This is the complete question given to solve by the school. There is no extra information I
Question:
This is the complete question given to solve by the school. There is no extra information I can add to. However I'm stuck with question B.
Demonstrate how each of the following transactions will affect the accounting equation (Assets = Capital + Liabilities). Your answer should include a summary total for each of Assets, Capital and Liabilities at the end of the week.
- i.On 1 April, Jing started a business selling personalised jumpers and put 20,000 of his savings into a business bank account.
- ii.On 2 April, Jing bought equipment for long-term use in the business for 5,000, paying by cheque from the business bank account.
- iii.On 3 April, Jing bought supplies of jumpers for resale costing 2,500, paying by cheque from the business bank account.
- iv.On 3 April, Jing paid 1,500 for a sewing machine, paying by cheque from the business bank account.
- v.On 6 April, Jing bought, on credit, fabric for resale, costing 1,500.
- vi.On 7 April, Jing took 150 from the business bank account for a personal expense.
Transactions | Effect on A = C + L | ||
Week 1 | Assets = | Capital + | Liabilities |
1 | |||
2 | |||
3 | |||
4 | |||
Summary (overall effect) |
B. During the second week of business, the following transactions took place:
- On 8 April, Jing paid by cheque a half of the money owing on her payables account.
- On 11 April, Jing paid by cheque 1,200 for four weeks' rent for her business premises.
- On 11 April, Jing paid by cheque 300 for two weeks' insurance from the business bank account.
- By the end of the day on the 14 April (i.e. after two weeks of trade), Jing had made sales for 6,000. Fifty percent of sales had been on cash and the rest on credit. Jingfei had sold half of her inventory after these two weeks of trade.
Using the new template below, demonstrate how the transactions in the second week will affect the expanded accounting equation (Assets = Capital + (Income - Cost of Sales - Expenses) + Liabilities. As for part (a) above, each entry for each transaction should show the relevant amount as well as the relevant account. Your answer should include a summary total for each of the Assets, Capital, and Liabilities at the beginning of the second week, that is, from your answer to part (a), as well as at the end of the same week. Please include the balance from week 1.
Transactions Week 2 | Effect on A = (C + (I - C of S - E)) + L | ||
---|---|---|---|
Assets = | (Capital + (Income - Cost of Sales - Expenses)) | Liabilities | |
Balance from Week1 | |||
1 | |||
2 | |||
3 | |||
4 | |||
Summary (overall effect) |
c. Using the information completed in the column (Capital + (Income - Cost of Sales - Expenses)) in (b), calculate (i) gross profit and (ii) net profit made by Jing's business in its first two weeks of trading. You do not need to provide an income statement. (Ignore any depreciation expense.)
d. Based on your answers to (a)-(c) above, prepare the balance sheet for Jing's personalised jumper business at 14 April.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill