MGT101 Financial Accounting GDB Solution Spring 2014

During a financial year, a business may experience thousands of transactions. It is the responsibility of an accountant to classify and record these transactions as well as to summarize the data in these transactions to create useful information. Every business transaction has two aspects. One aspect is debited while the other is credited. Both of the aspects have to be recorded in accounts appropriately. Accountants use the term debit for the entry to be placed on left side of an account and the term credit for entry on the right side of the same account.

DISCUSSION QUESTIONS:

Being a student of accounting, you are required to:

1)     Recognize business transactions from the following mentioned events.

2)     Analyze the business transactions thoroughly and determine its increasing or decreasing effects on the assetsliabilities, equity,revenues, or expenses of the business.

3)     Explain these increasing or decreasing effects into debits and credits

 

Report on Business and non-business events of ABC Company

During XXX financial year

 

1 ABC company sold goods of RS.10, 000 on account, agreeing to receive payment within 10 days after delivering the items.
2 Expenses incurred for the renovation of the new office of Rs.2, 000
3 Paid Rs.1,000 for the office equipment purchased on account
4 Expenses incurred by partner A on birthday party of his son worth Rs.20, 000
5 Laundry expenses by wife of  partner B for Rs.1,500
6 The company borrowed Rs.60,000 from Partner A’s father and promised to repay the amount borrowed within one year
7 company issued shares of capital stock for Rs.30,000 cash to Partner B, his wife and son
8 Rs.95,900 is a revenue earned by the business during the year
9 Paid Rs.4, 000 cash for office rent.
10 Expenses incurred on foreign official trip by partner A Rs.35,000

 

 Note: It is compulsory to follow the given format for answering the discussion questions (one is done for you):

 

Transaction #

 

Nature

Analysis

Recording

Purchased office equipment of RS.10, 000 on account Business transaction Increased assets (office equipment) and liabilities (accounts payable Dr. Asset and Cr. Liabilities 
       
       
       
       

 Solution:


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