Assets = Liabilities + Equity

Assets = Liabilities + [Equity + Revenue - Expenses]

Accounting for a Furniture trading reselling (trading) company

Double Book-keeping method

Transaction description Assets Name Asset

Owners Brought 100 laksh as equity Cash 100

HDFC Bank gave loan of 50L at 10% interest Cash 50
Cash -30
Rent Deposit of 30L paid (rent per month 3L)
Rent Deposit 30

Cash -100
Purchase furniture of 200L (cash paid 100L, balance
100L on credit) Stock 100
Stock 100
Cash 70
Sold 60L worth stock for 70L cash
Stock -60
Receivables 80
Sold 50L worth stock for 80L on credit
Stock -50
Cash -60
Suppliers were paid 60L
Cash 80
Customers paid 80L
Receivables -80
Rent of 3L Cash -3
Monthly Salary, electricity, etc of 4L Cash -4

223
selling (trading) company

g method Cash
= Liabilities Equity Revenue Expenses Rent Deposit
Stock
100 Receivables
50

100
70
-60
80
-50
-60

-3
-4

90 100 150 -117

223
 This is the balance Sheet

103 Equity 100

30 Loan 50
Payables (Supplier
90 40
due/Liabilities)
0 Profit 33
223 223
This is the P&L Statement

Revenue 150
Expenses 117
Profit 33
Text Book Problem 1-5 (Pg 31)

Accounting for a Furniture trading reselling (trading)

Double Book-keeping method
Transaction description

Owners invested 25000

Month's rent of 500 was prepaid in cash

Equipment costing 8000
500 for office supplies
750 for advertising
3000 salary in cash
Earned Travel commission of 10,000 of which 2,000 was paid in cash
Paid to supplier

Used 100 of the office supplies

Charged 1,000 on corporate credit card (Payables)

On last day of month - Prepaid rent

urniture trading reselling (trading) company
uble Book-keeping method
Assets Name Asset = Liabilities Equity Revenue Expenses

Cash 25000 25000

Cash -500
Rent Deposit 500
Stock 8000 8000
Cash -500 -500
Cash -750 -750
Cash -3000 -3000
Cash 2000
Receivables 8000 10000
Cash -5000 -5000

1000 -1000

Rent -500 -500

33250 4000 25000 10000 -5750

33250
 This is the balance She
Cash 17250
Rent Deposit 500

Stock 8000

Receivables 8000
33750

By applying materiality concept

Using materiality concept, we are

not worried about this $100, so no
entry
This is the balance Sheet This is the P&L Statement
Equity 25000 Revenue
Loan 50 Expenses
Payables
(Supplier
40 Profit
due/Liabilitie
s)
Profit 40
25130
his is the P&L Statement
150
110

40
Assets = Liabilities + Equity
Assets = Liabilities + [Equity + Revenue - Expenses]

Adjustments
Transaction description Assets Name

Newspaper subscription for 36 months received on 1st of

Cash
the the month
Adjustment entry on 30th of the month

On Jan 1st, Rs 100 L loan received (interest rate 1% per

Cash
month payable in June and Dec)
On 31st March, interest of 3L is payable
Cash
On 30th June, Rs 6L paid
Cash

Total contract value (revenue) is Rs. 5000L

Rs 200L incurred on the project Cash
WIP
Rs 500L incurred on the project Cash
WIP
Unearned revenue of 1000L (i.e 20% on contract value) Unearned
recognised as revenue Revenue
WIP

Rs 400L incurred on the project Cash

WIP
Invoice for Rs. 1500 is raised Receivables
Unearned
Revenue
Receivables
(balance)
WIP

Depreciation Adjustment
Purchased a machine for Rs. 1000 by paying cash; life 10
Cash
years
Machine
Purchased material worth Rs. 5000 by paying cash; life 10
Cash
years
Stock
Expenses on salary, electricity, etc incurred Rs.1000 Cash
Found 500 wort of stock after consumption Stock
Sold the product and raised invoice of Rs. 7000 Receivable

Provision for
Depreciation Adjustment
Depriciation

Machine
Less provision for
depreciaiton
Adjustments
Asset = Liabilities Equity Revenue Expenses

3000 3000
-83 83

100 100
3 -3
-3 -3
-3 -3

-200
200
-500
500
1000 1000
-700 -700

-400
400
1500
-1000

500
-400 -400

-1000
1000
 -5000
5000
-1000 -1000
-4500 -45000
7000 7000

-100 -100

1000

100
900

Cash -2100
WIP #NAME?
Unearned
Revenue 0
Revenue 1500
Expenses -1100
Profit 400
This is called recognition of Unearned Revenues

This is called recognition of unrecorded expenses

This is called recognition of unrecorded revenues

 Text Book Problem 2-2 (Pg 55)

Assets

Account receivable
Building 1120000
Less: Accumulated depreciation on building 538000
Equipment 761000
Less: Accumulated depreciation on
equipment 386000
Cash
Inventories
Investment in the Peerless companies
Land
Marketable securities

Reaarrange the above balance sheet such

that fixed ssets appear first and cash
appears at the end
Similarly, equity first, long term liabilities
next, correct liabilities at the end
 Equity and Liabilities

505000 Accounts payable

Capital Stock (Equity)
582000 Retained Eranings
Provision for tax

375000 Notes payable

89000 Accrued Expenses (but not paid)
513000 Bonds payable
320000
230000
379000

2993000
lities

241000
1000000
620000
125000

200000
107000
700000

2373000
 Period Expected Receipts Expected Cost Profit realization percentage

1 10 20 20%
2 20 40 60%
3 30 40 100%
4 40 -
5 20 -
Total 120

Cash basis of accounting

Period Revenue Expenses Profit/Loss Receivables

1 10 20 -10
2 20 40 -20
3 30 40 -10
4 40 0 40
5 20 0 20

Percentage of Completion

Period Revenue Expenses Profit/Loss Receivables

1 24 20 4 14
2 48 40 8 42
3 48 40 8 60
4 0 0 0 20
5 0 0 0 0

Completed contract method

Inventory
(work in
Year Sales Expenses Profit/loss Advance progress) Receivables

1 0 0 0 10 20
2 0 0 0 30 60
 3 120 100 20 0 0 60
4 0 20
5 0 0

Installment method

Inventory
(work in
Year Sales Expenses Profit/loss Advance progress) Receivables

1 1.66666666666667
2
3
4
5

Cost recovery first method

Inventory
(work in
Year Sales Expenses Profit/loss Advance progress) Receivables

1 0 0 0 10 20
2 0 0 0 30 60
3 0 0 0 60 100
4 0 0 0 100 100
5 120 100 20 0 0

Bad debts
Assets
Receivables 3000
Credit sales
Creating provision for doubtful debts
Profit realization percentage

Receivables
Receivables

Receivables
Perpetual method

Day Quantity Rate

1 1000
2 1200
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21