizens follow the law scrupulously. Run-ins with the police
ray indicate a fatal flaw in ones character. Persistent problems with the law enforcement
agencies, such as tax authorities, anti-corruption ot anti-money laundering agencies, of
regulators may be the proverbial tip of the iceberg. It is highly improbable that companies
that have suppressed tax ot paid bribes are holy when it comes to accounting
Promise of excenively bigh profitability: Companies in highly competitive industries must
saruggle to earn a decent profit. Monopolies are severely constrained by rules on profitability
So a business offering excessively high returns to investors should explain credibly where its
profits come from.
Payment problems: Persistent default in paying suppliers and employees may be a sign of sales
or profitability problems. Downgrading of credit rating is an important indicator of cash Row
mismatch or excessive debt.
High performance presure and buge financial incentives: Performance-based pay cuts both ways
In good times ic encourages people to do their best. In bad times it brings out the worst in
them. Companies thac award highly differentiated bonuses run the rsk of fraudulent reporting.
Lead indicators such as payment problems and aggressive organizational culture are particulary useful
in avoiding or substantially reducing the loss caused by fraud.
"The accounting equation states that at a given time, the sum of assets must equal the sum
of liabilities and equity: Assets = Liabilities + Equity. The equation helps us to understand the
effect of transactions.
There are four major financial statements:
+ The balance sheet presents an enterprise's assets, liabilities and equity.
‘+ The statement of profit and loss lists an enterprise's revenues and expenses
+The satement of changes in equity describes the changes in the components of equity.
+ The statement of cash flows lists the major items of cash receipts and cash payments
‘There is no specific form for the financial statements of proprietorship and partnership
businesses,
‘Companies must prepare their financial statements following the requirements of Schedule II
to the Companies Act
Key items in the financial statements are as follows:
Balance sheet: Assets: Non-current assets; Current assets
Balance sheet: Equity: Equity share capital; Other equity. Non-controlling interests
Balance sheet: Liabilities: Non-current liabilities; Current liabilities
Statement of profit and loss: Income: Revenue from operations; Other income
Statement of profit and loss: Expenses: Raw materials consumect; Employee benefits; Interest;
Depreciation and amortization; Tax
Statement of profit and los: Profit fr the period: Other comprehensive income; Comprehensive
‘© Statement of changes in equity: Equity share capital; Retained earnings; Other comprehensive
* Statement of eash flows: Operating activities; Investing activities; Financing activities
61 Recap
| Audit committee chair ov independent divector resignation, Ihe audit commie chair or
an independent str wy vesgon nly when they funamentlly disgee with dhe
‘management on a vital matter
CFO reset: CEOs nay let fo sible sons such as ber ere, eh roles
spouse's job, children’s education, les polluced city and so on, Sometimes they resign bec:
cof a difference of opinion with the management aver bu non
mat
ness decisions and financial reporting
© Contravention of the law: Good citizens follow the law scrupulously. Run-ins with the police
ray indicate a fatal flow in one’ character. Persistent problems with the law enforcement
agencies, such as tax authorities, anti-corruption or anti-money laundering agencies, or
regulators may be the proverbial tip of the iceberg. It is highly improbable that companies
thar have suppressed tax or paid bribes are holy when it comes to accounting.
= Promise of excesively high profitably: Companies in highly competitive industries must
struggle co earn a decent profit. Monopolies are severely constrained by rules on profitability.
So a business offering excessively high returns to investors should explain credibly where its
profits come from.
= Payment problems: Persistent default in paying suppliers and employees may be a sign of sales
or profitability problems. Downgrading of credit rating is an important indicator of cash flow
mismatch or excessive debt
© High performance pressure and huge financial incentives: Performance-based pay cuts both ways.
In good times it encourages people to do their best. In bad times it brings out the worst in
them, Companies that award highly differentiated bonuses run the risk of fraudulent reporting
Lead indicators such as payment problems and aggressive organizational culture are particularly useful
in avoiding or substantially reducing the loss caused by fraud.
= The accounting equation states that at a given time, the sum of assets must equal the sum
of liabilities and equity: Assets = Liabilities + Equity. The equation helps us to understand the
effect of transactions.
* There are four major financial statements:
‘+ The balance shect presents an enterprise's assets, liabilities and equity.
‘+ The statement of profit and loss lists an enterprise's revenues ancl expenses.
© The statement of changes in equity describes the changes in the components of equity.
+ The statement of cash flows lists the major items of cash receipts and cash payments.
= There is no specific form for the financial statements of proprietorship and partnership
businesses.
© Companies must prepare their financial statements following the requirements of Schedule IIL
to the Companies Act.
Key items in the financial statements are as follows:
Balance sheet: Assets: Non-current assets; Current assets,
Balance sheet: Equity: Equity share capital; Other equity. Non-controlling interests
Balance sheet: Liabilities: Non-current liabilities; Current liabilities
Statement of profit and loss: Income: Revenue from operations; Other income
Statement of profit and loss: Expenses: Raw materials consumed; Employee benefits; Interest;
Depreciation and amortization; Tax
+ Statement of profit and oss: Profit forthe period Other comprehensive income; Comprehensive
© Statement of changes in equity: Equity share capital Retained earnings; Other comprehensive
income
Statement of cask flows: Operating, activities; Investing activities; Financing activities te
Chapter 2 Financia stay
62
— ~
(Review Problem
On Ianuary 1, 20NX. Manohar started QualPholo Company. ‘The following, transactions 1h
turing the tit month
ested! 830,000 cash in the
phic: mater
typanys share capital (Shanes of FH gag
it, 29,000,
Manohar
Bought supplies of phot
Bought photographie equipment tor cash, 812,000,
Received fees for photographie services, £15,000,
Paid creditor for supplies, 85,000.
ext further $12,000 cash in the company's share capital,
tor servives, £19,000,
Is on ere
charges, €1,200,
1 ottigw rent, £2,500, and ele,
Paial dividends, 4,000.
Prepared the monthly payroll to be paid on February 1, £11,500,
Required
1. Analyze the ette
2. Prepare the b.
statement of
Solution to the Review Problem
L._Ftiget of transactions
ash flow:
ner
sory
conn
Ferny
rae
of these transactions on the accounting, eq
ance sheet, statement of profit and loss, sta
Jan 1 + 30,000
Balance 30,000
Jan. +9,000
Balance 30,000, 9,000
Jan. 5 = 12,000 +:12,000
Balance 18,000 9,000 72,000
Jan. 7 eae
Balance 9,000 12,000
Jon. 1B _
Batance 12,000
Jan. 18
Balance 40,000 9,000 12,000
Jan. oe
Balance 30,000 19,000 ~ 9,000 12,000
Jan, 3m
Balance 195000 ~ 9,000 12,000
jn 0
Balance 19000” 9,000 12,000
Jan, aI
Balance
ion,
ment of changes in equity anf
Aermouts in rapes
persis
ior
Fe
Equipment 62
Chapter 2 Financial St
( Review Problem
On January 1, 20XX, Manohar started QualPhoto Comp:
during the first month:
any. The following transactions 4.
y 8 tions tooy
Jan. Manohar invested %30,000 cash in the company’s share capital (shares of 2
Bought supplies of photographic materials on credit, 9,000.
Bought photographic equipment for cash, 212,000.
Received fees for photographic services, 715,000.
13 Paid creditor for supplies, %5,000.
18
Manohar invested further %12,000 cash in the company’s share capital,
22 Billed customers for services, 719,000.
7
Paid office rent, 2,500, and electricity charges, %1,200.
30 Paid dividends, 24,000.
31
Prepared the monthly payroll to be paid on February 1, 211,500.
Required
ane
10 eagy
x
1. Analyze the effect of these transactions on the accounting equation.
2. Prepare the ba‘ance
sheet, statement of profit and loss, statement of changes in equity
Statement of cash flows. :
Solution to the Review Problem
Effect of transactions
A
(amounts in ry
Bey
Trade
Brea ty lee
Socrates
errs
anats bere ( Review Problem
On January 1 20XX, Manohar started QualPhoto Company. The fllowing transactions ggg >
during the frst monty Pha
Jan. 1 Manohar invested 30,000 cash inthe company’s share capital (shares of tip cr
i y
2 Bought supplies of photographic materials on credit, %9,000.
5 Bought photographic equipment for cash, €12,000
7 Received fees for photogeaphic services, 215,000
13 Paid creditor for supplies, 85,000.
18 Manohar invested further €12,000 cash in the compeny’s share capital
22 Billed customers for services, £19,000
27 Paid office rent, 22,500, and electricity charges, 81,200.
30 Paid dividends, %4,000
31 Prepared the monthly payroll to be paid on February 1, 211,500.
Required
} Analyze the effect of these transactions on the accounting equation.
2, Prepare the balance sheet, statement of profit and loss, statement of changes in equiy
‘statement of cash flows. >
Solution to the Review Problem
1. Effect of transactions
(emounts jn py
ed
Cc Sy an arr Trade
Pees es
“9,000 0
a 12,000 +4000
Baie 36300 apg pm
mo» 00 9000
Bate” =
yo 13000 9000 12,000
ome 2 Te
ee 12,000 Review Problem
2, Financial statements
Panel A
QUALPHOTO
Balance Sheet, January 31, 20XX
Note In million
‘Assets
Non-current assets
Property, plant and equipment...
Total non-current assets
Current assets
Inventories. 2 9,000
Financial assets
Trade receivables 19,000
Cash. 32,300,
Total current assets... we 60,300
Total assets. 72,300
Equity and Liabilities
Equity
Equity share capital 3 42,000
ee
56,800
Current liabilities
Financial liabilities
‘Trade payables
Total current liabilities.
Total Tiailities 0m
Total equity and liabilities.
Panel B
eye)
Peden
Peete Dutesmame es
Note In € milion
Revenue from operations. 4 34,000
Total income. 34.000
Expenses
Employee benefits expenses
Other expenses. : 5
Total expenses .
Profit for the period.
63 SA caer crun Cue
poate cee umes
LO ma
Equity Share Retained 7
Capital Earnings
Balance, January 1, 20XX — >
42,000
Share capital issued.......... OT] Reval
Profit for the period a 80
Dividends... : =m om {6%
Balance, January 31, 20XX z eel 568%
Panel D
QUALPHOTO
Statement of Cash Flows
omen OL ages aD Od
In nalion
Cash flows from operating activities
Cash received from customers... een 15,000
Cash paid to suppliers and employees £8,700)
Net cash provided by operating activities... 300
Cash flows from investing activities
Purchase of equipment. (12,000)
Net cash used in investing activiti. (12,000)
Cash flows from financing activities
Proceeds from issue of share capital 42,000
Payment of dividends... (4,000)
Net cash provided by financing activities... . — 38,000
Net imerease im €€8M.o snes. : Rw
Cash and cash equivalents atthe beginning... 0
Cash and cash equivalents at the end... . 32a0
Notes:
1
Property, plant and equipment
Gross carrying value as of January 1, 20xx
Additions... snes Mseesnesea 7 !
Gross carrying value as of January 3, Xx fom ia
Accumulated depreciation as of January 1, 20xx.. aa oa)
DEPTECBHON nnniominronnn : A
Pomel deprecation as of January 31, 20Xx, a =
arrying value as of Jar 2,000 12000
: oor January 31, 20xx,.. 12,000 12,000
Supplies.
§ ‘Assignment Material
3, Equity share capital
4,200 shares of 210 each, fully paid
Revenue from operations
Revenue from services...
5, Other expenses
Rent expense
Electricity expense.
42,000
34,000
2,500
1,200
3,700
PsN Lae
{ Questions
1. State the accounting equation
2, Classify the following assets into tangible,
intangible and, financial categories
(@) aircraft; (b) copper mines; (¢) deposits;
{@) fishing licences; (e) franchises; (f) money
‘market funds; (g) newspaper masthead; (6)
tax-free bonds.
3. Are players’ contracts a cricket club's
tangible, intangible or financial assets?
4. Name the main financial statements,
5. How is the statement of changes tn enuity useful?
6 What can we learn from the statement of
cash flows?
( Probiems
Pai World, a business owned by Anant Pai,
month:
(@) Pat invested cash in the business
10.
nn
2
B.
Why should current assets and nor-current
be disclosed separately?
. Give alternative terms for (a) trade
receivables and (b) trade payables.
Is employee bonus payable a current
lability? Why or why not?
What are the components of equity?
Give four examples of cash low from financing
activities.
Why is it necessary to distinguish revenue
{from operations from other income?
Why is auditor resignation a red flag?
engaged in the following activities in the first Problem 2.1
Understanding the
Accounting Equation®
(0) Paid a rental deposit refundable on vacating the office.
(0) Advertised on a travel website on credit
(a) Appointed a cashier.
(@) Received a bank loan
(6 Bought a computer on part payment.
(g) Provided services on credit.
(0) Provided services for cash.
(i) Paid for the advertisement in (0)
() Collected payment for services provided in (p)
(k) Paid interest on bank loan.
() Paid Pais grocery bill.
Using the format given below, state whether each activity
company's assets, liabilities and
liablties and equity. Item (a) has been solved as an example.
resulted in increase or decrease in the
euity or had no effect on them. Consider the total fist om assets im ON equity. "crea
Balwant Travels had the following items on March 31, 20XX.
Problem 2.2 , amt
Preparing a Simple Balance Ba itding %50,000 Capital, Balwa wp
ae Office equipment .o.nenm 10,000 Retained earnings. x
Trade receivables so 5,200 Loan payable... a
000 Trade payables ,
10,000 Trade pay. ia
Cash
Prepare the March 31, 20XX balance sheet
Problem 2.3 Onna 1 20NK: Atta Sana setup Smart Analytics Company investing £10000) te
Preparing Financial copia The activites of the business resulted in the following revenues and exec tora
Statements from Year-end revenue from se EF; 10 elect, £9,000; salaries, $12.30; cou
Information * sie The following were the assets and liblites ofthe Business on December Soe sup’
FRDOO supplies, 214,500; trade receivables, 21,000; cash, 83,900; rent depres 100,000; long
loan payable, £4,000; trade payables, 9,200. During the year the company paid a dividend o fen
and Ms. Sharma made a further equity investment of £8,000 in the Leen y
Prepare the 20XX balance sheet and statement of profit and Insc,
cifect of six transactions of Venu Hair Stylists on the accountn
The following table shows the
equation. The amounts are in rupees.
Problem 2.4
Explaining
Transactions
Ror Venu’s
eee Capital
Problem 2.5 The
Explaining Transactionse The
Alternative to Problem 2.4 Assignment Material
67
eer _ Liabilities Equity
are Smee maT Hari’s
eee es ria
Balance 10,000 12,900 1100 6000
(@ +100 000
Balance 11,000 1190 7,100 “600,
()_+200 = 20
Balance 11,200 1,900 900 6.000
@ _-0 — =
Balance 10,600 11900 900 “600
@) — +2.000 a
Balance 12,600 11,900 “900 “6.000
oo + 1,500
Balance 12,600 13,400 “900 p00
0 SS | at
Balance 12,600, 3,400 900 7.400
Required
Write a bref explanation for each ofthe transactions f several explanations are posible wet all
of them,
(On March 1, 20XX, Sangeeta Shinde set up a loan recovery business as a sole proprietorship and Problem 2.6
concluded the following transactions in the first month
‘Analyzing the Effect of
(a) Shinde invested cash in the business, 220,000, Transactions on Asset,
(©) Bought equipment for cash, 212,008 Labiity and Equity
(©) Paid rent deposit for office, %5,000. Items
(a) Provided services for cash, 219,000,
(¢) Provided services on credit, 214,000.
(f) Paid salaries, 28,000.
(g) Collected payments for past invoices, €8,500.
(h) Received advance payment for services, %2,000.
(i) Paid rent, 2500.
Required
Analyze the effect of the transactions on the related asset, liability and equity items.
(On September 1, 20XX, Sukriti Sood set up Skin Glow asa sole proprietorship. The business engaged Problem 2.7
in the following transactions in the fist month: Aalyang the eect of
{@) Sood invested 210,000 cash in the business. Transactions on Asset,
(0) Took a bank loan, 230,00. Libilty and Equity
(2) Bought equipment for cash, 225,000. items
(4) Provided services for cash, €12,000. Alternative to Problem 2.6
(©) Paid interest on the bank loan, €300
(f) Bought supplies for cash, 81,000.
(g) Paid rent, £3,100.
(h) Received refund for retuin of supplies, €200.
(i) Paid salaries, 5,000.
Required
Analyze the effect of the transactions on the related asset, liability and equity items
‘On August 1, 20XX, Satish Pande set up rust Labs Company, The following transactions took place Problem 2.8
dling the fist month:
Anan the tect of
{@) Pande invested 820,000 ash in the company’s shate capital ‘Transactions on Asset
(b) Took a bank oan, £10,000. Uabilty and Equity tems
{Bought equipment for cash, €12,00. and Calulating Prot
(4) Bought supplies for cash, &5,000. Chapter 2 5;
i
| Manca,
68
- ervices, 29,000.
2) Billed customers for services, 891
| o stn
(ai sales commision, £100
Paid profession tax, £300.
te Pataca payments or past invoices, £700
(i) Collected payments for p
{j) Repaid a part of the bank loan, 26,000.
(R) Paid interest on bank loan, €150
Required
I Anne he fest of he transactions onthe related ast Katy and equ
2. Calculate the profit for August 20XX. 'Y items
eas On January 1 200% Ajay Jos setup Fly-by-Night Delivery Company. The follwing tan
af took place during the first month: i,
aes Ceoea (2) Josh invested 10,000 cash in the company’s share capital
dcoutyand equty tems) Bought a ear for cash, 88000,
snaacuatig Poft ex (0) Filled petiol for £000 on payment of €800; balance to be paid in two weeks
Ateratve to Problem 28 (@) Received advance payment from a customer, €l oe
(©) Bought office supplies on credit, 83,000
(6), Received cash for services provided, 28,000
(g) Billed customers for services, %6,200
th) Paid office rent, 84000.
(i) Paid the amount due in (c).
{) Collected payment from customers billed in (g), €4,900,
(k) Provided services to the customer in (d),
Required
2 Cian eee the transactions on the related asst, ability and equity tem
2. Caleulate the profit for January 20% SY andl equity tems
Problem 2.10 the eae rasanna et up a debt rating service a8 a Sle proprietorship. At the end ot th
Entering Beginning qrptusiness had the following balances: Cash, €3,000; Trane ee : Ome
Ere ar cating the £1,000; Office Equipment, 85,000; Trade Payables, €1,000 Prasanna’s C
bles, 2,000; Office Supp
Effect of ansactions on transactions took place in July:
apital, £10,000. The followin
Asset, Liability and Equity (a) Paid June salaries, €400,
Items and Calculating () Billed clients for services, %2,000.
Profit ex (©) Bought office equipment for cash, 21,000.
(A) Bought office supplies on credit, 2100
(¢) Withdrew cash for personal use, 71,000,
(8) Provided services for cash, 818,000,
(8) Prasanna invested in the business, 215,000.
(h) Collected payments for past invoices, 21,500.
() Paid electricity expense, ®300,
) Paid for past purchases of office supplies, £500
(&) Paid July salaries, %400.
Required
1. Enter the beginning balances.
2. Analyze the effect of the transactions on the related a
3. Calculate the profit for June 20XX.
sset, liability and equity items.
Problem 2.11
Entering Beginning
Balances, Analyzing the
Effect of Transactions on
re ede ta Mandal up weather focasing svn A he end fem
he had the following balances: Cash, 4,100; Trade Receivables, 23,400; Office Supplies, @
Pence Equipment, 10,000; Bank Loan Payable, 21,900; Mandiwala’s Capital, 816.700, The fallow
transactions took place in December:
Asset, Liability and Equity (a) Provided services on credit, 26,100
Items and Calculating (b) Took a bank loan, %6,000,
Profit # 44% Alternative (©) Paid himself office rent, €1,000.
to Problem 2,10, (4) Collected payments from clients billed in November, 22,800.
(€) Used office supplies for business purposes, 8300.
©) Provided services for cash, 2,800,
aa ig Assignment Material
= 69
{g) Paid interest on bank loan, 2100,
{h) Bought office supplies for cash, 8800.
() Billed customers for services, €1,700
()) Cancelled a bill in (i) because of customer complaint, &
(Pad staff sales for November 2100.
Required
1. Enter the beginning balances
2. Analyze the effect of the transactions on the rela
3, Caleulate the profit for December 20XX. rr
On February 1, 20XX, Arati Naik started Féte Company, a weddit
Suite blowing cavecions hi bonnet ak a eee ees oman
(@) Naik invested 714,000 cash in the company’s share capital Sea
ear ce eee ce ecuees canal isceeinr oe
6) Ped en a ae eee
{d) Bought office supplies on credit, €1,500, noe
(e)Billed customers for serves, T7500, Steers for To
(6) Used office supplies, 2800. ee
{@ Coleed payment from customers billed ine 6800
{6 aid for ofice supplies bought in (2) on acount, 120
(Billed customers for servis, €210
i) Paid Naik’s salary, 86,000.
OB Paid ofc rent fr February, 60
‘The following transactions took place in March 200%
(a) Paid office rent for March, 0
(b) Collected payments for February bills, 1,900.
{2 Bought ether supplies on crea 00
(@) Billed clients for services, 718,300.
{e) Used ofe supplies, 2300
(9 sued shares © a fend for cash, €12000
(g) Bought office equipment for cash, 212,000.
(h) Paid for office supplies bought on credit, 23,100.
(i) Paid assistants’ salaries, 76,200.
() Paid Naik’s salary, 26,000.
(k) Paid a dividend, %1,900.
Required
1. Analyze the effect of the transactions in February 20XX on the related asset, liability and
equity items.
2. Prepate the company’s February 20XX balance sheet, statement of profit and los, statement
cof changes in equity and statement of cash flows.
3, Enter the beginning balances for March 20XX.
4. Analyze the effect ofthe transactions in March 20XX onthe related asset, Hablity and equity
items.
5, Prepare the company’s March 20XX balance shee, statement of profit and fs, statement
of changes in equity and statement of cash flows
| Business Decision Cases J
Sampath failed the school final exam and ran away ffom home, He started working as a buling BOC 2.1
searpant arming between €1Q.00 and 215,000 a month, The job was uninteresting and strenuous Point Cabs
Soon he learnt driving and joined a leading car fleet on revenue-sharing terms, His monthly earings
averaged 220,000
age nt Pit Cas hs ai uns He ook ank ano 000
ard ieee his eavings of €TO0000 to buy a car costing, £600.00. kn ation, he invested 10
for meting day.torday cash needs, All cash receipts anc payents were rough is bank accu 70
Chapter 2 Finan
inanciay
a State,
Sampath scribbled his activites in a rough notebook. The following are the entries jg,
py
April 1
26
w
7
28
29
29
29
30
30
30
30
30
Required
Analyze the effects of the transactions on the accounting equation.
1
2
3
Prepare the finany
Started! business with savings of €118,000.
Took a bank foan of £500,000 to be repaid in monthly instalments of B95
interest at 18 per cent per annum. i
Bought a car tor eash, €600,000.
Bought an airport parking, licence for April, $10,000.
Paiel for fuel, £3,600.
Collected ftom customers, €1,700.
Collected from customers, $1,100.
Colleeteat from customers, £1,300.
Collected from customers, €3,100.
Collected from customers, €1,200.
Collected from customers, £1,600.
Paid for fuel, 26,100.
Collected from customers, €2,400.
Collected! from customers, 27.200. A customer di
not pay a bill of 8900 and wit py
rnext month
Collected from customers, €1,300.
Collected from customers, 21,700.
Bought a mobile phone for cash for business use, £12,000.
Collected from customers, £1,100
Collected frem customers, €1,800.
Collected fram customers, 81,100.
Collected from customers, 2600,
Paid for Fuel, 85,300.
Collected from customers, £1,800.
Collected from customers, €1,900.
Paid a fine for speeding, %500.
Collected from customers, 21,100,
Collected from customers, &1, 10.
Collected from customers, 24,500,
Paid for fuel, 3400.
Collected from customers, %4,400.
Collected from customers, %2,100.
Collected from customers, 22,600.
Collected fron: customers, %2,90.
Collected from customers, %3,700. Change of €120 not returned will be adjusted net
time.
Collected from customers, €3,100
Filled fuel for %3,920 and paid %3,240. The balance will be paid next time.
Collected from customers, €3,200.
Collected from customers, €2,900.
Repaired a side-view mirror damaged in an accident, 2750.
Collected from customers, 84,700
Paid taxi drivers’ union subscription for the month, €500.
Collected from customers, 84,100
Withdrew for personal purposes, €11,200
Paid substitute driver's salary, 88,000.
Eamed interest of 8130 on bank balance.
Paid the bank, 217,500,
al statements for April 20XX,
Evaluate the performance of the business Assignment Material 1
(On August 1, 20XX, Ajay ancl Jeevan quit as senior executives in a mutual fund to set ap MoneyCare BDC 2.2
Company, an investment advisory service, Each of them deposited 250,000 in MoneyCare’s bank MoneyCare Company
account in exchange for 5,000 shares. Also, they raised an interest-ree loan of %20,000 for the company
from their friend, They rented an office for the company in the city, costing %5,000 per month payable
fon the last day of the month, At the landiord’s insistence, they paid a deposit of 870,000, refundable
fon MoneyCare vacating the place.
‘They leased two computers for one year on a monthly rental of %6,000 per computer and
subscribed to a financial database for a fee of 811,000 per month. Computer rental and database
fee were payable at the beginning of the month, They appointed a secretary on a menthly salary of
29,000 and an assistant on a monthly salary of 85,000.
Depensling on their credit rating, MoneyCares customers paid in one of the following ways:
1. Before receiving service
2. Immediately on receiving service.
3. Within one month after receiving service.
During August, MoneyCare provided services for 270,800 and raised invoices with the following,
payment terms:
Fifteen customers with invoices totalling 262,100 could pay until end of September
= Two customers with invoices totalling %8,700 had to pay immediately. MoneyCare's other
transactions in August were as follows:
+ Paid computer rental, database fee, office rent and salaries as agreed.
+ Received from customers amounts totalling £24,100 including €15,400 from customers
who chose to pay early
4+ Paid for office supplies costing 21,800 but did not use them,
4 Received 89,000 from a customer for service to be provided in September
4 Eamed interest income of 3460 on the bank account
Required
1. Prepare MoneyCare’s financial statements for August
2. What do you think of the company’s financial performance?
{ interpreting Financial Reports
Jet Airways (India) Ltd. is a major airline in India, The following items appeared in the company
FR 2.1
recent financial statements: Jet Airways (India)
Aircraft fuel consumed Employee benefits Limited
1 2
3. Deferred tax liability 4. Travel agents’ commission
5. Purchase of investments 6, Provision for gratuity
7. Proceeds from sale of fixed assets 8 Net cash from operating activities
9. Share capital 10. Repayment of term loans and subordinated debt
11, Interest and finance charges 12, Frequent flyer points not availed of
13, Inventories 14. Aircraft lease rental
15. Wealth tax paid 16, Capital expenditure — aircraft and others
17. Dividend paid 18. Short-term borrowings
19. Unpaid dividend 20. Deposit with service tax department
Required
1. Identify the financial statement ~ balance sheet, statement of profit and loss, statement of
changes in equity, or statement of cash flows ~ in which you would expect to see each of
the items and indicate whether it is a revenue, expense, asset, liability, equity, operating
cash flow, investing cash flow, or financing cash flow.
2. Give any five items that do not appear in the above I
financial statements,
3. Verify your answers with the help of the information in the financial statements
butt you would expect to see in the Financial Analysis
aon ook they the fianesa) ster
Under tnd F300) eguized
statements 1, Identity items in the financial sta
2 Wend the sites tthe financial one : adequatey,
" Head the auditors reports of 25 companies, Your sample sh pian (Private sect
lean public wector) and foreign (US, UK, Australian) compares -
Auditors! Heports Required
1. Identity the ary points from these tc crore Pat em AOS cope and
4 Pte in your nn words whe yor wane :
3. In your opinion, what addivena,
4 Interview auditors tn tnd na
and
hy their reports du non give the
Answers to One-minute Quiz
21 4b.
22 axe
23 bd. (Note: Div
creditors.)
24
25
‘dend payable is an equi
Hem because it is payable to owners nr
Answers to Test Your Understand
24 (a) Bought a building c
in cash; (4) Paid trad
Purperes,
22 Net profit ~ Equity,
ing
2a ~ Equity 3, ao = In
= RAO) — 271,000) ~ (285,000 — 67,000)
= Net loss, 2500)
~ £35,000 + %4,500 Recap 97
Can journal entries be weapons of mass destruction? Satyam Computer Services is the most high FORENSIC CORNER
profile case of the collapse of accounting, auditing and corporate governance involving an Indian The Satyam Fraud
company. On January 7, 2009, B, Ramalinga Raju, chairman and exccutive of Satyam, resigned
after admitting that he had manipulated the accounts for several years in order to show hugely
inflated profits and fictitious assets totaling $1 billion. On that day, Satyamis stock plunged to
%40.25 at the National Stock Exchange, after opening at 2179, and touched a low of 86.30 on
January 9, 2009, che next trading day. Reacting to this development, the Sensex crashed 7 per cent.
AAs a news report put it, it was “a unique case of upheavals at a single company pulling down the
Indian stock market." " ’ a
: Eitious acouning eis were at he core ofthe fad The flowing enti sate the
(a) Trade Receivables.
: 1,000
Revenue from Services. 1,000
(6) Cash a 1,000
Trade Receivables 1,000
In reality, the company did not provide any services for 21,000 and certainly did not collet anything
for those made-up customers. ‘There was an elaborate scheme of manipulation of computerized
accounting records in breach of established conteol systems.
Cash, unlike receivables, can be verified easily. Cash is either there or not there. How did
the company conjure up the cash? Answer: The company produced fake bank deposit documents.
fad 3
The accounting system organizes information systematically
‘An account is a record of increases and decreases in an asset. liability or equity item.
‘Accounts can be in T form or standard form. Debit is left and credit is right.
Ledger is a collection of accounts.
Chart of accounts is a complete lst of the account titles used in an organization
Jounal is a chronological record of transactions.
‘Trial balance is a list of account balances.
Debit and credit rules:
‘+ Assets, expenses, dividends: Debit to increase. Credit to decrease.
+ Liabilities, capital, revenues: Credit to increase. Debit to decrease.
= Transaction processing steps:
1. Analyze the changes in asset, liability, capital, revenue, expense and dividend items.
2. Enter the transaction in the journal applying the debit and credit rules
3, Post the journal entry to the related accounts in the ledger
4. At the end of a period, balance the accounts and list them in a trial balance.
© Asset, expense and dividend accounts normally have normal balances. Liability, capital and
revenue accounts normally have credit balances.
= Errors are the result of incorrect journalizing, incorrect posting and incorrect balancing,
Error correction steps:
1. Understand the incorrect entry.
2. Visualize the correct entry.
3. Record the correcting entry
= Technological changes such as cloud computing, blockchain technology and machine learning
are changing the way accounting and auditing is done.
= Good internal control systems ensure the reliability of the accounting system.
* Satyam spooks market, Business Line, January 8, 2008. roblem e oe 20XX. The transactions for the month are a,
saeraft Company OP
( Review P!
Ganesh started Woo
follows: =
cash in share capital,
7 inc ar ePrdvance for @ SHOP, £2000
Fgh eulpment for cash, £120.
3 Bought supplies on credit,
7B Pt or emodeling a Hic, T2600
si int, 1,400.
for 211,200.
14 Paid for an advert 1
1} Received payment for furnishing an office,
33. Billed customers for work done, €13,100.
25 Paid assistants wages, €1,500.
28 Paid electricity charges, ®240. ;
29 Received payment from customers billed on September 23, 4,800.
30. Paid a dividend, €2,500
Required
1. Prepare journal entries for the above transactions.
2. Post the journal entries to the ledger.
3. Prepare a trial balance.
Solution to the Review Problem
1. Journal entries
General Journal Page 1
20XX Ee Ee
Sep. 1 Cath.sesse
Share Capital, ae 10,000,
4 Prepaid Rent. 10,00)
Cash 2,000
5 Re lent 2,000
eae 1,200
‘Trade Payables, -
10 Cash des i
Revenue from Ser me
vie
4 ‘Advertisement Expense. 8,600
_ ° 8,600
Cash 1,400 7
Revenue fi s
ae ftom Service: aan
ti ne Reels... a 11,200
_ Revenue for
ee im Services 112
‘en By Expense 13,100 7
8 Hlectrcty 13,100
Filly Expense. °
, Cash ‘Pense.... 1,500
9 Cash
: 1,500
Trade Rey aa
39 Dividends 83M a
a Is, 240
‘ash. 4,800
4,800
2,500
2,500 Post. Ref. Debit Credit Balance
1.200 1200
Post. Ref.
1
spade Receivables
Explanation Post. Ref.
1
1
Explanation Post. Ref. Debit Credit Balance
1 10,000 10,000
1 2,000 8,000
1 1.200 6.800
1 8,600 15400
1 1400 14,000
1 1,200 25,200
1 1500 -23,700
1 240 23,460
1 44800 28,260
1 2500 25,760
Prepaid Rent
Date Explanation Post. Ref. Debit Credit Balance
aN
Sep. 4 1 2,000 2,000
Trade Payables
Date Explanation Post. Ref. Debit Credit Balance
0x
Sep. 7 1 700 700
Share Capital
Date Explanation Post. Ref Debit Credit __ Balance
2oxX
Sep. 1 1 10,000 10,000
Dividends
Date Explanation Post. Ref. Debit Credit Balance
2oxx —
Sep. 30 1 2,500 2,500
Revenue fom Services
ate r ; :
ee Esplanaton Post. Ref. Debit __Creit__ Balance
OX —
Sp. 19 1 8,600 8.000
7 i 11.200 19,800
B ' 1100 32:900 Chapter 3 Transaction Proces,, .
en
Debit Credit
Salar Expen: Explanation — — 1,500 150
ate Expl 1
Pes Debit Credit Balance
ecriy Expense Post. Ref
tricity Ex
Electiiy Expense 240 2%
ie — 1
20XX se
Sep. 28 Debit Credit Balance
Aversnent apse Post. Ref
Date ene , 1,400 1400
20XX
Sep. 14
3. Trial balance
r
Trial Balan
Equipment
Supplies.
‘Trade receivables
Cash.
Prepaid rent...
‘Trade payables
Share capital
Dividends oon
Revenue from services
Salaries expense...
Electricity expense.
Advertisement expense
TOtA vrei
ELA
1. Define account a
2 What factors
ind ledger.
determine the
3 "Debits = Crea
4 Why do we
jourat
© cat US 9f debit and credit fog
(a) assets, (b) liabititi ‘) equit
6 What is the Meaniny ead
enter transactions first in the
10,
u.
Wing are asset,
liabitity
(@) Salaries.
able (©) Supp
‘xpense;
'vidends,
Bre VaR
700
8,300
25,760
2,000
= 70
10,000
2,500
32,900
(©) Cash; ( Trade
insurance; (h) |
expense payable
tle receivables; (g) Prepaid
interest income; (i) Interest
12, Why do we Prepare a trial balance? What
Kinds of errors can it detect? .
18. When do we opens suspense account? How
do we clear it?
14. What is cloud Computing? How will it change
accounting?
18. Distinguigh between accounting control and
Administratine control,
16. Why shoul
Mt the cashier not be allowed 10
exintain the customers ledger? n
poe internal eoniech system is
assurance the
No error or fraud is possible:
Comment,
7 Although the tRuPuter is faster and mor
wacurate than the f
more
re
aman brain, frauds a
nmeny BetPetrated ins compa
“vironment. Bo fon agree? —__ J
name the accounts) f0 be debited and credited fo the fllowing transaction. Nem (a) has b
Niped as an example
aid interest on bank loan e
{@) Proprietor withdrew cash for personal purposes
{@) Paid for supplies bought on credit last month...
(@) Paid rent for the current month
(@) Paid rent for the next month. -
(@) Issued additional share capital for cash...
() Paid income tax.. eS
(i) Received cash for services to be provided next month.
{) Collected payment for services provided last month.
(&) Provided services for cash ae
Paid a security deposit to the port trust...
0
(im) Paid rent for the proprietor’s home...
Interest Expense
Harsh Shah set up Eeco-drive Company, a car brokerage. It engaged in the folowing transactions.
(@) Shah invested cash in Beco-drive's share capital, £25,000.
(6) Bought supplies for cash, %1,200.
(©) Billed customers for services, 24,900.
(@) Took a bank loan, €10,000.
(@) Paid rent for the month, %1,000.
(©) Paid insurance premium for the month, $100.
Record the transactions in T accounts.
Rhetorica Company conducts public speaking classes. The following are the account balances on
March 31, 20XX:
Building... vw €10,000 Share capital. 7 10,000
Supplies 900 Revenue from services, ao 2
‘rade receivables 2100 Salaries expense erm 5,800
Prepaid insurance. 600 Electricity expense on 350
‘Trade payables 41,700. Insurance expense. 50
Prepare a trial balance.
Your review of accounting records reveals the following errors.
(2) Cash receipt of 80 for services yet to be provided was debited to Cash and credited to
Revenue ftom Services
(b) Credit purchase of supplies of €1,200 was debited to Supplies and credited to Cash
(© Interest payment of €400 was debited to Bank Loan Payable and credited to Cash.
(@) Cash payment of £2,900 to suppliers was debited to Trade Payables £9,200 and crested 0
Cash, 22,900.
Prepare correcting entries.
Ait set up Green Shoots Company, a farming consultancy, in October 20XX, “he transactions inthe
fst month were as follows:
(a) Ajit invested cash in the company’s share capital, £10,000.
(©) Took an interest-free loan from a friend, €2,000.
(9 Bought equipment for cash, 29,000.
101
Problem 3.1
‘Applying Double-entry
Rules
Problem 3.2
Using T Accounts
Problem 3.3
Preparing a Trial
Balances
Problem 3.4
Correcting Errors *
Problem 3.5
Transaction Analysis,
TT Accounts and Trial
Balances + 102
Problem 3.6
Transaction Analysis,
T Accounts and Trial
Balance #¥ Alternative
10 Problem 3.5
Problem 3.7
Balance x4
On November 1
Journal, Ledger, and Trial The business er
Chapter 3 Transaction
Prog,
e year, 2480,
e for one year,
(a) Paid insurance yea 8
(2) Bought suppies om credit 700.
{0 Bile customer fo servis, £14
(@) Provided services for cash, 8.200,
Oh) Received advance fom a custome, C150
() Paid for supplies in (e) on account,
() Paid salary for the month, %800. Note: Aji
(k) Collected receivables, 21,100.
also an employee ofthe company,
Required
1. Record the transactions directly in the accounts.
2. Prepare the October 31 trial balance.
Pradeep and Selvam set up Venus Photoshop Company in December 20XX. The ransoctions ny
first month were as follows:
(). Pradeep and Selvam invested cash in the company’s share capital, €2,500 each
(©) Took a bank loan, %1,000.
(©) Paid insurance for the month, 260.
(@) Bought supplies on credit, €350,
(©) Billed customers for services, 2,300.
(0) Used supplies, &270,
(8) Paid equipment rent for the month, %500.
(h) Collected receivables, 21,900
(Repaid bank loan, 2700,
@) Paid interest on bank loan, #100.
(%) Paid a dividend, e200,
Required
Record the transactions directly in the accounts
2. Prepare the December 31 trial balance
| 20XX, Jyoti Cupta established Trailblazer Company,
sAed in the following transactions in the first tron
1 Jyoti Gupta invested ¢
1 Took a bank loan, %3,0f
2
ought a camera costing 88,000 on down Payment of 35,
the remainder.
4) Bought software for cash, 81,000,
4 BOUBht fice supplies for cas, 1,100
iy Retumed office supplies for immediate cash refund, &400,
12. Provided services for cash, So 900"
if, Billed customers for services, 84 70,
18 Paid rent deposit, 23,900,
30 Collected receivables, &.700,
23° Paid insurance
33 Used office supplies, 245,
28 Bought office supplies on credit, %800
a leadership advisory service.
ash in the company's share capital, £10,000,
100,
000 and gave a bill payable fr
Required
30 bai interest on bank loan, feu
30 Pai assistants salary, 50,
2, Record the transactions inthe journal
post the journal entries to uke
2 {purmal entries to the ledger
Prepare the November 30, 2OXX trial balance, Ma
sient Material i
XX, Suresh Nair started SteesSafe Company, a
Le us transactions in the first ae Company, a driving school, The business engaged Prolam 3. 2 ar
sesh Nair invested cash in the company’s share capi Galance + # Alternative
Serena foreach, 1500 ne copia 50 toreblen 37
4) Bought car supplies for cash, 2800,
5 Paid subscription for six months for a magazine, 2,40,
Provided services for cash, %8,100
14 Took a bank loan, %1,000,
{Jf Paid car insurance premium for the month, €100.
1? Billed customers for services, 1,700.
10 Recvived advance from a customer, 730
20 Collected receivables, $800.
35. Used car supplies, 2390.
26. Paid petrol Bll forthe month, 21,280.
28 Bought office supplies on credit, £800.
50. Paid instructor's salary, €1,800.
31 Paid dividend, €500.
Ope flo
Required
1. Record the transactions in the journal.
2. Post the journal entries to the ledger.
5, Prepare the March 31, 20XX trial balance.
\whir Company designs drones. Its latest balance sheet is as follows: Problem 3.9
Beginning Balance Sheet,
Pee Journal, Ledger, and Trial
Epes) Balance + *
Equity and Liabilities
Equity
Equity share capital...
Other equity: Retained earnings...
abilities
Non-current liabilities
Bank loan payable.
Current liabilities
Trade payables.
Unearmed revenue.
Income tax payable
‘Total equity and liabilities...
Assets
Non-current assets
Exuipment
Current assets
Supplies...
‘rade receivables.
[28h
Total assets
30,000
8,180 104
Problem 3.10
Beginning Balance Sheet,
Journal, Ledger, and Trial
‘The company engaged in the following transactions in April:
Apr. 1 Paid March salaries, 71,930.
2 Paid rent for the month, %500.
5 Collected receivables, %2,160.
8 Paid insurance premium for April to September, %720.
9 Provided services for cash, %8,100.
12 Repaid bank loan, 22,000.
15 Paid for supplies bought in February, %2,590.
18 Provided services for payment received in March, 21,490.
20 Received advance from a customer, %160.
21 Billed customers for services, 3,760.
22 Used supplies, 2,130.
23. Bought supplies for cash, €1,720.
27. Refunded advance to a customer, %140.
28 Paid income tax for last year, 7590.
30 Bought supplies on credit, 1,270.
Required
1,
2
3.
4,
Fenestra Company provides window cleaning and repair services. It
Record the :ransactions in the journal.
Enter the March 31 balances in the appropriate accounts from the balance sheet. Vj.
Balance in tre explanation space of the account.
Post the journal entries to the ledger. Open additional accounts as may be necessary.
Prepare the April 30, 20XX trial balance.
ts latest balance sheet is as follows: 104
The company engaged inthe kllowing transactions in Apel
Paid March salaries, 21,930,
Pid ent for the menh, R50.
Collected receivables, 22,160
Paid insurance premium for Apri to September, 720,
Provided services fo cash, %8,100.
12 Repaid bank loan, 1.000.
15 Paid for supplies bought in February, €2,590.
Ape.
Os
Chapter 3 Transactioy
n Pre
LT ...-.. .
18 Provided services for payment received in March, 21,490
20 Received advance frum a customer, 160
21. Billed customers for services, 83760.
22° Used supplies, 2,130
23 Bought supplies for cash, €1,720.
2% Refunded advance to customer, 2140.
2 Paid income tax for ast year, 890.
30 Bought supplies on cet, 21,270
Required
1. Record the transactions in the journal
2. Enter the March 31 balances in the appropriate accounts from the balance sheet. Wig
Balance in the explanaton space of the account.
3. Post he journal ents othe ledger. Open adional accounts as may be necessary
44 Prepare the April 30, 22XX trial balance,
Problem 3.10 Fenestra Company provides window cleaning and repair services. Its latest balance shee ie follows
Beginning Balance Sheet,
Journal, Ledger, and Til FENESTRA COMPANY
Balance #44 PS ee ee
Aeratie to Problem 39 Fs and Lables
Equity
uty share capital
Other equity: Retained eanings
Non-curent liabilities
arent labilts
Trade payables, so
Bills payable
Non-current assets
Equipment -
Current assets
Supplies
Trade receivables...
Cashin
‘Total assets
The company engaged in the following transactions in October
Oct, 1 Paid rent for three months ending September, €300,
3 Provided services fr cash, 21,200
3. Provided services for payment received in August, 8810
6 Collected receivables, 71890.
7 Billed customers for services, €7,13,
8 Retumed supplies for immediate refund, 2490.
Foam
un >
assignment Material .
10 Bought supplies on credit, €1,720.
11 Refunded advance to a customer, 2400.
13 Paid a September invoice for supplies, 2,100
17 Received advance from a customer, 8730,
33. Paid a bill payable, $1,000.
a7 Paid telephone expense, 8430
38. Used supplies, €1,940
50 Bought supplies for cash, £270,
31 Paid salaries, &550.
Required
1, Record the transactions in the journal
2. Enter the September 30 balances in the appropriate accounts from the balance sheet. Write
Balance in the explanation space of the account.
3, Post the journal entries tothe ledger. Open additonal accounts as may be neces
4. Prepare the October 31, 20XX trial balance. : "
ater completing vocational education, Ramachandra set up AlignedRight Company, a plumbing Problem 3.12
service. The business carried out the following transactions in the first two months. Journal, edger, and Til
jn. 1 Ramachandra invested in the company’s share capital in the form of tools, €2,000 and balan for Two Periods
: cash, 21,00. ” ss eaeee
2. Took an interest-free loan from a customer, £10,000.
2. Bought a car costing €20,000 on down payment of £2,000 and gave eighteen bills payable
cof £7,000 each,
Bought tools for cash, %3,000.
Received advance from a customer, 89,800.
Provided services for cash, 73700.
Billed customers for services, 7,130
Provided services for advance received on January 5,
Bought supplies for cash, 21,810.
Used supplies, 21,620,
Collected receivables, 86,920.
Received advance from a customer, #1300.
Repaid loan, €1,000.
Paid salaries, 6310.
Paid a bill payable
Paid tool repair expense, €150,
Received advance from a customer, €2,400,
Billed customers for services, €2,940
Bought supplies on credit, 1,790.
7 Bought tools for cash, %8,000.
12 Provided services for cash, €1,910
14 Provided services for advance received on January 24 for £990 and refunded the balance
17 Returned defective supplies to be adjusted against future purchases, 2170.
18 Used supplies, 71,540.
2 Paid rent for January and February, €5,000.
B_ Collected receivables, €2,920.
Provided services for advance received on February 2 for 82,780 and collected the balance.
2% Paid petrol bill for January and February, 22,410.
28 Paid salaries for January and February, €7,540.
29 Paid telephone expense for January and February, €1,570.
Required
BRRBGGBasae
Feb,
1. Record the January transactions in the journal
2 Post the January journal entries to the ledger.
3. Prepare the January 31 trial balance.
4. Record the February transactions in the journal. ”
Chapter 3 Transaction py,
oc
106 _ a =
clevant accounts. Write Balance in the o
5. Enter the January 31 balances in the relevant accounts the *Planatg,
space. ¢ ledger. Open additional accounts as may be ne
«Post te February journal entries to the edger, Open ait 1 Be nec,
7. Prepare the February 29 tral balance
: car electra shop. The business carried ou the following trang,
Problem 3.12 Leo set up. ae agen tion,
Journal, Ledger, and Tal in the first two months share capital inthe form of equipment, £500
Salance for Two Periods Aug. 1 Leo invested in the company's share capital in the form of equip nd as,
3444 « Alternative to 2,000, ins ee
Problem 3.11 1 Took a bank loan of %6,000, repayable in six monthly instalments interest of %6q Per
month, nam
2 Paid rent for two months, %3; .
4 Bought equipment costing 710,000 and gave an interest-free bill payable due on Septembey
30.
& Bought supplies for cash, %2,000.
7 Provided services for cash, 74,300.
8 Received advance from a customer, €5,500
10 Used supplies, 910,
12 Billed customers for services, 26,450.
15 Provided services for advance received on August 8 for %5,900 and billed the customer
for the balance
18 Paid towing expense for a customer's car, 2360
21 Collected receivables, €6.550.
24 Paid bank loan first instalment with interest.
27 Paid salaries, &,900.
31 Paid electricity expense, 21,000.
Sep. 1 Bought furniture for cash, £1,000,
3° Billed customers for services, 75,390,
4° Received advance from customer, %800.
5 Provided services for cash, %760,
8 Received advance from customer, 21,250
11 Provided services for advance received on September 4 for 8530 and refunded the balance.
15 Bought supplies on credit, €1510,
18 Used supplies, &720,
23 Collected receivables, &4,360.
24 Paid bank loan second instalment with interest.
28 Paavied servies fr advance received on September 8 for ®1500 and collected the balance
29. Paid telephone expense for August and September, 8980,
29 Paid electricity expense, 2950,
30 Paid salaries, %3,000,
80 Pald the bil payable accepted on August 4, £10.00,
Required
2 Record the August transactions in the journal,
J pt the August journal entries to the edges
3. Prepare the August 31 trial balance
3 baer a SePtember 30 transactions inthe journal
5, = {he September 30 balances in the relevony accounts. Write Balance in the explanation
6 Tate eptember 30 journal entries to the ledger Open additional accounts as may be
7, Prepare the September 30 tial balance,
(Business Dec _ |
BDC 3.1 7
Nova Materials Limited
Nova Materiats i
Itis a mid-sized oo: y st ee
You to design
in medical and aerospace industies.
ee next one or two years. The compary hac engaged
sibilities as listed ent >
rial
ore at 107
a s that you wor c
ei que sues that you woul! Tike to cower in yours
the fort presentation On Your proposed accounting. syste A
Pep and Susitors. . ing system to the company’s board
jor over a decade in a leading software company, Vinay and Shei
8 Oe em, Kapoor § pany, Vinay and Sheela Kapoor decided BOC 3.2
oftware Ltd. on June 1. Each of them deposit ‘oftware Limited
is bank account in exchange for 3,000 shares of 810 each, pesited £30,000 Kapoor Softwer
e friend of the Kapoors, joined the compar
inh Sit Lal, an old f z pany as office manager on a monthly salar)
Peete how ty ef showed pt woke Amit pain he a al customer
4803 de all payments by chegute Although Amit had no knowledge of accountng, he
sess atl Me company’s letters, inv
's and other papers. Also, he noted
