BUS103 Assignment Answers on Financial Accounting

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Purchase of Goods For Cash

Which Accounts Are Affected For Each Transaction?

How Is Each Account Affected (Debit Or Credit, Increase Or Decrease), Specifically?

Which Is An Asset Account, Would Be Increased (a Debit) For $1,000 And The Cash Account, Also An Asset Account, Would Be Decreased (a Credit) For The Same Amount. Lastly, Assume One Of The Six Transactions Listed Above Was Not Entered In The Accounting Records In Error.

How Would The Trial Balance Be Affected, Specifically?

ABC Security Limited purchased security instruments for cash from the BM Equipment Limited for a cash of $10,000. The evidence required for entering this transaction is the sales invoice raised by the BM Equipment and the cash receipt issued by them.

To record this transaction Equipment account is to be debited by $10,000 and the cash account is to be credited by $10,000. Hence, a fixed assets account will be increased and a current assents account will be decreased.

ABC Security Limited provided security services to XYZ housing society on an event for cash of $5,000. The source document required for recording the transaction is the invoice raised to the XYZ housing and the cash receipts issued to the XYZ housing.

For the above transaction the cash account is to be debited by $5,000 and the service revenue account is to be credited by $5,000. Therefore, an assets account will be increased and a revenue account will be increased in contrast.

Also Checkout: Accounting Case Study Questions and Answers pdf

ABC Security Limited provided security services to PQR bank for the month of December 2019 on account for an amount of $15,000. To record this transaction the invoice raised to the PQR bank is needed as the evidence.

For the above transaction, the Accounts receivable account is to be debited and the service revenue account is to be credited by $15,000. Hence, an asset account will be increased and a revenue account will be increased too.

ABC Security Limited consumed electricity services from the state electricity provider. The state electricity provider raised a bill for the last month of an amount of $500. Hence, to record this transaction the electricity bill raised by the state electricity company is needed.

To record this transaction, the electricity expenses account will be debited and the electricity payable account is to be credited. Hence, an expenses account will be increased and a current liability account will be increased.

Paid electricity bill for the last month to the state electricity company for an amount of $500. The receipt issued by the state electricity company is needed for recording this transaction as an evidence.

To record this transaction, the electricity payable account is to be debited and the cash account is to be credited. Hence, the liability account will be decreased and the current assets account will be decreased.

Received the payment from the PQR bank for the services provided in the last month for an amount of $15,000. The cash receipts issued to the company is needed as an evidence for recording this transaction.

To record this transaction, the cash account is to be debited and the accounts receivable account is to be credited. Hence, an assets balance will be increase and on the contrary another assets account will be decreased.

If the above transaction of receipts from the PQR bank is not recorded and posted in the books of accounts, then the accounts receivable account will be overstated and the cash account will be understated. There will be no impact on the total assets as the transaction involves both the current account. Therefore, the trial balance will not be affected at all.

Harrison Jr, W. T., Horngren, C. T., & Thomas, C. W. (2014). Financial accounting. Pearson Education.

Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting. Pearson Higher Education AU.

Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial accounting theory and analysis: text and cases. John Wiley & Sons.

Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Financial accounting. Wiley.