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The transact Softomation in March are as follows: On March 1, 2010, Suresh invests Rs 50,000 in cash. 50000 Balance Sheet March 1, 2010 Equity 50000 Cash 50000 Total 50000 50000 On March 2, Suresh takes a loan of Rs 20000 from Manish for Softomation 20000 Balance Sheet March 2, 2010 Equity 50000 Cash 70000 Creditors 20000 Total 70000 70000 On March 3, Softomation buys a computer costing Rs 58000 in cash 58000 Balance Sheet March 3, 2010 Equity 50000 Cash 12000 Creditors 20000 Equipment- Computer 58000 Total 70000 70000 On March 4, Softomation buys computer supplies for 6000 on credit. 6000 Balance Sheet March 4, 2010 Equity 50000 Cash 12000 Creditors 26000 Suppies 6000 Equipment- Computer 58000 Total 76000 76000 On March 19, Softomation receives Rs 12000 for providing softwore services. 12000 Balance Sheet March 19, 2010 Equity 62000 Cash 24000 Creditors 26000 Suppies 6000 Equipment- Computer 58000 Total 88000 88000 On March 21, Softomation pays Rs 2000 to the creditor for supplies. 2000 Balance Sheet March 21, 2010 Equity 62000 Cash 22000 Creditors 24000 Suppies 6000 Equipment- Computer 58000 Total 86000 86000 On March 29, Softomation pays employees salary Rs 4000, and office rent Rs 1200. 4000 Balance Sheet March 29, 2010 Equity 56800 Cash 16800 Creditors 24000 Suppies 6000
58000 80800
On March 30, Softomation provides software services worth Rs 8000 on credit 8000 to a retail store Balance Sheet March 30, 2010 64800 Cash 24000 Debtors Suppies Equipment- Computer 88800
Equity Creditors
Total
On March 31, Suresh withdraws Rs 3500 from business for personal use. 3500 Balance Sheet March 31, 2010 Equity 61300 Cash 13300 Creditors 24000 Debtors 8000 Suppies 6000 Equipment- Computer 58000 Total 85300 85300 The following is the summary of the Softomation transactions during March 2010 On March 1, 2010, Suresh invests Rs 50,000 in cash. 50000 On March 2, Suresh takes a loan of Rs 20000 from Manish for Softomation 20000 On March 3, Softomation buys a computer costing Rs 58000 in cash 58000 On March 4, Softomation buys computer supplies for 6000 on credit. 6000 On March 19, Softomation receives Rs 12000 for providing softwore services. 12000 On March 21, Softomation pays Rs 2000 to the creditor for supplies. 2000 On March 29, Softomation pays employees salary Rs 4000, and office rent Rs 1200. 4000 On March 30, Softomation provides software services worth Rs 8000 on credit to a retail store 8000 On March 31, Suresh withdraws Rs 3500 from business for personal use. 3500 Effects of Transaction on Accounting Equation Assets Cash 50000 50000 20000 70000 -58000 + + + + + + Debtors 0 0 0 0 0 + + + + + + Supplies 0 0 0 0 0
1200
Balance March 4 Balance March 19 Balance March 21 Balance March 29 Balance March 30 Balance March 31 Balance
12000 0 12000 12000 24000 -2000 22000 -5200 16800 0 16800 -3500 13300
+ + + + + + + + + + + + +
+ + + + + + + + + + + + +
Softomation Profit & Loss A/c for the month ended March 31, 2010 Particulars Revenues: Revenues from services Expenses: Salaries Expense Rent Expense Total Expenses Net Profit
Rs
Rs 20000
Softomation Balance Sheet as on March 31, 2010 Equity and Liabilities Equity: Capital Invested Add: Profit Less: Drawings Creditors Rs 50000 14800 64800 3500 Rs Assets Cash Debtors Suppies Equipment- Computer 61300 24000
Total
85300
Softomation Cash Flow Statement for the month ended March 31, 2010 Particulars Cash flow from operating activities Cash received from software services Cash paid to suppliers
Rs 12000 -2000
Salaries paid Rent paid Net cash provided by the operating activities Cash flow from investing activities Purchase of equipment Net cash used in investing activities Cash flow from financing activities activities Capital invested by Suresh Loan from Manish Drawings made by Suresh Net cash provided by financing activities Net increase in cash Add: Opening cash balance Closing cash balance
-4000 -1200
-58000
Illustration On Jan 1, 2010, Qualphoto Company was incorporated. The following transactions took place during the first month: 2010 Jan
1 2 5 7 13 18 22 27 31
The company issued 3,000 shares of Rs 10 each 3000 Bought supplies of photographic material on credit, Rs 9000. Bought photographic equipment for cash , Rs 12,000. 12000 Received fees for photographic services, Rs 15,000. 15000 Paid creditors for supplies Rs 5000. 5000 Took a loan for Rs 12000. 12000 Billed customer for services Rs 19000. 19000 Paid office rent Rs 2500, and clectricity charges Rs 1200. 2500 Paid dividend Rs 4000. 4000
10
Required 1 Analyze the effects of these transaction on the accounting equation. 2 Prepare profit and loss account for the month of January, balance sheet as on Jan 31, 2010 and cash flow statement for the month of Jan. Solution 1 Effect of transaction on accounting equation (amounts are in rupees) Assets Cash 30000 30000 0 30000 + + + + + Debtors 0 0 0 0 + + + + + Supplies 0 0 9000 9000
Jan 5 Balance Jan 7 Balance Jan 13 Balance Jan 18 Balance Jan 22 Balance Jan 27 Balance Jan 31 Balance
-12000 18000 15000 33000 -5000 28000 12000 40000 40000 -3700 36300 -4000 32300
+ + + + + + + + + + + + + +
+ + + + + + + + + + + + + +
Qualphoto Company Profit & Loss A/c for the month ended Jan 31, 2010 Particulars Revenue: Fees revenue Expenses: Rent Expense Electricity Expense Total Expenses Net Profit
Rs
Rs 34000
2500 1200 3700 30300 Qualphoto Company Balnce Sheet as on Jan 31, 2010 Rs Rs Assets 30000 Cash 30300 Debtors 60300 Supplies 4000 Equipment 56300 16000 72300 Cash Flow Statement for the month ended Jan 31, 2010
Particulars Cash flow from operating activities Cash received from fees Cash paid to suppliers Rent paid Electricity charges paid Net cash provided by the operating activities Cash flow from investing activities Purchase of equipment Net cash used in investing activities
-12000
Cash flow from financing activities activities Proceeds from issue of shares Loan taken Dividend paid Net cash provided by financing activities Net increase in cash Add: Opening cash balance Closing cash balance
Page-55 Problem 1C.5 Cash 7000 -5000 2000 15000 17000 -1000 16000 -800 15200 400 15600 -200 15400 15400 -1000 14400 -300 14100 -9000 5100 -4000 1100 Assets = DebtorsOffice Supplies DVDs 1000 500 42000 5000 1000 500 47000 1000 1000 1000 -400 600 600 600 600 600 600 600 500 500 500 500 200 700 700 700 700 700 700 47000 47000 47000 47000 47000 2000 49000 49000 49000 49000 49000
2010, Nov. 1 a Bal b Bal c Bal d Bal e Bal f Bal g Bal h Bal i Bal j Bal k Bal
Profit & Loss A/c for the month ended Nov. 30 Revenues: DVD hire charges Expenses: Store rent 1000 Salary 800 Telephone charge 300 Net Profit
15000
2100 12900
Balance Sheet as on Nov. 30 Rs Assets 20000 DVDs 30400 Office Supplies 50400 Debtors 1000 Cash 51400
Cash Flow Statement for the month ended on Nov. 30 Cash flows from operating activities: DVD hire charges received Received from customers Store rent paid Salary paid Paid to suppliers Telephone charges paid Paid to creditors Net cash provided by operating activities Cash flows from investing activities: DVD purchased Payment made to supplier of DVD Net cash used by investing activities Cash flows from financing activities: Dividend paid Net cash uses by financing activities Net decrease in cash Add: Opening cash balance Closing cash balance
15000 400 -1000 -800 -200 -300 -9000 4100 -5000 -1000 -6000 -4000 -4000 -5900 7000 1100
Business Decision Case Cash Owners' contributio n Bal Loan taken Bal Deposit to landlord Bal Customer billed Bal Recd. Ser Rev. Bal Rec. from customers Assets DebtorsOffice SuppliesDeposit Prepaid Expenses
0 0
0 0
0 0
-40000 10000
40000 40000
0 0
40000 40000
11300
-11300
Bal Paid for office supplies Bal Unearned rev. Bal Int. recd. Bal Prepaid exp. Bal Exp. Incurred Bal Salary paid Bal
27100
14400
40000
-1200 25900 3000 28900 320 29220 -10000 19220 19220 -6000 13220
Profit & Loss A/c for the month ended Nov. 30 Revenues: Service revenue Interest revenue Expenses: Computer rental and database fees Salary Net Profit
Liabilities & Equity Share Capital Retained Profit Creditors Unearned Revenue Total
Balance Sheet as on Nov. 30 Rs Assets 40000 Deposit 15820 Office Supplies 55820 Debtors 10000 Cash 3000 68820
Cash Flow Statement for the month ended on Nov. 30 Cash flows from operating activities: Cash received from service revenue 5800 Received from customers 14300 Computer rent, database fees and salary paid -10000 Salary paid -6000 Paid to suppliers -1200 Interest received 320 Net cash provided by operating activities Cash flows from investing activities: Security deposit -40000 Net cash used by investing activities Cash flows from financing activities: Proceed from issue of shares 40000 Loan taken 10000 Net cash provided by financing activities
3220
-40000
50000
Net decrease in cash 13220 Add: Opening cash balance 0 Closing cash balance 13220 Problem Terrafiles Limited was incorporated on May 1, 2012. The company engaged in the following transactions during May. 1-May 2-May 3-May 4-May 5-May 15-May 18-May 23-May 28-May 29-May 30-May 3,000 shares @Rs. 10 each were issued. Hired a computer on monthly rent of Rs. 4,000. Paid two month's office rent in advance Rs. 1,000. Bough a computer on credit Rs. 6,000. Ordered supplies Rs. 800. Billed customers for services provided Rs. 18,300. Paid electricity bill for the month Rs. 260. Received cash from a customer for services to be provided later, Rs. 9,800. Received the supplies ordered on May 5. Paid computer rent for May. Paid salaries for May, Rs. 3,500.
Required: 1. Prepare journal entries. 2. Post the journal entries to ledger. 3. Prepare a trial balance as on May 31, 2012. The company engaged in the following transactions in June. Received from customer billed on May 15, Rs. 14,700. Returned defective supplies received on May 28, Rs. 240. Paid for computer bought on credit on May 4, Rs. 6,000. Received cash for services provided, Rs. 2,300. Paid for supplies bought on May 28 less return on June 2. Paid telephone bill for June, Rs. 840. Provided services for Rs. 9,200 to the customer who had paid in advance on May 23 and refunded the balance. Paid electricity bill for June, Rs. 310. Paid salaries for June, Rs. 3,500. Paid computer rental for June. Paid dividend Rs. 1,200.
June-1 June-2 June-6 June-10 June-13 June-18 June-20 June-27 June-28 June-29 June-30
Required: 1. Prepare journal entries. 2. Post the journal entries to ledger. 3. Prepare a trial balance as on June 30, 2012. Jounal Entries Date Particulars May-1 Cash a/c Dr To Share Capital a/c 2 3 No entry Prepaid Office Rent Expense a/c To Cash a/c Equipment a/c To Creditors a/c Dr
LF
Dr (Rs) 30000
1000
Dr
6000
5 15
No entry Debtors a/c To Service Revenue a/c Electricity Expense a/c To Cash a/c Cash a/c To Unearned Revenue a/c Supplies a/c To Creditors a/c Computer Rental Expense a/c To Cash a/c Salaries Expense a/c To Cash a/c Cash a/c To Debtors a/c Creditors a/c To Supplies a/c Creditors a/c To Cash a/c Cash a/c To Service Revenue a/c Creditors a/c To Cash a/c Telephone Expense a/c To Cash a/c Unearned Revenue a/c To Service Revenue a/c To Cash a/c Electricity Expense a/c To Cash a/c Salaries Expense a/c To Cash a/c Computer Rental Expense a/c To Cash a/c Dr Dr 18300
18
Dr
260
23
Dr
9800
28
Dr
800
29
Dr
4000
30
3500
June-1
14700
Dr
240
Dr
6000
10
Dr
2300
13
Dr
560
18
Dr
840
20
Dr
9800
27
Dr
310
28
Dr
3500
29
Dr
4000
30
Dr
1200
JF
Ledger Cash a/c Amount (Rs) Date 30000 May-03 9800 May-18 May-20 May-30 May-31 39800 31040 Jun-06 14700 Jun-13 2300 Jun-18 Jun-20 Jun-27 Jun-28 Jun-29 Jun-30 Jun-30 48040 31030 Share Capital a/c Amount (Rs) Date 30000 May-01 30000 30000 Jun-01 30000 Jul-01
Particulars By Prepaid Office Rent Expense a/c By Electricity Expense a/c By Computer Rental Expense a/c By Salaries Expense a/c By Balance c/d By Creditors a/c By Creditors a/c By Telephone Expense a/c By Unearned Revenue a/c By Electricity Expense a/c By Salaries Expense a/c By Computer Rental Expense a/c By Dividend a/c By Balance c/d
JF
Prepaid Office Rent Expense a/c Amount (Rs) Date Particulars 1000 May-31 By Balance c/d 1000 1000 Jun-30 By Balance c/d 1000 1000 Equipment a/c Amount (Rs) Date Particulars 6000 May-31 By Balance c/d 6000 6000 Jun-30 By Balance c/d 6000 6000 Creditors a/c Amount (Rs) Date Particulars May-04 By Equipment a/c
JF
Particulars
JF
6800 May-28 By Supplies a/c 6800 240 Jun-01 To Balnce b/d 6000 560 6800 Debtors a/c Amount (Rs) Date 18300 May-31 18300 18300 Jun-01 Jun-30 18300 3600 Service Revenue a/c Amount (Rs) Date 18300 May-15 18300 Jun-01 Jun-10 29800 Jun-20 29800 Jul-01
JF
To Balnce b/d
JF
Particulars By Debtors a/c By Balnce b/d By Cash a/c Unearned Revenue a/c By Balnce b/d
Jun-30
To Balnce c/d
JF
Electricity Expense a/c Amount (Rs) Date Particulars 260 May-31 By Balance c/d 260 260 310 Jun-30 By Balance c/d 570 570 Unearned Revenue a/c Amount (Rs) Date Particulars 9800 May-23 By Cash a/c 9800 9200 Jun-01 To Balnce b/d 600 9800 Supplies a/c Amount (Rs) Date 800 May-31 800 800 Jun-02 Jun-30 800
JF
JF
Jul-01 Dr Date May-20 Jun-01 Jun-29 Jul-01 Dr Date May-30 Jun-01 Jun-28 Jul-01 Dr Date Jun-18 Jul-01 Dr Date Jun-30 Jul-01
To Balnce b/d
560 Computer Rental Expense a/c Amount (Rs) Date Particulars 4000 May-31 By Balance c/d 4000 4000 4000 Jun-30 By Balance c/d 8000 8000 Salaries Expense a/c Amount (Rs) Date Particulars 3500 May-31 By Balance c/d 3500 3500 Jun-30 By Balance c/d 3500 7000 7000 Telephone Expense a/c Amount (Rs) Date Particulars 840 Jun-30 By Balance c/d 840 840 Dividend a/c Amount (Rs) Date Particulars 1200 Jun-30 By Balance c/d 1200 1200
JF
JF
JF
JF
Trial Balance as on May 31, 2010 Particulars LF Dr (Rs) Cr (Rs) Cash a/c 31040 Share Capital a/c 30000 Prepaid Office Rent Exp. a/c 1000 Equipment a/c 6000 Creditors a/c 6800 Debtors a/c 18300 Service Revenue a/c 18300 Electricity Expense a/c 260 Unearned Revenue a/c 9800 Supplies a/c 800 Computer Rental Exp. a/c 4000 Salaries Expense a/c 3500 64900 64900
Particulars
Cash a/c Share Capital a/c Prepaid Office Rent Exp. a/c Equipment a/c Debtors a/c Service Revenue a/c Electricity Expense a/c Supplies a/c Computer Rental Exp. a/c Salaries Expense a/c Telephone Expense a/c Dividend a/c
31030 30000 1000 6000 3600 29800 570 560 8000 7000 840 1200 59800
59800
Asset Source
Asset Exchange
Asset Source
Asset Source
Asset Use
Asset Source
Asset Use
+ + + + + + + + + + + + +
= = = = = = = = = = = = =
+ + + + + + + + + + + + +
50000 0 50000 12000 62000 0 62000 -5200 56800 8000 64800 -3500 61300
85300
Rs
4800
-58000
9000
1200
+ + + + + + + + + + + + + +
= = = = = = = = = = = = = =
+ + + + + + + + + + + + + +
0 30000 15000 45000 0 45000 0 45000 19000 64000 -3700 60300 -4000 56300
72300
Rs
6300
-12000
Liabilities Creditors 9000 9000 9000 9000 9000 9000 9000 2000 11000 -1000 10000 10000 -9000 1000 1000
+ Equity Share Capital Retained Profit 20000 21500 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 21500 15000 36500 -1000 35500 -800 34700 34700
Profit & Loss A/c Cash Flow Statement Revenue Expense Operating Investing Financing -5000 15000 1000 800 15000 -1000 -800 400 -200
34700 34700 -1000 34700 -300 34400 34400 -4000 30400 300 -300 -9000 -4000 -4000
15000
2100
4100
-6000
= Liabilities + Equity Profit & Loss A/c Cash Flow Statement Creditors Unearned Revenue Share Capital Retained Profit Revenue Expense Operating Investing Financing
0 10000 10000
40000 0 0 0 0 10000
-40000 10000 40000 0 25700 25700 5800 31500 25700 5800 5800
10000 10000
40000 40000
11300
10000
40000
31500
0 10000 10000 10000 10000 10000 10000 3000 3000 3000 3000 3000 3000
-1200 40000 40000 40000 40000 40000 40000 31500 3000 31500 320 31820 31820 -10000 21820 -6000 15820 320 320 -10000 10000 6000 16000 -6000 3220 0
31820
-40000
50000
Cr
(Rs) 30000
1000
6000
18300
260
9800
800
4000
3500
14700
240
6000
2300
560
840
9200 600
310
3500
4000
1200
JF
Cr Amount (Rs) 1000 260 4000 3500 31040 39800 6000 560 840 600 310 3500 4000 1200 31030 48040 Cr Amount (Rs) 30000 30000 30000 30000 30000 Cr Amount (Rs) 1000 1000 1000 1000
JF
JF
JF
JF
JF
JF
JF
JF
Cr Amount (Rs) 9800 9800 9800 9800 Cr Amount (Rs) 800 800 240 560 800
JF
JF
JF
JF
JF
The following is the summary of the Softomation transactions during March 2010 On March 1, 2010, Suresh invests Rs 50,000 in cash. 50000 On March 2, Suresh takes a loan of Rs 20000 from Manish for Softomation 20000 On March 3, Softomation buys a computer costing Rs 58000 in cash 58000 On March 4, Softomation buys computer supplies for 6000 on credit. 6000 On March 19, Softomation receives Rs 12000 for providing softwore services. 12000 On March 21, Softomation pays Rs 2000 to the creditor for supplies. 2000 On March 29, Softomation pays employees salary Rs 4000, and office rent Rs 1200. 4000 1200 On March 30, Softomation provides software services worth Rs 8000 on credit to a retail store 8000 On March 31, Suresh withdraws Rs 3500 from business for personal use. 3500 Jounalise the above transactions. Journal Entries Date Particulars 1/3/2010 Cash A/C To Capital A/C (Being business started with cash) 2/3/2010 Cash A/C To Creditors A/C (Being loan taken) 3/3/2010 Equipment A/C To Cash A/C (Being computer purchased) 4/3/2010 Supplies A/C To Creditors A/C (Being supplies purchased on credit 19/3/2010 Cash A/C To Services Revenue (Being services provided) 21/3/2010 Creditors A/C To Cash A/C (Being cash paid to the creditors for supplies) 29/3/2010 Salaries Expense A/C Rent Expense A/C To Cash A/C (Being salary and rent paid) 30/3/2010 Debtors A/C To Services Revenue (Being services provided on credit) 31/3/2010 Drawings A/C To Cash A/C (Being cash drawn from business for personal use)
Dr
Dr (Rs) 50000
Cr (Rs) 50000
20000 20000 Dr 58000 58000 Dr 6000 6000 Dr 12000 12000 Dr 2000 2000 Dr Dr 4000 1200 5200 Dr 8000 8000 Dr 3500 3500
Ledger Posting Dr Date 1/3/2010 2/3/2010 19/3/2010 Cash A/C Date 3/3/2010 21/3/2010 29/3/2010 29/3/2010 31/3/2010
Particulars J. F By Equipment A/C By Creditors A/C By Salaries Exp. A/C By Rent Exp. A/C By Drawings A/C
31/3/2010 By Balance c/d 1/4/2010 To Balance b/d Dr Date Particulars 31/3/2010 To Balance c/d 82000 13300 Capital A/C Amount (Rs) Date Particulars 50000 1/3/2010 By Cash A/C
J. F
J. F
50000 1/4/2010 By Balance b/d Dr Date Particulars 21/3/2010 To Cash A/C 31/3/2010 To Balance c/d Creditors A/C Amount (Rs) Date Particulars 2000 2/3/2010 By Cash A/C 24000 4/3/2010 By Supplies A/C
J. F
J. F
26000 1/4/2010 By Balance b/d Dr Date Particulars 3/3/2010 To Cash A/C Equipment A/C Amount (Rs) Date Particulars 58000 31/3/2010 By Balance c/d
J. F
J. F
58000 58000 Supplies A/C Amount (Rs) Date Particulars 6000 31/3/2010 By Balance c/d
J. F
J. F
6000 6000 Services Revenue A/C Amount (Rs) Date Particulars 20000 19/3/2010 By Cash A/C 30/3/2010 By Debtors A/C
J. F
J. F
20000 1/4/2010 By Balance b/d Dr Date Particulars 29/3/2010 To Cash A/C Salaries Expense A/C Amount (Rs) Date Particulars 4000 31/3/2010 By Balance c/d
J. F
J. F
4000 4000
J. F
Rent Expense A/C Amount (Rs) Date Particulars 1200 31/3/2010 By Balance c/d
J. F
1200 1200 Debtors A/C Amount (Rs) Date Particulars 8000 31/3/2010 By Balance c/d
J. F
J. F
8000 8000 Drawings A/C Amount (Rs) Date Particulars 3500 31/3/2010 By Balance c/d
J. F
J. F
3500 3500
Trial Balance as at 31/3/2010 Particulars Dr (Rs) Cr (Rs) Cash A/C 13300 Capital A/C 50000 Creditors A/C 24000 Equipment A/C 58000 Supplies A/C 6000 Services Revenue A/C 20000
Salaries Expense A/C Rent Expense A/C Debtors A/C Drawings A/C
13300 82000
58000
6000
4000
1200
8000
3500