Question

Bobbie opened a consulting firm and copleted these trannsactions during November, 2005

(a) Invested Rs 4,00,000 cash and office equipment with Rs 1, 50,000 in a business called Bobbie Consulting.

(b) Purchased land and a small building . The land was worth Rs. 1, 50,000 and the building worth Rs 3,50,000. The purchase price was price was paid with Rs 2,00,000 cash and a long term note payable for Rs 8,00,000.

(c) Purchased office supplies on credit for Rs 12,000.

(d) Bobbie transferred title of motor car to the business. The motor car was worth Rs 90,000.

(e) Purchased for Rs 30,000 additional office equipment on credit.

(f) Paid Rs 7,500 salary to the office manager.

(g) Provide services to a client and collected Rs 30,000.

(h) Paid Rs 4,000 for the month's utilities.

(i) Paid supplier created in transaction (c).

(j) Purchase new office equipment by paying Rs 93,000 cash and trading in old equipment with a recorded cost of Rs 7,000.

(k) Completed services of a client for Rs 26,000. This amount is to be paid within 30 days.

(l) Received Rs 19,000 payment from the client created in transaction (k).

(m) Bobbie withdrew Rs 20,000 from the business.

Analyse the above stated transactions and open the following T- accounts

Cash, client, office supplies, motor car, building, land , long term payables, capital , withdrawals, salary, expense and utilies expense.

Answer 1

(a) Anaylsis of Transaction The transaction increases cash and office equipment on one hand and increase capital on the other hand. Increase in assets is debited and increase in capital is credited. Hence, the transaction will be recorded with debit the cash and office equipment and credit the capital

$\begin{array}{ccc}& & \\ \text{Cash A/c}& & \\ \text{(a)}4,00,000\mid & & \end{array}\begin{array}{ccc}& & \\ \text{Office Equipment A/c}& & \\ \text{(a)}1,50,000\mid & & \end{array}\begin{array}{ccc}& & \\ \text{Capital A/c}& & \\ & |\text{(a)}5,50,000\mid & \end{array}$

(b) Analysis of Transaction This transaction increases assets on one hand and increase liabilities on another hand. Increase in assets is debited and increase in liabilities is credited. the office supplies will be debited and creditors will be credited.

$\begin{array}{ccc}& & \\ \text{Land A/c}& & \\ \text{(b)}1,50,000\mid & & \end{array}\begin{array}{ccc}& & \\ \text{Building A/c}& & \\ \text{(b)}3,50,000\mid & & \end{array}$

$\begin{array}{ccc}& & \\ \text{Cash A/c}& & \\ \text{(a)}4,00,000\mid & \text{(b) 2,00,000}& \end{array}\begin{array}{ccc}& & \\ \text{Note Payabale A/c}& & \\ & |\text{(b)}8,00,000& \end{array}$

(c) Analysis of Transaction This transaction increases assets on one hand and increase liabilities on another hand. Increase in assets is debited and increase in liablities is credited. The office supplies will be debited and creditors will be credited.

$\begin{array}{ccc}& & \\ \text{Office Supplies A/c}& & \\ \text{(c)}12,000\mid & & \end{array}\begin{array}{ccc}& & \\ \text{Creditor's A/c}& & \\ & |\text{(c)}12,000& \end{array}$

(d) Analysis of Transaction The Transaction increases motor car on one hand and increases capital on other hand. Increase in assets is debited and increase in capital is credited. The transaction will be recorded as debit the motor car and credit the increase in capital.

$\begin{array}{ccc}& & \\ \text{Motor car}& & \\ \text{(d)}90,000\mid & & \end{array}\begin{array}{cc}\text{Capital A/c}& \\ & \left(a\right)5,50,000\\ & \left(d\right)90,000\end{array}$

(e) Analysis of Transaction The Transaction increases office equipment assets on one side and creditors as liabilities on other side. Increase in assets is debited and increase in liabilities is credited.

$\begin{array}{ccccc}\text{Office Equipment A/c}& & & \text{Creditor's A/c}& \\ \text{(a)}1,50,000& & & & \text{(c)}12,000\\ \text{(e)}30,000& & & & \text{(e)}30,000\end{array}$

(f) Analysis of Transaction The payment of salary is an expense which decreases capital thus, are recorded as debit. Credit cash to record decrease in assets.

$\begin{array}{ccccc}\text{Salary A/c}& & & \text{Cash A/c}& \\ \text{(e)}7,500& & & \text{(a)}4,00,000& \text{(b)}2,00,000\\ & & & & \text{(f)}7,500\end{array}$

(g) Analysis of Transaction The transaction will increase assets cash on one side and increase revenue on the other side. Increase in assets cash will be debited and for increase in revenue Service account will be credited.
$\begin{array}{ccccc}\text{Cash A/c}& & & \text{Service A/c}& \\ \text{(a)}4,00,000& \text{(b)}2,00,000& & & \text{(g)}30,000\\ \text{(g)}30,000& \text{(e)}75,000& & & \end{array}$

(h) Analysis of Transaction The payment of month's liabilities is an expense which decrease capital and recorded as debit and record cash as credit to recrd decrease in assets.
$\begin{array}{ccccc}\text{Cash A/c}& & & \text{Month's Utilities Expenses A/c}& \\ \text{(a)}4,00,000& \text{(b)}2,00,000& & \text{(h)}4,000& \\ \text{(g)}30,000& \text{(f)}75,000& & & \\ & \text{(h)}4,000& & & \end{array}$

(i) Analysis of Transaction This transaction decreases the asstes and also decreases the liabilities. Record decrease in assets case will be credited and decrease in liabilities Creditors's account will be debited.
$\begin{array}{ccccc}\text{Cash A/c}& & & \text{Creditor's A/c}& \\ \text{(a)}4,00,000& \text{(b)}2,00,000& & \text{(i)}12,000& \text{(c)}12,000\\ \text{(g)}30,000& \text{(f)}75,000& & & \text{(e)}30,000\\ & \text{(h)}4,000& & & \\ & \text{(i)}12,000& & & \end{array}$

(j) Analysis of Transaction In this transaction, one assets office equipment is increasng and decreasing. The increased cost of equipment will be recorded as debit and decreased cost of equipment is recorded as credit. On the other hand, difference amount paid by cash will be decrease the assets and recorded in credit side.
$\begin{array}{ccccc}\text{Office Equipment A/c}& & & \text{Cash A/c}& \\ \text{(a)}1,50,000& \text{(j)}7,000& & \text{(a)}4,00,000& \text{(b)}2,00,000\\ \text{(e)}30,000& & & \text{(g)}30,000& \text{(c)}75,000\\ \text{(j)}1,00,000& & & & \text{(h)}4,000\\ & & & & \text{(i)}12,000\\ & & & & \text{(j)}93,000\end{array}$

(k) Analysis of Transaction This transaction increase assets on one side and increase in capital on the other side. Increase in assets Client account will be debited and to recors increase in capital Service account will be credited.
$\begin{array}{ccc}& & \\ \text{Salary A/c}& & \\ \text{(k)}26,000|& & \end{array}\begin{array}{cc}\text{Cash A/ c}& \\ & |\text{(k)}26,000\end{array}$

(l) Analysis of Transaction In this transaction, one asset cash is increasing and recorded as debit and another assets client is decreasing recorded as credit.
$\begin{array}{ccccc}\text{Cash A/c}& & & \text{Client A/c}& \\ \text{(a)}4,00,000& \text{(b)}2,00,000& & \text{(k)}26,000& \text{(l)}19,000\\ \text{(g)}30,000& \text{(c)}75,000& & & \\ \text{(l)}19,000& \text{(h)}4,000& & & \\ & \text{(i)}12,000& & & \\ & \text{(j)}93,000& & & \end{array}$

(m) Analysis of Transaction In this transaction, asset is decreasing one side cash will be credited to record the transaction and capital on the other side is decreasing will be recorded as debit side.
$$\begin{array}{cc}\text{Capital A/c}& \\ & \left(a\right)5,50,000\\ & \left(d\right)90,000\\ \left(m\right)20,000& \end{array}$$

$$\begin{array}{cc}\text{Cash A/ c}& \\ & \text{(k)}26,000\\ & \text{(m)}20,000\end{array}$$