Business Transactions Essay

GB518 | Assignment 2

Business Minutess

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Entire Markss

50 Markss

Weight

10 %

Due day of the month

Wednesday of Week 4 ( 11ThursdayJune 2014 ) by 5 Autopsies

PLEASE NOTE THE FOLLOWING INSTRUCTIONS

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  • This assignment consists of 5 inquiries and you are required to reply all of the inquiries. Please usage this word papers to finish the assignment and upload it on the portal.
  • Please do certain you follow the guidelines noted in your capable lineation particularly those associating to presentation of written work, late policy and academic unity.

Question 1 ( 10 Markss | Word bound: 300 )

The proprietor of a really little, parttime concern was non interested in maintaining elaborate histories for the concern. Recently, an comptroller advised that the concern should hold its histories recorded under the double-entry system. The proprietor argued that the system was excessively dearly-won and excessively elaborate for the demands of the concern. What statements could the accountant usage to back up the double-entry system? Do you hold with the proprietor?

Double entry system is an accounting system which involves two or more histories in a concern dealing. For illustration, when a concern house lends money from fiscal establishment, the hard currency history goes up and the loan liability history goes up every bit good, so in this dealing we can clearly see that there are two histories being affected, this type of maintaining histories in a individual concern dealing is called dual informations entry system.

I don’t needfully hold with the proprietor of the little concern company, because the advantages are greater than the individual informations entry system if he was at all interested in keeping his concern histories.

Fiscal statement and studies can be maintained easy by the usage of dual informations entry system. In today period of clip, all the accounting package make usage of dual entry accounting where by the concern houses are able to bring forth right study of histories on the income statement, balance sheet, hard currency flow statement and other fiscal statements and studies. Fiscal statements let you to measure the fiscal wellness of the company and compute fiscal ratios for farther analysis. Double informations entry system accounting allows maintaining record of assets and liabilities. Suppose in single-data entry accounting system, the record of minutess is merely one of the two-revenue and disbursal. Double data-entry system has the advantage of the accounting equation in which assets equal liabilities plus shareholders’ equity. The recording of assets, liabilities and shareholders’ equity allows to fix a balance sheet. A balance sheet is an of import fiscal statement of a concern house as it shows the capital the house owns and the liabilities the house owes. The other importance of dual entry informations accounting is that it maintains cheques and balances, where by forestalling fraud as it makes it hard to pull strings histories. In dual informations entry system we can observe history use by traveling through the diary entries and comparing them to old journal entries for the same or similar minutess as both sides of the accounting equation must equilibrate. The disbursals are besides non so high, merely for keeping two histories.

Question 2 ( 10 Markss | Word bound: 300 )

Recently, a new pupil of accounting was overheard doing the undermentioned comments: “Why are we larning how to utilize the double-entry system of entering in the accounting rhythm? Surely there are good computing machine bundles available these yearss which can manage all of these details.” Provide a suited answer.

Double entry system of accounting is preferred than other computing machine bundles because it is non so sophisticated than other accounting software’s since it is modified version of individual entry informations system of accounting. In dual informations entry accounting, it’s merely the care of recognition and debit histories. The histories are placed on the right and left side severally horizontally. We Can happen the history balance by ciphering the differences on the recognition side and debit side or besides from the side of T history. Through the usage of dual entry system, we can happen the mistakes easy. Suppose if the entire recognition does non be the entire debit, there must be some mistakes. In dual entry informations the plus is equal to liabilities plus proprietors equity. In dual informations entry system the debit entry increases the plus histories and decreases the liability equity histories. On the other manus, recognition entry increases liability and equity histories and decreases assets histories. A systematic technique is followed in entering fiscal dealing in dual informations entry system. It records fiscal minutess in a systematic and chronological order with suited narrative of the fiscal dealing. Double-entry system is a complete system of book maintaining. It records non merely each and every fiscal dealing, but besides each facet of the dealing. Double informations entry system is based on the double-entry rule which means ‘ for every debit sum there is a corresponding recognition sum ‘ . Such a method of debit and recognition can assist guarantee arithmetical truth of the recordings of fiscal minutess. The net income and loss history can be found by fixing the net income and loss history for the given period of clip. Through the usage of Double-entry book-keeping system, the information about the fiscal position can be known through the usage of balance sheet. Double entry book maintaining system keeps a elaborate record of fiscal minutess. Therefore, the recording of fiscal minutess in books provides necessary information for the intent of costs control. Double entry book maintaining system communicates fiscal information that is necessary for taking determinations by a concern. Double entry book maintaining will supply information for proprietors, directors and creditors about the concern, so, that they can do good determination about the concern.

Question 3 ( 10 Markss | Word bound: 300 )

An old-timer trader was in the wont of sing local garage gross revenues and flea markets in the hope of happening a deal or two. On one juncture he purchased a China home base for $ 2, because he knew that the home base was rare and was deserving at least 20 times that amount among antique aggregators. In fixing the histories for the old-timer trader, what value should the trader put on the home base? Why? Supply grounds to back up your reply.

The old-timer trader while fixing the histories should maintain in head that he brought the China home base for $ 2, which was rare and deserving 20 times more than what he paid. The history he should keep is dual informations entry system, where he can set debit on the one side and recognition history on the other side. The inside informations he can add up are the monetary value he paid for the points and the twelvemonth.

The trader after cognizing everything should raise the monetary value ticket to twenty times higher, which would come up to $ 40. The monetary value I agreed to because, foremost, the China home base was rare and antique, secondly, because the China home base is decidedly traveling to be sold to antique aggregator. The point would be sold instantly or may be after few old ages, since monetary value will travel up with the clip. The more he protract his sale, the better the monetary value he will bring. So in his history of dual informations entry system, the net income border will hit up, he can clearly cipher the net income or loss statement. Since in this scenario, the differences border will be greater, the net income will be immense. The old-timer trader has the wont of ever traveling for deal ; this I would state is his best bargain. All the antique points have the good chance of bringing good monetary value and he should ever duplicate the monetary value or more, as they have large market value. In today’s clip it is so hard to happen antique and it’s rare person will hold, so the monetary values should ever be high. If he be aftering to hive away that old-timer, he should make in such a mode that attracts the client, by exposing good effects on the point. He should Price the points utilizing a secure labelling system to avoid sticker-switch fraud. Breakaway spines can be used to avoid fraud if Anyone tries to take the spine, it will divide into two bantam Ags.

Question 4 ( 10 Markss )

For each of the undermentioned minutess, indicate whether the histories affected are an plus, a liability, equity, an income or an disbursal. Besides indicate whether the histories are being increased or decreased and whether the addition or lessening is a debit or recognition. For illustration, Wages paid to staff. Increase an disbursal ( debit ) and diminish an plus ( recognition ) .

Transaction

Analysis

Eg.

Wagess paid to staff.

Increase an disbursal ( debit ) and diminish an plus ( recognition ) .

A

Owner invested hard currency.

Increase in plus ( recognition )

Bacillus

Paid creditor by check.

Decrease in liability ( debit ) and lessening in plus ( recognition )

C

Cash payment made for insurance 6 months in progress.

Addition in disbursal ( debit ) and lessening in plus ( recognition )

Calciferol

Purchased supplies on history.

Increase in liability ( debit ) and increase in plus ( recognition )

Tocopherol

Sold a vehicle for hard currency.

Decrease in plus ( debit ) and increase in income ( recognition )

F

Invoiced a client for services performed.

Increase in income ( recognition )

Gram

Owner withdrew money from concern bank history for private usage.

Decrease in plus ( debit )

Hydrogen

Received payment on an history receivable.

Increase in income ( recognition )

I

Issued check and took out a loan to buy machinery.

Increase liability ( debit ) and increase plus ( recognition )

Joule

Paid for an advertizement aired on telecasting.

Addition in disbursal ( debit ) and lessening in plus ( recognition )

Question 5 ( 10 Markss )

Sally’s Spa began operations on 1 June 2014 and completed the undermentioned minutess during the first month.

  1. Sally-Anne deposited $ 25,000 of her personal financess in a current history of the concern.
  2. Spa equipment was purchased at a sum of $ 15,000, of which $ 10,000 was paid instantly. A loan payable was arranged for the staying sum.
  3. Sally collected $ 3,000 from clients for services performed.
  4. Rent was paid for the month $ 1,200
  5. Supplies bing $ 1,370 were purchased on recognition.
  6. Wagess of $ 500 were paid every bit good as an history for electricity $ 270
  7. Sally paid for the supplies purchased in ( 5 ) above.
  8. Supplies used during the month amounted to $ 640.

Required:

Record the above minutess in a worksheet. List the undermentioned assets, liabilities and equity as column headers: Cash at Bank ; Supplies ; Equipment ; Loan Payable ; Accounts Payable ; Sally-Anne, Capital. Indicate sums after each dealing and finish the worksheet.

  1. Sally-Anne deposited $ 25,000 of her personal financess in a current history of the concern.

Bank A/c Dr… … … … … … .25000

To Owner Capital A/c Cr… … … … … … … ..25000

  1. Spa equipment was purchased at a sum of $ 15,000, of which $ 10,000 was paid instantly. A loan payable was arranged for the staying sum.

Equipment A/c Dr… … … … 15000

To Cash/Bank A/c Cr… … ..10000

To Loan A/c Cr… … … … … … 5000

  1. Sally collected $ 3,000 from clients for services performed.

Bank/Cash A/c Dr… … … … .3000

To Income A/c Cr… … … … 3000

  1. Rent was paid for the month $ 1,200

Rent Exp A/c Dr… … … … … … 1200

To Bank A/c Cr… … … … … ..1200

  1. Supplies bing $ 1,370 were purchased on recognition.

Supplies A/c Dr… … … … 1370

To Sundry Creditors A/C Cr… ..1370

  1. Wagess of $ 500 were paid every bit good as an history for electricity $ 270

Wages & A ; Electricity Expenses A/c Dr… … … … 770

To Bank A/c Cr… … … … … … … … … … … … … 770

  1. Sally paid for the supplies purchased in ( 5 ) above.

Assorted Creditors A/c Dr… … … … ..1370

To Bank A/c Cr… … … … … … … … 1370

  1. Supplies used during the month amounted to $ 640.

Operation Exp A/c Dr… … … … … 640

To Supplies A/c Cr… … … … … .640

Assets

Liabilities

Equity

Cash at Bank

+

Supplies

+

Equipment

=

Histories Collectible

+

Loan Payable

+

Sally-Anne, Capital

GB518 | Assignment 2 | Marking Sheet

Requirement

Maximum

Marks

Marks Awarded

What statements could the accountant usage to back up the double-entry system?

10

“Why are we larning how to utilize the double-entry system of entering in the accounting rhythm? Surely there are good computing machine bundles available these yearss which can manage all of these details.”

10

In fixing the histories for the old-timer trader, what value should the trader put on the home base?

10

Transaction analysis

10

Fix a worksheet

10

Entire above

50

Weighted down

10

Marker’s general remarks

Marker’s name

Marker’s signature

Date marked

Campus

GB518 | Assessment 2 Business TransactionsPage 1 of 11

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