ABAB 113

Business Accounting
Semester 1 2016/2017
TUTORIAL 2: ACCOUNTING EQUATION
Question 1
Show the effect of the following transactions on the accounting equation.
a) Investment by owner / introduction of capital
On the 1st January 2011, Qayyum started a business by putting RM35,000 into the
business bank account. He also transfers his own car (valued at RM 24,000) to the
business.
Assets

Liabilities

+ Owner Equity

b) The purchase of asset and incurring liability

a)

A shop premise costing RM100,000 were acquired for the business. The money
was borrowed from CIMB bank and is due for repayment in 10 years' time.

b)

A stock of goods for resale was acquired at a cost of RM10,000 on credit from a
supplier BS Store.
Assets

Liabilities

+ Owner Equity

c) The purchase of asset by cash

The business purchase a computer costing RM5,000 for cash (using the business cheque)
Assets

Liabilities

+ Owner Equity

d) Payment of liability
A business cheque for RM3,000 was sent to BS Store .
Assets

Liabilities

+ Owner Equity

Statement of Financial Position (or Balance Sheet)

RM
Assets
Shop Premise
Motor Vehicle
Computer
Stock
Cash at bank
TOTAL ASSETS
Liability
Loan
Creditor
TOTAL LIABILITY
Owner's Equity
- Capital
TOTAL LIABILITY & OE
Question 2
Continuing from Question 1;
*Ignore the effect on stock for the time being since periodic inventory system will be used.
a) Sale of an asset for cash payment

Stock costing RM1,300 is sold to Mr. Lee for RM2,100 cash.

Assets

Liabilities

+ Owner Equity

b) Sale of an asset on credit

Stock costing RM2,000 is sold on credit to Gemilang Store for RM3,200.
Assets

Liabilities

+ Owner Equity

c) Pay expenses
Qayyum pays RM100 cash for the shop's electricity bill.
Assets

Liabilities

+ Owner Equity

d) Drawing by the owner

i.

Qayyum pays a holiday package for his family with a RM1,200 business cheque.

ii.

Qayyum also has taken goods costing RM300 for his own personal use. Normally
the goods can be sold for RM500.

Assets

Liabilities

+ Owner Equity

Statement of Comprehensive Income

RM
Sales Revenue
(-) Cost of goods sold
Gross profit
Electricity expenses
Profit/(loss)

Statement of Financial Position

RM
Assets
Shop Premise
Motor Vehicle
Computer
Stock
Cash at bank
Debtor - Gemilang
TOTAL ASSETS
Liability
Loan
Creditor

TOTAL LIABILITY
Owner's Equity
Capital
Profit/(loss)
(-)Drawing
TOTAL OE
TOTAL LIABILITY & OE

Question 3
Deala Sofia establishes an insurance agency on June 2014 and completed the following
transactions during June:
June Opened a business bank account in the name of DS Agency with deposit RM50,000 as
01
02
04
08
10
16
17
20
23
27
30
30

capital
Borrowed RM15,000 by issuing a note payable; due in 2 years
Received cash from fees earned RM9,200
Paid automobile expenses RM1,000 by cheque
Purchase office equipment RM5,500 cash
Paid rental RM3,500
Performed service on credit RM10,760
Paid RM2,500 on notes signed on June 02
Purchased supplies for RM3,450 on credit
Received RM5,000 from customers on amount owed on June 17
Paid salaries for RM1,500 to employees
Paid utilities bill for RM350

Required:

Indicate the effect of each transaction using the following format;

Date
Assets
E.g. Equipment
RM15,000

= Liabilities
EngLi
RM15,000

+ Owners Equity
0

+ Revenue
0

Expenses
0

Question 4
Chendana runs a boutique shop in Desa Semarak Muadzam. She started business on 1 July 2014
by paying RM45,000 into newly opened bank account. Below are related transactions for the
first month operation:
July Bought goods for resale on credit from Arfa Butik RM3,330
02
04
07
08
11
14
15
16
17

Bought Furniture and Fittings by cash RM4,800

Purchased goods for resale for cash RM3,500
Bought van on credit from TopMarks Sdn Bhd for RM22,000
Bought goods for resale on credit from Jakel for RM12,000
Borrowed RM10,000 from MARA and made first payment to TopMarks RM6,000.
Sold all the goods she bought on 4 July for cash RM5,000
Paid staff wages by cheque RM880
Sold half of the goods bought on 8 July to Optime on credit RM8,000
Chendana allow her cousin, Donna to join the business and she brought RM7,000 of
her own money into the business, which is used to pay part of the amount owed to

TopMarks.
18 Due to Donna carelessness, a potential client, Datin Lyza fell and broke her arm.
Datin Lyza threatened to sue the boutique and Chendana promised to pay RM3,000
for medical treatment.
25 Paid rent by cash RM1,200
28 Paid office maintenance by cheque RM550
Required:
Show how each of the above transaction affects the accounting equation and how the balance
sheet identity would appear after each transaction.

Date
E.g.

Effect On Accounting Equation

Assets
Liabilities
Owners
Building

BIMB

RM150,00

loan

RM150,000

Equity
0

Balance Sheet Position

Assets
Liabilities
Owners
Equity
RM150,000

RM150,000