Financial Accounting I – III
BBA | BBA-BI | BBA-TT | BCIS 1st
PU 2013 Fall Q. No. 2
The following transactions are entered in to by Nepal Motor 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. Cash will be paid in next month.
Jan 10: Billed customer for service provided for Rs. 20,000. The a
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. 20,000.
Jan 30: A total Rs. 10,000 in dividends is paid the owners.
Required: Pass necessary journal entries, T-accounts and Trial balance from above-mentioned transactions. [8 + 4 + 3]
Solution to this question:
Journal Entries
In the book of Nepal Motor Workshop
Jan 1
Cash a/c Dr. Rs. 60,000
Share capital a/c Rs. 60,000
(To record the issuance of shares and capital paid up)
Jan 2
Cash a/c Dr. Rs. 2,20,000
Notes payable a/c Rs. 2,20,000
(To record the issuance six-month 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 assets on cash)
Jan 4
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 10
Account receivable a/c Dr. Rs. 20,000
Service revenue a/c Rs. 20,000
(To record the billed customer for service provided)
Jan 16
Cash a/c Dr. Rs. 7,000
Service revenue a/c Rs. 7,000
(To record the cash received from service provided)
Jan 25
Wages and salaries expenses a/c Dr. Rs. 20,000
Cash a/c Rs. 20,000
(To record the payment of wages and salaries)
Jan 30
Dividend a/c Dr. Rs. 10,000
Cash a/c Rs. 10,000
(To record the payment of dividends)
T-accounts
Trial Balance
Nepal Motor Workshop
Jan 31
| 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 Account payable a/c Office supplies a/c Service revenue a/c Account receivable a/c Salaries & wages expenses a/c Dividends a/c | 1,07,000 25,000 75,000 50,000 2,500 20,000 20,000 10,000 | 60,000 2,20,000 2,500 27,000 |
| Total | Rs. 309,500 | Rs. 309,500 |
Also, see rules of journal entries