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Financial Accounting I – III
BBA | BBA-BI | BBA-TT | BCIS 1st
PU 2104 Spring Old Q. No. 2
The following transactions are entered in to by Auto Workshop during the first month of its operations:
Jan 1: Articles of incorporation are filed with the state, and 30,000 shares of capital stock are issued. Cash of Rs. 60,000 is received from the new owners for the share.
Jan 2: A six-year promissory note is signed at the local bank. The cash received from the bank is Rs. 2,20,000.
Jan 3: An existing workshop is purchased for Rs. 1,50,000 in cash. The values assigned to the land, building, and equipment are Rs. 25,000, Rs. 75,000 and Rs. 50,000 respectively.
Jan 4: Office supplies are purchased on account for Rs. 2,500 from a distributor. Cash will be paid in next month.
Jan 5: During the first month, Rs. 1,500 is paid to the distributor of the office supplies. The remaining Rs. 1,000 will be paid next month.
Jan 16: Service revenue receipt from workshop during the first month of operations amount to Rs. 7,000.
Jan 25: Wages and salaries paid in the first month amount to Rs. 2,000.
Jan 29: The utility bill of Rs. 800 is paid.
Jan 30: A total Rs. 1,000 in dividends is paid the owners.
Required:
a. Pass necessary journal entries for the above – mentioned transactions. [5]
b. T – Accounts [5]
c. Trial Balance [5]
Solution to this question:
a. Journal Entries
In the book of Auto Workshop
Jan 1
Cash a/c Dr. Rs. 60,000
Share capital a/c Rs. 60,000
(To record the issuance of shares and paid up)
Jan 2
Cash a/c Dr. Rs. 2,20,000
Notes payable a/c Rs. 2,20,000
(To record the issuance of six-year promissory note)
Jan 3
Land a/c Dr. Rs. 25,000
Building a/c Dr. 75,000
Equipment a/c Dr. 50,000
Cash a/c Rs. 1,50,000
(To record the purchase of workshop on cash)
Office supplies a/c Dr. Rs. 2,500
Account payable a/c Rs. 2,500
(To record the purchase of office supplies on account)
Jan 5
Account payable a/c Dr. Rs. 1,500
Cash a/c Rs. 1,500
(To record the partial payment for office supplies)
Jan 16
Cash a/c Dr. Rs. 7,000
Service revenue a/c Rs. 7,000
(To record the revenue received from workshop)
Wages & salaries expenses a/c Dr. Rs. 2,000
Cash a/c Rs. 2,000
(To record the payment of salary and wages)
Utility expenses a/c Dr. Rs. 800
Cash a/c Rs. 800
(To record the payment of utility bill)
Dividends expense a/c Dr. Rs. 1,000
Cash a/c Rs. 1,000
(To record the payment of dividends)
b. T-accounts
c. Trial Balance
Auto Workshop
| S.N. | Particulars | Dr. Rs. | Cr. Rs. |
| 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. | Cash a/c Share capital a/c Notes payable a/c Land a/c Building a/c Equipment a/c Office supplies a/c Account payable a/c Service revenue a/c Wages & salaries a/c Utility expenses a/c Dividends expense a/c | 1,31,700 25,000 75,000 50,000 2,500 2,000 800 1,000 | 60,000 2,20,000 1,000 7,000 |
| Total | Rs. 2,88,000 | Rs. 2,88,000 |
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