Accounting - An introduction to principles and practice, 6E.

Solutions to all Questions

Chapter 2 The Accounting Equation

Question 2.1 5000 = 0 + 5000 Question 2.2 1. 15000 = 0 + 15000 2. 25000 = 0 + 25000 3. 20000 = 5000 + 15000 4. 30000 = 7000 + 23000 5. 10000 = 3000 + 7000 6. 85000 = 15000 + 70000 7. 37000 = 0 + 37000 8. 38000 = 0 + 38000 9. 60000 = 10000 + 50000 10.75000 = 25000 + 50000. Question 2.3 1 July 2010 A Argenton commenced business Liabilities Assets = Bank = 6000 Motor Vehicle =25000 31000 = 4 July 2010 purchased inventory on credit Liabilities Assets = Bank 6000 Accounts Payable Inventory =3300 Motor Vehicle 25000 34300 = 5 July 2010 paid cash for inventory Liabilities Assets = Bank 6000 Accounts Payable - 2200 =3800 Inventory 3300 +2200 =5500 Motor Vehicle 25000 34300 = 6 July 2010 additional capital introduced Assets Liabilities = Bank 3800 Accounts Payable +3000 =6800 Inventory 5500 Motor Vehicle 25000 Office Equipment =4500 41800 =

Owners Equity Capital =31000 31000 Owners Equity Capital 31000

+ + =3300

3300 + + 3300

31000 Owners Equity Capital 31000

3300 + + 3300

31000 Owners Equity Capital 31000 +3000 +4500 =38500

3300 +

38500

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Question 2.4 22 August 2010 P Dumont obtained a loan Assets Liabilities Owners Equity = + Bank 3000 Accounts Payable 1500 Capital 48700 Loan from Bank +10000 =10000 =13000 Inventory 2200 Premises 45000 60200 = 11500 + 48700 25 August 2010 paid accounts payable Assets Liabilities Owners Equity = + Bank 13000 Accounts Payable 1500 Capital 48700 - 1500 - 1500 =11500 = 0 Inventory 2200 Loan from Bank 10000 Premises 45000 58700 = 10000 + 48700 26 August 2010 acquired inventory on credit and for cash Assets Liabilities Owners Equity = + Bank 11500 Accounts Payable =3080 Capital 48700 Loan from Bank 10000 - 1210 =10290 Inventory 2200 +3080 +1210 =6490 Premises 45000 61780 = 13080 + 48700 Question 2.5 1 September 2010 P Barrack commenced business with various assets Assets Liabilities Owners Equity = + Bank Capital = 2000 =46000 Inventory = 1000 Motor Vehicle = 8000 Premises =35000 46000 = 46000 3 September 2010 inventory purchased for cash Assets Liabilities = Bank 2000 - 1012 =988 Inventory 1000 +1012 =2012 Motor Vehicle 8000 Premises 35000 46000 = + Owners Equity Capital 46000

46000

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Question 2.5 Bank

finalised
+ Owners Equity

4 September 2010 bank granted a mortgage Liabilities Assets =

Inventory Motor Vehicle Premises

988 +15000 =15988 2012 8000 35000 61000 =

Mortgage

=15000

Capital

46000

15000 +
+ Owners Equity

46000

6 September 2010 machinery was purchased on credit Assets Liabilities =

Bank Inventory Motor Vehicle Premises Machinery

15988 2012 8000 35000 =8250 69250 =

Accounts Payable Mortgage

=8250 15000

Capital

46000

23250 +
+ Owners Equity

46000

7 September 2010 purchased inventory on credit Liabilities Assets =

Bank Inventory

Motor Vehicle Premises Machinery

15988 2012 +1320 =3332 8000 35000 8250 70570 =

Accounts Payable

Mortgage

8250 +1320 =9570 15000

Capital

46000

24570 +
+ Owners Equity

46000

10 September 2010 machinery was purchased for cash Liabilities Assets =

Bank

Inventory Motor Vehicle Premises Machinery

15988 - 2530 =13458 3332 8000 35000 8250 +2530 =10780 70570 =

Accounts Payable Mortgage

9570 15000

Capital

46000

24570 +
+ Owners Equity

46000

13 September 2010 payment of an account payable Liabilities Assets =

Bank

Inventory Motor Vehicle Premises Machinery

13458 - 8250 =5208 3332 8000 35000 10780 62320 =

Accounts Payable

Mortgage

9570 - 8250 =1320 15000

Capital

46000

16320 +

46000

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Question 2.6 1 September 2010 commenced business with various assets Assets Liabilities Owners Equity = + Bank Capital = 2000 d =46000 cr r Inventory = 1000 d r Motor Vehicles = 8000 d r Premises =35000 d r 46000 = 46000 3 September 2010 inventory purchased for cash Assets Liabilities = Bank 2000 dr - 1012 cr =988 dr Inventory 1000 dr +1012 d r =2012 dr Motor Vehicles 8000 dr Premises 35000 dr 46000 = + Owners Equity Capital 46000 cr

46000

4 September 2010 bank granted a mortgage Liabilities Owners Equity Assets = + Bank 988 dr Mortgage 46000 cr =15000 cr Capital +15000 d r =15988 dr Inventory 2012 dr Motor Vehicles 8000 dr Premises 35000 dr 61000 = 15000 + 46000 6 September 2010 machinery was purchased on credit Assets Liabilities = Bank 15988 dr Accounts Payable =8250 Inventory 2012 dr Mortgage 15000 Motor Vehicles 8000 dr Premises 35000 dr Machinery =8250 d r 69250 = 23250 7 September 2010 inventory purchased on credit
Assets Bank Inventory Motor Vehicles Premises Machinery 15988 2012 +1320 =3332 8000 35000 8250 70570 Liabilities = dr Accounts Payable dr dr dr Mortgage dr dr dr = 8250 +1320 =9570 15000 Owners Equity + cr Capital 46000 cr cr cr cr

Owners Equity + 46000 cr cr Capital cr

46000

24570 +

46000

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Question 2.6 finalised 10 September 2010 machinery was purchased for cash Liabilities Assets = Bank 15988 dr Accounts Payable 9570 15000 - 2530 cr Mortgage =13458 dr Inventory 3332 dr Motor Vehicles 8000 dr Premises 35000 dr Machinery 8250 dr +2530 d r =10780 dr 70570 = 24570 13 September 2010 payment of an account payable Assets Liabilities = Bank 13458 dr Accounts Payable - 8250 cr =5208 dr Inventory 3332 dr Mortgage Motor Vehicles 8000 dr Premises 35000 dr Machinery 10780 dr 62320 =

Owners Equity + cr Capital 46000 cr cr

46000

9570 - 8250 =1320 15000

Owners Equity + cr Capital 46000 cr dr cr cr

16320 +

46000

Question 2.7 Account balances of Fred McKay as 31 March 2010 Assets Liabilities Owners Equity = + Current Assets Current Liabilities Capital 32000 Bank 15000 Accounts Payable 8000 Inventory 10000 Non-current Liabilities Non-current Assets Loan - J Flynn 35000 Motor Vehicles 30000 Mortgage 50000 Premises 65000 Computers 5000 125000 = 93000 + 32000 Question 2.8 Account balances of Margaret Robertson as 31 March 2010 Assets Liabilities Owners Equity = + Current Assets Current Liabilities Capital 105000 Cash at Bank 25000 Accounts Payable 35000 Inventory 40000 Non-current Liabilities Non-current Assets Loan - A Pendix 100000 Land & Buildings 120000 Mortgage - Union 45000 Machinery 80000 Office Equipment 20000 285000 = 180000 + 105000

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Question 2.9 Account Group Assets

(debit)

Account Number 10 - 19 10-14 10 11 12 13 15-19 15 16 17 18 20-24 20 25-29 25 26

Current Assets Bank Cash on Hand Inventory Petty Cash Non-current Assets Computers Land and Buildings Machinery Motor Vehicles

Liabilities
(credit)

20 - 29 Current Liabilities Accounts Payable Non-current Liabilities Loan from P Broker Mortgage on Land and Buildings

Owners Equity
(credit)

30 - 39 Capital 30

Question 2.10 Account Group Assets

(debit)

Account Number 10 - 19 10 -14 10 11 15 - 19 15 16 17 18 19 20 - 24 20 25 - 29 25 26 30

Current Assets Bank Inventory Non-current Assets Premises Motor Vehicle Machinery Office Equipment Computers

Liabilities
(credit)

20 - 29 Current Liabilities Accounts Payable Non-current Liabilities Mortgage Loan from Bank

Owners Equity
(credit)

30 - 39 Capital

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Question 2.11 Balance Sheet of Fred McKay

as at 31 March 2010

Current Assets Bank Inventory Non-current Assets Motor Vehicles Premises Computers

15000 10000

Current Liabilities Accounts Payable 25000 Non-current Liabilities Loan from J Flynn 30000 Mortgage 65000 Total Liabilities 5000 100000 Owners Equity Capital 125000

8000 35000 50000 85000 93000 32000 125000

Question 2.12 Balance Sheet of Margaret Robertson

as at 31 March 2010

Current Assets Bank Inventory Non-current Assets Land & Buildings Machinery Office Equipment

Current Liabilities Accounts Payable 65000 Non-current Liabilities Loan from A Pendix 120000 Mortgage - Credit Union 80000 Total Liabilities 20000 220000 Owners Equity Capital 285000 25000 40000

35000 100000 45000 145000 180000 105000 285000

Question 2.13
Balance Sheet of A Argenton
as at 6 July 2010

Current Assets Bank Inventory Non-current Assets Motor Vehicles Office Equipment

6800 5500 25000 4500

Current Liabilities Accounts Payable 12300 Owners Equity Capital 29500 41800

3300 38500 41800

Question 2.14
Balance Sheet of P Dumont
as at 31 August 2010

Current Assets Bank Inventory Non-current Assets Premises

10290 6490

Current Liabilities Accounts Payable 16780 Non-current Liabilities Loan - Bank 45000 Total Liabilities Owners Equity Capital 61780

3080 10000 13080 48700 61780

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Question 2.15
Balance Sheet of P Barrack
as at 30 September 2010

Current Assets Bank Inventory Non-current Assets Motor Vehicles Premises Machinery

5208 3332 8000 35000 10780

Current Liabilities Accounts Payable 8540 Non-current Liabilities Mortgage Total Liabilities Owners Equity 53780 Capital 62320

1320 15000 16320 46000 62320

Question 2.16 1 September 2010 commencement of business by K Pullen Liabilities Owners Equity Assets = + dr Mortgage cr Capital Bank =12000 =7500 =52000 cr Inventory = 3000 dr Building =37000 dr Machinery = 7500 dr 59500 = 7500 + 52000 4 September 2010 purchased inventory for cash Assets Liabilities = Bank 12000 dr Mortgage - 2310 cr =9690 dr Inventory 3000 dr +2310 dr =5310 dr Building 37000 dr Machinery 7500 dr 59500 = Owners Equity + 7500 cr Capital 52000 cr

7500 +

52000

7 September 2010 additional cash and motor vehicle contributed by owner Assets Liabilities Owners Equity = + dr Mortgage cr Capital Bank 9690 7500 52000 +7500 dr +7500 =17190 dr +15000 Inventory 5310 dr =74500 dr Building 37000 Machinery 7500 dr Motor Vehicle =15000 dr 82000 = 7500 + 74500 10 September 2010 inventory purchased on credit Assets Liabilities = dr Accounts Payable Bank 17190 Inventory 5310 dr Mortgage +2915 dr =8225 dr Building 37000 dr Machinery 7500 dr Motor Vehicle 15000 dr 84915 = + Owners Equity

cr cr cr cr

=2915 cr Capital 7500 cr

74500 cr

10415 +

74500

Accounting - An introduction to principles and practice, 6E. Solutions to all Questions

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Question 2.16 continued 13 September 2010 machinery bought for cash Assets Liabilities = Bank 17190 dr Accounts Payable - 4620 cr Mortgage =12570 dr Inventory 8225 dr Building 37000 dr Machinery 7500 dr +4620 dr =12120 dr Motor Vehicle 15000 dr 84915 =

Owners Equity + 2915 cr Capital 74500 cr cr 7500

10415 +

74500

17 September 2010 loan from V Alan Assets Liabilities Owners Equity = + Bank 12570 dr Accounts Payable 2915 cr Capital 74500 cr cr dr Mortgage 7500 +10000 =22570 dr Loan from V Alan =10000 cr Inventory 8225 dr Building 37000 dr Machinery 12120 dr Motor Vehicle 15000 dr 94915 = 20415 + 74500 22 September 2010 machinery purchased on credit Assets Liabilities Owners Equity = + Bank 22570 dr Accounts Payable 2915 cr Capital 74500 cr dr cr Inventory 8225 +8800 Building 37000 dr =11715 cr Machinery 12120 dr Mortgage 7500 cr 10000 cr +8800 dr Loan from V Alan =20920 dr Motor Vehicle 15000 dr 103715 = 29215 + 74500 23 September 2010 inventory purchased for cash Assets Liabilities = dr Accounts Payable Bank 22570 - 3960 cr Mortgage =18610 dr Loan from V Alan Inventory 8225 dr +3960 dr =12185 dr Building 37000 dr Machinery 20920 dr Motor Vehicle 15000 dr 103715 = + Owners Equity 74500 cr

11715 cr Capital 7500 cr 10000 cr

29215 +

74500

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Question 2.16 continued 26 September 2010 payment of account payable Assets Liabilities = Bank 18610 dr Accounts Payable - 2915 cr =15695 dr Inventory 12185 dr Mortgage Building 37000 dr Loan from V Alan Machinery 20920 dr Motor Vehicle 15000 dr 100800 =

+ 11715 - 2915 =8800 7500 10000

Owners Equity 74500 cr

cr Capital dr cr cr cr

26300 +

74500

27 September 2010 purchased inventory on credit Assets Liabilities Owners Equity = + dr Accounts Payable cr Capital Bank 15695 8800 74500 cr Inventory 12185 dr +4070 cr =12870 cr +4070 dr dr Mortgage =16255 7500 cr Building 37000 dr Loan from V Alan 10000 cr dr Machinery 20920 Motor Vehicle 15000 dr 104870 = 30370 + 74500 28 September 2010 paid account payable Liabilities Assets = dr Accounts Payable Bank 15695 - 8800 cr =6895 dr Inventory 16255 dr Mortgage Building 37000 dr Loan from V Alan Machinery 20920 dr Motor Vehicle 15000 dr 96070 = Account Group Assets
[debit]

+ 12870 - 8800 =4070 7500 10000

Owners Equity 74500 cr

cr Capital dr cr cr cr

21570 + Account Number

74500

10 - 19 Current Assets Bank Inventory Non-current Assets Building Machinery Motor Vehicle 10-14 10 11 15-19 15 16 17 20-24 20 25-29 25 26 30

Liabilities
[credit]

20 - 29 Current Liabilities Accounts Payable Non-current Liabilities Mortgage Loan from V Alan

Owners Equity
[credit]

30 - 39 Capital

Accounting - An introduction to principles and practice, 6E. Solutions to all Questions

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Question 2.16
Current Assets

finalised
Balance Sheet of K Pullen
as at 30 September 2010

Current Liabilities

Bank Inventory Non-current Assets Building Machinery Motor Vehicle

6895 16255 37000 20920 15000

Accounts Payable 23150 Non-current Liabilities Mortgage Loan from V Alan Total Liabilities 72920 Owners Equity Capital
96070

4070 7500 10000 17500 21570 74500

96070

Question 2.17 Account Name Accounts Payable Accounts Receivable Bank Capital Commission Received Cost of Goods Sold Discount Allowed Discount Received Interest Inventory Land and Buildings Loan (repayable in 10 months) Machinery Mortgage on Land and Buildings Motor Vehicles Office Equipment Rent Received Sales Telephone Wages and Salaries Question 2.18 Account Name Stationery Sales Salaries Rent Postage Premises Motor Vehicles Loan (repayable in 18 months) Inventory Interest Received Equipment Electricity Computers Commission Cartage Outwards Cartage Inwards Capital Bank Overdraft Accounts Receivable Accounts Payable Account Group current liability (CL) current asset (CA) current asset (CA) owners equity (OE) revenue (R) expense (E) expense (E) revenue (R) expense (E) current asset (CA) non-current asset (NCA) current liability (CL) non-current asset (NCA) non-current liability (NCL) non-current asset (NCA) non-current asset (NCA) revenue (R) revenue (R) expense (E) expense (E) Account Group expense (E) revenue (R) expense (E) expense (E) expense (E) non-current asset (NCA) non-current asset (NCA) non-current liability (NCL) current asset (CA) revenue (R) non-current asset (NCA) expense (E) non-current asset (NCA) expense (E) expense (E) expense (E) owners equity (OE) current liability (CL) current asset (CA) current liability (CL) Chart of Account 20 10 11 30 40 50 51 41 52 12 15 21 16 25 17 18 42 43 53 54 Chart of Account 50 40 51 52 53 15 16 25 10 41 17 54 18 55 56 57 30 20 11 21

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Question 2.19 10 July 2010 cash sale of inventory (using perpetual inventory system) Assets Liabilities = + [debit] [credit] Bank 6800 dr Accounts Payable 3300 cr +2475 dr =9275 dr Inventory 5500 dr - 1210 cr =4290 dr Motor Vehicle 25000 dr Office Equipment 4500 dr 43065 = 3300 +

Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) Capital 38500 cr Sales =2475 cr -Cost of goods sold - 1210 dr = Profit =1265 cr

39765

15 July 2010 sold inventory on credit (using perpetual inventory system) Assets Liabilities Owners Equity [cr]+ = + [debit] [credit] (Revenue [cr] - Expense [dr] ) Bank 9275 dr Accounts Payable 3300 cr Capital 38500 cr dr Accnt Receivable =3740 Sales 2475 Inventory 4290 dr +3740 =6215 - 1540 cr dr =2750 -Cost of goods sold -1210 Motor Vehicle 25000 dr - 1540 Office Equipment 4500 dr = -2750 = Profit =3465 cr 45265 = 3300 + 41965 18 July 2010 payment of account payable Assets Liabilities = [debit] [credit] Bank 9275 dr Accounts Payable 3300 cr - 3300 - 3300 =5975 dr = 0 dr Accnt Receivable 3740 Inventory 2750 dr Motor Vehicle 25000 dr Office Equipment 4500 dr 41965 = 0 +

cr cr cr dr dr dr

Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) cr Capital 38500 cr dr Sales 6215 cr -Cost of goods sold -2750 dr = Profit 3465 cr

41965

21 July 2010 purchased inventory on credit and for cash (using perpetual inventory system) Assets Liabilities Owners Equity [cr]+ = + [debit] [credit] (Revenue [cr] - Expense [dr] ) Bank 5975 dr Accounts Payable =2860 cr Capital 38500 cr Sales 6215 cr - 1595 cr dr 4380 -Cost of goods sold -2750 dr Accnt Receivable 3740 dr = Profit 3465 cr dr Inventory 2750 +2860 dr +1595 dr 7205 dr Motor Vehicle 25000 dr Office Equipment 4500 dr 44825 = 2860 + 41965

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Question 2.19 finalised 25 July 2010 payment of expenses and purchase of machinery for cash Assets Liabilities Owners Equity [cr]+ = + [debit] [credit] (Revenue [cr] - Expense [dr] ) Bank 4380 dr Accounts Payable 2860 cr Capital 38500 cr Sales 6215 - 900 cr cr -Cost of goods sold -2750 - 110 cr Wages - 1540 = - 900 =1830 dr Electricity = - 110 dr Accnt Receivable 3740 = -3760 Inventory 7205 dr = Profit =2455 cr Motor Vehicle 25000 dr Office Equipment 4500 dr Machinery =1540 dr 43815 = 2860 + 40955 29 July 2010 receipt from account receivable and payment to account payable Assets Liabilities Owners Equity [cr]+ = + [debit] [credit] (Revenue [cr] - Expense [dr] ) Bank 1830 dr Account Payable 2860 cr Capital 38500 cr dr dr Sales 6215 +3740 - 2860 = 0 -Cost of goods sold -2750 - 2860 cr =2710 dr Wages -900 Accnt Receivable 3740 dr Electricity -110 -3760 - 3740 cr = 0 = Profit 2455 cr Inventory 7205 dr Motor Vehicle 25000 dr Office Equipment 4500 dr Machinery 1540 dr 40955 = 0 + 40955 Balance Sheet of A Argenton
as at 31 July 2010

cr dr dr dr dr

cr dr dr dr dr

Current Assets Bank Inventory Non-current Assets Motor Vehicles Office Equipment Machinery Question 2.20

2710 7205 25000 4500 1540

Owners Equity Capital 9915 Add Profit

38500 2455

40955

31040 40955

40955

Balance Sheet of G Cooranbong

as at 31 March 2010

Current Assets Bank Accounts Receivable Inventory Non-current Assets Office Equipment Computers

2500 1800 1000 3500 6000

Current Liabilities Accounts Payable Non-current Liabilities 5300 Loan - Bank Total Liabilities Owners Equity 9500 Capital Add Profit 14800

900 5000 5900 7000 1900 8900 14800

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Question 2.21
2 January 2010 D Brad commenced business

Assets [debit] Bank Equipment

= = 7000 dr =12100 dr 19100 = = 7000 - 2090 - 2255 =2655 =2255 12100 =2090 19100
dr cr cr dr dr dr dr

Liabilities [credit]

Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) Capital =19100 cr 19100

4 January 2010 purchased machinery and inventory for cash

Assets [debit] Bank

Liabilities [credit]

Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) Capital 19100 cr

Inventory Equipment Machinery

= = Liabilities [credit] +

19100 Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) Capital 19100 cr Sales = 4070 cr -Cost of goods sold = - 1980 dr = Profit =2090 cr

7 January 2010 sold inventory on credit (using perpetual inventory system)

Assets [debit] Bank Accnt Receivable Inventory Equipment Machinery 2655 =4070 2255 - 1980 =275 12100 2090 21190

dr dr dr cr dr dr dr

= =
dr dr dr dr dr dr dr dr

21190 Liabilities [credit] + Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) Capital 19100 cr +2000 cr +13860 cr =34960 cr Sales 4070 cr -Cost of goods sold -1980 dr = Profit 2090 cr 37050 Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) 34960 cr =7500 cr Capital Sales 4070 cr -Cost of goods sold -1980 dr cr = Profit 2090 +

9 January 2010 additional capital

Assets [debit] Bank 2655 +2000 =4655 Accnt Receivable 4070 Inventory 275 Equipment 12100 Machinery 2090 Motor Vehicle =13860 37050
12 January 2010 loan from A Relo

= =

Liabilities [credit] dr Loan from A Relo Bank 4655 +7500 dr =12155 dr Accnt Receivable 4070 dr Inventory 275 dr Equipment 12100 dr Machinery 2090 dr Motor Vehicle 13860 dr 44550 =

Assets [debit]

7500 +

37050

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Question 2.21 continued 15 January 2010 equipment and inventory purchased on credit Assets Liabilities = + [debit] [credit] Bank 12155 dr Accounts Payable +6050 cr Accnt Receivable 4070 dr +2365 cr dr Inventory 275 =8415 cr 7500 cr +2365 dr Loan from A Relo dr =2640 Equipment 12100 dr +6050 dr =18150 dr Machinery 2090 dr Motor Vehicle 13860 dr 52965 = 15915 + 17 January 2010 cash sale Assets [debit] Bank 12155 +3575 =15730 Accnt Receivable 4070 Inventory 2640 - 1925 =715 Equipment 18150 Machinery 2090 Motor Vehicle 13860 54615 Liabilities [credit] dr Accounts Payable dr Loan from A Relo =
dr dr dr cr dr dr dr dr

Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) Capital 34960 cr Sales 4070 cr -Cost of goods sold -1980 dr = Profit 2090 cr

37050

Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) 8415 cr Capital 34960 cr 7500 cr Sales 4070 +3575 =7645 -Cost of goods sold -1980 - 1925 = - 3905 = Profit =3740 cr + 15915 + + 38700

cr cr cr dr dr dr

20 January 2010 sale on credit Liabilities Assets = [debit] [credit] Bank 15730 dr Accounts Payable Accnt Receivable 4070 dr Loan from A Relo +968 dr =5038 dr Inventory 715 dr - 385 cr =330 dr Equipment 18150 dr Machinery 2090 dr Motor Vehicle 13860 dr 55198 =

Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) 8415 cr Capital 34960 cr cr Sales 7500 7645 +968 =8613 -Cost of goods sold -3905 - 385 = - 4290 = Profit =4323 cr 15915 + 39283

cr cr cr dr dr dr

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Question 2.21 Assets [debit]

finalised = Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) 8415 cr Capital 34960 cr cr Sales 7500 8613 cr -Cost of goods sold - 4290 dr = Profit 4323 cr +

23 January 2010 asset purchased for cash

Liabilities [credit] Bank 15730 dr Accounts Payable - 3850 cr Loan from A Relo =11880 dr Accnt Receivable 5038 dr Inventory 330 dr Equipment 18150 dr Machinery 2090 dr +3850 dr =5940 dr Motor Vehicle 13860 dr 55198 =
25 January 2010 payment of account payable

15915 + + 8415 - 6050 =2365 7500

cr dr cr cr

39283 Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) Capital 34960 cr Sales 8613 cr -Cost of goods sold - 4290 dr = Profit 4323 cr

Assets [debit] Bank Accnt Receivable Inventory Equipment Machinery Motor Vehicle

Liabilities [credit] dr Accounts Payable 11880 - 6050 cr =5830 dr 5038 dr Loan from A Relo 330 dr 18150 dr 5940 dr 13860 dr 49148 = = Liabilities [credit] 5830 dr Accounts Payable - 2365 cr +4070 dr =7535 dr Loan from A Relo 5038 dr - 4070 cr =968 dr 330 dr 18150 dr 5940 dr 13860 dr 46783 = =

9865 + +

39283

28 January 2010 payment to account payable and receipt from account receivable

Assets [debit] Bank

Owners Equity [cr]+ (Revenue [cr] - Expense [dr] ) 2365 cr Capital 34960 cr dr Sales 8613 cr - 2365 = 0 -Cost of goods sold - 4290 dr 7500 cr = Profit 4323 cr

Accnt Receivable Inventory Equipment Machinery Motor Vehicle

7500 +

39283

Balance Sheet of D Brad

as at 31 January 2010

Current Assets Bank Accounts Receivable Inventory Non-current Assets Equipment Machinery Motor Vehicle

7535 968 330 18150 5940 13860

Non-current Liabilities Loan from A Relo Owners Equity 8833 Capital Add Profit 37950 46783

7500 34960 4323 39283

46783

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Question 2.22 Account Group Assets

[debit]

Account Number 10 - 19 10-14 10 11 12 15-19 15 16 17 18 20-24 20 21 25-29 25 30 40 41 42 51 52 53 54 55 56 57 58 59 60

Current Assets Petty Cash Accounts Receivable Inventory Non-current Assets Office Equipment Premises Investment in Shares Motor Vehicles Liabilities 20 - 29 [credit] Current Liabilities Bank Overdraft Accounts Payable Non-current Liabilities Long Term Loan Owners Equity 30 - 39 [credit] Capital Revenue 40 - 49 [credit] Sales Rent Received Dividends Received Expense 50 - 69 [debit] Cartage Inwards Electricity Import Duty Interest Salaries Telephone Stationery Vehicle Expenses Bad Debt Expense Advertising Question 2.23

Balance Sheet of S T David

as at 30 April 2010

Current Assets Accounts Receivable Bank Inventory Non-current Assets Office Furniture Computers Motor Vehicles

3300 1500 880 6600 8800 22000

Current Liabilities Loan from Bank Accounts Payable 5680 Owners Equity Capital Add Profit 37400 43080

4000 330 34700 4050

4330 38750 43080

Revenue: Sales 11000 Less Expenses: Salaries 2000 + Cost of goods sold 3300 + Rent 1100 + Vehicle expenses 550 = 6950. Revenue - expenses = 11000 - 6950 = 4050 profit Current assets 5680 + non-current assets 37400 - current liabilities 4330 = owners equity 38750. Owners equity 38750 - profit 4050 = capital before the profit 34700

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Question 2.24 Accounting Account Name Equation Element Commenced business with cash asset Bank owners equity Capital Purchased inventory for cash asset Inventory asset Bank Sold inventory for cash asset Bank revenue Sales expense Cost of Goods Sold asset Inventory Purchased postage stamps for cash expense Postage asset Bank Sold inventory on credit asset Accounts Receivable revenue Sales expense Cost of Goods Sold asset Inventory Question 2.25 Accounting Account Name Equation Element Commenced business with cash and inventory asset Bank asset Inventory owners equity Capital Purchased stationery for cash expense Stationery asset Bank Sale of inventory on credit asset Accounts Receivable revenue Sales expense Cost of Goods Sold asset Inventory Purchase of motor vehicle for cash asset Motor Vehicle asset Bank Purchased inventory on credit asset Inventory liability Accounts Payable Business Transaction An increase or decrease of the account increase increase increase increase decrease increase increase increase decrease increase decrease increase increase Account is debit or credit debit debit credit debit credit debit credit debit credit debit credit debit credit Business Transaction An increase or decrease of the account increase increase increase decrease increase increase increase decrease increase decrease increase increase increase decrease Account is debit or credit debit credit debit credit debit credit debit credit debit credit debit credit debit credit

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Question 2.26 Business Transaction Paid wages expense Wages increase asset Bank decrease Purchased inventory on credit asset Inventory increase liability Accounts Payable increase Sale of inventory on credit asset Accounts Receivable increase revenue Sales increase expense Cost of Goods Sold increase asset Inventory decrease Received cash from a customer for inventory sold earlier in the month asset Bank increase asset Accounts Receivable decrease Purchased office equipment for cash asset Office Equipment increase asset Bank decrease Question 2.27 Business Transaction Rent received asset Bank revenue Rent Received Sale of inventory for cash asset Bank revenue Sales expense Cost of Goods Sold asset Inventory Purchased inventory on credit asset Inventory liability Accounts Payable Paid supplier for inventory purchased on credit last month liability Accounts Payable asset Bank increase increase increase increase increase decrease increase increase decrease decrease debit credit debit credit debit credit debit credit debit credit Accounting Equation Element Account Name An increase or decrease of the account Account is debit or credit debit credit debit credit debit credit debit credit debit credit debit credit Accounting Equation Element Account Name An increase or decrease of the account Account is debit or credit

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Question 2.28 Business Transaction

Accounting Account Name An increase or Equation decrease of the Element account Commenced business with cash and motor vehicle asset Bank increase asset Motor Vehicle increase owners equity Capital increase Purchased inventory for cash asset Inventory increase asset Bank decrease Sale of inventory on credit asset Accounts Receivable increase revenue Sales increase expense Cost of Goods Sold increase asset Inventory decrease Purchase of machinery on credit asset Machinery increase liability Accounts Payable increase Sold inventory for cash asset Bank increase revenue Sales increase expense Cost of Goods Sold increase asset Inventory decrease Purchased stationery on credit expense Stationery increase liability Accounts Payable increase Paid salaries expense Salaries increase asset Bank decrease Obtained a mortgage from the bank asset Bank increase liability Mortgage increase Paid cash for equipment asset Equipment increase asset Bank decrease Paid the supplier of stationery, purchased earlier on credit liability Accounts Payable decrease asset Bank decrease Rent received asset Bank increase revenue Rent Received increase Received cash from customers for inventory, sold earlier on credit asset Bank increase asset Accounts Receivable decrease

Account is debit or credit debit debit credit debit credit debit credit debit credit debit credit debit credit debit credit debit credit debit credit debit credit debit credit debit credit debit credit debit credit

Accounting - An introduction to principles and practice, 6E. Solutions to all Questions

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Question 2.29 Accounting Account Name An increase or Equation decrease of the Element account Purchased inventory on credit asset Inventory increase liability Accounts Payable increase Paid cash for motor vehicle asset Motor Vehicle increase asset Bank decrease Paid rent expense Rent increase asset Bank decrease Obtained a loan from the credit union asset Bank increase liability Loan from Credit Union increase Cash sale of inventory asset Bank increase revenue Sales increase expense Cost of Goods Sold increase asset Inventory decrease Additional computer and machinery introduced by the owner asset Computer increase asset Machinery increase owners equity Capital increase Paid the supplier of inventory purchased earlier, on credit liability Accounts Payable decrease asset Bank decrease Sold inventory on credit asset Accounts Receivable increase revenue Sales increase expense Cost of Goods Sold increase asset Inventory decrease Paid cash for advertising expense Advertising increase asset Bank decrease Cash received from customer who had been sold inventory on credit asset Bank increase asset Accounts Receivable decrease Paid cash for office equipment asset Office Equipment increase asset Bank decrease Commission received asset Bank increase revenue Commission Received increase Business Transaction Account is debit or credit debit debit debit debit debit debit debit debit debit debit debit debit debit debit debit credit credit credit credit credit credit

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