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Accounting and Transaction Processing Assignment A

Accounting and Transaction Processing Assignment A

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Published by Shubha Koirala

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Published by: Shubha Koirala on Jun 12, 2012
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06/12/2012

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Ans. 1
Cash a/c dr.500000To Capital a/c500000Purchase a/c dr. 40000To Cash a/c40000Furniture a/c dr.50000To Cash a/c 50000Assets a/c dr. 100000To Cash a/c100000Purchase a/c dr. 30000To Cash a/c30000Purchase a/c dr.2500To Sundry Creditor a/c2500Cartage a/c 2500To Cash a/c2500Cash a/c dr. 25500To Sales a/c25500Cash a/c dr. 2400To Sales a/c2400Mahendra a/c dr. 4650To Sales a/c4650Freight a/c dr.120To Cash a/c120
 
Bank a/c dr. 8000To Cash a/c 8000Cash a/c dr. 5000To Bank a/c 5000Cash a/c dr. 3000To Bank a/c 3000Provision for bad debts a/c dr. 1650To Mahendra a/c 1650Salary expenses a/c dr.4600To Cash a/c 4600
Ans no. 2
(i)Profit for the year is calculated by subtracting the expenses from the revenue.As,
matching concept
is the significant relation between revenue and expenses of the business, it has been applied in the treatment of profit for the year.
Accounting cost concept
states that all assets are recorded in the books of accounts at their purchase price, which includes cost of acquisition,transportation, and installation and not at its market price.Itincludes all types of assets like plant and machinery, building,stock,vehicle and so on. Thus, for thetreatment of Stock 
cost concept
is applied.(ii)
Morgan's Balance Sheet as at 31
st
August 2006
Capital & LiabilitiesAmountAssetsAmountCapitalProfit of the year Loan from Nicolarepayable 2011900018,0005000MachineryOffice equipmentCashDebtors700025002003500
 
Provision for depreciationAccrued expensesCreditorsBank 240030018002200PrepaymentsStock Drawings600390021,000
Total38,700.00Total38,700.00
(iii) To eliminate or reduce the bank overdraft, morgan should pay the money to the bank. So, he needsto maximize his business profit.(iv) There will be no effect on bank overdraft and it remains Rs.2200 as loan is not taken from the bank loan account will increase as Morgan already had loan from Nicola of Rs. 5000 and with addition of Rs.20,000 as on 1st september 2006, total loan accounts of morgan holds Rs.25,000.Profit for the year will decrease as the interest to be paid to Nicola will increase with the increment of loan amount.Capital will have no effect as owners equity is independent of the loan account.
Ans 3.Journal Entries:
1. Purchase a/c dr. 3000To Abraham a/c 3000(Being goods purchase from Abraham on credit)2. Abraham a/c dr. 18000To Bank a/c18000(Being amount paid by bank)

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