Professional Documents
Culture Documents
1b. Mr Jones started his business with his savings of $10,000 and a loan from the
bank. He bought the following items:
Computers: $5,000
Furniture: $7,000
Supplies: $3,000
After these purchases he had $6,000 cash at hand. How Much loan did he get from
the bank? Please use the accounting equation and show your calculations.
Answer:
Supplies: $3000
Total Assets is the sum of above amounts + Cash at hand after the purchases =
$6000
Weve to calculate the amount of loan Jones borrowed from bank which is a
LIABILITY
= $11000
2b. The information below is from the books of ABC Logistics Services for the year
ended December 31, 2015.
Fees: N50,000
Salaries: $18,000
Using this information, prepare the income statement of the company (include
appropriate headers, the correct layout and good formatting)
Answer:
The income statement represents the revenue and expenses of a company for a
period of time based on matching concept.The income statement consists of
revenues and expenses along with the resulting net income or loss over a period of
time due to earning activities
2b INCOME STATEMENT
Expenses
Transport Expenses $3,000
Lodging
Expenses $2,000
Salaries $18,000
Misc Expenses $4,000
Total
Expenses $27,000
Net Income $23,000
3a. What is a balance sheet? What are the components of a balance sheet?
Land: N75,000
Equipment: $15,000
Prepare the balance sheet (include appropriate headers, the correct layout and
good formatting)
Answer:
Liabilities are the debts owed by a business, often incurred to fund its operation.
e.g. Accounts Payable,Salaries Payable,Interest Payable
Owner's Equity is the residual interest in the assets of the company after
deducting all its liabilities.
Accounts
Cash $20,000 Payable $10,000
Loans
Land $75,000 Outstanding $50,000
Equipment $15,000
Accounts Owner's
Receivable $30,000 Equity
Owner's
Equity $80,000
Total Liabilities
& Owner's
Total Assets $140,000 Equity $140,000
Cash flow statement is a summary of the actual or anticipated inflow and outflows
of cash in an organization over an accounting period
Cash Flow From Investing Activities include the outflow of cash for long term
assets such as land, buildings, equipment, etc., and the inflows from the sale of
assets, businesses, securities, etc
Cash Flow From Finance Activities is the cash out flow to the entities investors
4d. What are the two factors that lead to failure in business ethics.
IGNORANCE: Tax law, regulations about insider trading and similar arcane rule
books are easily misunderstood, and inexperienced accountants or businesspeople
may engage in unethical behavior without even being aware of it