Question

Problem 3.6 Transaction Analysis, T Accounts and Trial Balance

** Alternative to Problem 3.5 Pradeep and Selvam set up Venus Photoshop Company in December 20XX. The transactions in the first month were as follows:

(a) Pradeep and Selvam invested cash in the company's share capital, 2,500 each.

(b) Took a bank loan, 31,000.

(c) Paid insurance for the month, 60.

(d) Bought supplies on credit, 350.

(e) Billed customers for services, *2,300.

(f) Used supplies, *270.

(g) Paid equipment rent for the month, 500.

(h) Collected receivables, 21,900.

(i) Repaid bank loan, 700.

j) Paid interest on bank loan, 100.

(k) Paid a dividend, *200.

Required

1. Record the transactions directly in the accounts.

2. Prepare the December 31 trial balance.

Answer 1

Note: Following figures have been revised since they are not in line with the whole question and appear to be a clerical error while posting the question:

b) Took a bank loan - 1,000

h) Collected receivables - 1,900*

*Since we have not even made sales up to 21,900 we cannot collect such an amount and hence the discrepancy was identified.

Main Answer:

Cash
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
a	ESC	5,000	c	Insurance Exp.	60
b	Bank Loan	1,000	g	Rent expense	500
h	Accounts Receivables	1,900	i	Bank Loan	700
			j	Interest expense	100
			k	Retained Earnings	200
				Closing Balance	6,340
	Total	7,900		Total	7,900
Bank Loan
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
i	Cash	700	b	Cash	1000
	Closing Balance	300
	Total	1,000		Total	1,000
Supplies on hand (Asset account)
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
d	Accounts Payable	350	f	Supplies expense	270
				Closing Balance	80
	Total	350		Total	350
Revenue
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
	Closing Balance	2,300	e	Accounts Receivable	2300
	Total	2,300		Total	2,300
Supplies expense (Expense account)
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
f	Supplies on hand	270		Closing Balance	270
	Total	270		Total	270
Interest Expense
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
j	Cash	100		Closing Balance	100
	Total	100		Total	100

Equity Share Capital
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
			a	Cash	5000
	Closing Balance	5,000
	Total	5,000		Total	5,000
Insurance Expense
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
c	Cash	60		Closing Balance	60
	Total	60		Total	60
Accounts Payable
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
	Closing Balance	350	d	Supplies	350
	Total	350		Total	350
Accounts Receivable
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
e	Revenue	2,300	h	Cash	1900
				Closing Balance	400
	Total	2,300		Total	2,300
Rent expense
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
g	Cash	500		Closing Balance	500
	Total	500		Total	500
Retained Earnings
Debit			Credit
S. No.	Particulars	Amount	S. No.	Particulars	Amount
k	Cash	200		Closing Balance	200
	Total	200		Total	200

Trial Balance
S. No.	Account	Debit	Credit
1	Cash	6,340
2	Equity Share Capital		5,000
3	Bank Loan		300
4	Insurance Expense	60
5	Supplies on hand	80
6	Accounts Payable		350
7	Revenue		2,300
8	Accounts Receivables	400
9	Supplies Expense	270
10	Rent Expense	500
11	Interest Expense	100
12	Retained Earnings	200
	Total(s)	7,950	7,950