MUF0021 Worksheet Accounting Equation QB PDF

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MUF0021: FUNDAMENTALS OF TOPIC 2: THE ACCOUNTING EQUATION – QUESTION Some exercises adapted from: Anthony Simmons and Richard Hardy, Cambridge VCE Accounting Units 3 and 4, [3rd edition] 2011, ISBN 9781107640702

EXERCISE 2.1 THE ACCOUNTING EQUATION a.

State the accounting equation three (3) different ways.

b.

Calculate the amount for the missing accounting element in each scenario in the following table, by using the accounting equation. Scenario 1

Assets

Liabilities $56 000

$45 000

2

$123 000

3

$330 000

4

$100 000

$98 000 $100 000

6

$89 612

7

$102 789

$51 500 $34 567

$0

8

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$34 000 $67 000

5

9

Owner’s Equity

$567 000 $1 000 000

$234 500 $1

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EXERCISE 2.2 THE ACCOUNTING EQUATION AND THE BALANCE SHEET Mark Florence is the owner of Ponte Jewellers, and has provided the following list of the firm’s Assets and Liabilities as at 31 May 2019: $ Stock Control

62 000

Bank (DR)

5 900

Creditors Control

3 400

Loan – BB Bank

30 000

Shop Fittings

12 000

Debtors Control

8 600

Office Equipment

4 100

*Note: Bank (DR) identifies the Bank account as an asset account. a.

State the accounting equation.

Assets = Liabilities + Owner’s Equity b.

Outline what is measured by the accounting equation.

The accounting equation states that assets must always equal liabilities plus owner’s equity. c.

Calculate Capital as at 31 May 2019.

62000-5900-3400-30000+12000+8600+4100=47400 d.

Prepare a Balance Sheet for Ponte Jewellers as at 31 May 2019.

Balance Sheet as at 31 May 2019

Assets

$

Stock Control

62000

Shop Fittings

12000

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$

Liabilities Capital

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$

$

47400

47400

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Debtors Control

8600

Office Equipment

4100

Total Assets

Owner’s Equity 86700

86700

Bank(DR)

5900

Creditors Control

3400

Loan – BB Bank

30000

Total Equlties

39300

86700

EXERCISE 2.3 THE ACCOUNTING EQUATION AND THE BALANCE SHEET Greg Miller owns Greg’s Gardening Supplies and has provided the following information as at 31 January 2020: Item

$

Item

Term Deposit

8 000 Bank

Debtors Control

2 490 Creditors Control

Stock Control

700 2 000

45 000 Motor Vehicle

Equipment a.

$

22 000

5 000 Loan – NAZ Bank

36 000

Define Equities. equity is the residual interest in the assets of the entity after deducting all its liabilities.

b.

Calculate Capital as at 31 January 2020. 8000+2490+45000+5000+700+22000-2000-36000=

c

Prepare a Balance Sheet for Greg’s Gardening Supplies as at 31 January 2020.

Balance Sheet as at 31 January 2020

Assets MUF 0 0 2 1F u n d a me n t a l so f Ac c o u n t i n g

$

$

Liabilities Wo r k s h e e t 2 : Qu e s t i o nBo o k l e t

$

$ P a g e3o f 1 1

Term Deposit

8000

Debtors Control

2490

Stock Control

45000

Owner’s Equity

Equipment

5000

Loan – NAZ Bank

36000

Bank

700

Creditors Control

2000

Motor Vehicle

22000

Total Assets

c.

Capital

45190

45190

38000

83190

83190

Total Equlties

83190

Referring to your answer to part ‘b’, explain your treatment of Stock Control. It’s an asset.

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EXERCISE 2.4 THE ACCOUNTING EQUATION AND THE BALANCE SHEET Laura Destio owns Mallacoota Water and has provided the following information as at 30 June 2021: Item Bank (CR)

$

Item 4 200 Shop Fittings

Stock Control Creditors Control Building

$ 43 000

12 000 Loan – BIB Bank

60 000

5 000 Debtors Control

10 500

100 000

*Note: Bank (CR) identifies the Bank account as a liability account – that is, Bank Overdraft. a.

Prepare a Balance Sheet for Mallacoota Water as at 30 June 2021.

b.

Explain why a Balance Sheet is titled ‘as at’.

c.

Referring to your answer to part ‘a’, explain your treatment of the following. i. Loan – BIB Bank ii. Bank (Overdraft)

EXERCISE 2.5 ANALYSE TRANSACTIONS Joe Jambul is the owner of Joe’s Garage, a business that sells car parts. Joe’s Garage commenced business on 1 March 2019 and below is a list of transactions for March: Mar

1

Received a loan for $50 000 from Kelang Bank

5

Office furniture worth $19 000 was purchased for cash

10

Purchased $2 000 of stock on credit from Tiung Man

15

The owner contributed to the business a delivery van worth $25 000

20

Paid $1 000 off the loan

25

Purchased stock worth $3 000 for cash

30

Paid the creditor Tiung Man $1 500

a.

Complete an analysis table to show the effect of each transaction on the accounting equation.

b.

Define the Accounting Entity Assumption. Referring to your answer in part a above, provide one (1)

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example of a transaction that reflects the application of this assumption.

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EXERCISE 2.6 ANALYSE TRANSACTIONS & BALANCE SHEET Kitty Yang owns and operates Kitty’s Fashions. The business commenced operations on 1 January 2019. Below are the transactions for the first 6 days of January. Jan

a.

1

Kitty contributed $50 000 cash to the business (Rec. 1)

2

Purchased $10 000 of stock for cash (Chq. 1)

3

Purchased Office Furniture valued at $5 000 for cash (Chq. 2)

4

Business received a loan of $12 000 from ZXY Bank (Rec. 2)

5

Business purchased $4 000 stock on credit from Li Imports (Inv. 345)

6

Kitty took stock valued at $1 000 home for personal use (Memo 1)

After each transaction, i. Complete an analysis table to show the effect of each transaction on the accounting equation. ii. Prepare a Balance Sheet to show the financial position of Kitty’s Fashions after each transaction has been recorded.

b.

Define the qualitative characteristic of Faithful Representation. Referring to your Balance Sheet in part a above, provide one (1) example of Faithful Representation.

c.

Define the qualitative characteristic of Relevance. Referring to your Balance Sheet in part a above, provide one (1) example of Relevance

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EXERCISE 2.7 TRANSACTIONS AND THE BALANCE SHEET As at 31 March 2019, the assets and liabilities of Pete’s Paint Emporium were as follows: Assets

$

Equities

Bank

6 300 Creditors Control

Debtors Control

8 000

Shop Fittings

18 000

Delivery Van

25 000

Stock Control

24 000 Capital

Total Assets

81 300 Total Equities

$ 11 000

? 81 300

In the first week of April 2019, the following transactions occurred: Apr

1

Paid $5 000 to a creditor.

2

Borrowed $28 000 cash from the NAB

2

Cash purchase of a second Delivery Van $28 000

3

Received $2 400 from a debtor.

4

Pete withdrew $1 500 worth of cash for personal use.

5

Pete contributed to the business Office Equipment valued at $4 000.

a.

Calculate Capital as at 31 March 2019.

b.

Complete the analysis table to show the effect of each transaction on the Balance Sheet.

c.

Prepare a Balance Sheet for Pete’s Paint Emporium as at 6 April 2019.

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EXERCISE 2.8 TRANSACTIONS AND THE BALANCE SHEET As at 30 September 2020, the assets and liabilities of Sam Booker Shoes were as follows: Assets

$

Debtors Control

Equities 3 000 Bank

Shop Fittings

15 000 Creditors Control

Stock Control

25 000 Loan – ANZ

Office Equipment

40 000 Capital

Total Assets

83 000 Total Equities

$ 2 500 7 000 36 000 ? 83 000

In the first week of October 2019, the following transactions occurred: Oct

1

Received $2500 from a debtor.

2

Sam contributed $5 000 of his own money to the business.

3

Paid $3 000 off the loan.

4

Purchased stock on credit for $10 000.

5

Sam took $2 500 of the Shop Fittings home for personal use.

6

Paid $3 000 to a creditor.

a.

Complete the analysis table to show the effect of each transaction on the Balance Sheet of Sam Booker Shoes.

b.

Prepare a Balance Sheet for Sam Booker Shoes as at 6 October 2020.

c.

Define the Accounting Entity assumption. Referring to your Balance Sheet in part b above, provide one (1) example that supports the Accounting Entity assumption.

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EXERCISE 2.9 ANALYSING REVENUE AND EXPENSE ACCOUNTS Kitty owns Kitty’s Cushions. On 1 January 2020 Kitty’s Cushions commenced business. During January Kitty’s Cushions had the following transactions: Jan

1

Kitty contributed $100 000 cash to the business (Rec. 1) Kitty contributed office equipment valued at $20 000 to the business (Memo 1) Paid $3 000 cash for rent for one month (Chq. 1)

2

Purchased stock on credit from Housewares House for $20 000 (Inv. 412)

3

Paid $2 000 cash for advertising (Chq. 2) Paid $1 500 cash for insurance (Chq. 3)

a.

10

Sold 20 cushions for a total of $400 cash (cost price $200) (Rec. 2)

14

Paid Housewares House $10 000 (Chq. 4)

15

Invested $30 000 in term deposit (Chq. 5)

25

Sold 100 cushions for $20 each (cost price $10 each) to Dollar Discounts (Inv. 1)

29

Paid $1 300 cash for electricity (Chq. 6)

31

Received $100 cash for interest revenue (Rec. 3)

Complete the analysis table to show the effect of each transaction on the accounting equation of Kitty’s Cushions.

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EXERCISE 2.10 ANALYSING REVENUE AND EXPENSE ACCOUNTS As at 28 February 2019, the assets and liabilities of Kamilla’s Cakes were as follows: Assets

$

Bank

40 000 Creditors Control

44 000

Shop Fittings

30 000 Loan – BankEast

36 000

Stock Control

50 000 Capital

45 000

Office Equipment Total Assets

Equities

$

5 000 125 000 Total Equities

125 000

In March 2019, the following transactions occurred: Mar

a.

1

Sold 10 cakes for $30 each cash (cost price $15 each) (Rec. 234)

4 10

Paid $3 000 cash for wages (Chq. 123) Paid creditor Flourless $8 000 cash (Chq. 124)

13

Sold 10 cakes for $300 (cost price $150) on credit to Sarah’s Café (Inv. 567)

14 19

Sarah’s Café paid the money for the cakes sold yesterday (Rec. 235) Purchased 100 cakes for $15 each for cash (Chq. 125)

21

Paid $100 cash for freight in (delivery) of the 100 cakes (Chq. 126) Sold 1 cake for $30 cash (cost price $15) (Rec. 236)

24

Owner took 5 cakes home for personal use (cost price $15 each) (Memo 1)

Complete the analysis table to show the effect of each transaction on the Balance Sheet of Kamilla’s Cakes.

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