Jan 1Started business by borrowing a loan of $50 000 from the Centrex Commercial Bank which was invested into the business along with his personal savings of $50 000. The loan carries an interest rate of 12% per annum. The following transactions took place during the year.
1Purchased the following assets and paid for them by cash:
Furniture and Fittings$30 000Equipment $ 45000
A motor van was purchased on account from Saunders Ltd for $40 000.
2Purchased computer parts for $36 000 cash
3Sold parts for $60 000 cash
4Purchase goods on account from Android Enterprise $18 000; ABC Ltd $15 000 and Peter Smith $24 000. Goods purchased from Peter Smith was subjected to credit term 5/12:n/30
5Sold goods on account to Monterry and Sons $52 000; Tainey Enterprises $41 000 and Smat Refined Goods $65 000. Offered Smat Refined Goods discount on the following terms 5/10; n/30
6Returned defective goods to ABC Ltd $2 300 and Monterry and Sons returned parts costing $3 500 to the firm due to poor quality.
7Paid the following expenses by cash Wages $30 000; Office supplies $8 000; Electricity $6 000; Telephone $7 000; Rent $15 000
8Insurance was purchased at the beginning of the year for $12 000. The insurance was for the two years 2011 and 2012.
9You withdrew $25 000 for his personal use during the year.
10Received $45 900 from Monterry and Sons for goods sold during the year.
11Paid Peter Smith and ABC the amount owing to them. The goods purchased from Peter Smith were paid for within the discount period.
12Received the cash owing from Smat Refined Goods within the discount period.
13Paid $36 000 to Saunders Ltd for the Motor van purchased during the year on credit.
14Inventory on 31st December 2011 is $12 000
15Depreciation Policy for the Non-current assets
a. Depreciate Fixtures and Fittings at $3 000 per annum
b. Motor Van is depreciated at 20% per annum on the reducing balance method (double declining balance method)
c. Equipment has a scrap value of $5 000 and an estimated useful life of eight (8) years.
Computec is a sole trader business that buys and resells computer parts. This business will adhere mainly to three concepts when preparing financial statements they are; the business entity concept, the accruals concept and the prudence concept.
The business entity concept treats the business or an organization and its owners as two separately identifiable parties this means that the personal transactions of owners are treated separately from those of the business for which data are recorded, analyzed, and reported.
The accruals concept means that the Business transactions are recorded when they occur and not when the related payments are received or made. This concept is called accrual basis of accounting and it is fundamental to the usefulness of financial accounting information. The prudence concept makes sure that assets and income are not overstated and liabilities and expenses are not understated. You should not overestimate the amount of revenues that you record, nor underestimate the amount of expenses.
| Computec | | | |
| General Journal | | | |
Date| Particulars| Folio | Debit| Credit |
January| | | $| $|
1| Cash| | 100,000.00| |
| Centrex Commercial bank-Loan| | | 50,000.00|
| Capital| | | 50,000.00|
| (started business with $100,000) | | | |
| | | | |
1| Fixtures and fittings| | 30,000.00| |
| Equipment | | 45,000.00| |
| Cash| | | 75,000.00|
| (paid for assets by cash)| | | |
| | | | |
1| Motor Van| | 40,000.00| |
| Saunders Ltd. | | | 40,000.00|
| (bought motor van on credit)| | | |
| | |...