Question

Q3:
In July 2005, Nasir Jamal started business and completed following transactions. Prepare General Journal entries for each business transaction.

July 1 He deposited Rs. 165,000 cash in a business bank account.(use cash as title)
July 2 Purchased equipment for Rs. 55,000 from ABC Co. paid Rs.20,000 andbalance will be paid after three month.
July 7 Paid rent for three months Rs. 1500
July 12 Purchase goods on credit from Khan & Co. Rs. 1200
July 17 Paid salaries to staff Rs. 2500
July 20 Paid to Khan &Co.Rs. 700
July 23 Paid insurance Rs. 400
July 27 Nasir withdrew Rs. 1500 cash from the business for personal use.

Required
Prepaid General Journal .

Q No.4
For each of the following items, give an example of a business transaction that has the described effect on the accounting equation:

a. Increase an asset and increase a liability.
b. Increase one asset and decrease another asset.
c. Decrease an asset and decrease owner's equity.
d. Decrease an asset and decrease a liability.
e. Increase an asset and increase owner's equity

No.5
Compute the missing amount in the accounting equation for each entity:

Assets Liability Owners Equity

Company A Rs. ? Rs.61,800 Rs.34,400

Company B 65,900 ? 34,400

Company C 81,700 79,800 ?

Answer 1

Q3. General journal

DATE	ACCOUNT TITLE	DEBIT	CREDIT
JULY 1	CASH	165,000
	OWNERS EQUITY OR CAPITAL		165,000
JULY 2	EQUIPMENT	55,000
	CASH		20,000
	ACOUNTS PAYABLE - ABC CO.		35,000
JULY 7	RENT	1,500
	CASH		1,500
JULY 12	PURCHASE (GOODS)	1,200
	ACCOUNTS PAYABLE- KHAN & CO.		1,200
JULY 17	SALARIES	2,500
	CASH		2,500
JULY 20	ACCOUNTS PAYABLE -KHAN & CO	700
	CASH		700
JULY 23	INSURANCE	400
	CASH		400
JULY 27	WITHDRAWALS	1,500
	CASH		1,500

Q. 4.

a. INCREASE AN ASSET AND INCREASE A LIABILITY

PURCHASE OF GOODS FOR CREDIT

(TRANSACTION DATED JULY 12)

THIS INCREASE THE ASSET GOODS AND INCREASE ACCOUNTS PAYABLE WHICH IS A LIABILITY.

b. INCREASE ONE ASSET AND DECREASE ANOTHER ASSET

PURCHASE OF EQUIPMENT FOR CASH

HERE EQUIPMENT IS AN ASSET AND CASH IS ALSO AN ASSET. WHEN WE PURCHASE EQUIPMENT FOR CASH IT WILL INCREASE ONE ASSET (EQUIPMENT) AND DECREASE ANOTHER ASSET(CASH)

c. DECREASE AN ASSET AND DECREASE OWNERS EQUITY

WITHDRAWAL MADE BY OWNER FOR PERSONAL USE

DECREASE ASSET CASH AND DECREASE OWNERS EQUITY WHEN WITHDRAWS CASH FROM BUSINESS.

d. DECREASE AN ASSET AND DECREASE A LIABILITY

PAYMENT MADE TO A CREDITOR

HERE ACCOUNTS PAYABLE IS DECREASED WHICH IS A LIABILITY AND CASH IS DECREASED WHICH IS AN ASSET.

e. INCREASE AN ASSET AND INCREASE OWNERS EQUITY

DEPOSIT OF CASH BY PROPRIETOR TO HIS BUSINESS

HERE AN ASSET CALLED CASH IS INCREASED AND OWNERS EQUITY IS ALSO GOT INCREASES.

Q5. COMPUTE MISSING AMOUNT

HERE WE APPLIES THE ACCOUNTING EQUATION

ASSET = LIABILITIES + OWNERS EQUITY

COMPANY A

ASSET =?

LIABILITY = 61,800

OWNERS EQUITY = 34,400

ASSET = 61,800 + 34,400 = 96,200

COMPANY B

ASSET = 65,900

OWNERS EQUITY = 34,400

LIABILITIES = 65,900 - 34,400 = 31,500

COMPANY C

ASSET = 81,700

LIABILITY = 79,800

OWNERS EQUITY = 81,700 - 79,800 = 1,900