sateen QUESTIONS 1. Accounting practice depends on the guidelines provided by a number of accounts, concepts, conventions and assumptions. You are required to explain clearly the followin concepts: ud (a) historical cost (a) prudence (0) consistency (e) matching (©) accruals (Q materiality 2. You are required to explain clearly the following accounting concepts: (@) business entity sep tc) going cuncen (b) objectivity eS {e) money measurerfent (©) periodicity Give an example of the application of the above accounting concents. 3. In each of the following events or transactions, identify the relevant accounting con conventions and assumptions. (a) Atthe end of the financial year, enterprise A recogr invoiced as expenses (b) During the accounting period, enterprise B acquired a new machine. The machine will i used by the manufacturing department for eight years. Depreciation will be provided o» a straight line basis so as to be similar to the other machines owned by the enterprie {6 Asat year end, enterprise C discamcred that debtor's figure include’ ceveral debts whic have been outstanding for some time. The amount for doubtful debts will be provides! in the financial statements. - (a) The owner of enterprise D takes goods from inventory for his personal use. This event i not recorded in the finaittial statements of enterprise D. (c) Enterprise E's accounting period ends or.91 March ~very year. (6) Enterprise % recugnised ‘the building xcquired tu years ago av R22 million which is the value at the «quisition date. The current market price of the building i RM15 million. (g) As at year end, enterprise G discoveied that 10% cf its inv<.ttory are obsolete, The amount of the obsolete inventory will be recognised in the financial statements. x stationery consumed but not ye! 4. Identify the appropriate accounting concepts in each of the following situations. Ti accounting year ends on 31 December. (@ Blue Enterprise acquired inventory worth RM1,000 on 1 November 20X9. As at the balance sheet date, the inventory is still unsold and reported on the balance sheet at RM1,000. (b) Red ‘Finterprise inventory as ai 1 October 20XS was valuest at RM10,000. %. 31 December 20X9, Red Enterp.ise expects to sell this iuwentusy ai RM15,000. Hu the expected profit of RM5,000 is not recorded in the income statement, (As at 31 December 20X9, the inventory of Green Enterprise is worth RM50,000, Dv to inventory obsolescence, 50% of the inventory will be sold at a discount of 70". Th expected loss on the inventory is recorded in the income statement for the year endesi 31 December 20X9, . ‘ (4) Itis Purple Enterprise’ policy tb provide for depreciation of all motor vehicles one by the business using the reducing balance method. —————————— _Problems and Group Activities Self Test Activities Answer the questions below. $T2.1 Ms. Munira starts a beauty saloon business on July 1 and plans to prepare the income Statemens each month. The following are the transactions in the month of July: (a) Invested RM20,000 cash and fittings worth RM8,000 in the business. (b) Paid shop rental of RM750. (c) Purchased additional fittings worth RM5,000 on credit. (d) Received revenue of RM1,100 from the services rendered and facial collection sold for that first and second week of the month. (e) Purchased additional fittings worth RM2,200 by cash. (f) Received revenue of RM2,400 from the services rendered in the third and fourth week of the month, : (g) Paid for the fittings bought in option (c). Required: Complete the table below by recording each of the above transaction based on the double-entry principles. Use add sign (+) or minus sign (-) to indicate the effect of each transaction on the accounting equation. Show a new amount for each of the transaction. ‘Transaction Cash Fittings (a) (b) = (©) = (d) = (e) = (f) = (g) E Creditors | Capital, Ms. Munira: $12.2 Ahmad Faez has just finished his Photography Certificate course at National Youth College. On June 1, Faez invests RM15,000 in his new business, Faez Photography. He decides to prepare financial statements for his business at the end of each month. The following are the transactions in the first month of the business operations in June: June 1 Rented office and dark room fittings from a photographer for RM800, by cash. 2. Purchased photography supplies worth RM420. 3. Paid RM200 for the office cleaning expenses for the month of June by cash. 8 Finished a few jobs for customers and collected payment of RM150. 12. Finished a photography assignment for Sagun’s wedding worth RM750 on credit. 15 Paid a half-month salary of RM225 for the shop assistant. 19 Received full payment from Sagun.20 22 24 26 27 28 30 30 30 Finished a photography assignment for Atika Nursery worth RM700 on credit. Purchased additional photography supplies worth RM250 on credit. ; Completed a photography assignment for Women’s Club worth RM475 on credit. Subscribed for a brochure to advertise Faez Photography from an advertising agency for a cost of RM120, which will be paid in early August. Received full payment from Atika Nursery. Settled the debt for additional photography supplies bought on June 22. Paid telephone bill for the month June of RM140 by cash. Paid a half-month salary of RM225 to the shop assistant. Ahmad Faez took out cash of RM300 for his personal use. Required: (a) (i) Form an accounting equation based on the ledger accounts involved as follows: ‘Assets = Liabilities + Owner’s equity That is, Cash + Debtors + Photography supplies = Creditors + Capital, Ahmad Faez* Show the effect of each transaction on the accounting equation. Use (+) sign to indicate an increment and (-) sign to indicate a decrement. (ii) Total the assets, liabilities and owner's equity as at 30 June. (b) Prepare the income statement and the statement of changes in equity for the month ended June 30 and the balance sheet as at June 30. *Capital = Beginning capital + Revenue — Expenses ~ Drawings $12.3. Trial balance for Danny Ltd. which provides image and fashion consultancy services is shown below. Danny Ltd. Trial Balance as at June 30, 2009 Account Debit (RM) Credit (RM) Cash 10,200 Debtors 2,640 Supplies 2,520 Fittings 9,600 Creditors F 6,840 Capital, Dogol 18,120 Total 24,960 ‘The followings are the business transactions in the month of July: july 4 Received cash of RM1,560 from.due accounts of the customers. 11 Sent bill to a customer for a consultancy service worth RM4,200. 15, Paid workers’ salaries of RM1,440. 18 Provided consultancy service to a customer who has paid a deposit of RM720 in May,