Unit 2 Tutorial Worksheet
1 What is the Purpose of the accounting equation and State the two forms it can be written:
The purpose of the accounting equation is the primary principle of accounting. The equation aids in the
preparation of the Finacial Statements. The accounting equation identifies whether the companys Assets is
equal to the Liabitliy and Owners Equity. .
The Accounting Equation
a) Basic Equation : Assets = Liability + Capital
b) Extended Equation : Assets = Liability + (Owners Equity +( Income - Expenses)- Drawings)
Therefore: Assets = Liability + (Capital + Income - Expenses)
2 Distinguish between Assets & Liabilities and provide (3) examples of each:
Assets: These are economic resources controlled by an entity resulting from past events for which future
economic benefit is anticipated to be derived from the resource to the company. There are two categories :
Fixed Assets : They are permanent in nature and expected to last over more than one accounting period.
Examples: Land, Building, Motor Vehicles
Current Assets: They continually change throughout one accounting period. Examples: Cash, Stock, Debtors
Liabilities: These are debts of the business. They represent a present obligation arising from past events
where an out flow of resources is expected to settle the entity debts. There are two categories:
Longterm Liabilities : Debts payable over a 12 month or more than one accounting period. Examples:
Mortgage Loans, Bonds payable
Current Liabilities: Debts payable within a 12 month accounting period. Examples: Creditors, Accured
Expenses, Overdraft (short term)
2 Tutorial Worksheet
3 Distinguish between Income & Expenses and provide (3) examples of each:
Income: Increase in economic benefit which resukts in an increase in equity other than share capital. This
economic benefit are inflows eith generated by the entities opersation or an enhancement of Assets or
decrease in liabilities. Examples: Rent Income, Discounts received, Sales.
Expenses: Cost of running the business in order to earn income. Examples: Wages, Telephone, Electricity
4 Effects on the Accounting Equation after receiving a bill for services rendered.
Expense: The expenses for the period will increase due to services rendered by supplier (Service expense). This
will inturn have an effect on the owners equity in the accounting equation where by the increase in expense
will then be deducted from the capital and revenue to obtain the final Owners Equity figure.
Liability: Current Liabilities will increase by way of Trade payables in the accounting equation.
5 Effects on the Accounting Equation after Equipment is sold for cash at Cost equivalent to value.
There will be no effect on the accounting equation as both items affected in the senario (Cash & Equipment)
are Assets being increased and decreased by the same value.
6 ABC Enterprises 10
Trial Balance
December, 31, 2014
Account Debit $ Credit $
Land 20,000
Supplies 200
Accounts Receiveable 1,200
Cash 5,000
Rent Expense 4500
Salary Expense 6000
Utility Expense 900
Accounts Payable 1300
Service Revenue 1000
Capital 35500
Total 37,800 37800
8 Kids Play
Adjusted Trial Balance
June, 30, 2013
Account Debit $ Credit $
Cash 8,600
Accounts Receiveable 9000
Supplies 2,000
Motor Vehicle 84,300
Accounts Payable 55400
Marlon Morgan: Capital 50700
Marlon Brown: Withdrawal 2300
Service Revenue 4500
Salary 3600
Rent 800
Total 110,600 110600
Workings
a) Cash Increased : 6600+2000= 8600
b) AR Increased: 8000+1000= 9000 , AP decreased: 55000-1000= 54000 * to review
c) Supplies Increased: 600+1400=2000, AP Increased: 54000+1400=55400
d) Motor Vehicle Decreased: 89000-4700=84300
e) Salary Decreased: 4100-500=3600
General Journal
Date Accounts and Explanations Debit $ Credit $
Cash 1,260
A. Advertising Expense 1260
Payment for advertising by cash
Accounts Receivable 500
B. Service Revenue 500
Performed service on account
Equipment 4000
C. Account Payable 4000
Purchased Equipment on account
Drawings 700
D. Cash 700
Owners withdrawal
Cash 250
E. Accounts Receivable 250
Amount collected from client
Land 36000
F. Cash 36000
Purchased Land by cash
42,710 42,710
9
Maury Wills Consultancy
General Journal
Date Accounts and Explanations Debit $ Credit $
Cash 25,000
Building 30,000
A. Capital 55,000
Owners Investment
Office Supplies 2,100
B. Account Payable 2,100
Purchased Office Supplies on account
Office Funiture 18,000
C. Cash 18,000
Purchased Office Funiture by cash
Salary Expense 2,200
D. Cash 2,200
Paid Salary
Accounts Receivable 5,100
E. Service Revenue 5,100
Consultant Services Rendered on account
Accounts Payable 800
F. Cash 800
Paid part of Office Funiture bill by cash
Advertising Expense 600
G. Accounts Receivable 600
Advertising Expense on account
Cash 1,600
H. Service Revenue 1,600
Consultant Services rendered for cash
Cash 1,200
I. Accounts Receivable 1,200
Payment received by cash
Rent Expense(Equipment) 700
Utilities 400
J. Cash 1,100
Paid Expense (Rent & Utilities) by cash
Drawings 3,000
K. Cash 3,000
Owner withdrawal for personal use
90,700 90,700
Cash
Date $ Date
A Owner's Equity - Cash 25000 C
H Service Revenue 1600 D
I Accounts Receivable 1200 F
J
27800
Balance b/d 2700
Accounts Receivable
Date $ Date
E Service Revenue 5100 I
5100
Balance b/d 3900
Accounts Payable
Date $ Date
F Cash 800 B
Balance c/d 1900 G
2700
Salary
Date $ Date
D Cash 2200
2200
Balance b/d 2200
Service Revenue
Date $ Date
E
Balance c/d 6700 H
6700
Advertising Expense
Date $ Date
G Accounts Payable 600
600
Balance b/d 600
Maury Wills Consultancy
Adjusted Trial Balance
June, 30, 2008
Account Debit $ Credit $
Cash 2,700
Accounts Receiveable 3900
Office Supplies 2,100
Building 30,000
Accounts Payable 1900
Capital 55000
Drawings 3000
Service Revenue 6700
Salary Expense 2200
Rent 700
Utilities 400
Advertising Expense 600
Office Funiture 18000
Total 63,600 63600
Ledger Accounts
$ Date
Office Funiture 18000 A
Salary 2200
Accounts Payable 800
Expenses - Rent & Utilities 1100
Drawings 3000
Balance c/d 2700
27800
Date
$
Cash 1200
Balance c/d 3900
5100
Date
B
$
Office Supplies 2100
Advertising Expense 600
2700 Date
Balance b/d 1900 A.
$
Balance c/d 2200
2200 Date
K
$
Account Receivable 5100
Cash 1600 Date
6700 Jii
Balance b/d 6700
$
Balance c/d 600
600 Date
Ji
Building ……….
$ Date $
Owners Equity - Purchase 30000 Balance c/d 30000
30000 30000
Balance b/d 30000
Capital ……….
$ Date $
A Cash 25000
Balance c/d 55000 Building 30000
55000 55000
Balance b/d 55000
Office Supplies
$ Date $
Accounts Receivable 2100 Balance c/d 2100
2100 2100
Balance b/d 2100
Office Funiture
$ Date $
Cash 18000 Balance c/d 18000
18000 18000
Balance b/d 18000
Drawing ……….
$ Date $
Cash 3000 Balance c/d 3000
3000 3000
Balance b/d 3000
Utilities …..
$ Date $
Cash 400 Balance c/d 400
400 400
Balance b/d 400
Rent .
$ Date $
Cash 700 Balance c/d 700
700 700
Balance b/d 700
