Financial Accounting I – III
BBA | BBA-BI | BBA-TT | BCIS 1st
PU 2014 Fall Q. No. 18
Read the following given information below and answer the question that follows.
Dynamic Service Company (DSC) was organized on June 1, 2014, by two college students. The company will provide computer services to all business. On June 1, 2014 this company received contribution of Rs. 50,000 from each of the two principal of the new business in exchange for shares of stock. The following additional transactions occurred during the first month of operations.
June 4 The company paid Rs. 48,000 cash for a truck.
8 The company borrowed Rs. 10,000 from bank as a loan.
13 Cash received for repair services performed was Rs. 4,500.
18 Expenses for operating the business so far this month were paid in cash Rs. 400.
25 Repairs service performed for a customer who agree to pay within a month amounted to Rs. 5,400.
26 The company paid Rs. 4,065 on its loan from the bank, including Rs. 4,050 of principal and Rs. 15 or interest. (The principal is the amount of loan. Interest is an expense, which reduces retained earnings)
30 Miscellaneous expenses incurred in operating the business from 13 to date were Rs. 3,825 and were paid in cash.
a. Prepare journal entries on the books of DSC to record the transactions entered in during the month. 
b. Post each transactions in appropriate T accounts. 
c. Prepare a trial balance dated June 30, 2014. 
d. Using figure from the trial balance prepared in part (c); compute total assets, total liabilities and owner’s equity. 
a. Journal entries
In the book of Dynamic Service Company
Cash a/c Dr. Rs. (2*50,000) 1,00,000
Share capital a/c Rs. 1,00,000
(To record the capital contribution by the two owners)
Truck a/c Dr. Rs. 48,000
Cash a/c Rs. 48,000
(To record the purchase of truck on cash)
Cash a/c Dr. Rs. 10,000
Bank loan a/c Rs. 10,000
(To record the taken off a bank loan)
Cash a/c Dr. Rs. 4,500
Service revenue a/c 4,500
(To record the cash received from service provided)
Operating expenses a/c Dr. Rs.400
Cash a/c Rs. 400
(To record the payment for operating expenses)
Account receivable a/c Dr. Rs. 5,400
Service revenue a/c Rs. 5,400
(To record the service revenue earned but not yet received)
Bank loan a/c Dr Rs. 4,050
Interest expenses a/c Dr. 15
Cash a/c Rs. 4,065
(To record the payment of bank loan with interest)
Miscellaneous expenses a/c Dr. Rs. 3,825
Cash a/c Rs. 3,825
(To record the payment for miscellaneous expenses)
c. Trial Balance
Dynamic Service Company
June 30, 2014
|S.N.||Particulars||Dr. Rs.||Cr. Rs.|
|Cash a/c |
Share capital a/c
Bank loan a/c
Service revenue a/c
Operating expenses a/c
Account receivable a/c
Interest expenses a/c
Miscellaneous expenses a/c
|Total||Rs. 1,15,850||Rs. 1,15,85|
d. Balance sheet
As on June 30, 2014
Retained earnings (9,900-400-15-3,825)
Total liabilities and owner’s equity