Accounting for decision making

Topics: Inventory, Balance sheet, Asset Pages: 4 (792 words) Published: November 6, 2013
GSM 5301 Accounting for Decision Making

Instructions: Answer all questions and show all working in answer book provided.

Question 1 (30 marks)

(a) Reen Delivery Service is owned and operated by Joanne Lee. The following selected transactions were completed by Reen Delivery Service during March 2012.

No.
Transactions
1.
Joanne Lee invested cash of RM30,000 into ReenDelivery Service. 2.
Purchased a van valued at RM20,000. The business paid cash RM5,000 and the balance is financed by bank loan. 3.
Purchased office supplies valued at RM2,700 on credit.
4.
Billed customers for delivery services and customer paid RM15,000 cash. 5
Made payment for creditor of RM1,900
6.
Interviewed an account assistant who will be paid a monthly salary of RM1,800. 7.
Billed customers for delivery services on credit, RM8,000
8.
The owner contributes her personal van to the business, RM20,000. 9.
Paid staff salary expense RM4,250; rental expense RM1,600; utility expense RM900 and other expenses RM550. 10.
Reen withdrew money from the business amounting to RM4,000 for personal use.

Using the table below, explain how each of the transaction above will affect the accounting equation and identify the account affected. e.g. Receives RM1,000 from cash sales

No.
Asset
=
Liability
+
Owner’s equity
e.g.
Increase RM1,000
=
No effect
+
Increase RM1,000

(15 marks)

(b) For each of the following items, discuss the relevant accounting principles:

(i) The personal assets of the owner of a company are not reported in the company's balance sheet/statement financial position.

(ii) The increase in the value of the furniture used in the company is not recorded in the balance sheet.

(iii) A large company purchases a RM250 digital camera and expenses it immediately instead of recording it as an asset and depreciating it over its useful life for 5 years.

(iv) The competency of the Chief Chef in the restaurant business is not...
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