University Business Accounting and Finance Assignment Solution

This document presents a comprehensive solution to a business accounting and finance assignment. It begins by defining key accounting elements such as assets, liabilities, equity, income, and expenses, and explains their representation in financial statements like the balance sheet and income statement. The solution then explores the relationship between the income statement and balance sheet. The assignment also includes responses to hypothetical questions regarding the double-entry system and error identification. Furthermore, the solution analyzes transactions for Blacker Ltd, providing a detailed breakdown of transactions and constructing a balance sheet. The assignment is well-structured, offering clear explanations and practical applications of accounting principles, making it a valuable resource for students studying business accounting and finance. The solution also references relevant academic sources to support the analysis and conclusions.

Running head: BUSINESS ACCOUNTING AND FINANCE
Business Accounting and finance
Name of the University:
Author’s Note:
Course ID:

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BUSINESS ACCOUNTING AND FINANCE
Table of Contents
Question 1:.......................................................................................................................................2
i) Explaining what are assets, liabilities, equity, income and expenses, while stating the financial
statement report such elements:.......................................................................................................2
ii) Explaining how income statement and balance sheet are related:..............................................3
Question 2:.......................................................................................................................................4
i) Providing relevant response to Bob:............................................................................................4
ii) Providing relevant response to Sarah:.........................................................................................4
Question 3:.......................................................................................................................................5
i) Blacker Ltd transaction analysis:.................................................................................................5
ii) Blacker Ltd Balance sheet:..........................................................................................................8
References:......................................................................................................................................9

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BUSINESS ACCOUNTING AND FINANCE
Question 1:
i) Explaining what are assets, liabilities, equity, income and expenses, while stating the
financial statement report such elements:
The overall assets are considered to be economic resources, which could be divided into
tangible and intangible form. In addition, the overall assets are mainly controlled by the
company, which could be converted into cash for supporting its obligations. The assets are
divided into current and non-current assets, where current assets are mainly identified to be cash,
accounts receivables and inventory. However, non-current assets can be identified to be
machinery, land and equipment’s, which cannot be sold quickly to generate cash.
In the similar way liabilities are mainly considered as obligations of the company, which
needs to be paid in future date. These liabilities mainly incur from past transactions that is
conducted by the company. Furthermore, equity is mainly considered to be the difference
between total asset and liabilities of an organisation. In same instance, current liabilities can be
identified, as account payable, short term obligations and term loan. On the other hand, non-
current liabilities can be identified as long tem loan, bonds issued and long term financial
obligations.
The equity can also be stated as the contribution that is provided owner/shareholders in
form of capital, which is directly used in maintaining the relevant activities of the organisation.
The balance sheet statement directly reports assets, liabilities and equity functions (Scholes,
2015). Equity can be identified as the total investment, which is conducted by shareholders,
which is depicted in balance sheet in form of common stock.

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BUSINESS ACCOUNTING AND FINANCE
Furthermore, the overall income is identified to be the revenue generated by the company
after selling its products and services. Relevant income cash also is detected the overall inflow of
funds, which could allow the company to afloat in the competitive market. Income can be
identified as revenue and any cash inflow, which is received by the company. Lastly, expenses
are the costs incurred from operations of the company, which help in deriving the actual net
income from operations. Moreover, the Income statement mainly includes both income and
expenses conducted by the organisation. Balachandran, Marra, & Rangan (2014) mentioned that
with the help of adequate financial report companies are able to depict their actual financial
position to its investors. Expenses are mainly identified as the cost of goods, administrative
expenses, rent and any cash outflow, which is been conducted by the company.
ii) Explaining how income statement and balance sheet are related:
The overall balance sheet directly includes net income, additional investment in the
business, and owner’s withdrawal from the income statement. Hence, the income statement is
directly related to the balance sheet for depicting the actual financial statement. The balance
directly reflects in balance sheet as retained income, deduction in owners’ equity and high
investment. The major linkage between income and balance sheet is the relevant transfer of cash
inflow and outflow, which helps in deriving the net income of the organisation. Moreover, with
the help of income statement the relevant changes in balance sheet cannot be conducted, which
might reduce viability of its operations. Hence, charges of depreciation are also transferred to
balance sheet reducing value of assets accumulated by the company.

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BUSINESS ACCOUNTING AND FINANCE
Question 2:
i) Providing relevant response to Bob:
With the help of double entry system companies are mainly able to conduct business
transactions in two different accounts. In addition, double entry system directly help in
maintaining the relevant accounting equation, which is asset= liability + equity. Hence, the use
of double entry system directly allows the organisation to adequately adjust the relevant
transaction in its financial report, where both increment in cash and liability both increases with
the inclusion of bank loan. The income and expenses directly depicts the retained income of the
organisation, which is reflected in equity section of the balance sheet (Loughran & McDonald
2016). The balance sheet equation (asset = liability + equity) can mainly help in identifying the
relevant double entry system, which might tally all the relevant entries. The use of double entry
system such as depreciation entry could reduce the balance in income statement and reduce asset
value in balance sheet for tallying the balance sheet equation.
ii) Providing relevant response to Sarah:
The errors in the double entry system are mainly identified from the use of Trial balance,
which could directly identify any kind of problems those in recording transactions. The overall
errors identified by the owner detected from trial balance could directly reflect on the financial
performance of the organisation. The overall wrong entry could be conducted, which might
reflect on the double entry system but could only be detected in Trail balance. Hence, the double
entry system does not present the errors, which could be conducted while recordings made by
individuals (Palepu, Healy & Peek, 2013). Therefore, the errors in double entry system can be
conducted in the recording process, which might be the case for Sarah. This error in recording

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BUSINESS ACCOUNTING AND FINANCE
could directly reflect on the trail balance from which the entries can be adjusted and depict the
actual transaction of the organisation.
Question 3:
i) Blacker Ltd transaction analysis:
Blacker ltd- Analysis of transactions (in dollars) for July 2017
Data Entry Assets = Liability + Equity
Dat
e
Transactio
ns
Cash at
bank
Current
assets
Noncurre
nt assets
Current
liabilities
Noncurren
t liabilities
Equity
1-
Jul-
17
Shareholder
s’
investment
$
1,000,00
0
$
1,000,0
00
1-
Jul-
17
Prepaid rent $
10,000
1-
Jul-
17
Shop fittings
and fixtures
$
9,600
5-
Jul-
17
Land
purchased
$
400,000
$
400,000
7-
Jul-
Term $ $

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BUSINESS ACCOUNTING AND FINANCE
17 deposit (200,000) 200,000
10-
Jul-
17
Inventory
purchased
$
(30,000)
$
60,000
$
30,000
17-
Jul-
17
Paid wages $
(2,600)
20-
Jul-
17
Sale of
inventory
$
17,000
$
(8,000)
24-
Jul-
17
Sale of
inventory
$
5,000
$
4,000
27-
Jul-
17
Paid owed
money
$
(10,000)
$
(10,000)
31-
Jul-
17
Paid wages $
(2,600)
31-
Jul-
17
Advertiseme
nt expense
$
(3,600)
31- Received $ $

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BUSINESS ACCOUNTING AND FINANCE
Jul-
17
payment 14,000 (14,000)
31-
Jul-
17
Depreciatio
n
$
(120)
31-
Jul-
17
Income tax
payable
$
500
31-
Jul-
17
accrued
expenses
$
(1,900)
31-
Jul-
17
income from
interest
$
395
31-
Jul-
17
Retained
income
$
26,675
$
1,447,175
$
1,447,1
75