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Liabilities Owner’s Equity Revenue

   

Added on  2021-04-19

4 Pages922 Words57 Views
Solution – 1AssetsLiabilitiesOwner’s EquityRevenueExpensesCash at BankLoan from bank–repayable in 5YearsDrawings byownerSales ofinventoryElectricityMachineryAccountsPayableCommissionReceivedRent paid on factoryShelving and storageracksPackaging andpostageAccounts ReceivableInterest paid on bankloanInventory (stock onhand)Mobile phonemonthly planFork liftsLegal feesComputer EquipmentOffice FurnitureShares in publiccompaniesSolution – 2a)M is the owner of the business.b)$ 15,000 is the owner’s investment in the business.c)$1,700 is owed to the business by customers.d)$800 is owed by the business to suppliers.e)Inventories mean the stock in trade or goods purchases by the business for further processing orsale. There are three types of inventories this business can have. These are:a.Raw Material Inventory b.Work in process Inventoryc.Finished Goods Inventory

f)Secured loan means the amount borrowed from banks, financial institutions or from any otherthird party which is secured by any movable or immovable fixed assets or accounts receivable orany other assets of the business. These loans can also be secured from guarantee or collaterals.For example, term loan taken by business which is secured by the fixed assets of the company isknown as secured loan.Solution – 3Journal entryDateAccounts affected & (type of account, + or -)DebitCredit23 MarchCash at bank (Asset +)600 Service revenue (Income +)600(Performed tiling services for cash)28 MarchAccounts receivable (Asset +)350 Service revenue (Income +)350(Repaired floor tiling and invoiced the customer)29 MarchWages (Expense +)700 Cash at bank (Asset -)70030 MarchCash at bank (Asset +)1,150 Accounts receivable (Asset -)1,15031 MarchLoan (Liability -)800 Cash at bank (Asset -)800Solution – 4Ethics are the acceptable practices and behavior that the auditors should follow.According to the Accounting Professional and Ethical Standards Board, the areas in which accountantsmust conduct themselves ethically and act in a professional manner are as below:(a)Integrity (Smallbusiness.chron.com, 2018) – this principle implies that the auditors shouldkeep their personal interests, gain or losses away from their professional work. They shouldopt for honest and sincere behavior. For example, the auditor might have some insight aboutthe pricing policy of the company so he should not take undue advantage of such informationand should remain honest.

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