MGT101 Financial Accounting Assignment 1 Solution Spring 2013

FINANCIALACCOUNTING (MGT101)
ASSIGNMENTNO. 01
DUE DATE: 2
nd May 2013
MARKS: 20
TOPIC TO BE TESTED:
• Application of “Rules of debit and credit”
LEARNING OBJECTIVES:
• To develop an understanding for applying the rules of debit and credit
On 1st March 2013, Mr. Adnan organized a business called A.R Rentals. Mr. Adnan’s new business was able to begin operations immediately by purchasing the assets and  taking over the location of Ammar Rentals, an equipment rental business. Below are thetransactions for the month of March 2013:
Date Transactions
2013
March 01
Mr. Adnan deposited Rs. 900,000 cash in the name of his business- A. R
Rentalsin the bank.
March 01 Paid Rs. 90,000 to Mr. Irfan as three month’s advance rent for the rental
yard and originally recorded this payment as an asset as per policy.
March 01 Purchased for Rs. 280,000 all the equipment from Ammar Rentals and paid
Rs. 170,000 cash and issued a 3 months note payable for Rs. 110,000.
March 04 Purchased office supplies and office furniture from Ashar & Co. amounting
to Rs. 5,000 and Rs. 50,000 respectively.
March 08 Received Rs. 10,000 cash from Mukhtar Construction Co. as rent of
equipment
March 10 Sent an invoice for Rs. 5,000 to M/S ABC for rental services provided.
March 17 Rs. 3,400 paid for maintenance of equipment to Raza & company
ASSIGNMENT QUESTIONRequired:
Fill the appropriate boxes of table given below
(1
st transaction is given as sample attempt in the table)
Date Accounts involved
Debit
Rs.
Credit
Rs.
Applied Rule of Debit and Credit
with respect to the nature of
account
2013
March 01 Bank
Capital
900,000
900,000
Increase in asset a/c
Increase in Owner’s equity a/c
March 01 ?
?
90,000
90,000
?
?
March 01 ?
?
?
280,000
170,000
110,00
?
?
?
March 04 ?
?
?
5,000
50,000
55,000
?
?
?
March 08 ?
?
10,000
10,000
?
?
March 10 ?
?
5,000
5,000
?
?
March 17 ?
?
3,400
3,400
?
?
March 27 ? 150 ?
March 27 Bank charges of Rs. 150 deducted by bank from bank account of business
March 30 Received a cheque of Rs. 10,000 from M/S ABCagainst rentalservices
March 31 Paid salaries for the month of March amounting to Rs. 3,600 ? 150 ?
March 30 ?
?
10,000
10,000
?
?
March 31 ?
?
3,600
3,600
?
?

Solution :

 

Date

 

Accounts involved

Debit

 

Rs.

Credit

 

Rs.

Applied Rule of Debit and Creditwith respect to the nature of account

2013

 

March 01

 

 

Bank

 

Capital

 

 

900,000

 

 

 

 

 

900,000

 

 

Increase in asset a/c

 

Increase in Owner’s equity a/c

March 01

Advance Rent

 

Bank

90,000

 

 

90,000

Increase in Asset Account

 

Decrease in Asset Account

March 01

Equipment

 

Cash

 

Ammar Rental

280,000

 

 

170,000

 

110,00

Increase in Asset Account

 

  Decrease in Asset Account

 

Increase in Liability Account

March 04

Office Supplies

 

Office Supplies

 

Ashar & Co.

5,000

 

50,000

 

 

 

 

 

55,000

  Increase in Asset Account

 

Increase in Asset Account

 

Increase in Liability Account

March 08

Cash

 

Rent Received

10,000

 

 

10,000

Increase in Asset Account

 

Increase in Income Account

March 10

M/s ABC

 

Rent

5,000

 

 

5,000

Increase in asset Account

 

Increase in Income Account

March 17

Repairing & Maintenance

 

Cash

3,400

 

 

3,400

Increase in Expense Account

 

Decrease in Asset Account

March 27

Bank Charges

150

 

 

150

Increase in Expense Account

 

Decrease in Asset Account

Bank

March 30

Bank

 

M/s ABC

10,000

 

 

10,000

Increase in Asset Account

 

Decrease in Asset Account

March 31

Salaries

 

Cash

3,600

 

 

3,600

Increase in Expense Account

 

Decrease in Asset Account

 

 

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