AIOU 1339 Basics of Accounting Solved Assignment 1 Spring 2025
AIOU 1339 Assignment 1
Q1. Fill in the Blank.(20 Marks)
- The main objective of any business is to earn profit and expansion.
- All those economic activities other than business aimed to earn profit are called profession.
- Partnership is the voluntary association of more than one person who contributes money and talent to carry on a business.
- Corporation is a business unit that is legally separate from its owners.
- The investment of cash or other assets in the business by the owner is called capital.
- Economic event that can be objectively measured in terms of money is called transaction.
- Withdraw of cash or other assets from business by the owner for personal use is called drawings.
- Purchase is of two types: cash purchase and credit purchase.
- Trade Discount is not written in the books of accounts.
- Liabilities are the claims against the assets of the business.
- The written evidence of a transaction is called voucher/document.
Q2. Identify the correct and incorrect statements.(20 Marks)
1. Incorrect: In bookkeeping there is no importance of proper records.
Corrected: Proper records are of utmost importance in bookkeeping.
2. Incorrect: There is no relation between transaction and bookkeeping.
Corrected: Bookkeeping records all transactions systematically, indicating a direct relation.
3. Correct: Trading institutions can find out their profit or loss by bookkeeping.
4. Incorrect: Due to complexity manufacturing institutions can work without an accountant.
Corrected: Manufacturing institutions often require an accountant due to complexity.
5. Incorrect: Business institutions have no direction from the government to keep proper books of accounts.
Corrected: Business institutions are often directed by the government to maintain proper books of accounts.
6. Incorrect: Business does not mean all those activities aim to earn profit.
Corrected: Business refers to activities aimed at earning profit.
7. Correct: Medical practice is an occupation, not a business.
8. Incorrect: In partnership only a single person is the owner of the business.
Corrected: In partnership, more than one person contributes and shares ownership of the business.
9. Correct: A single organization is also called a sole proprietorship.
10. Correct: Payment of salaries to employees is also a transaction.
Q3. Mr. Hamza started his own business. He executed the following transaction in the first month of his business. April 2024(20 Marks)
| Date | Details | Assets (Cash, Furniture, Building, Bank, Inventory) | Liabilities | Owner's Equity |
|---|---|---|---|---|
| 01-Apr | Business started with cash, furniture, building | Cash Rs.250,000 + Furniture Rs.200,000 + Building Rs.800,000 = Rs.1,250,000 | Rs.0 | Rs.1,250,000 |
| 02-Apr | Opened bank account with Rs.80,000 cash | Bank Rs.80,000, Cash Rs.170,000 | Rs.0 | Rs.1,250,000 |
| 03-Apr | Office expenses paid (Rs.1,000) | Cash Rs.169,000 | Rs.0 | Rs.1,249,000 |
| 05-Apr | Stationery purchased (Rs.50) | Cash Rs.168,950 | Rs.0 | Rs.1,248,950 |
| 07-Apr | Goods purchased Rs.15,000 (cash Rs.5,000) | Inventory Rs.15,000, Cash Rs.163,950 | Rs.10,000 (credit purchase) | Rs.1,248,950 |
| 10-Apr | Cash withdrawn from bank for office use Rs.8,000 | Cash Rs.171,950, Bank Rs.72,000 | Rs.10,000 | Rs.1,248,950 |
| 13-Apr | Sold goods Rs.15,000, Carriage paid Rs.200 | Cash Rs.186,750 (increased by Rs.15,000 - Rs.200), Inventory reduces | Rs.10,000 | Rs.1,263,750 |
| 21-Apr | Cash received from Tanveer & Co Rs.2,000 | Cash Rs.188,750 | Rs.10,000 | Rs.1,265,750 |
| 24-Apr | Advertisement expense Rs.1,000 (cheque issued) | Bank Rs.71,000 | Rs.10,000 | Rs.1,264,750 |
| 28-Apr | Withdrawn Rs.8,000 for personal use (Drawings) | Bank Rs.63,000 | Rs.10,000 | Rs.1,256,750 |
| 31-Apr | Goods worth Rs.500 given as charity | Inventory reduces by Rs.500 | Rs.10,000 | Rs.1,256,250 |
Final Summary:
Assets (Cash + Bank + Furniture + Building + Inventory): Rs.1,266,950
Cash: Rs.188,750, Bank: Rs.63,000, Furniture: Rs.200,000, Building: Rs.800,000, Inventory: Rs.15,000 - Rs.500 (charity)
Liabilities: Rs.10,000 (due for goods purchased)
Owner's Equity: Rs.1,256,250
The equation balances: Assets (1,266,950) = Liabilities (10,000) + Owner's Equity (1,256,250).
Q4. Akber Ali informs you that the transactions occurred during May 2024, the first month of business operations.(20 Marks)
a) Prepare the General Journal
| Date | Account | Debit (Rs.) | Credit (Rs.) | Explanation |
|---|---|---|---|---|
| May 1 | Cash | 15,000 | Owner’s investment in business. | |
| May 1 | Equipment | 4,000 | Owner’s investment in business. | |
| Owner’s Equity | 19,000 | |||
| May 1 | Property | 39,000 | Acquired property. | |
| May 1 | Land | 20,000 | Acquired land. | |
| Cash | 5,000 | Paid in cash. | ||
| Notes Payable | 54,000 | Balance paid via note payable. | ||
| May 2 | Property Insurance Expense | 1,500 | Premium paid for May. | |
| Cash | 1,500 | |||
| May 3 | Supplies | 500 | Supplies purchased. | |
| Equipment | 6,000 | Equipment purchased. | ||
| Accounts Payable | 6,500 | Purchase on account. | ||
| May 15 | Cash | 5,600 | Professional services performed, cash received. | |
| Accounts Receivable | 2,430 | Billed to clients for services performed. | ||
| Service Revenue | 8,030 | |||
| May 16 | Accounts Payable | 1,800 | Paid creditors on account. | |
| Cash | 1,800 | |||
| May 20 | Accounts Payable | 240 | Returned portion of supplies. | |
| Supplies | 240 | |||
| May 22 | Cash | 1,880 | Cash received from clients on account. | |
| Accounts Receivable | 1,880 | |||
| May 31 | Utility Expense | 500 | Paid utility bill. | |
| Cash | 500 | |||
| May 31 | Salaries Expense | 3,000 | Paid monthly salaries. | |
| Cash | 3,000 | |||
| May 31 | Accounts Receivable | 4,900 | Services performed, payment due within 30 days. | |
| Service Revenue | 4,900 |
b) Ledger Accounts
| Cash Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 1 | Owner's Investment | 15,000 | 15,000 | |
| May 1 | Property Purchase (part) | 5,000 | 10,000 | |
| May 2 | Insurance Premium Paid | 1,500 | 8,500 | |
| May 15 | Service Revenue (Cash) | 5,600 | 14,100 | |
| May 16 | Payment to Creditors | 1,800 | 12,300 | |
| May 22 | Cash from Clients | 1,880 | 14,180 | |
| May 31 | Utility Payment | 500 | 13,680 | |
| May 31 | Salaries Paid | 3,000 | 10,680 |
| Equipment Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 1 | Owner's Investment | 4,000 | 4,000 | |
| May 3 | Equipment Purchase (on Account) | 6,000 | 10,000 |
| Property Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 1 | Property Purchase | 39,000 | 39,000 |
| Supplies Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 3 | Supplies Purchased | 500 | 500 | |
| May 20 | Supplies Returned | 240 | 260 |
| Accounts Payable Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 3 | Supplies/Equipment Purchased | 6,500 | 6,500 | |
| May 16 | Payment to Creditors | 1,800 | 4,700 | |
| May 20 | Supplies Returned | 240 | 4,460 |
| Accounts Receivable Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 15 | Services Billed to Clients | 2,430 | 2,430 | |
| May 22 | Cash Received from Clients | 1,880 | 550 | |
| May 31 | Additional Billing | 4,900 | 5,450 |
| Land Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 1 | Land Purchase | 20,000 | 20,000 | |
| Service Revenue Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 15 | Services Performed | 8,030 | 8,030 | |
| May 31 | Additional Services Billed | 4,900 | 12,930 | |
| Property Insurance Expense Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 2 | Premium Paid for May | 1,500 | 1,500 | |
| Utility Expense Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 31 | Paid Utility Bill | 500 | 500 | |
| Salaries Expense Ledger | ||||
|---|---|---|---|---|
| Date | Details | Debit (Rs.) | Credit (Rs.) | Balance (Rs.) |
| May 31 | Monthly Salaries Paid | 3,000 | 3,000 | |
c) Trial Balance
| Trial Balance as of May 31, 2024 | ||
|---|---|---|
| Account | Debit (Rs.) | Credit (Rs.) |
| Cash | 10,680 | |
| Equipment | 10,000 | |
| Property | 39,000 | |
| Land | 20,000 | |
| Supplies | 260 | |
| Accounts Receivable | 5,450 | |
| Property Insurance Expense | 1,500 | |
| Utility Expense | 500 | |
| Salaries Expense | 3,000 | |
| Accounts Payable | 4,460 | |
| Notes Payable | 54,000 | |
| Service Revenue | 12,930 | |
| Owner's Equity | 19,000 | |
| Total | 90,390 | 90,390 |
Q5. Define the journal and describe the subsidiary journal with examples of each journal.(20 Marks)
A journal in accounting, often called the "book of original entry," is where all financial transactions are first recorded. These entries are made in chronological order, detailing the date, accounts involved, amounts, and a brief description of the transaction.
Subsidiary Journals
Subsidiary journals are specialized journals designed to record specific types of transactions. These simplify the accounting process by categorizing entries, making it easier to locate and analyze financial information. Here are the main types, along with examples:
1. Sales Journal: Records credit sales of goods or services. Example: On April 1st, Company A sold merchandise on credit to Customer X for $4,000.
2. Purchases Journal: Documents credit purchases of goods or inventory. Example: On April 2nd, Company A purchased raw materials on credit from Supplier Y for $3,500.
3. Cash Receipts Journal: Tracks all cash inflows. Example: On April 3rd, Company A received $2,000 in cash from Customer Z.
4. Cash Payments Journal: Captures all cash outflows or payments. Example: On April 4th, Company A paid $1,200 in cash for office supplies.
5. General Journal: Used for transactions that don't fit into specialized journals, like adjustments or unique entries. Example: On April 5th, depreciation of equipment amounting to $500 was recorded.
These journals not only help organize financial records but also streamline the process of posting entries to the ledger, ensuring accuracy and efficiency in accounting practices.
No comments:
Post a Comment