Question

Question 3
The following transactions took place during the month of April 2019 in the books of account of
Mr Motto, a sole trader:
1st Mr. Motto opened a business bank account and deposited a cheque for N$150 000.
6th He purchased a motor vehicle for N$120 000 on credit from Mayo Vehicle CC.
10th He bought goods on credit from Paul for N$5 000.
11th He sold goods on credit to Matina for N$3 000.
12th Matina paid Mr. Motto N$3 000 for the goods bought on credit and claimed a discount
5% for early payment.
25th Mr. Motto settled his account with Paul by cheque and was given a settlement discount
of 10%.
The business uses a periodic inventory system.
You are required to:
i. Identify the Journal book of prime entry and source document (s) used by Mr. Motto to
record each of the above transactions.
ii. Show the effect (+ for increase / - for decrease, the amount and the account) of each of
the above transactions on the accounting equation.
e.g.
Journal Source document
1 March Sales journal Receipt
Date Asset
Owner’s equity Liabilities
e.g.
1 March
+5 000 (Cash)
-5 000 (Stationery)

Answer 1

ANS (i)
JOURNAL BOOKS OF PRIME ENTRY
SL.NO	BOOK OF PRIME ENTRY	TRANSACTION TYPE
1	SALES DAY BOOK	CREDIT SALES
2	PURCHASE DAY BOOK	CREDIT PURCHASE
3	CASH BOOK	ALL BANK TRANSACTIONS
4	PETTY CASH BOOK	ALL SMALL CASH TRANSACTIONS
5	THE JOURNAL	ALL TRANSACTIONS NOT RECORDED ELSEWHERE
SOURCE OF DOCUMENTS USED
1	01-04-2019	BANK STATEMENT AND OWNERS EQUITY
2	06-04-2019	ASSET PURCHASE INVOICE
3	10-04-2019	PURCHASE INVOICE AND CREDITORS CONFIRMATION
4	11-04-2019	SALES INVOICES AND DEBTORS CONFIRMATION
5	12-04-2019	PETTY CASH BOOK
6	25-04-2019	BANK STATEMENT
ANS(ii)
1	01-04-2019	1,50,000.00	BANK
		1,50,000.00	CAPITAL ACCOUNT
	(Being Motto opened a business bank account and deposited a cheque for N$150 000)
2	06-04-2019	1,20,000.00	MOTOR VEHICLE ( FIXED ASSET )
		1,20,000.00	MAYO VECHICLE CC ACCOUNT ( CURRENT LIABILITIES )
	(Being purchased a motor vehicle for N$120 000 on credit from Mayo Vehicle CC)
3	10-04-2019	5,000.00	PURCHASE OF GOODS (DIRECT EXPENSES )
		5,000.00	PAUL ( CURRENT LIABILITIES )
	(Being bought goods on credit from Paul for N$5 000)
4	11-04-2019	3,000.00	MATINA ( CURRENT ASSET )
		3,000.00	SALE OF GOODS (DIRECT INCOME )
	( Being sold goods on credit to Matina for N$3 000)
5	12-04-2019	2,850.00	CASH
		150.00	DISCOUNT ALLOWED (INDIRECT EXPENSES )
		-3,000.00	MATINA (CURRENT ASSET )
	(Being Matina paid Mr. Motto N$3 000 for the goods bought on credit and claimed a discount 5% for early payment.)
6	25-04-2019	-5,000.00	PAUL ( CURRENT LIABILITY )
		500.00	DISCOUNT RECEIVED (INDIRECT INCOME )
		-4,500.00	BANK
	( Being Mr. Motto settled his account with Paul by cheque and was given a settlement discount of 10%.)