Tutorial 1 Introduction to Accounting 1 LTJ 2020

Tutorial 1

Section A

1. Define accounting. Explain the stages involved in your answer.

- Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing, and
reporting these transactions.

2. What is the difference between accounting and bookkeeping?

- Bookkeeping focuses on recording the business transaction from the sources of document. Accounting is the interpretation and presentation of that data to
business owners and investors.

3. Complete the gaps in the following table:

Assets (RM) = Liabilities (RM) + Equity (RM)
82,000 32,000 50,000
85,000 15,000 70,000
105,000 38,000 67,000
156,900 0 156,900
73,000 38,000 35,000

 Value, unit that can generate cash, practical

 More difficult to keep track of so many items

4. Classify the following items into assets, liabilities and equity, then, find out the amount of capital:
 Bank RM20,000
 Cash RM2,000 (Asset that can be exchanged into most/all the other kinds of assets, can be used to pay back liabilities) (in economic it is a medium of
exchange, exchange rate and a store of value)
 Drawings RM5,000
 Loan from bank RM50,000
 Inventories RM19,000
 Motor vehicles RM80,000
 Loss RM13,000
 Payables RM15,000
 Receivables RM18,000 (waiting for cash to be delivered, same category as cash = Asset, due to receive cash)
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You may use the following format for your answer:

Types Amount (RM)

Assets
Bank 20,000
Cash 2,000
Inventories 19,000
Motor Vehicles 80,000
Trade Receivables 18,000
139,000

Liabilities
Trade Payables 15,000
Bank Loan 50,000

65,000
Equity
Opening Capital 92,000
Loss (13,000)
Drawings (5,000)
Closing Capital 74,000
139,000

5. State what are the correct classifications for the following items? Are they debit or credit items? Revenue/Income

Inventory sold (at cost) = Expenses

Inventory sold/Sales (at selling price) = Income
Inventory balance = Asset
Correct classification Dr / Cr
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Discount received Income Cr

Commission received Income Cr
Receivables Asset Dr
Cash from owner Equity Cr
(Capital)
Sales Income Cr
Inventory sold (at cost) Expenses Dr
Insurance claim received Income Cr
Carriage inwards Expenses Dr
Advertising Expenses Dr
Office stationery Expenses Dr
Payables Liabilities Cr
Cash to owner Equity Dr
(Drawings)
Salaries Expenses Dr
Electricity Expenses Dr
Rental Expenses Dr
Discount given Expenses Dr
Insurance paid Expenses Dr
Bank interest paid Expenses Dr
Carriage outwards Expenses Dr
Commission paid Expenses Dr

6. Discuss the main users and their uses of accounting information.

Internal User

- Business owner or investor. Accounting information allow them to know the profit or loss generated by business and financial stability. With this, they can
make decision on whether to expand or to shut down the business or whether should they inject more capital.

- Management. Accounting information enables the management to determine whether the business is operated efficiently or not.

- Employees. Accounting information enables them to know the payment of the salaries and their career development. They can determine whether the
business is going well and should they in the business.

External User
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- Suppliers. Accounting information allows supplier to know the financial stability and cash flow of the business. With this, they can measure the ability of
the business to pay all the debts.

- Financial Providers. Accounting information allows them to know the financial stability and cash flow of the business. With this, they can measure the
ability of business to pay the money borrowed and all the interest charged.

- Government. With accounting information, government can determine whether the business is tax payables or not.

Section B: Extra exercise questions (for students’ own practice)

Question 1
Bibi contributed RM60,000 to start a new business on 1 March, selling school and college textbooks. The following are transactions that occurred in the month
of March:
 Paid by cheque RM20,000 for fixtures and fittings
 Paid by cheque RM6,000 for office equipment (i.e. computer, printer and fax machine)
 Purchased inventories totalling RM30,000, of which RM15,000 was paid by cheque and the balance will be paid 2 months later
 Sales totalling RM12,000, all deposited into the bank account (inventories sold were costing RM9,000)
 Paid staff salaries by cheque RM1,000
 Paid shop rental by cheque RM2,000
 Paid utilities by cheque RM500
 Paid telephone by cheque RM300
 Paid printer ink and A4 paper by cheque RM600
 Withdrew RM3,000 cheque for personal use
Required:
(a) Into which account was Bibi’s capital contribution of RM60,000 deposited? Calculate the balance of this account at the end of March.
= Bank Account
= RM 60,000 – RM 20,000 – RM 6,000 – RM 15,000 + RM 12,000 – RM 1,000 – RM 2,000 – RM 500 – RM 300 – RM 600 – RM 3,000 = RM 23,600

(b) Calculate the inventories balance at the end of March.

= RM 30,000 – RM 9,000 = RM 21,000

(c) Prepare a listing based on the Profit Determination Equation for the month of March.
Income Sales 12,000

Expenses Inventory sold 9,000

Staff salaries 1,000
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Rental 2,000
Utilities 500
Telephone 300
Printer ink and A4 paper 600
(13,400)
(1,400)

(d) Prepare a listing based on the Accounting Equation as at the end of March.
Asset Bank 23,600
Closing Inventories 21,000
Fixture and Fittings 20,000
Office Equipment 6,000
70,600

Liabilities Trade Payables 15,000

Equity Opening Capital 60,000
Loss (1,400)
Drawings (3,000)
Closing Capital 55,600
70,600

Question 2
Alan extracted the following transaction for the month of May:

1 Started the business with cash RM1,000 and bank account of

RM19,000 as capital.

Bank – RM 19,000 = Dr
Cash – RM 1,000 = Dr
Capital – RM 20,000 = Cr

3 Bought computer RM3,600 from Syarikat Cerah Sdn. Bhd. on credit

term.
Office Equipment – RM 3,600 = Dr
Other Payables: Syarikat Cerah – RM 3,600 = Cr
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7 Purchased goods RM6,000 from Daya & Co on credit term.

Purchases – RM 6,000 = Dr
Trade Payables – RM 6,000 = Cr

9 Received cheque RM2,600 from sales on cash term.

Bank – RM 2,600 = Dr
Sales – RM 2,600 = Cr

12 Issued a cheque RM3,000 for purchases of goods on cash term.

Purchases – RM 3,000 = Dr
Bank – RM 3,000 = Cr

16 Issued a cheque RM5,700 to Daya & Co., as settlement of purchases

above, after deducting a discount received of RM300.

Trade Payables: Daya & Co – RM 6,000 = Dr

Bank – RM 5,700 = Cr
Discount Received – RM 300 = Cr

17 Sales of goods RM4,000 to Era Enterprise on credit term.

Trade Receivables: Era Enterprise – RM 4,000 = Dr

Sales – RM 4,000 = Cr

21 Fatimah withdrew cash RM200 for family use.

Drawings – RM 200 = Dr
Cash – RM 200 = Cr

24 Issued a cheque RM2,000 to Syarikat Cerah Sdn. Bhd. as partial

settlement of amount owing.
Other Payables: Syarikat Cerah – RM 2,000 = Dr
Bank – RM 2,000 = Cr
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27 Received cheque RM3,800 from Era Enterprise, as settlement of sales

above, after deducting discount allowed of RM200.

Bank – RM 3,800 = Dr
Discount Allowed – RM 200 = Dr
Trade Receivables – RM 4,000 = Cr

28 Miscellaneous expense RM280 paid by cash.

Miscellaneous Expenses – RM 280 = Dr

Cash – RM 280 = Cr

Required:
Prepare the journal entries to show the double entries of all the transactions above.

Question 3
Prepare the journal entries to show the double entries of the following transactions of Gogo Trading in the month of March:

1 Started business with RM59,000 in the bank and RM1,000 cash.

Bank – RM 59,000 = Dr
Cash – RM 1,000 = Dr
Capital – RM 60,000 = Cr

2 Bought stationery by cheque RM750.

Stationery – RM 750 = Dr
Bank – RM 750 = Cr

3 Bought goods on credit from Smart Warehouse RM10,100.

Purchases – RM 10,100 = Dr
Trade Payables – RM 10,100 = Cr

4 Sold goods for cash RM3,400.

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Cash – RM 3,400 = Dr
Sales – RM 3,400 = Cr

5 Paid insurance by cash RM290.

Insurance – RM 290 = Dr
Cash – RM 290 = Cr

7 Bought a computer on credit from Tech Trader RM4,000.

Office Equipment – RM 4,000 = Dr

Other Payables: Tech Trader – RM 4,000 = Cr

8 Paid miscellaneous expenses by cash RM50.

Miscellaneous Expenses – RM 50 = Dr
Cash – RM 50 = Cr

10 Sold goods on credit RM6,300 to Bina Construction.

Trade Receivables: Bina Construction – RM 6,300 = Dr

Sales – RM 6,300 = Cr

14 Paid wages by cash RM350.

Wages – RM 350 = Dr
Cash – RM 350 = Cr

17 Paid rent by cheque RM2,250.

Rent – RM 2,250 = Dr
Bank – RM 2,250 = Cr

20 Received cheque RM4,000 from Bina Construction.

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Bank – RM 4,000 = Dr
Trade Receivables: Bina Construction – RM 4,000 = Cr

21 Paid Tech Trader by cheque RM4,000.

Other Payables: Tech Trader – RM 4,000 = Dr

Bank – RM4,000 = Cr

23 Bought goods on credit from Savemart RM2,500.

Purchases – RM 2,500 = Dr
Trade Payables: Savemart – RM 2,500 = Cr

25 Sold goods on credit to Flora Trader RM6,450.

Trade Receivables: Flora Trader – RM 6,450 = Dr

Sales – RM 6,450 = Cr

31 Paid Savemart by cheque RM1,250.

Trade Payables: Savemart – RM 1,250 = Dr

Bank – RM 1,250 = Cr

Question 4
Mr John started his tailoring business on 1 January. He has no accounting knowledge and requires your help in doing up the accounts of his business. He has
provided the following information for the whole year from 1 January to 31 December.
RM
Bank balance 75,000
Cash balance 1,030
Sales 86,660
Amount owing by Alex 500
Amount owing by Jessy 250
Amount owing by Gordon 750
Cost of inventories sold 5,150
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Shop rental 6,000

Equipment 15,000
Electricity and water 3,880
Air-conditioners 6,000
Amount owing to Coco Textiles 1,500
Interest received 300
Bank and cash withdrawn for home use 12,000
Commission paid to Kent (introduced new customers) 2,000
Inventories balance 2,900

Required:
(a) Find out how much profit Mr John’s business has made for the year, using the Profit Determination Equation.
Income Sales 86,660
Interest Received 300
86,960

Expenses Cost of inventories sold 5,150

Shop rental 6,000
Electricity and water 3,880
Commission paid 2,000
(17,030)
69,930

(b) Find out how much capital was injected by Mr John into his business on 1 January, using the Accounting Equation.
Asset Bank 75,000
Cash 1,030
Trade Receivables 1,500
Equipment 15,000
Inventories balance 2,900
Air Conditioners 6,000
103,430

Liabilities Trade Payables (1,500)

101,930
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Drawings (12,000)
89,930