Question

Show the effect of the following transactions of Avis Services on the accounting equation. Use “+” to denote an increase, “–” to denote a decrease and “0” to denote no change to the elements of the equation. Copy the table in your answer book and follow the example given. The business uses the periodic inventory system.

Assume that the bank balance is favourable at all times.

Example: Paid the insurance premium by cheque, R500
ASSETS
EQUITY
LIABILITIES
No.
Equipment
Receivables
Bank
=
Capital
Profit
+
Payables
e.g.
–R500
–R500
TRANSACTIONS
2.1.1
Purchased packing materials by cheque, R900.

Answer 1

	Assets =	Equity plus	Laibilities
2.1.1	+Packing Materials 900
	-Bank 900
2.1.2	- Bank 7000		-Loan 7000
2.1.3	-Bank 18,000
	+Computer 18,000
2.1.4	+Bank 3,000	+ Rental Income 3,000
2.1.5	+Bank 6,000	+ Service Revenue 6,000
2.1.6	+ Motor Cycle 50,000		+Accounts Payable 50,000
2.1.7	- Bank 12,000		- Accounts Payable 12,000
2.1.8	-Bank 11,000	-Drawings 11,000
2.1.9	+Stationery 400
	- Bank 400
2.1.10	+ Bank 80,000	+Capital 80,000

2.2.1 Calculation of profit/loss on sale of asset:

	Particulars	Amount
	Cost of Asset	30,000
Less:	Accumulated Depreciation on March 1	22,000
Less:	Depreciation between March 1 to May 31 =20%*30,000*3/12	1,500
	Book Value on May 31	6,500
	Selling Price	5,000
	Loss (Since Book Value > Selling Price)	1,500

Fixed Asset Realisation A/c

Date	Particulars	Amount	Date	Particulars	Amount
31/5	Equipment	30,000	31/5	Accumulated Depreciation	22,000
			31/5	Depreciation Expense	1,500
			31/5	Bank	5,000
			31/5	Loss on Sale of Equipment	1,500
	Total	30,000		Total	30,000