Professional Documents
Culture Documents
Syllabus
Syllabus
11/12/2020
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Distribution of Final Mark
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References
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Cost Management and
Strategy
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Business Transactions
Asset and Equity
Assets = Property owned by a business enterprise
Equities = Rights or claim to the properties
𝐴𝑠𝑠𝑒𝑡𝑠= 𝐸𝑞𝑢𝑖𝑡𝑦
Equities
Types of equity:
Rights of creditors = Liabilities/Debts of the
business
Rights of owner = Owner’s Equity
Example: Long Taxi
Owner: John Long
Business: Long Taxi
(a) John Long deposits $10,000 to a bank account in
the name of Long Taxi. This is called investment.
𝐴𝑠𝑠𝑒𝑡𝑠 ′
}= {𝑂𝑤𝑛𝑒 𝑟 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
Add Cash 10,000 Add Captital 10,000
′
𝐴𝑠𝑠𝑒𝑡𝑠 𝑂𝑤𝑛𝑒 𝑟 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
𝐶𝑎𝑠h
10,000
=
}{
𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 , 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
10,000
Change cash into land 10,000
}{
=
𝐶𝑎𝑠h 𝐿 𝑎𝑚𝑑 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 ,𝐶𝑎𝑝𝑖𝑡𝑎𝑙
10,000 + 1 0,000
+7,500
−7,500 ¿ ❑
7,500 10,000
2,500
Long’s plans are to lease automobiles and other equipment and storage facilities from
Ross Bus Company for several months until he can arrange financing for the purchase
of automobiles and for the construction of storage facilities.
(c) During the month, Long purchases $850 of gasoline, oil and other
supplies form various suppliers, agreeing to pay in the near future.
′
𝐴𝑠𝑠𝑒𝑡𝑠 𝑂𝑤𝑛𝑒 𝑟 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
}{
=
𝐶𝑎𝑠h 𝐿 𝑎𝑚𝑑 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 ,𝐶𝑎𝑝𝑖𝑡𝑎𝑙
10,000 + +7,500 1 0,000
−7,500 ¿ ❑
7,500 10,000
2,500
}{
=
𝐶𝑎𝑠h 𝑆 𝑢𝑝𝑝𝑙𝑖𝑒𝑠 𝐿 𝑎𝑚𝑑 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 , 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
2,500 + + 850 + 7,500 +850 + 1 0,000
❑ ¿ ❑ ❑
850 850
2,500 7,500 10,000
Note:
• This transaction is called purchase on account and the liability is termed account
payable.
• Consumable goods purchased (such as supplies) are considered to be prepaid
expenses or assets.
(d) Long Taxi paid $400 for the gasoline the suppliers
′
𝐴𝑠𝑠𝑒𝑡𝑠 𝑂𝑤𝑛𝑒 𝑟 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
}{
=
𝐶𝑎𝑠h 𝑆 𝑢𝑝𝑝𝑙𝑖𝑒𝑠 𝐿 𝑎𝑚𝑑 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 , 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
2,500 + + 850 + 7,500 +850 + 1 0,000
❑ ¿ ❑ ❑
850 850
2,500 7,500 10,000
}{
=
𝐶𝑎𝑠h 𝑆 𝑢𝑝𝑝𝑙𝑖𝑒𝑠 𝐿 𝑎𝑚𝑑 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 , 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
2,500 850
+ 850 + 7,500 + 10,000
− 400 ❑ ❑ − 400 ❑
2,100 850 7,500 450 10,000
(e) During the month, Long Taxi earned $4,500 from
the fares
′
𝐴𝑠𝑠𝑒𝑡𝑠 𝑂𝑤𝑛𝑒 𝑟 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
}{
=
𝐶𝑎𝑠h 𝑆 𝑢𝑝𝑝𝑙𝑖𝑒𝑠 𝐿 𝑎𝑚𝑑 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 , 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
2,500 + 850 + 7,500 850 + 10,000
− 400 ❑ ❑ − 400 ❑
2,100 850 7,500 450 10,000
}{
=
𝐶𝑎𝑠h 𝑆 𝑢𝑝𝑝𝑙𝑖𝑒𝑠 𝐿 𝑎𝑚𝑑 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 ,𝐶𝑎𝑝𝑖𝑡𝑎𝑙
2,100 1 0,000
+ 850 + 7,500 4 50 +
+4,500 ❑ ❑ ❑ +4,500
6,600 850 7,500 450 14,500
(f) Long Taxi paid some business expenses during the month as
follows: Wages = $1,125; Rent = $850; Utilities = $150;
Miscellaneous = $75.
′
𝐴𝑠𝑠𝑒𝑡𝑠 𝑂𝑤𝑛𝑒 𝑟 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
}{
=
𝐶𝑎𝑠h 𝑆 𝑢𝑝𝑝𝑙𝑖𝑒𝑠 𝐿 𝑎𝑚𝑑 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 ,𝐶𝑎𝑝𝑖𝑡𝑎𝑙
2,100 1 0,000
+ 850 + 7,500 4 50 +
+4,500 ❑ ❑ ❑ +4,500
6,600 850 7,500 450 14,500
Note:
¿
Expenses: the amount of assets consumed or services used in the process of earning revenue.
Example: supplies used, wages of employees, etc.
(g) At the end of the month Long Taxi determined that
the supplies in hand is $250, and the reminder has
been used in the operation.
}{
=
𝐶𝑎𝑠h 𝑆 𝑢𝑝𝑝𝑙𝑖𝑒𝑠 𝐿 𝑎𝑚𝑑 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 ,𝐶𝑎𝑝𝑖𝑡𝑎𝑙
4,400 + 850 + 7,500 4 50 + 1 2,300
❑ − 600 ❑ ❑ −600
4,400 250 7,500 450 11,700
(h) At the end of the month Long Taxi withdraws
$1,000 in cash for personal use.
′
𝐴𝑠𝑠𝑒𝑡𝑠 𝑂𝑤𝑛𝑒 𝑟 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
}{
=
𝐶𝑎𝑠h 𝑆 𝑢𝑝𝑝𝑙𝑖𝑒𝑠 𝐿 𝑎𝑚𝑑 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 ,𝐶𝑎𝑝𝑖𝑡𝑎𝑙
4,400 + 850 + 7,500 4 50 1 2,300
+
❑ − 600 ❑ ❑ −600
4,400 250 7,500 450 11,700
}{
=
𝐶𝑎𝑠h 𝑆 𝑢𝑝𝑝𝑙𝑖𝑒𝑠 𝐿 𝑎𝑚𝑑 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒 𝐽𝑜h𝑛 𝐿𝑜𝑛𝑔 ,𝐶𝑎𝑝𝑖𝑡𝑎𝑙
4,400 1 1,700
+ 250 + 7,500 4 50 +
−1,000 ❑ ❑ ❑ −1,000
3,400 250 7,500 450 10,700
Summary Assets = Liabilities + Owner's Equity
Account John Long,
Cash + Supplies + Land = +
Payable Capital
(a) +10000 +10,000 Investment
(b) -7,500 +7,500
2,500 7,500 10,000
(c) +850 +850
2,500 850 7,500 850 10,000
(d) -400 -400
2,100 850 7,500 450 10,000
(e) +4,500 +4,500 Fares earned
6,600 850 7,500 450 14,500
(f) -2,200 -1,125 Wages exp.
-850 Rent expense
-150 Utilities exp.
-75 Misc. expense
4,400 850 7,500 450 12,300
(g) -600 -600 Supplies exp.
4,400 250 7,500 450 11,700
(h) -1,000 -1,000 Withdrawal
3,400 250 7,500 450 10,700
Financial reports
Financial Statements
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Income Statement for Long Taxi
Long Taxi
Income Statement
For Month Ended August 31, 2017
Fares earned $ 4,500.00
Operating expenses:
Wages expense $ 1,125.00
Rent expense 850.00
Supplies expense 600.00
Utilities expense 150.00
Miscellaneous expense 75.00
Total operating expenses 2,800.00
Net income
$ 1,700.00
Retained Earnings
Long Taxi
Retained Earnings
For Month Ended August 31, 2017
Retained Earnings on July 2017 $ 0
Net income for the month $ 1,700.00
Less dividends - 1,000.00
Increase in retained earnings 700.00
Retained earnings, August 31, 2017
$ 700.00
Balance Sheet
Long Taxi
Balance Sheet
August 31, 2017
Assets
Cash $ 3,400.00
Supplies 250.00
Land 7,500.00
Total assets
$ 11,150.00
Liabilities
Account payable $ 450.00
Owner's Equity
John Long, capital $ 10,000.00
Retained earnings $ 700.00
Total liabilites and owner's equity
$ 11,150.00
Balance Sheet
Long Taxi
Balance Sheet
August 31, 2017
Assets Liabilities
Cash $ 3,400.00 Account payable $ 450.00
Supplies 250.00 Owner's Equity
Land 7,500.00 John Long, capital $ 10,000.00
Retained earnings $ 700.00
Total assets $ 11,150.00 Total liabilities and owner's equity
$ 11,150.00
Statement of Cash Flows
Long Taxi
Statement of Cash Flows
For Month Ended August 31, 2017
Cash received from customer $ 4,500.00
Expenses and payments ($ 2,600.00)
Cash payment for purchasing
land ($ 7,500.00)
Cash from capital $10,000.00
Dividends ($1,000.00)
Net cash flow
$ 3,400.00
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Account receivables
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Exercise
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The End