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Financial Accounting Assignment - (Solved)

Added on - 08 Dec 2020

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Financial AccountingThe specific branch of accounting which involves a process of recording, reporting andsummarizing the multiple the transaction result. Financial accounting is more based ondouble entry system. Financial accounting provides aggregate and collective information forthe company. The data and information under financial accounting are historical in nature.[ CITATION Ken193 \l 1033 ]Double Entry Bookkeeping SystemThe double entry bookkeeping system is the business transactions, amounts which must berecorded in minimum of two accounts. It is used to satisfy the accounting equation:Assets= Liabilities + Equity[ CITATION Hay191 \l 1033 ]Question:Advertising company owned by Mr. Ashu Malla provides advertising consulting services.During January 2012, the following events occurred:Jan 1 Owner contribute $ 50000 and a new computer costing $20500 to start his business.Jan 3 Office suppliers were purchased on account for $4000.Jan 8 Company obtained 12% 5-year loan of $ 20000 from the bank.Jan 13 Company paid the utility bills for $ 2750.Jan 16 $ 3000 was paid in Accounts Payable from the purchase of office supplies on Jan 3.Jan 18 Advertising services completed in January were billed to clients Mira’ Flowers at $18300.Jan 20 Advertising received $ 5500 from Mira’ Flowers, a client as payment on account.Jan 25 Mr. Ashu Malla withdraw $ 6000 of cash for personal use.Prepare Journal Entry, General Ledger Account and make a Trial Balance.
Solution:DateParticularsRefAmount (Dr.)Amount (Cr.)Jan 1Cash a/cComputer a/cTo owner’s equity Mr. Ashu Malla(Being business started with cash andcomputer)500002050070500Jan 3Office Suppliers a/cTo Account Payable a/c(Being office suppliers purchase oncredit)40004000Jan 8Cash a/cTo Bank loan a/c(Being bank loan obtained)2000020000Jan 13Utility Bills a/cTo Cash a/c(Being utility bill paid)27502750Jan 16Account Payable a/cTo Cash a/c(Being paid partial account payable)30003000Jan 18Account Receivable Mira’ Flower a/cTo Advertising service a/c(Being bill paid to customer forservice earned)1830018300Jan 20Cash a/cTo Account Receivable Mira’Flowers(Being cash received from customerbilled previously)55005500Jan 25Drawing a/cTo cash a/c(Being cash withdraw by owner)60006000Total$ 130050$ 130050
General LedgerGeneral ledger means the record of financial data with debit and credit account recordsvalidated by a trial balance. It provides a record of each financial transaction which takesplace during the life of an operation.[ CITATION Cla14 \l 1033 ]Above transaction are recorded in General Ledger.Dr.Cash AccountCr.DateParticularsAmount ($)DateParticularsAmount($)Jan 1Owner’s Equity a/c50000Jan 13Utility Bill a/c2750Jan 8Bank Loan a/c20000Jan 16Account Payable a/c3000Jan 20Account Receivable a/c5500Jan 25Drawing a/c6000By, Balance c/d63750Total75500Total75500Feb 1To, Balance b/d63750Dr.Computer AccountCr.DateParticularsAmount ($)DateParticularsAmount($)Jan 1Owner’s Equity a/c20500By, Balance c/d20500Total20500Total20500Feb 1To, Balance b/d20500Dr.Owner’s Equity AccountCr.DateParticularsAmount ($)DateParticularsAmount($)Jan 1Cash a/c50000Jan 1Computer a/c20500To, Balance c/d70500Total70500Total70500Feb 1By, Balance b/d70500Dr.Office Suppliers AccountCr.DateParticularsAmount ($)DateParticularsAmount($)Jan 3Account Payable a/c4000By, Balance c/d4000Total4000Total4000Feb 1To, Balance b/d4000
Dr.Account Payable AccountCr.DateParticularsAmount ($)DateParticularsAmount($)Jan 16Cash a/c3000Jan 3Office Suppliers4000To, Balance c/d1000Total4000Total4000Feb 1By, Balance b/d1000Dr.Advertising Service AccountCr.DateParticularsAmount ($)DateParticularsAmount($)Jan 18Account Receivable a/c18300To, Balance c/d18300Total18300Total18300Feb 1By, Balance b/d18300Dr.Bank Loan AccountCr.DateParticularsAmount ($)DateParticularsAmount($)Jan 8Cash a/c20000To, Balance c/d20000Total20000Total20000Feb 1By, Balance b/d20000Dr.Utility Bills AccountCr.DateParticularsAmount ($)DateParticularsAmount($)Jan 13Cash a/c2750By, Balance c/d2750Total2750Total2750Feb 1To, Balance b/d2750Dr.Account Receivable AccountCr.DateParticularsAmount ($)DateParticularsAmount($)Jan 18Advertising Service a/c18300Jan 20Cash a/c5500By, Balance c/d12800Total18300Total18300Feb 1To, Balance b/d12800
Dr.Drawing AccountCr.DateParticularsAmount ($)DateParticularsAmount($)Jan 25Cash6000To, Balance c/d6000Total6000Total6000Feb 1To, balance b/d6000Trial BalanceTrial balance is a summary of the business activities. Trial balance is a sheet recording all theledger balances which are categorized into debit and credit. It records the transaction andsummarize them into ledger and create a worksheet and classify the ledgers is a trial balance.With the help of general ledger, trial balance is prepared below:Trial BalanceS.NParticularsRefAmount (Dr.)Amount (Cr.)1Cash a/c637502Computer a/c205003Owner’s Equity a/c705004Officer Suppliers a/c40005Account Payable a/c10006Advertising Service a/c183007Bank Loan a/c200008Utility Bills a/c27509Account Receivable a/c1280010Drawing a/c6000Total109800109800
Sole TradingSelf-employed person who owns and runs their own business as an individual is known a soletrading company. It is a simple form of business structure and is relatively easy andinexpensive to start up. These kinds of business doesn’t have any legal identity.[ CITATION Kor19 \l 1033 ]Final Account of sole-traders company:Question:The following trial balance of Mr. Shyam prepare the trading account, profit and loss accountand balance sheet for the year ended 31stDecember 2015.Trial Balance as on 31stDecember 2015S.N.ParticularsRefAmount (Dr.)Amount (Cr.)1Capital a/c3250002Purchase a/c2150003Opening Stock a/c550004Sales a/c4850005Freight Inward a/c200006Salaries a/c1050007Trade Payables a/c950008Trade Receivable a/c1050009Furniture a/c17500010Administration Expenses a/c7500011Sales Return a/c600012Purchase Return a/c1000013Discounts a/c9500450014Investment a/c5000015Bad Debts a/c2500
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