LO 1 UNDERSTAND THE LANGUAGE AND CONTEXT OF FINANCIAL ACCOUNTING, FUNDAMENTAL CONCEPTS AND PRINCIPLES
LO 2 APPLY THE DOUBLE ENTRY SYSTEM FOR ASSETS, LIABILITIES AND CAPITAL
LO 3 PROCESS COMMON TRANSACTIONS AND ADJUSTMENTS USING TIIE DOUBLE
ENTRY SYSTEM AND PRODUCE A SET OF ACCOUNTS FOR A SOLE TRADER
Question 1
Al Masa, a sole trader, decided to install a new machine to use within her sole trader business. The following costs were incurred:
You are required to:
a. Outline your understanding of the terms capital expenditure and revenue expenditure. (using relevant examples) (6 marks)
b. Calculate the cost of the machine to be included within the "Machine nominal ledger "
c. After one month of operations, Al Masa installed an extra spare part costing 2,500 OMR, the new spare part is expected to increase the productivity of the new machine by 20%. Should Al Masa include the 2500 OMR in the cost of the new machine? Justify your answer.
Question 2
Your office has agreed to hire Abdullah for training during summer time. Abdullah is going to university, but he doesn't have deep knowledge in accounting. Abdullah is showing some confusion regarding the Trial Balance. He can't understand the usefulness of the trial balance and doesn't know if it is one of the financial statements. You are required to prepare notes for Abdullah to explain the following:
a. The definition of the different financial statements.
b. Explanation and justification of the usefulness of each statement.
c. Is the trial balance a financial statement? Explain why / why not?
d. Explanation of the usefulness of the trial balance.
Question 3
a. At which cost arc the assets normally shown? Which accounting concept justifies your answer?
b. Explain briefly what the consistency concept means.
Question 4
1. Mr. Yahya started business with cash: OMR 100,000.
2. He opened a bank account in Bank Dhofar with 80% of the amount provided in cash.
3. Purchased goods from Mr. All on credit OMR 12,000
4. Purchased Machinery from Technicom Ltd. by raising a loan from Bank Dhofar for OMR 120,000, immediately deposited in the bank account.
5. Paid interest on loan OMR AQO and installment of OMR. 2,400.
6. Goods returned to All costing OMIC700.
7. Sold goods for OMR 9,000 (costing OMR 7,200) on credit to Sally Ltd.
8. Took cash of OMR 1,300 from business for personal use.
9. Purchased computers by cheque for OMR 4,000.
10. Full cash payment received from Sally Ltd, directly deposited in bank account.
11. Paid wages for OMR 4,700.
12. Payment to Ali by cheque for the full amount.
You are required to:
a. Construct a table of assets, liabilities and owner's equity in equation form.
b. Explain the reasons why after every transaction we still have the same balance.
Question 5
Global Gulf Ltd. started the business on In January 2015, with OMR 70,000 in cash.
The following transactions took place:
| 3-Jan |
Opened bank account in Mill Bank with cash, OMR 55,000. |
| 5-Jan |
Sold goods for cash to Amal Ltd, OMR 17,000. |
| 7-Jan |
Bought goods from Neyra Ltd for cash OMR 23,000. |
| 10-Jan |
Bought goods from Mayssa Ltd on credit for OMR 18,000. |
| 12-Jan |
Sold goods to Jawaher Ltd on credit for OMR 11,000. |
| 14-Jan |
Received loan from Ahli Bank 15,000 OMR and deposited the same into bank. |
| 17-Jan |
Partial payment to Mayssa Ltd by cheque for 50% of the amount due. |
| 19-Jan |
Purchased a vehicle for OMR 9,500 and payment made by cheque. |
| 20-Jan |
Withdrew OMR 6,000 from bank for personal use. |
| 22-Jan |
Mayssa Ltd paid by cheque for the balance. |
| 25-Jan |
Received cash payment from Jawaher Ltd for full amount. |
| 27-Jan |
Purchased Stationary supplies by cash for OMR 500. |
| 31-Jan |
Paid wages and salaries for OMR 8,000. |
a. Prepare the journal entries for the above transactions.
b. Post them to the appropriate ledger accounts.
c. Prepare trial balance from the ledger balances.