Question

4.1 For each of the following activities, identify the transaction cycle in which each activity falls under and give a reason for the selected cycle.

1. Purchase of plant and machinery by cheque
2. Settlement of electricity bill
3. Cost of palm oil used in preparing soap at Unilever
4. Issue of shares for cash
5. Receipt of goods worth GHS500,000 from Papa Tony enterprise
6. Michael delivered goods to his customers before payment was made
7. Sold goods on credit to Apambila and Sons
8. Papa Tony paid the salaries of his factory workers for the month of September

4.2 Papistic Enterprise is a trading concern located at James Town. The following are transactions which have occurred within the business;

1. Purchase of goods from Kobina for GH¢5000 and Mikel for GH¢1200 all on credit

2. Return of goods worth GH¢400 to Mikel

3. Sale of goods on credit to Esi Mansa for GH¢3000

4. Payment of electricity bills amounting to GH¢ 400 by cheque

5. Cash sales GH¢300

6. Payment of cash to Kobina and Mikel

7. Return of goods worth GH¢600 from Esi Mansa

8. Cash deposited into bank

9. Payment of salaries worth GH¢10000 to workers for the month of September

10. Disposal of equipment for cash (GH¢50000)

Required:

For each transaction above,

1. Identify the two accounts involved
2. State the effect on the accounting equation
3. State the account to be debited and the account to be credited

Answer 1

4.1

Following are five business transactions cycles and their nature

Revenue cycle—Interactions with customers. ...

Expenditure cycle—Interactions with suppliers. ...

Production cycle—Give labor and raw materials; get finished product.

Human resources/payroll cycle—Give cash; get labor.

Financing cycle—Give cash; get cash.

4.2

Hope it helps.