Financial
Accounting
FA2
Lesson3
LENG CHANREANGSEY,
DEPUTY MANAGER (TAX AND ACCOUNTING), BA, CAT
Accounting Cycle
Review!!!
Question1
On 10 May Amanda bought goods for resale. Her supplier allowed her a credit period of 30
days. To date the goods have not been sold.
How is Amanda's accounting equation affected by the transaction?
Assets: Increased Liabilities: Increased Capital: Unchanged
Assets: Increased Liabilities: Unchanged Capital: Reduced
Assets: Unchanged Liabilities: Increased Capital: Reduced
Assets: Reduced Liabilities: Reduced Capital: Unchanged
Question2
At 1 September 20X5, the balance on Emma’s capital account was
$75,600. The statement of profit or loss for the year to 31 August 20X6
reported a net profit, after deducting owner’s drawings, of $3,200. Emma
paid herself a monthly salary of $1,000 and also withdrew for her own use
goods costing $2,300 with a selling price of $2,600. No additional capital
was introduced during the year.
What was Emma’s closing capital balance at 31 August 20X6?
A $64,200
B $64,500
C $75,500
D $78,800
Books of prime entry 5
In order for business transactions to be reflected in the financial
statements, they must first be recorded by the business in its books of
prime entry:
Book of prime entry Source documents recorded
Sales day book Sales invoices
Sales returns day book Credit notes sent
Purchase day book Purchase invoices
Purchase returns day book Credit notes received
Cash received day book Cash received
Cheques issued day book Cheques, direct debits, standing orders
Petty cash book Notes and coins paid and received
Journal Adjustments
• Information collected in the books of prime entry then feed into the
ledger accounts of the business and ultimately the financial
statements.
Discount
There are 2 types of discount in accounting world:
Trade Discount: a reduction to cost of goods
Trade discount will not have a double entry for that, which mean it
reduce the amount of the goods directly at the time of purchase.
Example, buy movie ticket using VISA card will receive 10% discount.
Cash Discount/Settlement Discount: a reduction in amount
payable to the supplier.
This kind of discount is to speed up the payment. For example, if you pay
the bill within 7days, you will get 5% discount. This type of discount has
double entries.
❖ Discount Received: Dr. Account Payable, Cr. Discount Received
❖ Discount Allowed: Dr. Discount Allowed, Cr. Account Receivable
Ja Kvai Co., Ltd.
July 1. Owner invested USD 500,000 cash along with computer equipment that had a market value of USD 120,000 two
years ago but was now worth USD100,000 only.
July 2. Paid USD 15,000 cash for the rent of office space for the month.
July 4. Purchased USD 12,000 of additional equipment on credit (due within 30 days).
July 8. Completed a work for a client and immediately collected the USD 32,000 cash.
July 10. Completed work for client and sent an invoice for USD 27,000 (paid within 30 days)
July 12. Purchased additional equipment for USD 8,000 in cash.
July 15. Paid an assistant USD 6,200 cash as wages for 15 days.
July 18. Collected USD15,000 on the amount owed by the client.
July 25. Paid USD12,000 cash to settle the liability on the equipment purchased.
July 28. Owner withdrew USD 500 cash for personal use.
July 30. Completed work for another client who paid only USD 40,000 for 50% of the system design.
July 31. Paid salary of assistant USD 700.
July 31. Received PLDT bill, USD 1,800 and Meralco bill USD 3,800. Both are water & electricity.
Required:
Prepare the journal entries, T accounts and trial balance for this business.
T-Acc. & Balancing
Dr. Cash on hand Cr. Dr. NCA-Equipment-Cost Cr. Dr. Utilities Expense Cr.
Dr. Rent Expense Cr.
Dr. Payable Cr. Dr. Receivable Cr. Dr. Wage Expense Cr.
Dr. Capital Cr. Dr. Sale Cr.
Question 1 9
Which of the following statements about books of prime
entry is true?
A. A business can only have a maximum of five books of
prime entry.
B. Source documents are recorded in the books of prime
entry.
C. Credit notes received are recorded in the sales returns
day book.
D. The journal is not a book of prime entry.
Question 2
10
Question 3
11
Question
Question 4 13
Helen buys goods for her business with a list price of $450 for
cash. She receives a 10% trade discount.
Which of the following journal entries correctly records this
transaction?
A. Dr Purchases $450, Cr Cash $450
B. Dr Purchases $405, Cr Payables $405
C. Dr Purchases $450, Cr Cash $405, Cr Discounts received $45
D. Dr Purchases $405, Cr Cash $405
Note: Cash Discount (settlement discount) vs trade discount
Question 5
14
Question 6 15
Which prime entry record is used to record direct
debits to pay utility bills?
A. Sales returns day book
B. The journal
C. The cheques issued book
D. The purchase returns day book
Question 7 16
Goods costing $300 have been sold on credit to a
customer. The customer has returned 10% of these
goods for a refund and a credit note has been
issued for these goods.
Which of the following journal entries correctly
records this return?
A. Dr Sales $30, Cr Receivables $30
B. Dr Sales $30, Cr Cash $30
C. Dr Receivables $30, Cr Sales $30
D. Dr Sales $300, Cr Receivables $300
Question 8 17
Which of the following are source documents?
1. Sales day book
2. Credit note from supplier
3. Trial balance
4. Invoice
A. 1 and 3
B. 1 and 2
C. 2 and 3
D. 2 and 4
Question 9 18
Which of the following results in a credit entry of $450
on X's account in the books of Y?
A. X buying goods on credit from Y
B. Y paying X $450
C. Y returning goods to X
D. X returning goods to Y
Question 10 19
The following entries have been made in the cash
at bank ledger account:
What is the balance on the account?
A. $500 credit balance
B. $9 900 debit balance
C. $9 900 credit balance
D. $10 400 debit balance
Question 11 20
The following entries have been made in the trade
payables control account:
What is the balance on the account?
A. $770 debit balance
B. $770 credit balance
C. $1 290 debit balance
D. $1 290 credit balance
Question 12 21
The following entries have been made in the trade
receivables control account:
What is the balance on the account?
A. $300 debit
B. $300 credit
C. $1 200 debit
D. $1 200 credit
