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Chapter 2

BALANCE SHEET-SOME EXAMPLES

Analysing impact on assets/liabilities


Bought furniture for cash Recd amount due from a customer Bought a car on credit Paid amount due to a creditor Appointed office assistant Cash withdrawn by the proprietor for personal purposes Provided services on credit Recd interest on bank deposit Sold unused eqpt at purchase price Owner invested cash in the business

Answer to problem set 1


Assets Liabilities Equity

1
2 3 4 5 6 7 8 9 10

Cash decrease, furniture assets increase, hence no impact


Cash increase, debtors decrease, so no effect Assets (car) increase Cash decreases. Assets decrease No impact Assets decrease Debtors increase Cash increases Cash increases, eqpt asset decreases, no impact Cash increases hence assets increase

No efffect
No effect Creditors increase Creditors decrease No impact Decreases Increases Increases

increases

Qual photo company transactions


Jan 1st Manohar invested 30,000 cash in the companys share capital Bought supplies of photographic materials on credit Rs. 9,000 Bought photographic equipment for cash Rs. 12,000 Recd fees for photographic services Rs. 15,000 Paid creditors for supplies Rs. 5,000 Took a loan Rs. 12,000 Billed customers for services Rs. 19,000 Paid office rent Rs. 2500 and electricity charges Rs. 1200 Paid dividends Rs. 4,000 Question: Analyse effect of these transactions on the accounting

equation Prepare a profit and loss account, statement of retained earnings, balance sheet and cash flow statement

Impacts of transactions
Assets Cash January 1 Balance January 2 +30,000 30000 9000 9000 Debtors Supplies eqpt Liabilities Creditors equity +30,000 30000

Balance

30000

9000 12000

9000

30000
15000

January 5 -12000
January 7 15000 Jan 13 Jan 18 Jan 22 Jan 27 Jan 31 Balance -3700 -4000 32300 19000 9000 -5000 12000 19000

-5000 12000 19000 -3700 -4000 12000 16000 56300

QualPhoto Company Profit &Loss account For the month of January 31 20XX

Revenues Fee revenue Expenses Rent expense Electricity exp Total exp

34000
2500 1200 3700
30300

Net profit

Balance sheet as on January 31, 20xx


Assets

Cash Debtors Supplies Equipment

32300 19000 9000 12000


72300

Total assets

Liabilities

Creditors

16000
16000

Total liabilities

Equity

Share capital Retained earnings Total equity

30000 26300 56300

Total liabilities and equity 72300

Cash flow statement For the month ended January 31, 20xx
Cash flows from operating activities Cash received from customers Cash paid to suppliers and employees

15000 (8700)
6300

Net cash provided by operating activities

Cash flows from investing activities Purchase of equipment

-12000
-12000

Net cash used in investing activities

Cash flows from financing activities Proceeds from issuance of share capital Payment of dividends Proceeds from loan

30000 -4000 12000


38000

Net cash provided by financing activities

Net increase in cash Beginning balance Ending balance

32300 00000 32300

Ram Software Limited


Ram and others invest Rs. 50000 cash in RSL Ram took a loan of Rs. 20000 RSL purchased two comps for cash each costing Rs. 29000 RSL purchased stationery supplies for Rs. 6000 on credit RSL sells software to retail store and recieves a price of Rs. 12000 RSL pays Rs. 2000 to its creditors for supplies RSL pays salaries to its employees Rs. 4000 and rent of Rs. 1200 RSL delivers a software package for a shoe shop. Customer agrees to pay rs. 8000 a week later Ram withdraws Rs. 3,500 for his personal use (as profit share)

Dimple Parathas Review question no. 2


M/s Dimple Parathas Limited Balance Sheet as at March 31, 2X10 Amount Current Assets Cash in Hand Bills Receivable Sundry Debtors Current Liabilities 50000 Provision for Taxation 200000 Sundry Creditors 150000 Total Current Liabilties 50000 100000 150000 Amount

Total Current Assets

400000 Long-Term Liabilities


Bank Loan 150000 200000 350000

Long-Term Assets Land Building

Debentures 800000 Total Long-Term Liabilities 200000 Owners Equity Share Capital 1000000 400000

Net, Plant and Machinery Total Long Term Assets

500000 Retained Profits 1500000 Total Owners Equity

1400000

Total Assets

1900000 Total Liabilities & Owners Equity

1900000

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