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Tutorial 1 Introduction to Accounting
4
Tutorial 1: Suggested solutions
Section A
1. Accounting is the process of providing data/information to the respective
users to help them make business decisions. It involves the following stages:
i) Collecting - source documents as evidence/proof of transactions
and as the source for recording business transactions.
ii) Recording - relevant details from source documents in the respective
books of prime entry.
iii) Summarising - from the books of prime entry and transferring
(posting) these summaries to the respective ledgers (T accounts).
iv) Communicating the accounting information to users, by preparing the
financial statements for decision making purposes.
2. Bookkeeping is an initial part of the accounting process that emphasise on –
collecting and recording business transactions from the source documents
to the respective books of prime entry, using the double entry system.
Accounting is the process of providing data/information to the
respective users to help them make business decisions.
3. Accounting equation is an equation which is based on the principle that
all the assets (resources) available/owned by a business are either
provided by the owner (equity) and/or supplied by outsiders
(liabilities) i.e.
Assets = Equity + Liabilities
It follows that after every business transaction, the equation still
balances.
4. In order for accounting information to be useful in helping users make
decisions, they need to be sorted into orderly and meaningful
categories (classified). They also need to be summarised so that the
users can ascertain the performance and position of the business rather
than getting lost in the mass pool of data.
5. Liabilities = RM32,000
Assets = RM85,000
Equity = RM67,000
Equity = RM156,900
Liabilities = RM38,000
6.
Types Amount (RM)
Assets
Bank
20,000
Cash
2,000
Inventories
19,000
Motor vehicles
80,000
Receivables
18,000
139,000
Liabilities
Loan
50,000
Payables
15,000
Equity
Capital
?
Drawings
(5,000)
Loss
(
13,000
)
139,000
Capital ? = RM92,000
Tutorial 1 Introduction to Accounting
5
7.
Revenue Correct classification Dr/Cr
Discount received
Income (Other income)
Cr
Commission received
Income (Other income)
Cr
Rece
ivables
Asset
Dr
Cash from owner
Equity
Cr
Sales
Income
Cr
Inventory sold Cost of goods sold –
Expenses
Dr
Insurance claim
received
Income (Other income) Cr
Carriage inwards Cost of goods sold -
Expenses
Dr
Advertising
Expenses
Dr
Office stationery Expenses. Or is it Asset?
(Can do discussion)
Dr
management & control, liability of owner(s), sharing of profit, taxability
etc. Each also has its advantages and disadvantages. Please refer Lecture
notes for details.
10 Your answer should touch on these areas:
Ease of raising capital, management & control of business, profit
sharing, liability of owners on business’ debts, how are the owners
taxed etc.
11.
Listing based on the Profit Determination Equation:
Types Amount (RM)
Revenue
Sales
86,6
6
0
Interest received
300
86,96
0
Expenses
Cost of inventories sold
5,150
Rental
6,000
Electricity and water
3,880
