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Botswana College of Distance & Open Learning

Diploma in Business Management

Principle of Accounting

Assignment: 1

Mmoniemang Motsele

Student No: 201006379


SECTION A

Question 1

a) C
b) B
c) B
d) B
e) D
f) A
g) A
h) D
i) C
j) C

Short answer questions

Accounting: The systematic recording, reporting, and analysis of financial transactions of a


business. Accounting allows a company to analyze the financial performance of the business, and
look at statistics such as net profit.

Accounting cycle: What Does Accounting Cycle Mean?


The name given to the collective process of recording and processing the accounting events of a
company. The series of steps begin when a transaction occurs and end with its inclusion in the
financial statements. The nine steps of the accounting cycle are:

1. Collecting and analyzing data from transactions and events.

2. Putting transactions into the general journal.

3. Posting entries to the general ledger.

4. Preparing an unadjusted trial balance.

5. Adjusting entries appropriately.

6. Preparing an adjusted trial balance.

7. Organizing the accounts into the financial statements.

8. Closing the books.

9. Preparing a post-closing trial balance to check the accounts

Final accounts: means statements which are finally prepared to show the profit earned or loss
suffered by the firm and financial state of affairs of the firm at the end of the period concerned.

For a manufacturing firm, the final accounts consist of :


(1) manufacturing account
(2) trading account,
(3) profit and loss account, and
(4) Profit and loss appropriation account. A trading firm's final accounts will include all of the
above except the manufacturing account. Together, these accounts generate the gross
profit, net income, and distribution of net income figures of the firm.

Books of original entry: The books of original entry are where transactions are first entered into
the system. From these books the entries are then transferred to the ledger accounts mentioned
above.
The main books of original entry are:

Sales Day Book this records the day to day sales invoices to customers and any Vat
amount

Sales Returns Day Book otherwise known as the Returns Inwards day book this
records any returns made by the customer to the business which will result in a credit note
being issued.

Purchase Day Book this records the day to day purchase invoices made by the
company from their suppliers including VAT amounts.

Purchase Returns Day Book otherwise known as the Returns Outwards Day Book. This
records any returns sent back to the suppliers also resulting in a credit note.

Cash Book this is used to record all bank and cash payments and receipts and is also a
main book of account within the ledgers as well as a book of original entry.

Petty cash book records all small cash payments recorded using the petty cash voucher.

Journals used to record transactions that are not covered in the books of original entry. It
is used to explain corrections or unusual entries that do not have documents to support
them.

Business entity concept: The business entity concept states that each business entity should
conduct its own separate accounting. Only assets, liabilities, and owner's equity specifically related
to a given business should be reported in the financial statements of that business.

Double entry bookkeeping: An accounting technique which records each transaction as both a
credit and a debit. Credit entries represent the sources of financing, and the debit entries represent
the uses of that financing. Since each credit has one or more corresponding debits (and vice versa),
the system of double entry bookkeeping always leads to a set of balanced ledger credit and debit
accounts. Selected entries from these ledger balances are then used to prepare the income
statement.

Realization concept: This concept states that revenue from any business transaction should be
included in the accounting records only when it is realized. The term realization means creation of
legal right to receive money. Selling goods is realization, receiving order is not.
Suspense account: A suspense account is an account in the general ledger in which amounts are
temporarily recorded. The suspense account is used because the proper account could not be
determined at the time that the transaction was recorded.

When the proper account is determined, the amount will be moved from the suspense account to
the proper account.

Prudence concept: prudence concept: Accounting concept that requires recording (recognizing)
the expenses and liabilities as soon as possible, but the revenues only when they are realized or
assured.

General ledger: A book of final entry summarizing all of a company's financial transactions, through
offsetting debit and credit accounts.
Section B

Question 1

Books of Victor

VICTORS
LEDGER ACCOUNTS FOR THE YEAR ENDED 31ST DECEMBER
2010

Capital Account

Date Details Amount Date Details Amount


Dec 31 Balance c/d 14 000 Dec 1 Bank 5 000
Vehicle 6 000
Furniture 3 000

14 000 14 000
14 000
1 Jan Balance b/d

Bank Account

Date Details Amount Date Details Amount


1 Dec Capital 5 000 1 Dec Rubing 820
4 Dec Shen 350 5 Dec Purchases 920
Yi & Co 250 9 Dec Typewriter 450
28 Dec Wages 400
28 Dec Rent 350
31 Dec Bal c/d 2 660
5 600 5 600
2 660
1 Jan Bal b/d

Vehicles Account

Date Details Amount Date Details Amount


1 Dec Bank 6 000 31 Dec Balance c/d 6 000
1 Jan Balance b/d 6 000

Rubing Account

Date Details Amount Date Details Amount


1 Dec Bank 820 1 Dec Bank 820

Simon Account

Date Details Amount Date Details Amount


1 Dec Balance c/d 2 280 1 Dec Balance c/f 2 280
Balance b/d 2 280

Purchases Account

Date Details Amount Date Details Amount


13 Dec Balance c/d 1 820 5 Dec Drawing 80
Bank 920 Balance c/d 2 660

2 740 2 740
1 Jan Balance b/d 2 660

Furniture Account

Date Details Amount Date Details Amount


1 Dec Capital 3 000 31 Dec Balance c/d 3 000
1 Jan Balance B/d 3 000

Shen Account

Date Details Amount Date Details Amount


1 Dec Balance b/f 700 4 Dec Bank 350
31 Dec Balance c/d 350

700 700
350
1 Jan Balance b/d

Rent Account

Date Details Amount Date Details Amount


28 Dec Bank 350 31 Dec Balance c/d 350
1 Jan Balance b/d 350

Cash Account

Date Details Amount Date Details Amount


30 Dec Yi & co 250 30 Dec Bank 250

James Account

Date Details Amount Date Details Amount


1 Dec Balance c/f 1 000 31 Dec Balance c/d 1 000
1 Jan Balance b/d 1 000

Typewriter Account

Date Details Amount Date Details Amount


9 Dec Bank 450 31 Dec Balance c/d 450
1 Jan Balance b/d 450

Jack Account

Date Details Amount Date Details Amount


13 Dec Balance 1 820 13 Dec Purchases 1 820
1 Jan Balance b/d 1 820

Sales Account

Date Details Amount Date Details Amount


31 Dec Balance c/d 1 135 15 Dec Yi & Co 560
18 Dec T Cherian 575

1 135 1 135
1 Jan Balance b/d 1 135

Yi & Co Account

Date Details Amount Date Details Amount


15 Dec Sales 560 30 Dec Cash 250
20 Dec Sales returns 50
31 Dec Balance c/d 260

560 560
1 Jan Balance b/d 260

T Cherian Account

Date Details Amount Date Details Amount


18 Dec Sales 575 31 Dec Balance c/d 575
1 Jan Balance b/d 575
Sales returns Account

Date Details Amount Date Details Amount


20 Dec Yi & Co 50 31 Dec Balance c/d 50
1 Jan Balance b/d 50

Drawings Account

Date Details Amount Date Details Amount


24 Dec Bank 80 31 Dec Balance c/d 80
1 Jan Balance b/d 80

Wages Account

Date Details Amount Date Details Amount


28 Dec Bank 400 31 Dec Balance c/d 400
1 jan Balance b/d 400

Victors
Trial Balance as at 31st December,2010

Dr Cr
P P
Sales 1135
Purchases 2660
Return inwards 50
Motor vehicle 6000
Furniture 3000
Creditors: Jack 1820
Simon 2280
Office Equipments 450
Debtors: T. Cherian 575
James 1000
Shen 350
Yi & Co. 260
Drawings 80
Wages 400
Rent 350
Bank 2660
Capital 14000
Total 19235 19235
V Malanses Trading and Profit and loss for the year ended 31st December, 2010

P P
Sales 127245
Less return inwards (3486)
123759
Less cost of goods sold
Opening Stock 7940
Add Purchases 61420
Less Return outwards (3156)
68004
(6805) 61199
Other Incomes
Discount Received 62
Gross Profit 62622

Less Operation Expenses


Depreciation: Fixtures and Fitting 190
Van 1400
Rent and Insurance 8870-600 8270
Carriage Outwards 3210
Wages and Salaries 39200+350 42700
0
General Office Expenses 319+16 335
Provision for doubtful debts 110
Discount allowed 2480 (58695)
Net Profit 3927
V Malases balance sheet as at 31st December, 2010

P P
Non Current Assets
Fixture and fitting (1900-190) 1710
Van 5600-1400 4200
5910

Current Assets
Stock 6805
Debtors 12418-740 11678
Cash 140
Prepayments 600
19223
Total Assets 25133

Equity and Liabilities


Capital 25200
Add Net Profit 3927
29127
Less Drawings (21400)
7727

Current Liabilities
Creditors 11400
Bank overdraft 2490
Accruals Rent 3500
Office Expense 16 17406
25133
References:

Wood, F. and Sangster A., 1999. Business Accounting 1 8th Ed.

Ainsworth, P. and Deines D., 2010 Introduction to Accounting 6th Ed.

www.opentuition.com: ACCA. Introduction to Financial Reporting