Question

This question is designed to test on the understanding of students in the recording of the business transactions using the double entry system under the book of prime entry format.

INSTRUCTIONS:

1.    Assuming you are planning to set up a sole trading business selling finished goods (name your product) to customers in your area (any area choose by the student is acceptable).

2.    Create possible business transactions between your business and supplier and also between your business and customers.

3.    The business transactions should include at least:

a.    4 credit transactions

b.    2 returns transactions

c.     4 cash transactions

d.    2 drawing transactions

e.    2 operating expenses transactions

f.      2 other revenues transactions

g.    Other transactions

4.    Your report should include the following informations:

a.    Introduce the business background (including capital contributed, name of the business, address, type of goods sold,etc)

b.    Accounting transactions

c.     Specialised journals

d.    Subsidiary ledgers account

e.    Trial Balance as at that date.

5.    Report format

b     Table of content

c.    Introduction

d.    Content

e      Conclusion  

  f  Bibliography or references

g    Appendix

Answer 1

Please find below the required answer for above question:

1.

Name of Business	Global Trading Company
Address of Business	Tower Plaza, Plot No.1, Sector-90, Vashi, Navi Mumbai - 400704. Maharashtra. INDIA
Name of Product	Laptop

2. & 3.

Journal Entries in the books of Global Trading Company
Entry No.	Particulars		Amt (in Rs.)	Amt (in Rs.)
1	Cash A/c	Dr.	250,000
	To Capital A/c			250,000
	[Being cash introduced by owner in business as an initial capital]
2	Purchases A/c	Dr.	80,000
	To Accounts Payable A/c			80,000
	[Being 4 laptops purchased costing Rs. 20,000 each on credit from the supplier]
3	Accounts Receivable A/c	Dr.	60,000
	To Sales A/c			60,000
	[Being 2 laptops costing Rs. 20,000 each sold on credit for Rs. 30,000 each to the customer]
4	Purchases A/c	Dr.	100,000
	To Accounts Payable A/c			100,000
	[Being 5 laptops purchased costing Rs. 20,000 each on credit from the supplier]
5	Accounts Receivable A/c	Dr.	108,000
	To Sales A/c			108,000
	[Being 4 laptops costing Rs. 20,000 each sold on credit for Rs. 27,000 each to the customer]
6	Accounts Payable A/c	Dr.	40,000
	To Purchase Returns A/c			40,000
	[Being 2 laptops purchased for Rs. 20,000 each vide entry no. 4 returned to supplier due to some defect in them]
7	Sales Returns A/c	Dr.	30,000
	To Accounts Receivable A/c			30,000
	[Being 1 laptop sold for Rs. 30,000 vide entry no. 3 returned by customer due to defect in it]
8	Office Equipment A/c	Dr.	10,000
	To Cash A/c			10,000
	[Being an asset purchased for cash]
9	Accounts Payable A/c	Dr.	80,000
	To Cash A/c			80,000
	[Being paid cash to supplier against 4 laptops purchased vide entry no. 2]
10	Cash A/c	Dr.	30,000
	To Accounts Receivable A/c			30,000
	[Being cash received from customer against 2 laptops to sold to them vide entry no. 3 after adjustment of 1 return laptop]
11	Cash A/c	Dr.	30,000
	To Sales A/c			30,000
	[Being 1 laptop costing Rs. 20,000 sold in cash for Rs. 30,000]
12	Drawings A/c	Dr.	1,000
	To Cash A/c			1,000
	[Being cash withdrawn from business for personal use]
13	Drawings A/c	Dr.	500
	To Cash A/c			500
	[Being cash withdrawn from business for personal use]
14	Office Rent A/c	Dr.	5,000
	To Accounts Payable A/c			5,000
	[Being office rent bill booked]
15	Salaries A/c	Dr.	15,000
	To Cash A/c			15,000
	[Being salaries paid in cash to office staff]
16	Cash A/c	Dr.	250
	To Interest Received A/c			250
	[Being interest received on company's fixed deposits]
17	Cash A/c	Dr.	11,000
	To Office Equipment A/c			10,000
	To Profit on sale of Office Equipment A/c			1,000
	[Being office equipment purchased vide entry no. 8 for Rs. 10,000 sold at a profit of Rs. 1,000]
18	Laptop Repairs A/c	Dr.	900
	To Cash A/c			900
	[Being faulty laptops got repaired by paying cash]

4.

a. I have started a trading properietory business named Global Trading Company loacted at Vashi, Navi Mumbai, Maharashtra, INDIA with an initial capital of Rs. 250,000 which involves purchase and selling of laptops.

b. As given in above journal entries

c. Specialised Journals are as follows:

Cash Receipts Journal
Date	Ref	Description	LF	Amount	Accounts Receivable	Cash Sales	Other
1	1	Capital		250,000			250,000
10	10	Accounts Receivable		30,000	30,000
11	11	Sales		30,000		30,000
16	16	Interest Received		250			250
17	17	Office Equipment		11,000			11,000
Total	321,250	30,000	30,000	261,250
Cash Payments Journal
Date	Ref	Description	LF	Amount	Accounts Payable	Cash Purchases	Other
8	8	Office Equipment		10,000			10,000
9	9	Accounts Payable		80,000	80,000
12	12	Drawings		1,000			1,000
13	13	Drawings		500			500
15	15	Salaries		15,000			15,000
18	18	Laptop Repairs		900			900
Total	107,400	80,000	0	27,400
Sales Journal
Date	Ref	Description	Invoice No.	Amount
3	3	Accounts Receivable	-	60,000
5	5	Accounts Receivable	-	108,000
Total transferred to Sales A/c	168,000
Purchase Journal
Date	Ref	Description	Invoice No.	Amount
2	2	Accounts Payable	-	80,000
4	4	Accounts Payable	-	100,000
Total transferred to Purchase A/c	180,000

d.

Subsidiary Ledger Accounts in the books of Global Trading Company
Cash A/c
1	To Capital A/c	250,000	8	By Office Equipment A/c	10,000
10	To Accounts Receivable A/c	30,000	9	By Accounts Payable A/c	80,000
11	To Sales A/c	30,000	12	By Drawings A/c	1,000
16	To Interest Received A/c	250	13	By Drawings A/c	500
17	To Office Equipment A/c	11,000	15	By Salaries A/c	15,000
			18	By Laptop Repairs A/c	900
				By Balance c/f	213,850
		321,250			321,250
Capital A/c
	To Balance c/f	250,000	1	By Cash A/c	250,000
		250,000			250,000
Purchases A/c
2	To Accounts Payable A/c	80,000		By Balance c/f	180,000
4	To Accounts Payable A/c	100,000
		180,000			180,000
Accounts Receivable A/c
3	To Sales A/c	60,000	7	By Sales Returns A/c	30,000
5	To Sales A/c	108,000	10	By Cash A/c	30,000
				By Balance c/f	108,000
		168,000			168,000
Accounts Payable A/c
6	To Purchase Returns A/c	40,000	2	By Purchases A/c	80,000
9	To Cash A/c	80,000	4	By Purchases A/c	100,000
	To Balance c/f	65,000	14	By Office Rent A/c	5,000
		185,000			185,000
Sales A/c
	To Balance c/f	198,000	3	By Accounts Receivable A/c	60,000
			5	By Accounts Receivable A/c	108,000
			11	By Cash A/c	30,000
		198,000			198,000
Purchase Returns A/c
	To Balance c/f	40,000	6	By Accounts Payable A/c	40,000
		40,000			40,000
Sales Returns A/c
7	To Accounts Receivable A/c	30,000		By Balance c/f	30,000
		30,000			30,000
Office Equipment A/c
8	To Cash A/c	10,000	17	By Cash A/c	10,000
		10,000			10,000
Drawings A/c
12	To Cash A/c	1,000		By Balance c/f	1,500
13	To Cash A/c	500
		1,500			1,500
Office Rent A/c
14	To Accounts Payable A/c	5,000		By Balance c/f	5,000
		5,000			5,000
Salaries A/c
15	To Cash A/c	15,000		By Balance c/f	15,000
		15,000			15,000
Interest Received A/c
	To Balane c/f	250	16	By Cash A/c	250
		250			250
Profit on sale of Equipment A/c
	To Balane c/f	1,000	17	By Cash A/c	1,000
		1,000			1,000
Laptop Repairs A/c
18	To Cash A/c	900		By Balance c/f	900
		900			900

e.

Trial Balance of Global Trading Company
Particulars	LF	Debit	Credit
Cash A/c		213,850
Capital A/c			250,000
Purchases A/c		180,000
Accounts Receivable A/c		108,000
Accounts Payable A/c			65,000
Sales A/c			198,000
Purchase Returns A/c			40,000
Sales Returns A/c		30,000
Drawings A/c		1,500
Office Rent A/c		5,000
Salaries A/c		15,000
Interest Received A/c			250
Profit on sale of Equipment A/c			1,000
Laptop Repairs A/c		900
Total	554,250	554,250