Assignment 1st | Financial Accounting

Read Instructions Before Start an Assignment:

Assignment Have divided into 3 Part and compulsory to attempt all parts.
It has covered the Week 1 to week 3 Learning Concepts.

(Part 1st)

1) Solve Accounting Equation

Fill in the missing information below and write down the analysis (i.e., Explain the application of
accounting equation)
Assets Liabilities Shareholders’ Equity
Business #1 $393,000 $181,000 $212,000
Business #2 $74,800 $38,600 $ 36200
Business #3 $30,000 $21,400 $8,600
Business #4 $25,000 $33,800 (8,800)*
Business #4’s equity is in an accumulated deficit position.

Analysis:

*Business-1:The accounting equation is already balanced in this case. Liabilities ($181,000) and
shareholders' equity ($212,000) add up to a total asset value of $393,000. Therefore, it shows that the
business has enough assets to pay off its debts and the investment made by shareholders.

*Business-2:As per the analysis, the shareholder's equity of the business is $36,200. Therefore, it
represents the value of assets the business has after reducing liabilities and indicates the interest of
ownership in the company.

*Business-3: The sum of liabilities and shareholders' equity equals the total assets of $30,000.
Therefore, the accounting equation could be considered balanced.

*Business-4: The shareholders' equity is negative equity of (8,800), a deficit. Therefore, the
corporation has negative equity as its liabilities exceed its assets.
 Assignment 1st | Financial Accounting

Fill in the missing information below and write down the analysis (i.e., Explain the application of
accounting equation)
Assets Liabilities Shareholders’ Equity
Business #1 $1,40,000 80,000 60,000
Business #2 1,250,000 $1,50,000 1,100,000
Business #3 75,000 48,500 $26,500
Business #4 52,000 $59,600 (7,600) *
Business #4’s equity is in an accumulated deficit position.

Analysis:
*Business-1:The business's assets are equal to the sum of the values of liabilities and shareholder's
equity, which shows that there are enough assets within the company. Therefore, we can say that the
accounting equation is balanced.

*Business-2: The assets of 1,250,000 equal the sum of liabilities and shareholders’ equity.
Consequently, we can say that the above equation is balanced.

*Business-3: The shareholders’ equity of $26,500 equals a deduction of liabilities from assets.
Therefore, the above equation is balanced.

*Business-4: The shareholders’ equity is (7600), a deficit. Liability has exceeded the value of the sum
of assets and shareholders’ equity.

1 A business has $250,000 total liabilities. At start-up, the owners invested $500,000 in the
business. Unfortunately, the business has suffered a cumulative loss of $200,000 up to the
present time. What is the amount of its total assets at the present time?
Solve It:
ANS:
Total Liabilities a business has= $250,000
Opening capital= $500,000
Cumulative loss= $200,000
Closing capital= $300,000
Assets= Liability+ Owner's Equity
=$250,000+300,000
= $550,000
Therefore, the total assets the company has in present time is $550,000

2 A business has $485,000 total liabilities and $1,200,000 total owners’ equity. What is the
amount of its total assets?
Solve It:
ANS:
 Assignment 1st | Financial Accounting

Total liabilities= $485,000

Total owners' equity= $1,200,000
Total assets= $1,685,000

3 A business has $175,000 total liabilities. At start-up, the owners invested $250,000 capital. The
business has earned $190,000 cumulative profit since its creation, all of which has been retained
in the business. What is the total amount of its assets?
Solve It:
ANS:
Total liabilities=$175,000
Opening Capital= $250,000
Cumulative profit=$190,000
Closing Capital= $440,000
Asset=Liabilities+Shareholders' equity
Assets= 175,000+$440,000
=$615,000

(Part 2nd)
Account Classification:
Each of the following accounts is either an Asset (A), Liability (L), Shareholders’ Equity (SE),
Revenue (Rev), Expense (Exp)
Mark the first blank with the appropriate classification – A, L, SE, Rev, Exp
If you have identified an item as either an Asset or Liability, mark the
second blank as “C” if the item is current.

A/L/SE C (Mention only Current

Assets/Current Liabilities)
Long-term A
investments
Accounts receivable A CA
Consulting revenue Rev
Rent revenue Rev
Computer A
Mortgage payable L
Salaries L CL
payable
 Assignment 1st | Financial Accounting

Cash A CA
Equipment A
Retained earnings SE
Temporary A CA
investments
Accounts payable L CL
Income tax expense Exp
Car A
Salaries expense Exp
Utilities expense Exp
Land A
Inventory A CA
Building A
Interest expense Exp
Bank loan payable L CL
Common shares SE
Telephone expense Exp
 Assignment 1st | Financial Accounting

(Part -3rd)

Transactions
Prepare the general journal entries to record the following transactions for the business for the
month of May 2022:
May
1 Owner deposited $50,000 of his own money into the business’ bank account.
3 Employed a part-time worker to begin work on the first Monday of next month,
earning a salary of $450 per week.
5 Purchased office supplies for $80 and a laptop for $2,500, both on credit.
5 Bought $8,000 worth of new inventory on credit to be sold in the shop.
6 Paid rent of $900.
7 Received $2,000 cash from a client for services provided.
9 Sold inventory for $1,750 cash, and $4,150 on credit. The inventory had cost the
business $4,000
10 A short-term bank loan of $10,000 was taken out to help with some equipment
purchases.
12 Owner took home $1,500 for personal use
19 Invoiced a client for $2,100 for services provided.
21 Paid electricity of $412.
23 Paid $2,000 of accounts payable
25 Received cash for $3,000 of accounts receivable
30 Paid $300 principle off the loan and a further $35 interest.
31 Office supplies used this month total $38.

General Journal Template:

Date Details Debit Credit

1 May Cash A/c Dr $50,000
To Capital A/c $50,000
(Being money deposited by the owner)

3 May Salary A/c Dr $450

To Cash A/c $450
(Being employed part-time worker)
 Assignment 1st | Financial Accounting

5 May Office Supplies A/c Dr $80

Laptop Asset A/c Dr $2500
To accounts payable $2580
(Being purchased office supplies and
laptop)
5 May Inventory A/c Dr $8,000
To Sales A/c $8,000
(Being bought new inventory which is
to be sold)
6 May Rent A/c Dr $900
To Cash A/c $900
( Being paid rent)
7 May Cash A/c Dr $2000
To Service A/c $2000
(Being received cash for services)
9 May Cash A/c Dr $1,750
Accounts receivable Dr $4,150
To sales A/c $5900
Sales A/c Dr $4000
To inventory A/c $4000
( Being sold inventory)
10 May Loan A/c Dr 10,000
To purchases A/c $10,000
(Being taken loan for purchasing
equipment)
12 May Capital A/c Dr $1500
To Drawings A/c $1500
(Being money taken out by owner)
19 May Accounts Receivable Dr $ 2100
To service A/c $2100
(Being invoiced a client for services)
21 May Utilities A/c Dr $412
To Cash A/c $412
(Being paid utilities bill)
23 May Accounts payable Dr $2000
To Cash A/c $2000
(Being paid accounts payable)
25 May Cash A/c Dr $3000
To accounts receivable $3000
(Being received cash for accounts
receivable)
 Assignment 1st | Financial Accounting

30 May Short term Loan A/c Dr $300

Interest A/c Dr $35
To Cash A/c $335
(Being paid principle off the loan along
with the interest)
31 May Office supplies A/c Dr $38
To Cash A/c $38
(Being used office supplies)

Ledger
Post the entries from the general journal into a general ledger using both the running balance
format and the t-form format.

T-form Template
Dr. Cr.
Cash at Bank
Date Description Amount Date Description Amount
May 1 To Capital A/c $50,000 May 6 By Rent A/c $900

May 7 To Service A/c $2,000 May 12 By Cash A/c $1,500

May 9 To Sales A/c $1,750 May 21 By Utilities A/c $412

May 25 To Accounts $3,000 May 23 By Accounts Payable $2,000

Receivable
May 30 By Loan A/c $300

May 30 By Interest A/c $35

May 31 By Office supplies A/c $38

By Balance c/d $51,113

(Balance)

$56,300 56,300
To Balance b/d $51,113

Dr. Accounts Receivable Cr.

Date Description Amount Date Description Amount
May 9 To Sales A/c $4,150 May 25 By Cash A/c $3,000

May 19 To Service A/c $2,100 By Balance c/d $3,250

(Balance)
 Assignment 1st | Financial Accounting

$6,250 $6,250

To Balance b/d $3,250

Dr. Inventory Cr.

Date Description Amount Date Description Amount
May 5 To Sales A/c $8,000 May 9 By Sales A/c $4000
By Balance c/d $4,000
(Balance)
$8,000 $8,000
To Balance b/d $4000

Dr. Office Supplies Cr.

Date Description Amount Date Description Amount
May 5 To Accounts payable $80 By Balance c/d $118
(Balance)

May 31 To Cash A/c $38

$118 $118
To Balance b/d $118

Dr. Accounts Payable Cr.

Date Description Amount Date Description Amount
May 23 To Cash A/c $2,000 May 5 By office supplies A/c $80
To Balance c/d $580 May 5 By laptop asset A/c $2500
(Balance)

$2580 $2580
By Balance b/d $580

Dr. Short-term Loan Payable Cr.

Date Description Amount Date Description Amount
May 10 To purchases A/c $10,000 May 30 By Cash A/c $300
By Balance c/d $9700
(Balance)

$10,000 $10,000
To Balance b/d $9700

Dr. Drawings Cr.

Date Description Amount Date Description Amount
To Balance c/d $1500 May 12 By Capital A/c $1500
(Balance)

$1500 $1500
By Balance b/d $1500
 Assignment 1st | Financial Accounting

Dr. Sales Cr.

Date Description Amount Date Description Amount
May 9 To inventory A/c $4,000 May 5 By Inventory A/c $8,000
To Balance c/d $9,900 May 9 By Cash A/c $1,750
(Balance)
May 9 By accounts receivable $4,150
$13,900 $13,900
By Balance b/d $9,900

Dr. Service Fee Revenue Cr.

Date Description Amount Date Description Amount
To Balance c/d $4100 May 7 By Cash A/c $2,000
(Balance)
May 19 By accounts receivable $2,100
$4100 $4100
By Balance b/d $4100

Dr. Purchases Cr.

Date Description Amount Date Description Amount
To Balance c/d $10,000 By short term loan A/c $10,000
(Balance)
$10,000 $10,000
By Balance b/d $10000

Dr. Electricity Expense Cr.

Date Description Amount Date Description Amount
May 21 To Cash A/c $412 By Balance c/d $412
(Balance)
$412 $412
To Balance b/d $412

Dr. Office Supplies Expense Cr.

Date Description Amount Date Description Amount
May 31 To Cash A/c $38 By Balance c/d $38
(Balance)
$38 $38
To Balance b/d $38

Dr. Rent Expense Cr.

Date Description Amount Date Description Amount
May 6 To Cash A/c $900 By Balance c/d $900
(Balance)
$900 $900
To Balance b/d $900
 Assignment 1st | Financial Accounting

Dr. Interest Expense Cr.

Date Description Amount Date Description Amount
May 30 To Cash A/c $35 By Balance c/d $35
(Balance)
$35 $35
To Balance b/d $35

Dr. Capital Cr.

Date Description Amount Date Description Amount
May 12 To drawings A/c $1500 May 1 By Cash A/c $50,000
By Balance c/d $48,500
(Balance)
$50,000 $50,000
By Balance b/d $48,500

Prepare a trial balance as at 31 May 2016.

Accounts/Items Debit Credit

$51,113
Cash at Bank
$3,250
Accounts Receivable
$4,000
Inventory
$118
Office Supplies
$580
Accounts Payable
$9700
Short-term Loan Payable
$1500
Drawings
$9,900
Sales
$4100
Service Fee Revenue
$10,000
Purchases
$412
Electricity Expense
$38
Office Supplies Expense
$900

Rent Expense
 Assignment 1st | Financial Accounting

$35
Interest Expense
$48,500
Capital
$72,074 $72,074

Perform Accrual Entries:

A company, XYZ Ltd, has paid interest on the outstanding term loan
of $1,000,000 for March 2018 on 5th April 2022. The interest is
charged at 1% per month. Determine the accrued expense journal
entry for the example transaction, given that XYZ Ltd reported the
accounting year at the end of 31st March 2022.
Date Details Debit Credit
March 31 Accured interest expenses $10,000
Accrued expense $10,000
Assignment 1st | Financial Accounting
Assignment 1st | Financial Accounting
Assignment 1st | Financial Accounting
Assignment 1st | Financial Accounting
Assignment 1st | Financial Accounting