Question 2: Double entry book-keeping and simple accounts preparation You are given a list of transactions...

Question 2: Double entry book-keeping and simple accounts preparation

You are given a list of transactions of ‘Happy T-shirt’ below.

Transaction 1: You are opening a new business selling printed T-shirts called ‘Happy T-shirt’. You buy t-shirts and print before selling them. You invest £5,000 and borrow £5,000 to start your company. What are the dual effects on the accounting equation?

Transaction 2: After you form your company, you need to buy equipment to print the t-shirts. You purchase £2,000 of equipment to print the t-shirts on credit. This amount is to be repaid in four weeks’ time. What are the dual effects on the accounting equation?

Transaction 3: You purchase 1,000 plain t-shirts at £5 each in cash. These t-shirts will be printed as sold under ‘Happy T-shirt’ brand. What are the dual effects on the accounting equation?

Transaction 4: You receive an order for 50 t-shirts’ from a customer. The selling price per tshirt is £10 per shirt, or £500 total. The customer pays half of the order in cash and the rest to be settled in two weeks’ time. What are the dual effects on the accounting equation?

Transaction 5: You receive another order for 700 t-shirt at £10 each. 40% of the sales is paid. The rest of the payment will be settled in 3 weeks’ time. What are the dual effects on the accounting equation?

Transaction 6: Happy T-shirt repays the amount of £2,000 due for the machinery bought (see transaction 2). What are the dual effects on the accounting equation?

Your tasks are:

1. Show the dual effects of each transaction on the accounting equation. You can use the terms decrease or increase, or try Dr. and Cr. if you can.

2. Prepare the income statement, statement of financial position for Happy T-shirt for March 2020.

Expert Solution

ekkarill92 answered 2 years ago

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