Question

Selected transactions for the Sleezer Company are listed below.

1.		Paid monthly utility bill.
2.		Purchased new display case for cash.
3.		Paid cash for repair work on security system.
4.		Billed customers for services performed.
5.		Received cash from customers billed in transaction 4.
6.		Dividends paid to owners.
7.		Incurred advertising expenses on account.
8.		Paid monthly rent.
9.		Received cash from customers when service was rendered.

List the number of the transaction and then describe the effect of each transaction on assets, liabilities, and stockholders' equity.

Answer 1

Sr no.

Transactions

Comments on impact of transactions

1

Paid monthly utility bill

Electricity expense will be charged in P&L having corresponding impaact on Cash/ Bank

2

Purchased new display case for Cash

Office Equipment/ Furniture- Tangible fixed asset will be increased having corresponding impact on Cash/ bank in case of cash purchase or impact on Payable for fixed assets in case of credit purchase.

Further depreciation will be charged on the cost of asset purchased during the useful life of the asset.

3

Paid Cash for repair work on security system

Repair & Maintenance expenses will be charged through P&L having corresponding impact on Cash/ Bank.

4

Billed customers for services performed

Asset will be created as Debtors and Revenue from services will be credited in P&L.

5

Received cash from Customers billed in transaction 4

Cash/ Bank will be debited corresponding credit of Debtors' account. Overall, no impact on total asset as Asset in Cash is increased with simultaneously decreasing of Debtors.

6

Dividend paid to owners

Cash/ Bank will be credited due to payment of dividend and Shareholders' equity (Reserves & Surplus or Profil/ Loss A/c) will be debited accordingly.

7

Incurred advertisement expenses on account

Advertisement expenses will be charged in P&L with corresponding impact on Cash/ Bank or Payables

In case of advertisement expenses paid for more than 1 reporting period, then the advertisement expenses paid for excess period will be deferred.

8

Paid monthly rent

Rent expenses will be debited and charged in P&L with corresponding impact on Cash/ Bank.

9

Received cash from Customers when service was rendered

Cash/ Bank will be increased with corresponding credit of Debtors. Overall no impact on total value of asset.