QUESTION 1

a) On 6 May 20X7, Blake buys some goods for EM7,000 from Smith, and agrees to pay for them sometime within the next two weeks. The effect of this is that a new asset, stock of goods, is acquired, and a liability for the goods is created. A person whom money is owed for goods is known in accounting language as a creditor. The balance sheet becomes:

B BlakeBalance Sheet as at 6 May 20X7AssetRMShop32,000Stock of Goods7,000Cash at bank28,00067,000Less : Creditor(7,000)60,000Capital60,000

i) How does the balance sheet of an entity provide a useful source of information?The balance sheet is a summary of the financial condition of a business at a particular time. Because every income and expenses affecting the financial condition, the balance sheet will be constantly changing. Therefore, the concept of time must be emphasized in discussing the balance-sheet.The financial statements usually requires basic information about the type, number and value of property owned by a business. To get this information we need to provide inventories.A complete inventory is a list of all financial assets and physical assets owned by the business. It involves personnel either property such as livestock, machinery, rice, stock and bank balances as well as real estate such as buildings and land. If there are no records available, make an inventory is the first step in providing a complete farm records. To complete the recording system useful, must be in the inventory finance. Therefore, provides the inventory has two steps; physical calculation and assessment.

ii) Why do you think the RM7,000 value for creditors is shown in brackets?The information inbracketsis used to show the amounts that make up a particular item which constitute a deductible of creditors.

b) Hill has the following assets and liabilities as on 30 November 20X9:

Creditors RM2,800; Equipment RM6,000; Car RM7,300; Stock of Goods RM8,100; Debtors RM4,050; Cash at bank RM9,100. You are not given the capital amount at that date.

During the first week of December 20X9:

Hill bought extra equipment on credit for RM110. Hill bought extra stock by cheque RM380. Hill paid creditors by cheque RM1,150. Debtors paid Hill RM640 by cheque and RM90 by cash. Hill put in an extra RM1,500 into the business, RM1,300 by cheque and RM200 in cash.You are required to draw up a balance sheet as on 7 December 20X9 after the above transactions have been complete.HillBalance Sheet as at 7 December 20X9

AssetRMRMTOTALEquipment 6,0001106,110Car7,3007,300Stock of Goods8,1003808,480Cash at bank9,1001,50010,600Debtors4,0507304,78034,5502,72037,270Less : Creditor(2,800)(1,150)(3,950)31,7501,57033,320Capital31,7501,57033,320

QUESTION 2

a) Enter the following transaction in the personal accounts (i.e. the creditor and debtor accounts) only. Balance off each personal account at the end of the month. After completing this, state which of the balances represent debtors and which represent creditors.

20X8Sept1 Sales on credit to Johnny RM520; Thomas RM630; Sean RM240.2 Purchases on credit Ben RM390; Raymond RM510, Patrick RM280.8 Sales on credit to Thomas RM640; Lance RM418.10 Purchases on credit from Raymond RM92; James RM870.12 Returns inwards from Sean RM25; Thomas RM190.17 Returned goods to Raymond RM12; James RM84.20 Paid Ben by cheque RM390.24 Johnny paid us by cheque RM400.26 Paid James by cheque RM766.28 Johnny paid us by cash RM80.30 Lance pays us by cheque RM418.

DescriptionDebit (out)Credit (in)

Sales to Johnny520

Sales to Thomas630

Sales to Sean240

Purchase from Ben390

Purchase from Raymond510

Purchase from Patrick280

Sales to Thomas640

Sales to Lance418

Purchase from Raymond92

Purchase from James870

Returns inwards from Sean25

Returns inwards from Thomas190

Returned goods to Raymond12

Returned goods to James84

Paid Ben by cheque390

Johnny paid us by cheque400

Paid James by cheque766

Johnny paid us by cash80

Lance pays us by cheque418

b) Complete the gaps in the following table:

AssetsLiabilitiesCapital

12,5001,80010,700

28,0004,90023,100

16,8004,30012,500

19,6003,15016,450

25,5006,30019,200

51,40011,65039,750

4,2002,1002,100

3,7502,0001,750