Question

QUESTION TWO [20]

Show the effect of the following transactions of Mac Limited on the accounting equation using the format provided. Use + if the element increases, - if the element decreases and 0 if the element remains unchanged. Also indicate the amount.

E.g. Mac bought stationery on credit, R900. No.	Assets	= Equity	+ Liabilities
E.g.	0	-900	+900

Transactions:

2.1 Bought invoice books on credit, R1 300.

2.2 Bought a computer by cheque, R230 000.

2.3 Cash received for services rendered, R14 000.

2.4 Paid the annual fire insurance by cheque R22 400.

2.5 Received R2 000 from a debtor in part settlement of her account.

2.6 The tenant paid the monthly rental to Mac Limited, R15 000

2.7 Received an account for repairs to the machinery, R17 500.

2.8 Bought fuel for delivery vehicle by cheque, R400.

2.9 Mac took R1 800 drawings from the business.

2.10 Cash received for services rendered to Mr Harry who is a valued customer, R101 150.

Answer 1

Show the effect of the following transactions of Mac Limited on the accounting equation

Transaction	Assets	=	Equity	+	Liabilities
2.1 Bought invoice books on credit, R1 300.	0		-1300		+1300
2.2 Bought a computer by cheque, R230 000.	+230,000		0		0
	-230,000		0		0
2.3 Cash received for services rendered, R14 000.	+14,000		+14,000		0
2.4 Paid the annual fire insurance by cheque R22 400.	+22,400		0		0
	-22,400		0		0
2.5 Received R2 000 from a debtor in part settlement of her account.	+2,000		0		0
	-2,000		0		0
2.6 The tenant paid the monthly rental to Mac Limited, R15 000	+15,000		+15,000
2.7 Received an account for repairs to the machinery, R17 500.	+17,500		+17,500
2.8 Bought fuel for delivery vehicle by cheque, R400.	-400		-400
2.9 Mac took R1 800 drawings from the business.	-1,800		-1,800
2.10 Cash received for services rendered to Mr Harry who is a valued customer, R101 150.	+101,150		+101,150
Total	$145,450	=	$144,150	+	$1,300

Journal entries as follows:

Trn.	Account Title	Debit	Credit
2.1	Stationery expense	R1300
	Accounts payable		R1300
2.2	Computer	R230,000
	Cash		R230,000
2.3	Cash	R14,000
	Service revenue		R14,000
2.4	Prepaid Insurance	$22,400
	Cash		$22,400
2.5	Cash	R2,000
	Accounts Receivable		R2,000
2.6	Cash	R15,000
	Rental revenue		R15,000
2.7	Cash	R17,500
	Accounts receivable		R17,500
2.8	Utilities expense (fuel)	R400
	Cash		R400
2.9	Drawings	R1,800
	Cash		R1,800
2.10	Cash	R101,150
	Service revenue		R101,150

Please feel free to ask any query regarding the solution. Give your valuable rating. Thank You!