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Questions For Practice - Transaction Analysis

Satya Paul started a new business on April 1, 2017 and the transactions for the first quarter are listed, including starting the business with Rs. 1,000,000 capital, various purchases and sales of goods and assets, payments of rent and salaries, and deposits and withdrawals from bank accounts. The document also provides two analysis questions, requesting journal entries for various transactions and an explanation of how certain transactions would affect the income statement and balance sheet of Kong Fuser Ltd.

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1K views2 pages

Questions For Practice - Transaction Analysis

Satya Paul started a new business on April 1, 2017 and the transactions for the first quarter are listed, including starting the business with Rs. 1,000,000 capital, various purchases and sales of goods and assets, payments of rent and salaries, and deposits and withdrawals from bank accounts. The document also provides two analysis questions, requesting journal entries for various transactions and an explanation of how certain transactions would affect the income statement and balance sheet of Kong Fuser Ltd.

Uploaded by

Asvag Onda
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Illustration 3.4: Satya Paul started a new business on 1st April 2017.

For the first quarter his


transactions are listed below.

1. Started business with `1,000,000 capital in cash


2. Opened a bank account and deposited `990,000 in the bank
3. Paid towards rent `60,000 by cheque
4. Bought stationary for `7,000 paid in cash.
5. Invested `100,000 in government bonds through bank account.
6. Bought Machinery for `250,000 paid through bank account.
7. Bought Furniture for `150,000 from M/s Furniture Mart on credit
8. Bought goods for `400,000 paid by cheque
9. Bought goods for `200,000 from X Limited on credit
10. Sold goods for cash `550,000
11. Made part payment to X in cash `150,000.
12. Sold goods to Y on credit for `250,000
13. Received part payment from Y by cheque for `175,000, allowed him discount of `5,000
for prompt payment.
14. Received interest on investment `1,000 by cheque.
15. Paid Salary to employees by cheque `110,000.

1. Transaction Analysis and journal entries: Analyze the following transactions and
pass necessary journal entries:
a. Goods sold to RS & Company for `450,000 on credit on 10th April 2017. 50% of
goods returned by them on 18th April 2017 being defective.
b. SR & Company from whom an amount of `925,500 was due; made a payment
of `900,000 as full and final settlement.
c. An asset with a book value of `225,000 was destroyed by fire.
d. Made investment of `400,000 in government securities on 28th February 2017.
The market value of these investments has fallen to `320,000 on the date of the
Balance Sheet.
e. Make provision for towards warranty cost at `850,000.

2. Kong Fuser Ltd prepares its financial statements on financial year basis. How would
the following transactions affect the Profit and Loss Account and Balance Sheet of the
company:

a. Purchased computer on 1st April 2017 to be used in the office for `100,000. The
useful life of the computer is estimated to be 3 years with zero residual value.
b. Purchased stationary items for `20,000 during the year. At the end of the year
inventory in hand amounted to `1,800.
c. Purchased land for `3,000,000 on 31st October 2017 for setting up office
building.
d. Paid annual fire insurance premium amounting to `22,000 on the office car on
1st October 2017.
e. Received an advance payment of `1,500,000 from a customer on 28th February
2017, goods were not yet delivered to him by 31st March 2017.
f. Salary paid during the year amounted to `2,400,000 including an advance of
`100,000 paid to one of the employee. Salaries for the month of March 2017
amounting to `185,000 were paid in April 2017.

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