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Financial Accounting I – III
BBA | BBA-BI | BBA-TT | BCIS 1st
PU 2013 Spring Q. No. 2
Three Star Service House was resigned on 1st January 2013 by a group of professionals to provide consulting services to the small business houses in Pokhara. The following transactions taken place during the first month of its operation are provided:
Jan 1, Received contribution of Rs. 25,000 from each of the six partners in exchange for shares of stock.
Jan 4, Purchased a computer and printer for a total Rs. 35,000 with a down payment of Rs. 15,000 and signed a ten-month promissory note for the reminder.
Jan 9, Signed a two year promissory note at the bank and cash received of Rs. 9,000.
Jan 10, Paid Rs. 400 for wages earned by employees for the first week of the month.
Jan 15, Collected of Rs. 80,000 in cash from the services provided during the first half of January.
Jan 18, Paid commission of Rs. 500 to the local agents.
Jan 22, Paid Rs. 4,000 rent for the month of January and Rs. 8,000 for the month of February and March in advance.
Jan 30, Billed Rs. 4,000 to the local clients for by providing consulting service, clients allowed to pay 10th February.
Required:
a. Journal entries of the above transactions for the month of January. [8]
b. T-accounts [4]
c. Trial Balance [3]
Solution to this question
a. Journal Entries
In the book of Three Star Service House
Jan 1
Cash a/c Dr. Rs. (25,000×6) 1,50,000
Share capital a/c Rs. 1,50,000
(To record the issuance of shares and received the contribution from six contributors)
Jan 4
Office equipment’s a/c, Dr. Rs. 35,000
Cash a/c Rs. 15,000
Notes payable a/c Rs. 20,000
(To record the purchase of office equipment’s with down payment)
Jan 9
Cash a/c Dr. Rs. 9,000
Notes payable a/c Rs. 9,000
(To record the sign of two years promissory note)
Jan 10
Wages expense a/c, Dr. Rs. 400
Cash a/c Rs. 400
(To record the payment of wages to employees)
Jan 15
Cash a/c Dr. Rs. 80,000
Service revenue a/c Rs. 80,000
(To record the collection of cash from service provided)
Jan 18
Commission expense a/c Dr. Rs. 500j
Cash a/c Rs. 500
(To record the payment commission)
Jan 22
Rent expenses a/c Dr. Rs. 4,000
Prepaid expenses a/c Dr. 8,000
Cash a/c Rs. 12,000
(To record the payment of rent expenses and prepaid rent)
Jan 30
Bills receivable a/c Dr. Rs. 4,000
Service revenue a/c Rs. 4,000
(To record the service revenue earned but not yet received)
b. T-accounts
c. Trial Balance
In the book of Three Star Service House
Jan 31, 2013
| S. N. | Particulars | Dr. Rs. | Cr. Rs. |
| 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. | Cash a/c Share capital a/c Office equipment’s a/c Account payable a/c Notes payable a/c Wages expenses a/c Service revenue a/c Commission expenses a/c Rent expenses a/c Prepaid rent a/c Bills receivable a/c | 211,100 35,000 400 500 4,000 8,000 4,000 | 150,000 20,000 9,000 84,000 |
| Total | Rs. 2,63,000 | Rs. 2,63,000 |
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