Question

Company XYZ has appointed you as an Accountant and you are asked to review the following transactions as at 30 June 2018, which is the current year before any adjusting entries have been made.

1 (a) 08/09/2017 Purchase equipment for cash $5000

(b) 18/10/2017 Provide services to a client A for $500 on account

(c) 20/10/2018 pay the bank loan for $10000

(d) 11/12/2018 Invest additional $30000 cash into the business by the owner

(e) 01/18/2018 Collect an account receivable in cash from client A

(f) 31/01/2018 Pay wages to employees for $5000

(g) 04/02/2018 Paid the electricity bill for $100

(h) 06/04/2018 Sell a piece of equipment for $3000 in cash

(i) 05/05/2018 Withdraw cash by the owner for private usage for $500

(j) 06/06/2018 Borrow money on a long-term basis from a bank for $100000

Requirement:

1. List the effect of each of the following transactions upon any or all of the four financial statements of a business. Apart from indicating the financial statement(s) involved, use appropriate phrases such as ‘increase total assets’, ‘decrease equity’, ‘increase income’, ‘decrease cash flow’ to describe the transaction concerned.

2. Record all the necessary journals following the template below.

Answer 1

• All working (if any required) forms part of the answer
• Requirement 1

Transaction	Financial Statement	Effect
a	Balance Sheet, Statement of Cash Flows	Increase Property Plant & Equipment	Decreases Current Asset	Decreases Cash Flows
b	Income Statement, Balance Sheet	Increase Income	Increase Current Liabilities
c	Balance Sheet, Statement of Cash Flows	Decreases Total Assets	Decreases Total Liabilities	Decreases Cash Flows
d	Balance Sheet, Statement of Owner's Equity, Statement of Cash Flows	Increases Total Assets	Increase Equity	Increases Cash Flows
e	Balance Sheet, Statement of Cash Flows	Increase Cash	Decreases Accounts receivables	Zero effect on Total Assets in totality.
f	Income Statement, Balance Sheet, Statement of Cash Flows	Decrease Total Assets	Decreases Equity	Decreases Cash Flows
g	Income Statement, Balance Sheet, Statement of Cash Flows	Decrease Total Assets	Decreases Equity	Decreases Cash Flows
h	Income Statement, Balance Sheet, Statement of Cash Flows	Increases or decreases Total Assets and Equity on the bsis of cost of equipment that has been sold.		Increases Cash Flows
i	Balance Sheet, Statement of Owner's Equity, Statement of Cash Flows	Decreases Total Assets	Decreases Total Equity	Decreases Cash Flows
j	Balance Sheet, Statement of Cash Flows	Increase total asset	Increases total liabilities	Increases Cash Flows

• Requirement 2

Transaction	Accounts title	Debit	Credit
a	Equipment	$                           5,000.00
	Cash		$                                         5,000.00
b	Accounts receivables	$                               500.00
	Servcie Revenues		$                                             500.00
c	Bank Loan	$                         10,000.00
	Cash		$                                       10,000.00
d	Cash	$                         30,000.00
	Owner's Capital		$                                       30,000.00
e	Cash	$                               500.00
	Accounts receivables		$                                             500.00
f	Wages Expenses	$                           5,000.00
	Cash		$                                         5,000.00
g	Electricity Expenses (utilities expenses)	$                               100.00
	Cash		$                                             100.00
h	Cash	$                               500.00
	Equipment		$                                             500.00
i	Owner's Drawings (or withdrawals)	$                               500.00
	Cash		$                                             500.00
j	Cash	$                      100,000.00
	Bank Loan (Long Term Loan)		$                                     100,000.00