Answer To The Question No. 1 (A) General Journal
Answer To The Question No. 1 (A) General Journal
Answer To The Question No. 1 (A) General Journal
1
(a)
General Journal
J1
Date Accounts Title and Explanation Ref Debit Credit
(b)
General Ledger
Cash
Date Explanation Ref Debit Credit Balance
Capital
Date Explanation Ref Debit Credit Balance
Prepaid Rent
Date Explanation Ref Debit Credit Balance
Equipment
Date Explanation Ref Debit Credit Balance
Notes Payable
Date Explanation Ref Debit Credit Balance
Office Supplies
Date Explanation Ref Debit Credit Balance
Accounts Payable
Date Explanation Ref Debit Credit Balance
Service Revenue
Date Explanation Ref Debit Credit Balance
Advertising Expense
Date Explanation Ref Debit Credit Balance
Utilities Expense
Date Explanation Ref Debit Credit Balance
Miscellaneous Expense
Date Explanation Ref Debit Credit Balance
Accounts Receivable
Date Explanation Ref Debit Credit Balance
(c)
Anna Car Repairing Shop
Trial Balance
January 31, 2018
Cash $20,530
Equipment $80,000
Capital $1,00,000
$2,15,764 $2,15,764
_________ _________
_________ _________
Service Revenue:
Assets:
Current Assets:
Cash $20,530
Accounts Receivable $5,900
Prepaid Rent $36,000
Office Supplies $22,800
_______
Total current asset $85,230
Fixed Asset:
Equipment $80,000
________
Total Assets $1,65,230
Owner’s Equity:
Beginning capital $1,00,000
Add: Net Income $32,066
_________
Closing capital $1,32,066
__________
Total liabilities & owner’s equity $1,65,230
_________
_________
The cost principle is an accounting concept that requires the numbers on the financial
statements be based on actual expenses from business transactions incurred during the
period.
b) Economic Entity Assumption:
An assumption that requires that the activities of the entity be kept separate and distinct from
the activities of its owner and all other economic entities.
c) Monetary Unit Assumption:
An assumption stating that companies include in the accounting records only transaction data
that can be expressed in terms of money.
d) Going Concern:
An accounting principle that requires companies to be accounted for as if they will continue
operating into the future is known as going concern.
e) Periodicity:
Periodicity means that accountants will assume that a company's complex and ongoing
activities can be divided up and reported in annual, quarterly and monthly financial
statements.
f) Revenue Recognition Principle:
The matching concept represents the primary differences between accrual accounting and
cash basis accounting. "Matching" means that firms report revenues and the expenses that
brought them in the same period.
h) Accrual Basis of Accounting:
The accrual basis of accounting is a system of recognizing revenues and expenses when they
are incurred instead of focusing on when they are paid or collected.
i) Dual Aspect of Accounting:
The dual aspect concept states that every business transaction requires recordation in two
different accounts. This concept is the basis of double entry accounting, which is required by
all accounting frameworks in order to produce reliable financial statements.
(a)
Baker Corporation
Cash Flow Statement
For the year ended December 31, 2015
Current assets
(i) Current ratio=
Current liabilities
Cash + accounts receivable + inventory
=
Accounts payable + notes payable + accrued expenses
$40,000+$320,000+$460,000
=
$390,000+$110,000+$20,000
$820,000
=
$520,000
= 1.57:1
Significance: Measures a company’s ability to pay short term obligations or those due within
one year. It tells investors how a company can maximize the current assets to satisfy its current
debt and other payable.
$40,000+$0+$320,000
=
$520,000
$360,000
=
$520,000
= 0.692:1
$2,200,000
=
$335,000
= 6.567 times
Significance: It’s important because it measures how many times a business can collect its
average account receivable during the year.
Net income
(iv) Profit Margin =
Net sales
$106,000
=
$2,200,000
= 4.8%
Net sales
(v)Asset turnover =
Average total assets
$2,200,000
=
($1,110,000+$1,200,000)/2
$2,200,000
=
$1,155,000
=1.90 times
Net income
(vi)Return on asset=
Average total assets
$106,000
=
$1,155,000
= 9.17%
Net income
(Vii)Return on common stock holder’s equity=
Average common stock holders’ Equity
$106,000
=
$100,000+$150,000+ { ($ 80,000+ $ 1,10,000)/2 }
$106,000
=
$100,000+$150,000+$95,000
$106,000
=
$345,000
= 30.72%
Debt
(viii) Debt to Asset=
Total asset
$320,000
=
$1,200,00
= 26.67%
(ix) Income before income taxes & interest expenses
Times interest earned ratio=
Interest expense
$180,000
=
$29,000
= 6.21 times