Question

Question 1: Hashem started a business that offers legal services on 1 December 2019. The following are transactions occurred during the month of December 2019: 1. Hashem brought in RM50,000 cash and office equipments worth RM12,000 into the business. 2. Bought a car for his own use worth RM112,000 by paying cash (company’s money) of RM12,000 and signing a note payable for the balance. 3. Provided legal services to a client worth RM7,000 and received cash of RM3,000 from the client. 4. Purchased office supplies worth RM2,000 cash. 5. Paid RM700 cash for advertising expenses for the months of December 2019. 6. Sent a bill totaling RM5,000 to a client for the legal service provided and yet to receive payment. 7. Received RM3,000 cash as an agreement to start work as a legal advisor for a company starting February 2020. 8. Paid RM3,600 cash for employees’ salary. 9. Paid RM2,400 cash for December office rental. 10. As at 31 December 2019, the office supplies used is RM400. Based on the above information, you are required to:

a) Show the effects of all the above transactions in the accounting equation.

b) Prepare the journal entries to record all transactions.

Answer 1

(a) effect on Accounting Equation

1. This transaction will increase share holders Equity by 62000 and increase assets by 62000

2. Drawings will be there on 112000 which will cause a Decrease in Shareholders' Equity and Decrease in Asstes by 12000 and Increase in Liability by 100000

3. this transaction will increase the revanue which will result in Increase of share holder's we Equity by 7000 and Increase cash by 3000 and 4000 increase in accounts receivable both combined will result in 10000 increase in assets also.

4. Decrease cash by 2000 and Decrease in share holder's Equity by 2000 due to increase in expences.

5. Decrease in Cash 700 and same amount of decrease in share holder's Equity due to increase in expences.

6. Increase in Accounts receivable which will cause increase in assets and increase in revanue cause increase in share holder's Equity.

7. Increase in cash by 3000 and at the same time Increase Increase in liability by 3000 due to unearned revanue.

8. Decrease in cash by 3600 and Decrease in shareholders' Equity by 3600 due to raise in expences.

9. Decrease in cash by 2400 and Decrease in share holder's Equity by the same amount.

10. Increase in inventory by 600 which will result in Increase in Asset and increase in share holder's Equity by same amount.

(b)

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