Accounting Business Reporting for Decision Making

150 Accounting: Business Reporting for Decision Making

Problems

 BASIC |   MODERATE |    CHALLENGING

4.24 Understanding business transactions  LO3, 4

For each of the following transaction outcomes, describe an example of a transaction that would

result in that outcome.

a. Both asset and equity accounts decreased.

b. Both asset and equity accounts increased.

c. Liability accounts increased and equity accounts decreased.

d. One asset account increased and another asset account decreased.

e. One asset account increased, another asset account decreased and a liability account increased.

4.25 Understanding business transactions  LO3, 4

For each of the following independent scenarios, explain why each transaction is or is not a busi-

ness transaction.

a. Jacquie, a sole trader, meets with her bank and negotiates a loan to provide additional finance to

her business.

b. Jacquie, a sole trader, purchases inventory for her store using EFTPOS.

c. Mulvey Ltd signs an employment contract for a new director two months before they actually

start.

d. Rush & Co receives an invoice for internet expense.

e. Rush & Co pays the internet expense outstanding.

f. A partner from Dixon Associates withdraws a computer from the business for home use.

g. Jacquie, a sole trader, has lunch with a potential client and discusses a discount incentive

scheme for future business between the two parties.

h. The partner from Dixon Associates uses personal funds for a new home theatre system.

4.26 Preparing a worksheet and calculating profit or loss  LO4, 5

Enter the following transactions for the month of March 2017 in a worksheet and calculate

the  profit or loss for the period. Explain how the worksheet assists in the calculation of profit

or loss.

2017

March 3

4

7

8

8

10

12

17

27

Injected capital to commence business $200 000.

Purchased office stationery $1600.

Received cash fees $2400.

Took out a loan from Smith Bank $18 000.

Paid rent for March $1800.

Purchased office suite of furniture on credit $8000.

Invoiced a customer for services $2200.

Paid wages to executive assistant $980.

Invoiced a customer for services $2200.

4.27 Preparing a worksheet   LO4, 5

The closing balance sheet items are given below for Jason Woodstock in accounting equation form

as at 30 June 2018. Transactions for the following month of July are also given.

Assets = Liabilities + Equity

Cash at bank + Accounts receivable =Accounts payable + Capital

$39 400 + $2 800 = $1 200 +$41 000