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Financial Accounting

Tutorial 1, Wk 1

1. (a) Define the term accounting.

(b) Distinguish between financial and management accounting.

2. Define the FOUR qualitative characteristics of accounting. Is there any reason why accounting

information might not possess all of these qualities?

3. List and explain any FIVE accounting conventions.

4. Copy and complete the following table.

Assets($) Liabilities($) Owners Equity($)

(a) 125,000 45,000 ?

(b) ? 347,000 223,000

(c) 645,000 ? 330,700

(d) 65,000 45,000 ?

(e) 225,000 225,000 ?

(f) 385,000 ? 385,000

(g)

5. List the users of accounting information. Describe the kinds of information needed by each user

group. Explain why one set of accounting information is unlikely to satisfy the needs of all

users.

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6. Henry starts a business on 1 March 2011. Hisbusiness transactions for the month of trading are

as follows:

1 March Henry pays 35,000 of his own money into a business bank account. He

also transfers his own motor car(valued at 18,750) to the business.

2 March Premises costing 120,000 are acquired for the business. 20,000 of this is

paid bybusiness cheque. The remaining 100,000 is borrowed and is due for

repayment in 10 years time.

5 March A stock of goods for resale is acquired at a cost of 24,600. These goods

are bought on credit from R Black Ltd.

7 March Stock costing 8,700 is sold on credit to P Stevens for 11,300.

16 March Stock costing 9,700 isbought from a supplier and is paid for immediately

bybusiness cheque.

21 March A 220 cheque is drawn on the business bank account to purchase opera

tickets forHenry and his wife.

23 March Stock costing 5,500 is sold on credit to K Jones for 7,850.

28 March Henry draws 1,000 out of the business bank account to cover personal

living expenses. He also takes goods out ofbusiness for his own use.

These goods had cost the business 500.

31 March A cheque for 10,000 is sent to R. Black Ltd in part payment of the

amount owing to the company.

Required: (a) Describe the effect of these transactions on the assets, liabilities and capital of the

business and show the balance sheet as at 31 March 2011.

(b) Record the above transactions in necessary T accounts and extract a trial balance.

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7. A business has the following assets and liabilities on 30 September 2011:

Assets & liabilities Amount ()

Trade debtors 12,670

Trade creditors 17,850

Bank overdraft 4,800

Cash in hand 35

Stock of goods for resale 21,950

Land andbuildings 54,000

Office furniture and equipment 3,500

How much is the owners capital on 30 September 2011

8. Help Marcus Adams to identify the debit and credit entries in the following transactions.

(a)Bought a machine on credit from Angelo, cost 6,400

(b)Bought goods on credit from Barnfield, cost 2,100

(c)Sold goods on credit to Carla, value 750

(d)Paid Daris (a creditor) 250

(e)Collected 300 from Elsa, a debtor

(f) Paid wages 5,000(g)Received rent bill of 1,000 from landlord Graham

(h)Paid rent of 1,000 to landlord Graham

(i) Paid an insurance premium of 150

9.

a. The basic accounting equation is Assets = Liabilities + __________ _______.

For each of the transactions in items b through h, indicate the two (or more) effects on the accounting equationof the business or company.

b. The owner invests personal cash in the business.

Assets: Increase Decrease No Effect

Liabilities: Increase Decrease No Effect

Owner's (or Stockholders') Equity: Increase Decrease No Effect

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c.The owner withdraws business assets for personal use.




d.

The company receives cash from a bank loan.




e.

The company repays the bank that had lent money to the company.




f.

The company purchases equipment with its cash.




g.

The owner contributes her personal truck to the business.




h.

The company purchases a significant amount of supplies on credit.




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