Question

Mr. Ali the owner of a business in Muscat; incorporates as Software Programming Company that specialises in providing computer programming services and selling computer devices and accessories. The business has been established on 1st July 2019 without having specialized accounting department or system. However, at the end of July the business faces major difficulties and misunderstanding of the process of recording and journalizing the relevant economic transactions that have been done during the first month in an appropriate and standardized way. In this case you are required to handle some financial problems that Mr. Ali has provided you with the following transactions:

July 1. Mr. Ali The owner invests OMR 110,000 cash in the business.

July 2. The business purchased office equipment for OMR 45,000 cash. With annual depreciation of 10% for the next 10 years with no expected salvage value.

July 3. The business purchased for OMR 3,600 on account from a Supply Company computer paper and other supplies expected to last for several months.

July 5. The business provided OMR 14,000 of programming and maintenance services for a customer. It received cash of OMR 7,000, and it billed the balance of OMR 7,000 on account.

July 7. The business purchased computer accessories as an inventory in order to resell them. The business purchased 1000 headsets for OMR 10 each.

July 10. The business paid OMR 4,000 from the purchases due balance for the supplier.

July 15. The baseness purchased supplies OMR 8,000 in cash.

July 20. The business sold 550 units for customers for OMR 20 each.

July 23. The business received OMR 5,500 of the sales due balance from the customers.

July 27. Mr. Ali withdrawn OMR 1,600 cash from the business for his personal use.

July 28. The business hired a new secretary with basic salary of OMR 650.

July 29. The business received OMR 4,500 for programming services that will provide during the next 3 months.

July 30. The business paid the following expenses in cash for July: Store rent OMR 1,000, salaries and wages of employees OMR 3,400.

July 31. The business purchased a 6-month insurance policy for OMR 1,800

July 31. Received and paid the electricity and other utilities bills of OMR 1,100.

From the above transaction you are required to prepare:

6. Prepare the Journal entries for the month of July. (0.25 for each account= 7 marks)

Answer 1

Journal Entries:

Date	Account Title and Explanation	Debit (OMR)	Credit (OMR)
July 1	Cash	110,000
	Capital		110,000
	(To record investment in business)
July 2	Office Equipment	45,000
	Cash		45,000
	(To record purchase of equipment)
July 3	Supplies	3,600
	Accounts Payable		3,600
	(To record purchase of supplies)
July 5	Cash	7,000
	Accounts Receivable	7,000
	Service Revenue		14,000
	(To record service revenue)
July 7	Inventories	10,000
	Accounts Payable		10,000
	(To record purchase of inventories)
July 10	Accounts Payable	4,000
	Cash		4,000
	(To record amount paid to supplier)
July 15	Supplies	8,000
	Cash		8,000
	(To record purchase of supplies)
July 20	Accounts Receivable	11,000
	Sales Revenue		11,000
	(To record sales revenue)
July 20	Cost of goods sold ( 550 Units * 10 OMR/Unit)	5,500
	Inventories		5,500
	(To record cost of goods sold)
July 23	Cash	5,500
	Accounts Receivable		5,500
	(To record amount received from the customer)
July 27	Capital	1,600
	Cash		1,600
	(To record cash withdrawn for personal use)
July 28	No Jounral Entry required
July 29	Cash	4,500
	Unearned Revenue		4,500
	(To record amount of advance received)
July 30	Store Rent	1,000
	Salaries and wages	3,400
	Cash		4,400
	(To record salaries and rent)
July 31	Prepaid Insurance	1,800
	Cash		1,800
	(To record purchase of insurance policy)
July 31	Utilities Expense	1,100
	Cash		1,100
	(To record utilities expenses)