This assignment will assess the following learning outcomes:
1 Understand the language and context of financial accounting, fundamental concepts and principles
2 Apply the double entry system for assets, liabilities and capital
3 Process common transactions and adjustments using the double entry system and produce a set of accounts for a sole trader.
ANSWER ALL THE QUESTIONS
Question 1:
Accounting is based on concepts and principles. It is easy to understand the meaning of these concepts and to see examples in practice. However, sometimes an accountant can be confused when taking these concepts into consideration.
a) Explain and assess the purpose of accounting concepts.
b) Discuss cases where the use of these concepts is confusing. Suggest what to do in these cases.
Question 2:
a) Technica Ltd bought a machine at a cost of OMR 100,000. The asset has an estimated life of five years, and it is normal to write off the cost of the asset to the profit and loss account over this time. In this case a depreciation cost of OMR 20,000 per annum will be charged.
- How does the going concern concept determine the accounting treatment in this scenario?
b) Technica Ltd depreciates office equipment by 20% because it has a useful life, on average, of five years. This year the profitability is down and you think you can squeeze an extra year's life out of your equipment. Is it acceptable not to charge any depreciation this year? Justify your answer.
Question 3:
The financial information enclosed in financial statements is useful for a wide range of users because of its characteristics. What makes the financial information useful for the different users?
Question 4:
The account balances of Waves Ltd are showing the following:
- Cash in bank OMR 23,000
- Account receivable OMR 15,000
- Office supplies OMR 14,400
- Goods for sale OMR 27,600
- Account payable OMR 12,000
- Share capital OMR 68,000
The following transactions took place in May 2015:
| 2015 |
|
OMR |
|
2 May
|
Purchased goods for resale on credit
|
10,800 |
|
5 May
|
Received payments from customers
|
6,000 |
|
6 May
|
Received rent
|
2,500 |
|
10 May
|
Sales on cash, cost of the sales 5,000 OMR
|
6,300 |
|
11 May
|
Store's rent payment
|
1,300 |
|
14 May
|
Proprietors introduced capital
|
13,000 |
|
18 May
|
Purchased office supplies for cash
|
800 |
|
22 May
|
Bought on credit a delivery van
|
7,500 |
|
24 May
|
Sales on credit to REEMA Ltd. Cost of sales 6,700 OMR
|
9,500 |
|
24 May
|
Paid electricity bill
|
150 |
|
30 May
|
Paid assistant's wage
|
1,250 |
| 30 May |
Purchased goods for resale on cash |
8,500 |
1. Construct a table of assets, liabilities and owner's equity in equation form.
2. Analyse the effects of the transactions on the accounting equation.
Question 5:
Rula Ltd commenced business on 1 January 2015, with OMR 120,000 in cash.
The following transactions took place:
1 January Purchased goods for OMR 12,000 on cash
2 January Purchased computers for OMR 2,700
3 January Purchased goods on credit from Elma Ltd. OMR 11,200
4 January Sold goods for OMR 4,200 on cash
5 January Sold goods on credit to Tiffany Ltd for OMR 3,800
8 January Paid wages OMR 2,700 in cash
9 January Bought goods from Maya Ltd. for OMR 2,850 on credit
10 January Sold goods to Hyden Ltd. OMR 800 on credit
11 January Sold goods on credit to Tiffany Ltd. for OMR 4,000
12 January Paid Elma Ltd all that was owed
15 January Tiffany Ltd paid in full.
16 January Purchased goods for OMR 3,400 cash
17 January Sold goods worth OMR 2,500 cash
18 January Hyden Ltd paid OMR 500 on account
19 January Paid Maya Ltd in full
22 January Loan Received from ABN Bank OMR 20,000 25 January Purchased leasehold OMR 24,000
1. Pass journal entries for the above transactions of Rula Ltd.
2. Post them to the appropriate ledger accounts.
3. Prepare trial balance from the ledger balances.