SINGAPORE INSTITUTE OF TECHNOLOGY
BACHELOR OF ACCOUNTANCY WITH HONOURS PROGRAMME
ACC1001 INTRODUCTION TO FINANCIAL ACCOUNTING
(Trimester 1, 2014)
Tutorial 2: Recording Transactions
Question 1
Ex 3-10 (Extracted from textbook page 133)
If debits equal credits in a trial balance, you can be assured that no errors were made. Do
you agree? Explain.
Answer
A trial balance is an internal report that lists each account in the general ledger together with
the balance in that account as of the trial balance date. The trial balance is used to detect
errors in the accounts and in preparing financial statements. Trial balances that fail to balance
are the result of errors in journalising or posting and if the trial balance does not agree, it
means that an error has been made.
However, even if the trial balance agrees, there are still errors that are not revealed by the trial
balance. This will be discussed in the next lecture.
Question 2
Calvin Car Trading had the following assets, liabilities, income and expenses and drawings as
at 31 March 20X6:
$
Inventory
7,200
Drawings
2,000
Cash at Bank
9,100
Sales revenue
19,600
Fixtures and fittings
13,800
Salaries expense
3,700
Trade payables
5,200
Utilities expense
4,300
Long-term borrowing
5,000
Rental expense
6,400
The beginning equity as at 1 March 20X6 is $16,700.
(a) Calculate the profit for the period from 1 March to 31 March 20X6.
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(b) Calculate the ending equity as at 31 March 20X6.
Answer:
(a)
Profit for the period
=
=
=
Total income Total expenses
$19,600 ($3,700 + $4,300 + $6,400)
$5,200
(b)
Ending equity as at 31 March 20X6 =
=
=
Equity on 1 March 20X6 + Profit Drawings
$16,700 + $5,200 - $2,000
$19,900
Ending equity as at 31 March 20X6 =
=
Total assets total liabilities
($7,200 + $9,100 + $13,800) ($5,200 +
$5,000)
$19,900
Question 3
Michael set up Hang Seng Electrical, a sole proprietorship that sells hardware items from a
rented shop at an established shopping mall. Hang Seng started its operations on 1 April
20X2 and had the following cash transactions in April 20X2:
(a)
(b)
1 April
2 April
(c)
5 April
(d)
8 April
(e)
9 April
(f)
12 April
(g)
(h)
20 April
23 April
(i)
(j)
25 April
28 April
(k)
30 April
Michael contributed $30,000 of his personal savings into the business.
The business purchased $10,000 worth of electrical items on credit
from Loss City.
The business sold $5,500 of electrical items on credit to Best Yuki.
The cost of the items sold was $2,000.
The business purchased a delivery truck costing $6,000 and paid
$2,000 in cash. The remaining $4,000 was on credit from Lim Motors.
Best Yuki found that some of the items sent on 5 April were defective
and returned $200 worth of items. The cost of the candies returned
was $80.
The business purchased $7,000 of electrical items from Yung Ho on
credit.
Best Yuki paid $5,3000 to Hang Seng.
The business returned $400 worth of items back to Yung Ho. The
items were purchased on 12 April.
The business paid $6,600 to Yung Ho.
The following payments were made: salary of $1,200 to the shop
assistant, $2,000 for shop rental and $100 for utilities.
The business took up a bank loan of $5,000 from Norway Bank.
Identify the effects of the above transactions on the accounting equation in the following
format:
Dat Assets
e
1 Apr Cash
+ $30,000
Liabilities
Equity
Capital
+ $30,000
Answer
Date
1 Apr
2 Apr
5 Apr
8 Apr
9 Apr
12 Apr
20 Apr
23 Apr
25 Apr
28 Apr
30 Apr
Assets
Cash
+ $30,000
Inventory
+ $10,000
Trade Receivables
+ $5,500
Inventory
- $2,000
Delivery Truck
+ $6,000
Cash
- $2,000
Inventory
+ 80
Trade receivable
- $200
Inventory
+ $7,000
Trade receivables
- $5,300
Cash
+ $5,300
Inventory
- $400
Cash
- $ 6,600
Cash
- $3,300
= Liabilities
= -
+
+
= Trade payables
+ $10,000
= -
= Other payable
+ $4,000
= -
= Trade payables
+ $7,000
= -
Sales returns
- $200
Cost of sales
+ $80
-
= Trade payables
- $400
= Trade payables
- $6,600
= -
Cash
+ $5,000
= Bank loan
+ $5,000
Salaries expense
- $1,200
Rent expense
- $2,000
Utilities expense
- $100
-
Equity
Capital
+ $30,000
Sales revenue
+ $5,500
Cost of sales
- $2,000
-
Question 4
Ex 3-41 (Extracted from textbook page 141)
Harui Nursery, a retailer of garden plants and supplies, had the accompanying balance sheet
accounts on December 31, 20X0:
Following is a summary of transactions that occurred during 20X1:
(a) Purchase of inventory on credit, $550,000.
(b) Sales on credit of $810,000. Cost of inventory was $445,000.
(c) On 1 June 20X1, the business borrowed $80,000 from a supplier. The note is payable
in 4 years. Interest is payable yearly on 31 December at a rate of 15% per annum.
(d) Paid $25,000 for rent of the store in July 20X1.
(e) Paid $165,000 for wages in November.
(f) Paid $75,000 for miscellaneous expenses such as utilities, advertising, etc. (to be
posted to Miscellaneous expense)
(g) Received $692,000 from trade receivables.
(h) Paid $472,000 to trade payables.
Required:
1. Prepare journal entries for the above transactions.
2. Post the entries to the relevant ledger accounts using the columnar format.
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3. Prepare a trial balance as at 31 December 20X1.
Answer:
1.
Date
(a)
Particulars
Inventory
Debit
Credit
550,000
Trade payables
550,000
(Being purchase of inventory on credit)
(b)
Trade receivables
810,000
Sales revenue
810,000
(Being sales on credit)
Cost of sales
445,000
Inventory
445,000
(Being transfer of inventory to cost of sales)
(c)
Cash
80,000
Note payable
80,000
(Being loan from supplier)
Interest expense (15%*$80,000*7/12)
Accrued interest
7,000
7,000
(Being accrual of interest at year end)
(d)
Rent expense
25,000
Cash
25,000
(Being payment of rent expense)
(e)
Wages expense
165,000
Cash
165,000
(Being payment of wages expense)
(f)
Miscellaneous expense
75,000
Cash
75,000
(Being payment of miscellaneous expense)
(g)
Cash
692,000
Trade Receivables
692,000
(Being receipt from trade receivables)
(h)
Trade payables
472,000
Cash
472,000
(Being payment to trade payables)
2.
Inventory
Date
Particulars
Debit
8
Credit
Balance
20X1
Dec 31
Balance b/d
Trade payables
131,000 Dr
550,000
Cost of sales
681,000 Dr
445,000
236,000 Dr
Credit
Balance
Trade Payables
Date
Particulars
Debit
20X1
Dec 31
Balance b/d
116,000 Cr
Inventory
Cash
550,000
472,000
666,000 Cr
194,000 Cr
Trade Receivables
Date
Particulars
Debit
Credit
Balance
20X1
Dec 31
Balance b/d
Sales revenue
40,000 Dr
810,000
Cash
850,000 Dr
692,000
158,000 Dr
Credit
Balance
810,000
810,000 Cr
Sales Revenue
Date
Particulars
Debit
20X1
Dec 31
Trade Receivables
Cost of sales
Date
Particulars
Debit
Credit
Balance
20X1
Dec 31
Inventory
445,000 Dr
Cash
Date
Particulars
Debit
Credit
Balance
20X1
Dec 31
Balance b/d
Note payable
24,000 Dr
80,000
104,000 Dr
Rent expense
25,000
79,000 Dr
Wages expense
165,000
86,000 Cr
Miscellaneous expense
75,000
161,000 Cr
Trade receivables
692,000
Trade payables
531,000 Dr
472,000
59,000 Dr
Credit
Balance
80,000
80,000 Cr
Credit
Balance
Note payable
Date
Particulars
Debit
20X1
Dec 31
Cash
Interest expense
Date
Particulars
Debit
Accrued interest
7,000
20X1
Dec 31
10
7,000 Dr
Accrued interest
Date
Particulars
Debit
Credit
Balance
7,000
7,000 Cr
Credit
Balance
20X1
Dec 31
Interest expense
Rent expense
Date
Particulars
Debit
Cash
25,000
20X1
Dec 31
25,000 Dr
Wages expense
Date
Particulars
Debit
Cash
165,000
Credit
Balance
20X1
Dec 31
165,000 Dr
Miscellaneous expense
Date
Particulars
Debit
Cash
75,000
Credit
Balance
20X1
Dec 31
11
75,000 Dr
3.
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