Testbank to accompany
Accounting 8th Edition by John Hoggett, Lew Edwards, John Medlin, Matthew Tilling Tilling and Evelyn Hogg
Prepared by
Barbara Burns
© John Wiley !ons "ustralia, Ltd #$%#
Testbank to accompany Accounting 8e
Chapter 3: Recording transactions Multiple Choice
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The tran The transac sacti tions ons below below are are 'rom 'rom the record recordss o' Templ emplest estow owee (ictu (icture re )ram )ramer ers, s, the the internal transaction is* +ash sa sale (aid monthly rent on premises premise s +redit sa sale ecorde ecorded d deprecia depreciation tion on on shop 'i-tur 'i-tures es and 'itt 'ittings ings
".!WE / !ection 0&% #& a& b& c& d&
Whic Which h o' o' the these se even events ts woul would d not not be reco record rded ed by acco accoun unta tant nts1 s1 eceived an an or order 'r 'rom a customer The owner paid his daughter 2s school 'ees 'rom the business ban3 account ac count +redit sale /epre /epreci ciat ation ion on mo motor tor vehic vehicle less calcu calcula lated ted at the the end o' the the 'ir 'irm2 m2ss 'inan 'inancia ciall year year&&
".!WE " !ection 0&% 0& a& b& c& d&
The even The eventt that that may may be be recor recorded ded in a 'irm2 'irm2ss sust sustai ainab nabil ilit ity y repor reportt but but not not in in thei theirr 'inancial report is* Loan Lo an repa repaym ymen ents ts (ayments made to employees under the !uperannuation !uperannuatio n 4uarantee Legislation (lann (lanned ed e-pen e-pendit ditur uree on waste waste dispo disposal sal /epreciation /epreciation charged charged on Environmental Environmental 5''icers 5''icers motor vehicle
".!WE + !ection 0&% 6& a& b& c& d&
The sour sourcce do docum umen entt 'o 'or a cash ash sa sale co could uld be be a* a* (urc urchas hase orde order r +redit card slip +he7ue butt +redi edit not note
".!WE B !ection 0&# 8& Thee true Th true stat statem emen entt con conce cern rnin ing g the the acco accoun unti ting ng peri period od is* is* a& The lengt length h o' the accoun accounting ting period period varies varies with with the the needs needs o' users& users& b& The accountin accounting g period originates originates 'rom the accounting accounting e7uation e7uation c& "ccounti "ccounting ng periods periods are are hardly hardly ever ever shorter shorter than than 9 months months
© John Wiley and !ons "ustralia, Ltd #$%# %&#
Chapter 3: Recording transactions
d& The accounting accounting period period is the se7uence se7uence o' events events 'rom transactions transactions through through to 'inancia 'inanciall statements ".!WE " !ection 0&0 9& :n order order to to prov provid idee tim timel ely y in'o in'orm rmat ation ion 'or 'or deci decisio sion;m n;ma3 a3ing ing the the li'e li'e o' o' the the busi busines nesss is divided into arbitrary time periods o' e7ual length called* a& Li'e cy cycles b& 5perating cycles c& Months d& "cco "ccoun unti ting ng peri period odss ".!WE / !ection 0&0 <& a& b& c& d&
" deposi depositt rece receiv ived ed in advanc advancee by by Maha Mahara ra== +o +o 'or 'or servic services es not yet suppl supplie ied d can can be be initially recorded by Mahara= in a liability account called* !ales Mortgage >nea >nearn rned ed inco income me E-pe Epens nses es pay payab able le
".!WE + !ection 0&6 ?& a& b& c& d&
The acc The accou ount ntin ing g ent entry ry to reco record rd the the paym paymen entt o' o' a liab liabil ilit ity y is is /ebit /ebit an asset asset accou account nt and and credit credit a liabi liability lity accou account nt /ebit a liability account accoun t and credit an e7uity account /ebit /ebit an e7uity e7uity accou account nt and credit credit a liabi liability lity accou account nt /ebit /ebit a liabilit liability y account account and and credit credit an asset asset accoun accountt
".!WE / !ection 0&< @& a& b& c& d&
The true statement is* 4!T 4!T coll collect ectio ions ns is an an asset asset acc accoun ountt :n the income statement income and e-penses are recorded net o' 4!T :' the 4!T 4!T inclusive price o' o' a pac3age pac3age o' boo3s boo3s is A%#$$ the the 4!T component is A%#$& The entries entries to to account account 'or 4!T are regarded regarded as internal internal transacti transactions ons
".!WE B !ection 0&"ppendi%$& %& #& 0& 6& a& b& c& %&0
List List the the ste steps ps in in the the acco account untin ing g cycl cyclee in thei theirr corr correc ectt se7u se7uenc ence* e* Entries ar are ma made in in th the =o =ournal " business tr transaction oc occurs " trial ba balance is is prepared Entries are made in the ledger #, 6, %, 0 #, %, 6, 0 0, #, %, 6 © John Wiley and !ons "ustralia, Ltd #$%#
Testbank to accompany Accounting 8e
d&
6, #, 0, %
".!WE B !ection 0&< %%& a&
" chart o' o' accounts is is* " planni planning ng device device used used by by mana manage geme ment nt to to ant antic icipa ipate te in'orm in'ormat atio ion n 'low 'lowss thro through ugh the accounting system " list o' accounts accounts receivable receivable " char chartt sho showi wing ng the the orga organi nisa sati tion onal al stru struct ctur uree o' o' the the 'irm 'irm " plan plan o' o' the the ledg ledger er lis listi ting ng acc accou ount nt tit title less and and thei theirr rela relate ted d numb number erss
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".!WE / !ection 0&9 %#&
The term term used used in the the )ram )ramewo ewor3 r3 'or 'or the (repar (reparati ation on and and (rese (resentat ntation ion o' )inanc )inancial ial !tatements 'or income which arises in the course o' the ordinary activities o' an entity is* evenue 4ain )ees (ro'it
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".!WE " !ection 0&6 %0& a& b& c& d&
" party party to whom whom the the entit entity y owes owes money money 'or goods goods or services services provide provided d to the entity entity is is called a* +reditor /ebtor /ebit +redit
".!WE " !ection 0&6 %6& %6&
!ele !elect ct the the acc accou ount nt type typess 'or 'or thes thesee ite items ms** epairs and maintenance epairs and maintenance payable "ccounts receivable /rawings E-pense, E-pense, liabili liability ty,, asset asset,, e7uity e7uity "sset, liability, asset, e7uity E-pen Epense, se, asset asset,, asset asset,, e-pen e-pense se E-pense, E-pense, liabili liability ty,, asset, asset, liabili liability ty
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".!WE " !ection 0&6&
© John Wiley and !ons "ustralia, Ltd #$%# %&6
Chapter 3: Recording transactions
%8& %8&
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!ele !elect ct the the acc accou ount nt type typess 'or 'or thes thesee ite items ms** (repaid insurance Mortgage 4!T +ollected Light and power E-pense E-pense,, liabi liability lity,, liabili liability ty,, e7uity e7uity "sset, e7uity, asset, e-pense "sset, "ss et, liabilit liability y, liabi liability lity e-pense e-pense E-pense E-pense,, liabi liability lity,, asset, asset, liabili liability ty
".!WE + !ection 0&6& %9&
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4!T 4!T pai paid d by a busi busines nesss on the the purc purchas hasee o' its its good goodss and and servi service ces, s, and and 'or 'or whic which ha reduction o' 4!T collected will be claimed 'rom the ta- department, is stored in an account called* 4!T ou outlays 4!T collections +redi +redita table ble ac7ui ac7uisit sitio ions ns :nput nput cre credits
".!WE " )eedbac3 !ection 0&6 %<& a& b& c& d&
" chron chronolo ologi gical cal rec record ord o' o' all all the the transa transact ction ionss o' an ent entit ity y is provi provided ded in in the* the* Ledger Journal Balance sheet Trial balance
".!WE B !ection 0&8 %?& a& b& c& d&
Whic Which h is the the cor correc rectt stat statem ement ent conce concerni rning ng a char chartt o' o' accou accounts nts11 The acc accou ount ntss ar are lis listted in in al alphabe habettica ical or order :s drawn drawn up at at the commenc commencement ement o' o' a business business :s similar 'o 'or most businesses :t is a lis listt o' o' acc accou ount ntss wit with h the their ir curre urrent nt bala balanc nces es
".!WE B !ection 0&9
%&8
© John Wiley and !ons "ustralia, Ltd #$%#
Testbank to accompany Accounting 8e
%@& i& ii& ii& iii& iii& a& b& c& d&
The doubl The double;e e;ent ntry ry syst system em re7u re7uire iress how how man many y o' the the 'ol 'ollo lowi wing ng to to be tru true1 e1 "t lea least st one one acc accoun ountt shoul should d be deb debit ited ed and and one one acc accou ount nt cre credi dite ted d Total otal debi debits ts shou should ld e7ua e7uall tot total al cre credi dits ts Thee acc Th accoun ounti ting ng e7uat e7uation ion sho shoul uld d ssta tay y in in bal balan ance ce $ % # 0
".!WE / !ection 0&< #$& a& b& c& d&
" credit entry is is made to* /ecr /ecrea ease se an e-pe e-pens nse, e, incr increa ease se inco income me,, and and incr increa ease se e7ui e7uity ty /ecrease /ecrease an asset, asset, increase increase a liabilit liability y, and decrease decrease e7uity :ncr :ncrea ease se an asse asset, t, decr decrea ease se a lia liabi bili lity ty,, and and decr decrea ease se e7ui e7uity ty /ecr /ecrea ease se an asse asset, t, decr decrea ease se a lia liabi bili lity ty,, and and incr increa ease se e7ui e7uity ty
".!WE " !ection 0&< #%& a& b& c& d&
:' a transac transactio tion n causes causes an e7uit e7uity y accoun accountt to decrease decrease,, which which o' these these related related e''ect e''ectss may may also occur1 " decr decrea ease se o' an e7ual 7ual amou amount nt in a lia liabi bili litty acc accou ount nt "n increase increase o' o' an e7ual e7ual amount amount in an asset account " decr decrea ease se o' an e7ual 7ual amou amount nt in an asset sset acco accoun untt " decr decrea ease se o' an e7ua e7uall amou amount nt in anot anothe herr e7u e7uit ity y acc accou ount nt
".!WE + !ection 0&< ##& ##& a& b& c& d&
The acco The accoun unti ting ng ent entry ry whe when n inc incom omee is earn earned ed on on cred credit it is* is* /ebit cash, credit income /ebit accounts accounts receivable, receivable, credit income /ebit bit incom omee, cred crediit accoun ounts payable /ebit bit in incom omee, cr credi edit ac accoun ounts re receivabl vablee
".!WE B !ection 0&? #0& a& b&
:' a sole sole propri proprieto etorr who who owns owns an an elect electrica ricall store store ta3es ta3es hom homee a // player player 'or his own personal use it would be considered considered to be* "n ee-pense nse bec becau ause se an as asset ha has be been gi given ven aw away "n increase increase in in e7uity e7uity and a decrease decrease in assets assets because the proprietor proprietor now owns owns the // player © John Wiley and !ons "ustralia, Ltd #$%# %&9
Chapter 3: Recording transactions
c& d&
" decre decreas asee in in asse assets ts and and a decr decrea ease se in in e7ui e7uity ty bec becaus ausee by by ta3i ta3ing ng the the // // play player er the the owner has made a drawing 'rom the business "n incr increa ease se in ass asseets and and an incr increa ease se in e7ui e7uity ty
".!WE + !ection 0&? #6& Whic Which h sta state teme ment nt rela relati ting ng to the the gene genera rall =our =ournal nal is incorr incorrec ect1 t1 a& Thee debi Th debitt and and cre credi ditt e' e''ect 'ectss o' each each tran transa sact ctio ion n are are sho shown wn toge togeth ther er b& :t is re'erred re'erred to as as a boo3 o' original original entry entry c& :t prov provid ides es a reco record rd o' tran transa sact ctiions ons in in dat datee orde order r d& :t can can use use the the ru runnin nning g bal balan ance ce 'orm 'ormat at or the CT2 CT2 'orm 'ormat at ".!WE / !ection 0&? #8& a& b& c& d&
" 'irm 'irm borr borrow owss A6$$ A6$$$ $ cash cash 'ro 'rom m the the ban3& ban3& Th Thee tran transac sacti tion on is is reco recorde rded d as* /ebi /ebitt Ban Ban3 3 Loa Loan n A6$ A6$$$ $$DD cre credi ditt 5wn 5wner er22s ca capita pitall A6$ A6$$$ $$ /ebit +ash at at ban3 A6$$$D credit "ccounts "ccounts eceivable eceivable A6$$$ A6$$$ /ebi /ebitt +ash ash at ban3 ban3 A6$$ A6$$$D $D cre credit dit Ban Ban3 3 Loan oan A6$$ A6$$$ $ /ebi /ebitt Ban Ban3 3 Loa Loan n A6$ A6$$$ $$DD cre credi ditt +as +ash h at at ban ban3 3 A6$ A6$$$ $$
".!WE + !ection 0&? #9& a& b& c& d&
+reol +reol !oaps !oaps re7uire re7uiress its its custom customers ers to pay pay 'or their their orde orders rs sisi- wee3 wee3ss be'or be'oree shippi shipping ng the the goods& How should the payments be initially recorded by +reol1 /ebit bit ban3 an3, cre credit a liabili ility acco accou unt /ebit ban3, credit an an e-pense account /ebit ban3, credit an an as asset ac account /ebit ba ban3, cr credit an an in income ac account
".!WE " !ection 0&? #<&
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Machin Machinery ery is purch purchase ased d on credit credit 'or 'or A%9 $$$ plus 4!T& 4!T& The The gene general ral =ournal =ournal entry entry to to record this transaction is* A A / + E7uipment %9 $$$ "ccounts (ayable %9 $$$ E7uipment E7uipment %6 868 4!T 5utlays % 688 "ccounts (ayable %9 $$$ E7uity %9 $$$ 4!T 5utlays % 9$$ "ccounts (ayable %< 9$$ E7uipment %9 $$$ 4!T 5utlays % 9$$ "ccounts (ayable %< 9$$
© John Wiley and !ons "ustralia, Ltd #$%#
Testbank to accompany Accounting 8e
".!WE / !ection 0&?
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5n #$ June in repair repaired ed an2 an2ss comput computer er and and charg charged ed her A99 A99$ $ cash cash includi including ng 4!T 4!T& The The general =ournal entry to record the transaction is* A A / + +ash at ban3 99$ 4!T +ollections 9$ :ncome 'rom repairs 9$$ +ash at at ban3 9$$ 4!T +ollections 9$ :ncome 'rom repairs 99$ +ash at ban3 99$ 4!T 5utlays 9$ :ncome 'rom repairs 9$$ .one o' the above
".!WE " !ection 0&? #@&
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b&
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5n %8 May May 5sa3a 5sa3a paid paid A<%8 A<%8 cash cash 'or an %?;m %?;mont onth h insura insurance nce policy policy includi including ng %$F %$F 4!T& 4!T& The general =ournal entry to record the payment is* A A :nsurance E-pense 98$ 4!T 5utlays 98 E7uity <%8 :nsurance :nsurance E-pense E-pense 8?8 4!T +ollected 98 (repaid :nsurance 98$ (repaid :nsurance 98$ 4!T 5utlays 98 +ash <%8 +a +ash 98$ (repaid :nsurance 98$
".!WE + !ection 0&? 0$&
J& Wood per'orme per'ormed d carpen carpentry try service servicess 'or 'or A<8$$& A<8$$& He receiv received ed cash cash o' A#$$ A#$$$ $ and and gave gave credit 'or A88$$& :gnoring 4!T the transaction is recorded as* a& /ebi /ebitt +ash +ash A#$ A#$$$, $$, debit debit "ccou "ccount ntss ece eceiva ivable ble A<8$ A<8$$D $D cre credi ditt "cc "ccoun ounts ts rec recei eiva vable ble A#$ A#$$$, $$, credit :ncome Earned A<8$$ b& /ebit :ncome Earned A<8$$D credit +ash A#$$$, A#$$$, credit credit "ccounts "ccounts (ayable (ayable A88$$ A88$$ c& /ebit +a +ash A< A<8$$D cr credit E7 E7uity A< A<8$$ d& /ebi /ebitt +as +ash h A#$$ A#$$$, $, debi debitt E7u E7uit ity y A88$ A88$$D $D cre credi ditt :nc :ncom omee Ear Earne ned d A<8$ A<8$$ $ ".!WE " © John Wiley and !ons "ustralia, Ltd #$%# %&?
Chapter 3: Recording transactions
!ection 0&?
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Guinn Guinn paid paid A66$, A66$, includin including g 4!T, 4!T, 'or 'or advert advertisi ising& ng& The entry entry to to record record this transac transactio tion n is* /ebit bit "dve dvertising sing A66$D credit +a +ash A6 A66$ /ebit "dvertising "dvertising A6$$, A6$$, debit debit 4!T 4!T 5utlays 5utlays A6$D credit credit +ash +ash A66$ /ebi /ebitt "dve "dvert rtis isin ing g A66$ A66$DD cre credi ditt 4!T 4!T 5utl 5utlay ayss A6$, A6$, cred credit it +as +ash h A6$$ A6$$ /ebi /ebitt "dve "dvert rtis isin ing g A66$ A66$,, deb debit it 4!T 4!T 5ut 5utla lays ys A66D A66D cred credit it +ash +ash A6?6 A6?6
".!WE B !ection 0&? 0#& a& b& c& d&
The stat The statem emen entt rela relati ting ng to to a tria triall bal balan ance ce that that is inc incorr orrec ectt is* is* " tria triall bala balanc ncee may may be prepar prepared ed at at any any tim timee to test test the the e7u e7ual alit ity y o' debit debitss and and cred credit itss in the ledger " trial balance balance reports the 'inancial 'inancial per'ormance per'ormance o' a business business Thee 'act Th 'act that that the the sum sum o' the the deb debit it colu column mn e7ua e7uals ls the the sum sum o' the the cre credit dit colu column mn does does not not guarantee that no errors have been made in the ledger " tria triall bala balanc ncee is a list list o' o' all all the the accou account ntss in the the ledg ledger er wit with h thei theirr curre current nt bal balanc ances es
".!WE B !ection 0&@ 00& 00& a& b& c& d&
" tria triall bala balanc ncee will will disc disclo lose se whi which ch o' o' thes thesee erro errors rs11 ecording a transaction twice ecording ecording an amount on the right side side o' the wrong wrong account account ecording a debit as as a credit 5mitting a transaction
".!WE + !ection 0&%$ 06& a& b& c& d&
Whic Which h o' o' thes thesee err error orss woul would d be be det detec ecte ted d by by a tria triall bal balan ance ce11 " cash cash sal salee was was recor recorded ded in the the sal sales es acc accou ount nt as as A#0< A#0< inste instead ad o' o' A#<0 A#<0 but but was was corr correc ectl tly y recorded in the ban3 account 5''ice 5''ice salaries salaries were were recorded recorded as o''ice o''ice e-penses e-penses Thee sale Th saless assi assist stant ant poc3et poc3eted ed the the cash cash 'rom 'rom a cash cash ssal alee and and did not ring ring it it up on the register (urc (urcha hase se o' o' inve invento ntory ry on on cre credit dit was was rec record orded ed as a debit debit to the the plant plant and and e7uip e7uipme ment nt account and a credit to creditors
".!WE " !ection 0&%$ 08& a& b& %&@
The boo boo33ee 33eeper per recorde recorded d wages wages 'or the mon month th as as a debit debit to the !ales !ales accou account nt rathe ratherr than than as a debit to Wages E-pense& This error will result in* 5verstated pro'it 'or the period >nderstated >nderstated e7uity e7uity at the end end o' the the period period © John Wiley and !ons "ustralia, Ltd #$%#
Testbank to accompany Accounting 8e
c& d&
>nde nderstat stated ed asse ssets at at th the en end o' o' th the pe period riod .o e''ect on pro'it o' the period
".!WE / !ection 0&%$ 09& %& #& 0& 6& a& b& c& d&
The corr The correc ectt cla class ssi'i i'ica cati tion on 'or these these ledge ledgerr acc accou ount ntss is* is* Land "ccounts eceivable :nterest eceived Mortgage (ayable % "sset # Liability 0 :ncome 6 "sset % "sset # "sset 0 Liability Liability 6 Liability Liability % "sset # Liability 0 Liability 6 Liability % "sset # "sset 0 :ncome 6 Liability
".!WE / !ection 0&6
© John Wiley and !ons "ustralia, Ltd #$%# %&%$
Chapter 3: Recording transactions
Fill in the blanks %&
T are events that are given accounting recognition and are the T 'irst stage in the accounting cycle&
".!WE transactions !ection 0&0 #&
The assumption involves the division o' the operating li'e o' a 'irm into e7ual time intervals&
".!WE accounting period !ection 0&0 0&
The liability account recording 4!T collected by an entity 'rom its customers is titled 4!T &
".!WE +ollections !ection 0&6 6&
The source document associated with the provision o' goods on credit is an i&
".!WE invoice !ection 0&# 8&
" o' is a plan o' the ledger listing the names o' all ledger accounts together with an appropriate numbering system&
".!WE chart o' accounts !ection 0&9 9&
:n the accounting e7uation income and e-penses can be thought o' as sub;classi'ications o' e& ".!WE e7uity !ection 0&< <&
( is the process o' trans'erring entries in the =ournal to the ( appropriate ledger accounts&
".!WE (osting !ection 0&?
%&%%
© John Wiley and !ons "ustralia, Ltd #$%#
Testbank to accompany Accounting 8e
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The accounting system where recording is a dual process and every transaction has two or more e''ects on the accounting e7uation is 3nown as the ; accountin accounting g system& system&
".!WE double;entry !ection 0&< @&
" is a list o' ledger accounts and their balances prepared prepared to veri'y veri'y the the e7uality e7uality o' debits and credits credits in the ledger ledger&&
".!WE trial balance !ection 0&@ %$&
"ccounts in the general are organised in the order that they appear in the accounting reports&
".!WE ledger !ection 0&9
© John Wiley and !ons "ustralia, Ltd #$%# %&%#
Chapter 3: Recording transactions
Short answer questions uestion 3!"!
:' assets and liabilities at the start o' the period are, respectively, A%#$,$$$ and A98,$$$, income 'or the period e7uals A#$,$$$ and e-penses e7ual A%%,$$$ what is e7uity at the end o' the period1 "ssume these are the only changes in e7uity 'or the period& !ection* 0&< uestion 3!#
Belinda decided to open a hairdressing salon Luscious Hair& /uring her 'irst wee3 in business the 'ollowing transactions occurred* July % Belinda deposited A%9,$$$ in a business ban3 account& 0 (aid A%#,$$$ 'or e7uipment to 'it out the shop& 0 Bough oughtt a year year22s sup suppl ply y o' o' hair hairdr dres essi sing ng supp suppli lies es on cred credit it 'or 'or A%, A%,6$$& 6$$& 9 (aid creditors 'or hairdressing supplies A%,6$$& 9 Ban3ed ta3ings 'rom clients o' A98$ < (aid e-penses ; !alary Ipart;time A#$$ ; e n t A %8 $ < Belin elinda da with withdr drew ew A0$$ A0$$ 'rom 'rom the the bus busin ines esss at the the end end o' o' the the 'irs 'irstt wee3& ee3& EG>:E/* >sing the template below complete a chart o' accounts 'or Luscious Hair including a suitable number 'or each account& Luscious Hair +H"T 5) "++5>.T!
%&%0
+> RENT ASSETS ASSETS
I%$$;%8$
NON-CRRENT ASSETS
I%8%;%@@
CRRENT !"A#"!"T"ES
I#$$;#8$
NON-CRRENT !"A#"!"T"ES
I#8%;#@@
E$"T%
I0$$;0@@
"NCO&E
I6$$;6@@
© John Wiley and !ons "ustralia, Ltd #$%#
Testbank to accompany Accounting 8e
I8$$;8@@
E'(ENSES )ETER&"NAT"ON )ETER&"NAT"ON O* (RO*"T !ection* 0&9
I9$$;98$
uestion 3!3
E-plain how the rules 'or debits and credits are derived 'rom the accounting e7uation& our answer should include the rules 'or income and e-penses& !ection* 0&<
Solutions E$a% t&pe questions Solution uestion 3!"
E7uity at the end o' the period K opening e7uity income e-penses K IA%#$,$$$ ; A98,$$$ A#$,$$$ ; A%%,$$$ K A96&$$$ !ection* 0&< Solution uestion 3!#
Luscious Hair +H"T 5) "++5>.T! I%$$;%8$ CRRENT ASSETS %$ 8 ; Ban3 %%$ ; Hairdressing supplies I%8%;%@@ NON-CRRENT ASSETS %8 0 ; !alon E7uipment CRRENT !"A#"!"T"ES #$ 8 ; +reditors
I#$$;#8$
.ON-CRRENT !"A#"!"T"ES
I#8%;#@@
E$"T% 0$ # 0$ 0 "NCO&E 6$ 0 E'(ENSES 8$ 0 8$ 9 8$ @
; ;
I0$$;0@@ +apital, Belinda /rawings
;
I6$$;6@@ eceipts 'rom customers
; ; ;
I8$$;8@@ Hairdressing supplies used ent !alaries
© John Wiley and !ons "ustralia, Ltd #$%# %&%6
Chapter 3: Recording transactions
I9$$;98$ )ETER&"NAT"ON )ETER&"NAT"ON O* (RO*"T 9$ % ; :ncome account !ection* 0&9
Solution uestion 3!3
"ssets /r +r ;
K
Liabilities /r +r ;
E7uity I:ncome E-penses /r +r /r +r /r +r ; ; ;
:' the le't hand side o' the e7uation is assumed to be o' a debit nature and the right hand side is assumed to be o' a credit nature the rules o' debit and credit 'ollow& :ncreases in assets are debits, reductions in assets Ithe opposite are credits& :ncreases in liabilities and e7uity Iright hand side are credits, reductions in liabilities are debits& :ncome adds to e7uity so its rules are the same as 'or e7uity& E-penses reducing e7uity there'ore its rules are the opposite o' e7uity, i&e& increases in e-penses are debits and reductions are credits& !ection* 0&<
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