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.
a. Pass necessary journal entries for the above – mentioned transactions. 
b. T – Accounts 
c. Trial Balance 
Solution to this question:
a. Journal Entries
In the book of Auto Workshop
Cash a/c Dr. Rs. 60,000
Share capital a/c Rs. 60,000
(To record the issuance of shares and paid up)
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)
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)
Account payable a/c Dr. Rs. 1,500
Cash a/c Rs. 1,500
(To record the partial payment for office supplies)
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)
c. Trial Balance
|S.N.||Particulars||Dr. Rs.||Cr. Rs.|
Share capital a/c
Notes payable 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
|Total||Rs. 2,88,000||Rs. 2,88,000|