Accounting Comprehensive Assignment

Question no 01:

(a) Journals:-

Date Details Debit ($) Credit ($)

2018 Cash 100,000
O1-Jan Capital 100,000
02-Jan Prepaid Rent 36,000
Cash 36,000
03-Jan Equipment 80,000
Cash 60,000
Notes Payable 20,000
04-Jan Office Supplies Expense 17,600
Accounts Payable 17,600
13-Jan Cash 28,500
Service Revenue 28.500
13-Jan Accounts Payable 17,600
Cash 17,600
14-Jan Salaries & Wages Expense 19,100
Cash 19,100
18-Jan Accounts Receivable 21,200
Cash 32,900
Service Revenue 54,100
23-Jan Cash 15,300
Accounts Receivable 15,300
25-Jan Cash 4,000
Unearned Service Revenue 4,000
26-Jan Office Supplies Expense 5,200
Accounts Payable 5,200
28-Jan Utilities Expense (Water) 19,000
Cash 19,000
31-Jan Advertising Expense 5,000
Cash 5,000
31-Jan Utilities Expense (Electricity) 2,470
Accounts Payable 2,470
31-Jan Utilities Expense (Telephone) 1,494
Accounts Payable 1,494
31-Jan Miscellaneous expenses 3,470
Cash 3,470
31-Jan Rent Expense 12,000
 Prepaid Rent 12,000
($36,000÷3)= $12,000

(b) Ledgers:-

Cash Account

Date Details Debit Credit Balance

2018
01-Jan Capital 100,000 100,000
02-Jan Prepaid Rent 36,000 64,000
03-Jan Equipment 60,000 4,000
13-Jan Service Revenue 28,500 32,500
13-Jan Accounts Payable 17,600 14,900
14-Jan Salaries & Wages Expense 19,100 (4,200)
18-Jan Service Revenue 32,900 28,700
23-Jan Accounts Receivable 15,300 44,000
25-Jan Unearned Service Revenue 4,000 48,000
28-Jan Utilities Expense (Water) 19,000 29,000
31-Jan Advertising Expense 5,000 24,000
31-Jan Miscellaneous expenses 3,470 20,530 Dr.

Capital Account

Date Details Debit Credit Balance

2018 Cash 100,000 100,000 Cr.
01-Jan .

Prepaid Rent Account

Date Details Debit Credit Balance

2018
02-Jan Cash 36,000
31-Jan Rent Expense 12,000 24,000 Dr.
.

Notes Payable Account

Date Details Debit Credit Balance
2018
31-Jan Equipment 20,000 20,000 Cr.
.

Accounts Payable Account

Date Details Debit Credit Balance

2018
04-Jan Office Supplies Expense 17,600
13-Jan Cash 17,600 00
26-Jan Office Supplies Expense 5,200 5,200
31-Jan Utilities Expense (Electricity) 2,470 7.670
31-Jan Utilities Expense (Telephone) 1,494 9,164 Cr.

Equipment Account

Date Details Debit Credit Balance

2018
03-Jan Cash 60,000 60,000
Notes Payable 20,000 80,000 Dr.
Rent Expense .

Accounts Receivable Account

Date Details Debit Credit Balance

2018
18-Jan Service Revenue 21,200
31-Jan Cash 15,300 5,900 Dr.
.

Unearned Service Revenue Account

Date Details Debit Credit Balance

2018
25-Jan Cash 4,000 4,000 Cr.
.
 Service Revenue Account

Date Details Debit Credit Balance

2018
13-Jan Cash 28,500 28,500
18-Jan Cash 32,900 61,400
Accounts Receivable 21,200 82,600 Cr.

Office Supplies Expense Account

Date Details Debit Credit Balance

2018
04-Jan Accounts Payable 17,600 17,600
26-Jan Accounts Payable 5,200 22,800 Dr.

Salaries & Wages Expense Account

Date Details Debit Credit Balance

2018
14-Jan Cash 19,100 19,100 Dr.

Utilities Expense (Water, Telephone, Electricity) Account

Date Details Debit Credit Balance

2018
28-Jan Cash 19,000 19,000
31-Jan Accounts Payable 2,470 21,470
31-Jan Accounts Payable 1,494 22,964 Dr.

Advertising Expense Account

Date Details Debit Credit Balance

2018
31-Jan Cash 5,000 5,000 Dr.
.

Miscellaneous Expense Account

Date Details Debit Credit Balance
2018
31-Jan Cash 3,470 3,470 Dr.
.

Rent Expense Account

Date Details Debit Credit Balance

2018
31-Jan Prepaid Rent 12,000 12,000 Dr.
.

(c) Trial Balance:-

 Dona Car Repairing Shop

Trial Balance

January 31, 2018

Details Debit ($) Credit ($)

Cash 20,530
Capital 100,000
Prepaid Rent 24,000
Notes Payable 20,000
Accounts Payable 9,164
Equipment 80,000
Accounts Receivable 5,900
Unearned Service Revenue 4,000
Service Revenue 82,600
Office Supplies Expense 22,800
Salaries & Wages Expense 19,100
Utilities Expense (Water, Telephone, Electricity) 22,964
Advertising Expense 5,000
Miscellaneous Expense 3,470
Rent Expense 12,000
Total = $2,15,764 $2,15,764

(d) Income Statement:-

 Dona Car Repairing Shop

Income Statement

For the Month ended 31st January, 2018

Details $ $

Revenues:
Service Revenue 82,600

Expenses:
Rent Expense 12,000
Miscellaneous Expense 3,470
Advertising Expense 5,000
Utilities Expense (Water, Telephone, Electricity) 22,964
Salaries & Wages Expense 19,100
Office Supplies Expense 22,800 85,334
Net Loss = $(2,734)

Dona Car Repairing Shop

Equity Statement

Details $ $

Capital on 1st January

Owner’s Capital 100,000

Less: Net Loss 2,734

Capital on 31st January $97,266

Balance Sheet:-
 Dona Car Repairing Shop

Balance Sheet

January 31, 2018

Details $ $

Assets:
Cash 20,530
Equipment 80,000
Prepaid Rent 24,000
Accounts Receivable 5,900

130,430
Total Assets =

Liabilities: 9,164
Accounts Payable 20,000
Notes Payable 4,000
Unearned Service Revenue
33,164
Owner’s Equity:
Dona Ridge’s Capital on 31st January, 2018
97,266
Total Liabilities & Equity =
130,430

Question no. 02:

(a) Cost Principle: Cost principle is recording assets, liabilities, and equity investments on
the financial statements at their original/actual price. The cost principle is actually equal
to the amount paid for each transaction.
Example: If a buyer buys a house and the actual price of the house is $100,000 but the
buyer paid $70,000 then the buyer will record $70,000 as the actual amount paid even
though the house has a value of $100,000.
(b) Economic Entity Assumption: The economic entity assumption is an accounting
principle that differentiates the transactions carried out by the business/company from
owner. It means, both the business and the owner have different identity.
Example: If a car business owner sells a model of car from his personal collection then
he won’t record it under the car company name. Because it is not a business transaction,
the car is not included in the business collection.
 (c) Monetary Unit Assumption: Monetary Unit Assumption is only recording accounting
transactions that can be expressed in terms of money. Means any transaction that has
exchanged money.
Example: Buying a $5,000 worth products will be recorded in financial statements but
hiring an employee with $20,000 salary won’t be recorded as it doesn’t include any
transaction of money.
(d) Going Concern: The going concern assumption states that the financial activities of a
business are assumed to be in operation for an indefinite period of time. This allows a
business to operate with a view towards a long term.
Example: In case of basis for depreciation the cost of a fixed asset is allocated over it’s
useful life and it will not be considered as the current year only.
(e) Periodicity: Periodicity is an accounting concept that is used to prepare and present
financial statements into the artificial period of times as required by internal
management, shareholders or investors.
(f) Revenue Recognition Principle: The revenue recognition principle is a feature of
accrual accounting which states that revenues are recognized on the income statement in
the period when it is earned and not necessarily when cash is received.
Example: A company recognizes revenue when the ads for promotions are aired even if
the payment is not received or where payment is received in advance.
(g) Matching Concept: The matching concept is an accounting principle which states that
expenses should be recognized in the same reporting period as the related revenues.
(h) Accrual Basis of Accounting: Accrual accounting is an accounting method where
revenue or expenses are recorded when a transaction occurs rather than when payment is
received or made. The method follows the matching principle, which says that revenues
and expenses should be recognized in the same period.
(i) Dual Aspect of Accounting: Dual Aspect of Accounting is also known as double entry
accounting. Means any transaction of a business is recorded in two separate accounts.
The dual aspect concept states that each transaction made by a business impacts the
business in two different aspects which are equal and opposite in nature.

Question no 03:

A) Cash Flow Statement:

OXLY Corporation
Cash flow statement
31 December 2015
Details $ $

Cash flow from Operating Activities:

Net Income 106,000
Add: Depreciation 30,000
Less: Decrease in inventory (140,000)
Add: Decrease in Accounts Receivable 30,000
Add: Increase in Accounts Payable 70,000
Add: Increase in Notes Payable 20,000
Net Cash Inflow from Operating Activities = 116,000

Cash flow from Investing Activities:

Purchase of Equipment (40,000)
Net Cash Outflow from Investing Activities = (40,000)

Cash flow from financing Activities:

Long Term Debt (30,000)
Dividends Payment (76,000)
Net Cash Outflow from Financing Activities = (106,000)

Net increase in Cash= (30,000)

Cash at the Beginning Period 70,000

Cash at the Ending Period = 40,000

B) Calculating Ratios:

Current Assets 820,000

 Current Ratio = Current Liabilities = 520,000 = 1.5769 or, 1.58

Current Assets−Inventory 820,000−460,000

 Quick Ratio = Current Liabilities = 520,000 = 0.69

Sales
 Accounts Receivable Turnover = Average Accounts Receivable =
2,200,000
(320,000+350,000)÷ 2
= 6.56
 Net Income 106,000
 Profit Margin = Sales = 2,200,000 = 0.04818 or. 0.0482 or, 4.82%

Sales 2,200,000
 Asset Turnover = Average Assets = (1,200,000+1,110,000)÷ 2 = 1.90

Net Income 106,000

 Return on Assets (ROA) = Average Total Assets = (1,200,000+1,110,000)÷ 2 =
0.09177 or, 0.0918 or, 9.18%
Net Income
 Return on Common Stockholders’ Equity =
Average Stockholders ’ Equity
=
106,000
(100,000+100,000+150,000+150,000+110,000 +80,000)÷ 2
= 0.3072 or, 30.72%

Total Liabilities 840,000

 Debt to Asset = Total Assets = 1,200,000 = 0.70

EBIT 180,000
 Times Interest Earned Ratio =
Interest
= 29,000
= 6.20