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Accounting for Business | Document

   

Added on  2020-03-23

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ACCOUNTING FOR BUSINESS

Answer - 1 :(a)LANDSCAPING BUSINESSSTATEMENT SHOWING CASH BUDGET FOR THREE MONTHSFROM 01.07.2018 TO 30.09.2018PARTICULARSJULYAUGUSTSEPTEMBERA. Opening Balance26500061800B. RECEIPTS :Fees140000160000200000Proceeds from the saleof surplus non-currentassets100000C. TOTAL (A+B)166500260000261800D. PAYMENTSSalaries & Wages700007000070000Supplies8500920012000New equipment120000Purchase of plants420004500061000TOTAL (D)240500124200143000E. BALANCE (C-D)-74000135800118800BORROWINGS/INVESTMENTS74000-74000CLOSINGBALANCE061800118800Closing Balance OfLoan74000Notes:1. Since the balance goes negative in the month of August,wewould be borrowing an equal amount of it from bank.2. Since the company generated enough cash in the month ofAugust,it repaid the loan amount taken from the bank.(b) While the company purchase the equipment, the bank balance of the company goes negativeand therefore, a borrowing was made equivalent to that amount(Bruner, Eades and Schill, 2017).But, if the company goes for the rental arrangement of $10000 per month, the bank balanceremains positive in all the three months. Also, the balance as on 30.09.2018 is $9000 more incase of lease arrangement than in case of purchase.

However, an equipment usually have a life span of more than 5-6 years, therefore, the cost ofthe equipment today would be equal to rent paid for 1 year consistently that is, the cost of theequipment $120000 would be equal to 12 months and so, if the equipment is being used for morethan one year, the rental expense would be more than the original cost. Therefore, assuming thatthe equipment is for more than one year at least, it is hitherto purchase the equipment so as to bearthe cost for once rather than bearing it for months and months. LANDSCAPING BUSINESSSTATEMENT SHOWING CASH BUDGET FOR THREE MONTHS FROM01.07.2018 TO 30.09.2018PARTICULARSJULYAUGUSTSEPTEMBERA. Opening Balance2650036000161800B. RECEIPTS :Fees140000160000200000Proceeds from the sale ofsurplus non-current assets100000C. TOTAL (A+B)166500296000361800D. PAYMENTSSalaries & Wages700007000070000Supplies8500920012000Rent Paid for the leasedequipment100001000010000Purchase of plants420004500061000TOTAL (D)130500134200153000E. BALANCE (C-D)36000161800208800BORROWINGS/INVESTMENTSCLOSING BALANCE36000161800208800

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