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Additional Illustration on Topic 4

Additional Illustration on Topic 4. Exhibit 1(a): The balance sheet and the effects of business transactions. 1. The introduction of capital On 1 July 2008, B Blake started in business and deposited RM5,000 into a bank account opened specially for the business. B Blake

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Additional Illustration on Topic 4

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  1. Additional Illustration onTopic 4

  2. Exhibit 1(a): The balance sheet and the effects of business transactions 1. The introduction of capital On 1 July 2008, B Blake started in business and deposited RM5,000 into a bank account opened specially for the business. B Blake Balance Sheet as at 1 July 2008 Assets: RM Cash at bank [1] 5,000 Owner’s Equity: Capital [1] 5,000

  3. The purchase of an asset by chequeOn 3 July 2008, Blake buys a building for RM3,000 paying by cheque. B Blake Balance Sheet as at 3 July 2008Assets: RMCash at bank (5,000 – [2]3,000) 2,000Building [2] 3,000 5,000Owner’s Equity: RMCapital 5,000

  4. The purchase of an asset and the incurring of a liabilityOn 6 July 2008, Blake buys some goods for RM500 from D Smith, and agrees to pay for them some time within the next two weeks. B Blake Balance Sheet as at 6 July 2008Assets: RMCash at bank 2,000Inventories [3] 500Building 3,000 5,500Liabilities: RMAccounts Payable [3] 500Owner’s Equity:Capital 5,000 5,500

  5. Sale of an asset on creditOn 10 July 2008, goods which cost RM100 are sold to J Brown for the same amounts, the money to be paid later. B Blake Balance Sheet as at 10 July 2008Assets: RMCash at bank 2,000Accounts Receivable [4] 100Inventories (500 – [4]100] 400Building 3,000 5,500Liabilities: RMAccounts Payable 500Owner’s Equity:Capital 5,000 5,500

  6. Sale of an asset for immediate paymentOn 13 July 2008, goods which cost RM50 are sold to T Blair for the same amounts. Blair paid for the goods immediately by cheque. B Blake Balance Sheet as at 13 July 2008Assets: RMCash at bank (2,000 + [5]50) 2,050Accounts Receivable 100Inventories (400 – [5]50) 350Building 3,000 5,500Liabilities: RMAccounts Payable 500Owner’s Equity:Capital 5,000 5,500

  7. The payment of a liabilityOn 15 July 2008, Blake pays a cheque for RM200 to D Smith in part payment of the amount owing. B Blake Balance Sheet as at 15 July 2008Assets: RMCash at bank (2,050 – [6]200) 1,850Accounts Receivable 100Inventories (400 – 50) 350Building 3,000 5,300Liabilities: RMAccounts Payable (500 – [6]200) 300Owner’s Equity:Capital 5,000 5,300

  8. Collection of an assetOn 31 July 2008, J Brown, who owed Blake RM100, makes a part payment of RM75 by cheque. B Blake Balance Sheet as at 31 July 2008Assets: RMCash at bank (1,850 + [7]75) 1,925Accounts Receivable (100 – [7]75) 25Inventories 350Building 3,000 5,300Liabilities: RMAccounts Payable 300Owner’s Equity:Capital 5,000 5,300

  9. Exhibit 1(b): Summary of the effect upon assets, liabilities and owner’s equity of each type of transaction is shown below:

  10. Exhibit 1(b): Summary of the effect upon assets, liabilities and owner’s equity of each type of transaction is shown below: (cont’d)

  11. Exhibit 2(a): The effects of business transactions on the balance sheet The following is the financial position of F Dale Enterprise as on 31 July 2008: F Dale Enterprise Balance Sheet as at 31 July 2008 Assets: RM Cash in hand 40 Cash at bank 7,280 Accounts Receivable 5,770 Inventories 6,150 Equipment 11,500 Motor Vehicle 6,290 Total Assets37,030 Liabilities: RM Accounts Payable 3,950 Owner’ Equity: Capital 33,080 Total Liabilities & Owner’s Equity 37,030

  12. Exhibit 2(a): The effects of business transactions on the balance sheet (cont’d) During the first week of August 2008, (a) Dale purchased additional equipment on credit for RM1,380. (b) Dale purchased additional goods by cheque RM570. (c) Dale paid creditors by cheque RM790. (d) Debtors paid dale RM840 by cheque and RM60 by cash. (e) Dale put in additonal RM250 cash as capital. Required: Draw a balance sheet as at 7 August 2008 after the above transactions have been completed.

  13. Exhibit 2(a): The effects of business transactions on the balance sheet (cont’d) F Dale Enterprise Balance Sheet as at 7 August 2008 Assets: RM Cash in hand [40 + (d)60 + (e)250] 350 Cash at bank [7,280 – (b)570 – (c)790 + (d)840] 6,760 Accounts Receivable [5,770 – (d)900] 4,870 Inventories [6,150 + (b)570] 6,720 Equipment [11,500 + (a)1,380] 12,880 Motor Vehicle 6,290 Total Assets37,870 Liabilities: RM Accounts Payable [3,950 + (a)1,380 – (c)790] 4,540 Owner’ Equity: Capital [33,080 + (e)250] 33,330 Total Liabilities & Owner’s Equity 37,870

  14. Exhibit 2(b): Analysis on the effects of the transactions on the balance sheet

  15. Exhibit 3(a): The double entry system for assets, liabilities and owner’s equity

  16. Exhibit 3(b): The double entry system for assets, liabilities and owner’s equity In journal entry format:

  17. Exhibit 3(b): The double entry system for assets, liabilities and owner’s equity (cont’d)

  18. Exhibit 3(c): The double entry system for assets, liabilities and owner’s equity In account format: Bank Total Debit RM1,015 Less: Total Credit RM 868 Balance c/f RM 147 =======

  19. Exhibit 3(c): The double entry system for assets, liabilities and owner’s equity (cont’d) Cash

  20. Exhibit 3(c): The double entry system for assets, liabilities and owner’s equity (cont’d) Capital

  21. Exhibit 3(c): The double entry system for assets, liabilities and owner’s equity (cont’d) Machinery

  22. Exhibit 3(c): The double entry system for assets, liabilities and owner’s equity (cont’d) Vans Total Debit RM600 Less: Total Credit - 0 - Balance c/f RM600 ======

  23. Exhibit 3(c): The double entry system for assets, liabilities and owner’s equity (cont’d) A/c Payable A/c Receivable

  24. Exhibit 4(a): The double entry system for expenses and revenues In journal entry form:

  25. Exhibit 4(b): The double entry system for expenses and revenues In account form: Bank Utilities Expense

  26. Exhibit 4(b): The double entry system for expenses and revenues (cont’d) Insurance Expense Postages Expense Rent Revenue

  27. The double entry system for the movement of inventory/stock under periodical inventory system Inventory/stock movement refers to the increase and/or decrease in inventory. 1. Increase in inventory due to: (a) the purchase of inventory - recorded in Purchases Account (b) the return of inventory from customer - recorded in Returns Inwards Account (Sales Returns A/c)

  28. The double entry system for the movement of inventory/stock (cont’d) Inventory/stock movement refers to the increase and/or decrease in inventory. 2. Decrease in inventory due to: (a) the sale of inventory - recorded in Sales Account (b) the return of inventory to supplier - recorded in Returns Outwards Account (Purchases Returns A/c)

  29. Exhibit 5(a): The double entry system for the movement of inventory/stock

  30. Exhibit 5(a): The double entry system for the movement of inventory/stock (cont’d)

  31. Exhibit 5(b): The double entry system for the movement of inventory/stock Journal entry:

  32. Exhibit 5(b): The double entry system for the movement of inventory/stock (cont’d) Journal entry:

  33. Exhibit 5(c): The double entry system for the movement of inventory/stock General ledger: Purchases A/c Payable Cash

  34. Exhibit 5(c): The double entry system for the movement of inventory/stock (cont’d) General ledger: Sales A/c Receivable

  35. Exhibit 5(c): The double entry system for the movement of inventory/stock (cont’d) General ledger: Purchases Returns Sales Returns

  36. Exercise 1:The effects of transactions upon assets, liabilities, owner’s equity, revenues and expenses and the double entry system

  37. Exercise 1 (cont’d)

  38. Exercise 1 (cont’d)

  39. Exercise 1 (cont’d)

  40. Exercise 1 (cont’d)

  41. Exhibit 6(a): Recording business transactions in general journal During the month of January 2008, the following transactions of The Green Crescent, a sundry shop, owned by Encik Zakaria Yahya, took place: January 1, made cash purchases, RM4,000.

  42. Exhibit 6(a): Recording business transactions in general journal (cont’d) January 2, made cash sales, RM400. January 4, paid Kayu Trading by cheque for the purchase of selves.

  43. Exhibit 6(a): Recording business transactions in general journal (cont’d) January 6, made credit sales, RM300. January 8, paid a cheque for electricity consumed last month.

  44. Exhibit 6(a): Recording business transactions in general journal (cont’d) January 9, credit purchases of RM1,000. January 10, credit sales of RM600.

  45. Exhibit 6(b): Recording business transactions in general journal 2008 RM 1 Jan Paid a cheque for personal driving 4,000 2 Made cash sales 400 4 Paid Kayu Trading by cheque for the purchase of shelves 500 6 Made credit sales 300 8 Paid a cheque for electricity consumed last month 150 9 Purchased goods on credit 1,000 10 Made credit sales 600 11 Paid a cheque for water consumed for the last two months 80 14 Paid a cheque for personal driving license and road tax for private use 400 16 Paid telephone bill with cheque 200 18 Made cash sales 700 Made credit purchases 400

  46. Exhibit 6(b): Recording business transactions in general journal (cont’d) 2008 RM 19 Jan Paid creditors with cheques 900 20 Received cheques from debtors 600 21 Returned goods to creditors 50 22 Owner took some goods from the shop for family use 88 23 Debtors returned goods to the shop 100 24 Made cash sales 800 26 Purchased goods on credit 1,200 27 Paid cash for repair of shop 200 28 Owner took cash for personal use 100 29 Debtors sent cheques for amounts owing 900 30 Obtained discounts of RM80 for paying early with cheques of RM1,500 to creditors 31 Paid the two shop assistants cash of RM600 each. Required: Journalize all the above transactions.

  47. Exhibit 6(b): Recording business transactions in general journal (cont’d)

  48. Exhibit 6(b): Recording business transactions in general journal (cont’d)

  49. Exhibit 6(b): Recording business transactions in general journal (cont’d)

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